Call to Order and Roll Call
The3rd meeting of the Capital Planning Advisory Board was held on Friday, July 29, 2011, at 9:00 AM, in Room 169 of the Capitol Annex. Senator Jack Westwood, Chair, called the meeting to order, and the secretary called the roll.
Members:Senator Jack Westwood, Co-Chair; Representative Melvin B. Henley, Co-Chair; Representative Ron Crimm; David Buchta, Charles Byers, Carole Henderson, John Hicks, Bill Hintze, F. Ryan Keith, Mary Lassiter, Mark Overstreet, and Katie Shepherd.
Guests testifying before the board: Robert L. King, Allen Lind, and Sherron Jackson, Council on Postsecondary Education; Steve Rucker, Janet Lile, and Glenn Thomas, Commonwealth Office of Technology; Jamie Link, Mack Gillim, and Robin Kinney, Finance and Administration Cabinet; Michael A. Jones, Colonel (Retired), Charles R. Flynn, Major (Retired), Department of Military Affairs; Steven T. King, Kentucky Air National Guard; Ken Lucas and Judy Solomon, Kentucky Department of Veterans Affairs.
Approval of Minutes June 17, 2011
There was a motion made by Mr. Buchta, seconded by Mr. Hintze and adopted by voice vote to approve the minutes of the June 17, 2011 meeting.
Postsecondary Project Recommendations
Mr. King, Mr. Lind, and Mr. Jackson gave an overview of the Council on Postsecondary Education’s (CPE) project recommendations. CPE evaluated postsecondary construction and information technology projects for the board, and recommended funding for 104 projects in three categories: asset preservation and renovation; construction of new/expanded education and general research facilities; and information technology initiatives.
Mr. King said CPE has developed a new approach and model to address the capital needs of postsecondary institutions and requested the board’s support in this endeavor. To fund this initiative, in its 2012-14 budget request due November 2011, CPE intends to request multi-biennial funding that would cover a six-year period.
The new model would recommend that a pool of funds be established and administered by CPE, and funding be done in terms of an allocation of dollars to each university, rather than on a per-project basis. Postsecondary institutions will select and rank their projects based on three priority areas: asset preservation; construction of new/expanded education and general research facilities; and information technology initiatives. Each institution must submit a project list to CPE in order to be eligible to receive an allocation of funds, and the institutions must agree to meet a certain balance of the expenditures on asset preservation.
This new multi-biennial funding approach would provide a balanced investment as recommended by the VFA Study; allow more flexibility for institutions to implement capital projects; allow campuses to better plan for construction; and provide for stronger protection of state-owned assets.
A workgroup, comprised of CPE and university representatives, will meet over the coming months to address the proper size of the pool and the duration of the program; the mechanism to determine the allocation for each institution; and the appropriate balance between asset preservation and renovation versus new/expanded space. (The VFA Study will serve as a basis for determining these factors. The study recommends 55% for capital renewal/replacement and renovation, and about 45% for new and expanded space.)
In response to a question from Representative Henley, Mr. King replied that the smaller institutions have extramural research projects, but not nearly at the volume as the University of Kentucky or the University of Louisville. There are projects that call for lab space, new science buildings, and various campuses. Mr. Jackson added that the extramural research at the University of Kentucky and the University of Louisville applies directly to one of the goals of House Bill 1 which calls for the institutions to be nationally competitive as a Top 20 Research Institution. The list highlights the progress that has been made on that goal.
In response to a question from Representative Henley, Mr. King replied that a working group of university representatives will be meeting with CPE staff over the next two months to reach agreement on the best approach/model to use. Mr. King further explained that it was CPE’s hope that the campuses have a reasonably predictable flow of dollars so as to undertake projects as needed and recommended by the VFA Study. One of the issues the working group will address is making sure there are some minimum dollar requests when an actual proposal is made.
Mr. Overstreet noted that CPE planned to request multi-biennial funding whereas agency budget requests are for two years. Mr. King said CPE realizes that one General Assembly session cannot bind another, however, two years ago the Legislature adopted pension reform legislation that sets out quite specifically financial obligations that the state must commit to fulfill through 2024. If there was an agreement to adopt CPE’s proposal, it would at least create a framework against which the Governor and the Legislature would have an ongoing obligation to protect the university facilities and meet the needs of higher education.
Mr. King said historically there have been relatively modest pools of money for deferred maintenance set aside from year to year subject to a matching requirement, but the data shows that approach is not sufficient to meet growing needs. Mr. Hicks commented that the data driven side is another element of this plan that is very worthy and the VFA Study has done a good job of bringing the board’s attention to the significance of deferred maintenance issues on the campuses. The idea of a balanced approach between new construction and asset preservation is a good one.
Mr. Hintze stated that the board, since its inception, has made maintenance its highest priority in policy recommendations, and has tried to devise a means to provide a regular higher stream of funding. The multiyear aspect CPE’s plan is in keeping with the six-year process that this board has been supportive of. There are other examples within the existing capital investment statutes and other examples as they apply to certain other entities of state government where multiyear assets can remain available to be pooled and applied over more than one biennium.
Information Technology Project Recommendations
Commissioner Steve Rucker, Janet Lile, and Glenn Thomas gave a brief overview of the Commonwealth Office of Technology’s (COT) review and report on information technology (IT) projects for the board. COT recommended 59 IT projects for funding, of that amount, 51 projects were designated as “High Value” and eight projects were noted as “critical” because of their direct contribution to meeting the strategic goals of the Commonwealth.
