What is a capital project?
A capital project is a project that results in a major asset, such as the construction of a new building (including planning, design and construction), major facility renovation, construction of utility infrastructure (water, electrical, gas and other utility systems) or the purchase of major building-related equipment. The project results in an asset that will have a life of longer than a year and a cost of more than $400,000.
Capital projects are initiated for a variety of purposes, but most typically are to provide sufficient facilities to serve the growth in student population or programs, to renovate a facility to meet current usage needs or to improve facility life-safety for its occupants, such as seismic safety upgrades or asbestos removal. Capital projects are usually initiated by the campus and if costing under $60 million can be approved by the chancellor; otherwise, the projects require UC regental approval.
What are "student service" and “student facilities” capital projects and how are they funded?
Student facilities are buildings and grounds that house student services and activities, rather than instructional or research activities. Student service capital projects include such facilities as competitive and recreational sports areas, student unions, retail and food services, residence halls and the multiple buildings that provide student services and programs as well as most all of the university's "public venues" (excluding the Mondavi Center and the Buehler Alumni Center). All told, there are approximately 180 student service facilities and more than 50 acres of student-related fields and open spaces.
Student service and student facilities capital projects may be funded by a variety and combination of sources, although each fund source often has legal, contractual or policy restrictions on the type of project that can be funded by the fund source:
- General Funds: General Funds are funds received from the state in support of higher education. These funds may be used towards instructional or research facilities but are specifically unallowable for use on student service facilities with the exception that if a student facility includes programs that provide academic support (such as learning skills assistance), some use of general funds may be allowable.
- Education Fee funds: These are systemwide fees, established by the Regents, and paid by students to support the academic mission activities of the campus (instruction, research and financial aid) that are not fully funded by the state general funds. Education Fee funds may not be used for student service facilities unless the service is considered "academic support."
- Student Services Fee funds: Student services fees are systemwide fees, established by the Regents, and paid by students in support of student services, programs and activities. In contrast to General Funds and Education Fee funds, these fees may not be used for instruction or research-related purposes but only for student services, such as student programs, operating costs of student services and capital projects related to student services. Generally, the Student Services Fees support annual operating costs, though perhaps not to the degree needed, leaving limited funds for capital purposes.
- Campus-Based Fees: Campus-based fees are implemented by individual campuses and may either be imposed by the chancellor to address critical life-safety concerns (such as with the Facilities Safety Fee) or are fees that students choose to vote upon and impose upon themselves for specific purposes, such as the Facilities and Campus Enhancement Fee and the Campus Expansion Initiative Fee, both of which were initiated by and voted upon by students to address specific student service needs for which other funding was not available or not sufficient. These two fees have either partially or fully funded student facilities, including the multi-use Aggie Stadium, Schaal Aquatic Center, Activities and Recreation Center, Equestrian Center covered arena, Student Health and Wellness Center and Student Community Center. A key point to bear in mind is that these fees were adopted for specific purposes and cannot be redirected.
- Other Sources: Other sources that may be used to fund capital projects include various revenue streams and gift funds. For example, Student Housing and Memorial Union (MU) Auxiliary generate revenue through their activities, though these revenue streams generally need to be directed towards Housing or MU expenses and projects, rather than used for broader purposes. Gift funds donated by charitable persons or organizations are an important source of funding for capital projects. Gift funds are usually donated for a legally restricted purpose, such as a new building or wing of a building.
How are capital funds different from operating budget funds?
Capital funds are simply funds designated for funding capital projects, while operating funds are funds directed towards ongoing staffing and operating costs of programs and services. Although capital and operating funds may stem from similar source types (registration fees, campus-based fees, revenues, gifts), they are appropriated for specific purposes and are often not interchangeable. For example, campus-based fees that were approved by students in official referenda documents to construct a specific new facility cannot be redirected in any significant way to other uses.
There are a few areas in which capital and operating funds can be used for the same purposes, most notably in the area of building maintenance. The custodial, utilities, building repairs and grounds maintenance costs may be paid from either capital or operating funds and often are paid with a mix of these sources since one single source may not be sufficient.
Why are we constructing new facilities? Why can't we use the building funds for services and programs instead?
- Capital projects take many years to plan and design before construction begins. A facility being built today is possibly the result of many years of planning for its construction and financing.
- Most student service capital projects are financed by restricted sources (as described above), and the funds could not be redirected to operating budgets. The students or donors who are funding a new facility expect it to be built in a reasonably timely manner.
- The university has a responsibility to provide safe, modern facilities for the campus.
What roles do students play in planning the new facilities, and what role do students have in overseeing the use of student fee funds once the capital projects are completed?
Students play an integral role in the conceptualization, design, construction and governance of student service facilities.
In many cases, they are the first ones involved in advocating for a new or renovated facility and play the principal role in developing and approving a campus-based fee to fund the costs of facility construction and operation. Buildings such as the Activities and Recreation Center (ARC) and the Health and Wellness Center were developed in this way and the funding associated with these and similar facilities was approved by students through a student referendum and corresponding election. Students also serve as members of the planning committees that are established for every construction project and that oversee the selection of architects as well as all aspects of the design and construction phases of a building. Lastly, students remain involved in these projects through their ongoing participation in the student-majority committees that are established to oversee the building’s operation and maintenance activities and the corresponding use of student fees. Their ideas and continuing involvement, from start to finish, are essential in ensuring that student service facilities and programs always reflect evolving student needs.