MEETING OF THE FINANCE COMMITTEE
OF THE BOARD OF TRUSTEES
HOUSTON COMMUNITY COLLEGE
August 17, 2010
Minutes
The Board of Trustees of Houston Community College met as a Facilities and Finance
Committee on Tuesday, August 17, 2010, at the HCC Administration Building, 2nd Floor,
3100 Main in Seminar Room A, Houston, Texas.
BOARD MEMBERS PRESENT
Neeta Sane, Vice Chair
Sandie Mullins, Secretary
Bruce Austin
Yolanda Navarro Flores
Eva Loredo
Christopher W. Oliver
Mary Ann Perez
ADMINISTRATION
Mary Spangler, Chancellor
Art Tyler, Deputy Chancellor/COO
Renee Byas, General Counsel
Doretha Eason, Executive Assistant to the Chancellor
William Carter, Vice Chancellor, Information Technology
Charles Cook, Vice Chancellor for Instruction
Daniel Seymour, Vice Chancellor, Planning and Institutional Effectiveness
Margaret Ford Fisher, President, Northeast College
Fena Garza, President, Southwest College
Zachary Hodges, President, Northwest College
Betty Young, President, Coleman College
OTHERS PRESENT
Kim James, Board Counsel, Bracewell & Giuliani
Clarence Grier, Financial Advisor, RBC Capital Markets
Tom Sage, Bond Counsel, Vinson & Elkins
Alan Ainsworth, President Elect, Faculty Senate
Other administrators, citizens, representatives of the news media
CALL TO ORDER
Mrs. Sane, Vice Chair, called the meeting to order at 10:20 a.m. and declared the Board
convened to consider matters pertaining to Houston Community College as listed on the
duly posted Meeting Notice.
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Facilities and Finance Committee – August 17, 2010 – Page 2
FINANCIAL OVERVIEW AND BUDGET WORKSHOP
Dr. Spangler apprised that the overview will include a review of the approved budget for
FY 2010-2011 and the proposed biennium budget for FY 2011-2013. She informed that
Dr. Tyler would present budget material and she would then discuss the strategic
planning portion.
Dr. Tyler apprised that the presentation would include recommendations to the Board. He
noted that there have been significant changes from the perspective of the state level. Dr.
Tyler provided a preview regarding the next proposed biennium budget. He noted that the
follow-up workshop will provide an opportunity to make recommendations for changes.
He noted the next budget would be presented for approval in June or July of 2011. He
noted that it is necessary to know the allocations from the state before the next biennium
budget can be presented for approval by the Board.
Mr. Austin noted that the Board should be active participants in the policy making
process. He noted that it would be useful to develop a model that includes the Board
interaction from a planning standpoint.
Dr. Spangler provided an overview regarding strategic planning. She applauded the
Board for the approval of a two-year budget which allows for better planning
opportunities. She provided an overview of the following:
•
Imperativeness of the budget coinciding with the strategic plan (strategies and
action)
•
Preparing for the financial challenges in lieu of the anticipated reduction of state
allocations for community colleges as well as the anticipated requirement to earn
funding according to formula funding for community colleges.
(Mrs. Flores arrived 10:37 a.m.)
•
Multiple options for reducing the expenses as well as opportunities for increasing
revenues.
(Mr. Oliver arrived at 10:39 a.m.)
Ms. Mullins asked if there is an oversight of grant writing to make certain all colleges are
receiving an opportunity to pursue grants. Dr. Seymour noted that there are two
approaches in that the college offers grant writing workshops and secondly, the college
faculty is able to attend and complete grant applications for their respective colleges.
Ms. Loredo asked if there will be an opportunity to seek grants to make up the shortfall
due to the reduction from state funding. Dr. Spangler apprised that the grant opportunities
will depend on the grant requirements and noted it will not be a one-for-one exchange but
the college will seek ways to leverage opportunities.
Mr. Austin suggested that quality circles are utilized similar to that of NASA to identify
grants and thereby, develop subject matter experts or a surgical team as it relates to
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Facilities and Finance Committee – August 17, 2010 – Page 3
grant writing. He noted that this will improve the utilization of the college’s assets and
resources. He noted that this would be in line with the smart growth thought process. Dr.
Seymour apprised that the grant writers have been repositioned which allows them to be
closer to institutional research.
Mr. Austin recommended obtaining a copy of Analysis of Smart Growth from the Urban
Institute (Washington, DC) and noted that the community college is an economic
development anchor.
