Board of Trustees
Finance & Audit Committee Meeting
December 15, 2014
Supplemental Capital Budgeting Request
1
UT CAPITAL SPEND VS. HIGHER ED INDUSTRY
Moody's
A1
Moody's
A2
UT FY 14
Actual
UT FY 15
Budget
Capital Spending
as a % of Depreciation
126
120
97
51
Average Age of Plant
11.5
12.4
14.1
14.1
Key Take-Away Message:
1. UT spending on physical plant lags the industry
2. Our physical plant is older than the industry
3. Our current pace of funding will cause the University to fall further
behind.
4. This same picture exists if we looked only at UTMC.
2
INVESTMENT IN CAPITAL ASSETS – THE CONUNDRUM
FY 15 Budget
Cash from Operations
Net Income
(in millions)
$ (26.5)
Depreciation
Principal Payments
Cash Available from Operations
58.6
(14.0)
$ 18.1
Capital Needs:
Depreciation
$
Sources:
Cash Available from Operations
State Capital Appropriations
Total Sources
Capital Funding Below Depreciation
58.6
18.1
11.8
29.9
$
28.7
Cash from Operations and State
Capital Appropriations are
insufficient to properly re-invest in
the capital assets of the University.
To properly fund depreciation, the
University would need to use
institutional reserves or debt.
This is not sustainable over the
long-term.
The University capital funding is
$28M short of depreciation and
approximately $40M short of the
higher education industry. This
shortfall is split roughly 50/50
between the academic and clinical
missions.
3
FY 15 CAPITAL BUDGET ALLOCATION
FY 15 Capital Budget and Allocation
FY 15 Capital Budget
Allocation:
Facilities
Provost
IT
Hospital
(in millions)
$ 18.0
$
$
Hospital Break-down:
CEO Contingency
Individual Leaders (projects < $80K)
Clinical
Facilities
IT
$
$
5.0
4.0
3.0
6.0
18.0
1.0
1.5
1.5
1.0
1.0
6.0
FY 15 Capital Budget was
determined based on a breakeven cash flow model.
The Academic portion was
allocated between Facilities,
IT, and Provost.
The Hospital portion was
allocated between top
management and individual
leaders. Management’s
portion was further allocated
between Clinical, Facilities,
and IT related initiatives.
4
UT LIQUIDITY VS. INDUSTRY
Days Cash on Hand
Moody's
A1
Moody's
A2
UT FY 14
Actual
140
124
111
Key Take-Away Message:
1. UT liquidity lags the industry
2. For context, one day of cash for UT equals $2.3 million
3. This same picture exists if we looked only at UTMC.
5
A PRACTICAL REALITY
1. The University cannot accomplish its Academic and Clinical
missions on capital spending from operations and statement
appropriation of only $29.9 million (FY 15 Budget)
2. Not properly investing in our plant will accelerate a downward
spiral that will drive patients, physicians, students, faculty and staff
away from the institution.
3. While we are diligently exploring ways to increase capital funding,
we must continue to run the hospital and university.
4. We recommend that $28.7 million of supplemental capital funding
be approved, with actual spending to happen over the next three
fiscal years. This total amount would reduce cash on hand by 12
days, if no other management action is taken over that three year
period.
6
REQUEST OF SUPPLEMENTAL CAPITAL FUNDING
Project
Parking Garage Stabilization and Maintenance
UC Data Center
North Engineering HVAC Replacement
Bridge Repairs/Replacement
Building Envelop/Water Project
IT projects
Emergency Power-Phase 2
CT Scanner replacement
Likely timing of cash outflow
FY17
FY16
FY15
Total Amount
0.8
0.7 $
1.5 $
$
2.7
0.3
3.0 $
1.2
1.5 $
0.3
3.0
2.0
2.0
1.8
1.8
1.1
7.0
8.1
0.9
0.9
1.8
1.5
1.5
EMR updates (ED, PT/OT, oncology)
Telecom coverage
0.8
0.9
0.8
0.5
0.4
Kobacker - Peds
0.5
0.3
0.2
Ultrasound
0.1
0.1
Ambulatory investment
3.8
0.4
Total Capital Funding
$
28.7 $
4.3 $
2.0
20.8 $
1.4
3.7
7