AIA Ohio Issue Brief

Moratorium on Capital Projects - HB 95

ISSUE

AIA Ohio opposes placing a moratorium on the creation, acquisition and expansion of capital projects and real estate for public institutions of higher education and requests restoration of the capital component.

BACKGROUND

The biennial budget bill, House Bill 95, as passed by the Ohio House of Representatives contains language that would place a two-year moratorium on the “creation, acquisition, and expansion of academic programs, capital projects, real estate, and student centers.” In addition, funding of the capital component (debt service) has been eliminated.

The moratorium and loss of capital component funding will have a negative economic impact on architects, particularly those who service the public sector. In turn, this will result in a loss of revenues and a reduction in this small business component for the State of Ohio.

Statewide, the deferred maintenance problem among higher education institutions is estimated to be between $2 billion and $3 billion. A moratorium will only exacerbate this problem and make it more difficult to address in the future, particularly as the large number of buildings built in the 1950’s, 1960’s and 1970’s continue to age.

Given that interest rates are at an all-time low and that a slow economy is resulting in construction costs coming in under estimate, it’s both a good time to borrow and a good time to build.

Moving Ohio to its future level of economic success requires institutions of higher education to continue to be sensitive to the market’s demand for emerging occupations, career choices and job training. The moratorium would prohibit an institution from responding to these demands through facility modifications and support.

From an outside perspective, opportunities to purchase real estate that respond to the mission, goals and market-driven needs of an institution come along once in a lifetime. – If a key parcel of land became available and an institution could not purchase it, that opportunity may not come along for another 40 years. – Such a moratorium on real estate transactions could impact an institution’s ability to deliver services to its students and the community.

Beginning in the 1996-97 capital budget, higher education transitioned from what some considered to be an uncontrolled escalation in capital funding to a formulaic approach whereby campuses made the decision of how much to allocate to which projects based upon a “capital allowance”. The capital allowance, or capital component as it is now called, is based upon institutional enrollment and the age of facilities used for offering credit courses, supporting sponsored research and providing non-credit job training programs. The campus-focused accountability in planning and prioritizing for renovations and other capital needs that has evolved throughout the 8-year program would be undermined and create funding and construction difficulties. Elimination of the capital component funding would result in the loss of monies pledged to repay bonds, could result in the downgrading of campuses’ bond ratings, and could delay the facility renovations needed to meet the needs of current and emerging programs.

For additional information contact: David W. Field, CAE, Executive Vice President, AIA Ohio, 17 S. High Street, Suite 200, Columbus, Ohio 43215. Phone: 614-221-0338. Fax: 614-221-1989. E-mail: field@assnoffices.com.