Mr. Oliver noted that enrollment is a thread that connects to the budget impact and asked
where the college is in regards to out-of-district tuition. Dr. Tyler apprised that the Board
approved out-of-district and out-of-state increases and noted that the enrollment will be
discussed later in the budget presentation.
Mr. Oliver noted that more consideration should be given to partnering with others.
Dr. Spangler informed that the college as a whole is in a good position and currently is
working on developing recommendations to include the following initiatives:
•
Identify strategies
•
Establish a Budget Task Force
•
Colleges provide recommendations to identify large cost items for review and
discussion
Dr. Tyler apprised that there will need to be a tier approach to close the funding gap such
as salaries, contract services, debt service, and utilities.
Ms. Loredo referenced the restricted budget and expressed that a focus should be placed
on utilizing the grant funds received. Dr. Tyler noted that the restricted budget consists
mainly of financial aid and noted that there are reasons why financial aid funds are not
drawn down such as students do not need funds or students decide attend another
institution.
Ms. Mullins asked what percentage of the grant funds is restricted. Dr. Spangler noted
that the grant funds are 100 percent restricted.
Ms. Mullins asked what percentage of the international funds is restricted. Dr. Spangler
noted that the international funds are unrestricted as they are entrepreneurial monies.
(Mr. Oliver stepped out at 11:05 a.m.)
Ms. Mullins noted that her inquiry is in regards to the Qatar contract. Dr. Tyler noted that
an invoice has been submitted for reimbursement and more will be submitted in the near
future.
(Mr. Oliver returned at 11:06 a.m.)
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Facilities and Finance Committee – August 17, 2010 – Page 4
Mr. Austin noted that there is an enterprise fund and noted that the international costs
should be part of the enterprise fund.
Mrs. Sane noted that according to the last discussion, administration was to bring
recommendations before the Board to consider a draft policy for allocating the funding.
Dr. Spangler noted that the recommendations will be presented to the Board Governance
Committee for discussion as it relates to developing a policy.
Ms. Mullins apprised that the Board approved the Qatar contract with the understanding it
was a revenue generating opportunity.
Ms. Loredo inquired if replacements are in place to fill the vacated positions by the faculty
and staff that will be leaving for Qatar. Dr. Tyler apprised that the majority of the persons
leaving are part-time. He noted that the seed funds from the Saudi Arabia contract are
being used to cover expenses for Qatar and that no operating funds have been used for
the Qatar contract.
Mr. Oliver referenced the large expense items previously mentioned and asked if
administration has a plan for addressing these items.
Dr. Tyler noted that attention must be given to growth/new programs, legislative actions,
state of the economy, as well as tuition and fees.
(Mrs. Perez stepped out at 11:19 a.m.)
Dr. Tyler noted that there are challenges that must be addressed and “what ifs” must be
reviewed for the FY2011-2013 biennium budget. He apprised that the master plan must
be reviewed and noted that there must be smart growth that will be effective because
when building, there must be consideration to the operation costs of those buildings.
(Mrs. Perez returned at 11:25 a.m.)
Dr. Tyler presented budget assumptions and updates to those assumptions. Dr. Tyler
apprised that the approved budget for FY2010-2011 may not be adequate and therefore,
there is a possibility that recommendations will be presented to the Board regarding
possible increases to the budget.
Mr. Austin suggested that administration host a television show on HCC/TV to
communicate information regarding enrollment increases. He noted that the purpose is to
make the community aware of the growth. Dr. Spangler noted that it is imperative that the
Board knows how the money is being spent and what options are available for continued
or future expenditures. She noted that the strategic planning office has been asked to
gather information to present options to the Board.
Dr. Seymour noted that the options will be based on the Budget Task Force
recommendations.
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Facilities and Finance Committee – August 17, 2010 – Page 5
Mrs. Flores asked when the information will be presented to the Board for discussion.
Mr. Oliver asked how each of the large expenses referenced by Dr. Tyler is being
addressed. Dr. Tyler noted that the expense items are some of the issues that the Budget
Task Force will address. He noted that revenues will be received in the coming year that
were not present previously such as the revenue from the North Forest taxable value and
out-of-district and out-of-state fees.
Mr. Clarence Grier, Financial Advisor, provided information on the current debt service
obligations. He noted that the obligation is $19.7 million for the current year and $23.7
million for next year.
Mr. Oliver asked if there are any ways to reduce the debt services. Mr. Grier noted that
one option is borrowing from the open market to replace current debt with lower rate
loans.
(Mrs. Perez stepped out at 11:45 a.m.)