Mr. Hintze noted that the Executive Summary in COT’s report recommends that KRS 45.750(1) be amended to include the word “infrastructure” in the definition of an information technology system. He said there needs to be some precision to the definition to such a term if the capital planning and budgeting definition were to be broadened. He recommended that COT submit a revised definition to the board for review.
Commissioner Rucker replied that agencies turn in a request for a software application, but they do not include the underlying infrastructure, such as servers or bandwidth requirements, to support that application.
In response to a question from Mr. Overstreet regarding project risks, Mr. Thomas said one of the major considerations for any project is the risk associated with it. Projects that are costly or have long timelines have more risk associated. These projects are more likely to not be completed on time and will cost more in the long run.
Review of Agency Capital Plans
Representatives from the Finance and Administration Cabinet (FAC) included Deputy Secretary Jamie Link, Robin Kinney, and Mack Gillim. Mr. Link gave a brief overview of the Cabinet’s capital plan, which included projects for the statutory project pools (Capital Construction and Equipment Purchase Contingency Fund; Emergency Repair, Maintenance and Replacement Fund; and Statewide Deferred Maintenance Pool); construction and renovation/restoration projects on the Capitol campus, at the Capital Plaza Complex, and various other state locations; additional infrastructure projects for the Data Readiness Center; and various projects to replace portions of facilities that show signs of wear and tear due to use and aging.
In response to questions from Senator Westwood, Mr. Gillim replied that the Modernized E-File project, an electronic filing platform developed by the Internal Revenue Service, will save the Commonwealth money because it will cut the cost to process a tax return from $2 to a few cents per return. He stated that it would also increase the accuracy of the tax returns. When this program is fully implemented, there will be even more savings.
In response to questions from Mr. Hintze, Mr. Link stated that the conceptual design of the new Capital Plaza Tower Complex is underway, and funding is in place for Phase II of the design. Currently, the Cabinet is discussing efficient space planning. The Cabinet has not initiated the Sower Office Complex at this time.
In response to a question from Ms. Lassiter, Mr. Rucker said COT replicates disaster scenarios twice a year to ensure state government data is safe in the Data Readiness Center.
Retired Colonel Michael A. Jones, Lieutenant Colonel Steven T. King, and Retired Major Charles R. Flynn, representing the Department of Military Affairs (DMA), gave a brief overview of the Department’s capital plan. The Department reported that there has been no major change in needs, issues, or focus from DMA’s last capital plan. The Department would like to focus on the Armory Installation Maintenance Pools requested in each biennium in an amount designed to help alleviate the maintenance backlog and to address the infrastructure issues of the statutory and quazi-commercial activities of Bluegrass Station, the Old Arsenal, and the DMA Statewide Emergency Radio Network.
In response to a question from Mr. Hintze, Colonel Jones said that the current Medical Command Unit building at Bluegrass Station is in poor condition and DMA would like to construct a new unit located at the Boone National Guard Center in Frankfort. Lieutenant Colonel King added that Frankfort would be the best location for this new building because of other readiness processing efforts that are conducted at the Boone National Guard Center.
In response to a question from Mr. Hicks, Colonel Jones replied that if DMA is authorized a maintenance pool in the next budget, armory projects in Harrodsburg, Prestonsburg, and Walton would be the primary projects to be addressed. Also, the Department would like to move the Emergency Operations Center from the Administrative Office of the Courts building to the Boone National Guard Center.
In response to questions from Senator Westwood, Lieutenant Colonel King stated that the 40-year old armories are structurally unstable and the settlement issues are due to site drainage erosion. The new armories will be designed to have adequate bearing capacity.
The next plan to be reviewed was for the Kentucky Department of Veterans Affairs (KDVA). Representing KDVA were Commissioner Ken Lucas and Judy Solomon. Mr. Lucas gave a brief overview of the capital plan, which included two projects for the 2012-14 biennium, and one project for the 2014-2016 biennium.
KDVA’s 2010-12 maintenance pool appropriation ($200,000) will be used to repair a hill slide at Kentucky Veterans Cemetery North and to address mold and moisture problem at the Eastern Kentucky Veterans Center. Each project is estimated to cost $100,000.
Mr. Lucas discussed two currently authorized projects that have not been initiated. The Kentucky Veterans Cemetery Southeast project was authorized in the 2006-2008 budget ($200,000 General Funds and $6,000,000 federal funds). To date, there has been no activity on the project due to site selection issues. Leslie County officials have now hired Nesbitt Engineering, from Lexington, and there is a potential site for the project. The site will still need to be evaluated by the federal government before construction can start.
In response to a question from Senator Westwood, Mr. Lucas stated that he thinks the federal government will be agreeable to the site for the cemetery project in Leslie County.
The Construct Fourth State Veterans Nursing Home project in Radcliff was authorized in the 2008-2010 budget ($19,500,000 federal funds and $10,500,000 bond funds). The project will be sited on a 197-acre site that is part of Fort Knox. The federal government plans to deed the land to the Commonwealth. Mr. Lucas said the timeline for receipt of federal funds for this project is not certain. This project is ranked No. 44 on a federal priority list, however, if an emergency occurs, the project could be downgraded and funded at a later date.
Board Discussion of Planning Issues
Senator Westwood stated that if there is nothing right now, he would encourage the members to be thinking about what has been heard in the presentations and reports thus far. The Board will begin working on recommendations at the next meeting.
Schedule of Future Meetings
Senator Westwood stated that the next meeting is scheduled for Friday, August 26 starting at 10:00 AM.
With there being no further business to discuss, the meeting was adjourned at 10:58 AM.