Mr. Austin noted that taking advantage of the lowest rate is the best option and noted that
there needs to be some concepts in regards to the four large debt items.
(Mrs. Perez returned at 11:48 a.m.)
Mr. Austin noted that there are options for utilities and contract services such as internal
staff performing services that maybe performed by external parties. He noted that there
must be a rational discussion regarding options.
Mr. Oliver revisited the available options for reducing debt.
(Mr. Austin stepped out at 11:51 a.m.)
Mr. Grier informed that the following options could be considered:
Option 1 - Pay as you go
However, this option could exhaust the cash on hand, which could reduce credit rating.
Option 2- Expand the loan term
This option would reduce monthly payments but would increase interest cost because of
the longer term.
Option 3 – Review a combination
This option would be of Options 1 and 2 of reducing the rate and expanding the term.
Dr. Tyler noted that discussions with the Financial Advisor have taken place; however, in
discussing the bond rating, it was noted that there must be consideration in regards to
increasing the revenue. He noted that there are two other options available which is
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Facilities and Finance Committee – August 17, 2010 – Page 6
raising taxes and increasing tuition and fees. Dr. Tyler noted that the bond rating
agencies asked which options the Board is considering, but informed the bond rating
agencies that the Board has not discussed either option.
(Mrs. Perez stepped out at 11:57 a.m.)
Dr. Tyler noted that Student Services has reviewed the possible affect of a tuition
increase on financial aid.
(Mr. Austin returned at 12:00 p.m.)
Dr. Tyler noted that it is anticipated that there will be an increase in expenses of
approximately $4 million for FY2010-2011.
(Mrs. Perez returned at 12:05 p.m.)
Dr. Tyler apprised that there is an anticipated increase in revenues and expenses
according to conservative growth projections for the next couple years.
Mr. Austin noted that the county is cautious in terms of tax revenue collections and asked
if the college is taking this same approach.
(Mrs. Perez left at 12:09 p.m.)
Dr. Tyler noted that the increase regarding revenues from taxes is marginal at one
percent for 2010-2011 and less than one percent for 2011-2012.
Mr. Austin recommended that a career and licensing matrix is developed of career and
licensure requirements for continue education courses to determine what portion of the
cohorts are in Houston and would attend HCC classes scheduled during campus down
periods. Dr. Seymour noted that if there is an unmet demand, HCC is making a good
effort at targeting these areas.
Mr. Austin noted that it would be a revenue generation effort for the college.
Dr. Tyler noted that $6.9 million was set aside over a two-year period to offset the state
appropriations. He noted that the recommendation to the Board would be to spread the
cost over the next three years.
Mr. Austin asked if there is an employee benefits cafeteria plan in place at the college.
Mr. Willie Williams noted that the state requires the college to participate in the state plan;
therefore, the college does not have an option.
Mr. Flores asked what the current revenue to debt ratio is. Dr. Tyler noted that the ratio is
1.01 to 1.0, which is a little over 2.2 to 1.0.
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Facilities and Finance Committee – August 17, 2010 – Page 7
Mrs. Flores asked when the budget task force will provide their recommendations. Dr.
Spangler noted that the task force has not been established at the time. She noted that
the Office of Institutional Effectiveness was asked to gather data when it became
apparent that the Coordinating Board and state will reduce funding.
Dr. Tyler apprised that the next workshop will focus on: (1) review of if it is prudent to
increase any tuition and fees; (2) the financial advisors’ recommendations; (3) the salary
increase funding of $1.5 million approved in the budget but not disbursed; and (4) review
anticipated cost of contracts for the next budget cycle.
Ms. Mullins noted that she requested that faculty salaries are separated from staff and
administration when the information is presented to the Board.
(Mrs. Flores left at 12:30 p.m.)
Mr. Oliver noted that reducing the indebtedness is vital especially if there is a possible
recommendation of increasing tuition and fees or the tax rate. Dr. Tyler noted that the
financial advisors could provide an overview of options available in regards to cash and
cash equivalents.
Mr. Austin noted that the Board set a reserve policy of ten percent; however, he is not
certain that this amount is sufficient; therefore, lowing debt services is adequate but he
recommends taking advantage of new technologies to reduce costs.
Mrs. Sane announced that the next budget workshop will be held on Tuesday, August 24,
2010 at 10:00 a.m.
ADJOURNMENT
With no further business coming before the Board, the meeting adjourned at 12:37 p.m.
Minutes recorded, transcribed & submitted by:
Sharon Wright, Manager, Board Services
Minutes Approved as Submitted: