MEETING OF THE
STRATEGIC PLANNING COMMITTEE
OF THE BOARD OF TRUSTEES
HOUSTON COMMUNITY COLLEGE
May 14, 2010
Minutes
The Strategic Planning Committee of the Board of Trustees of Houston Community
College held a meeting on Thursday, May 14, 2010, at the HCC Administration Building,
3100 Main, 2nd Floor, Seminar Room A, Houston, Texas.
COMMITTEE MEMBERS PRESENT
Richard Schechter, Committee Chair
Bruce Austin, Committee Member
Mary Ann Perez, Committee Member
Neeta Sane
Yolanda Navarro Flores
ADMINISTRATION
Mary S. Spangler, Chancellor
Art Tyler, Deputy Chancellor/COO
Doretha Eason, Executive Assistant to the Chancellor
Renee Byas, General Counsel
Charles Cook, Vice Chancellor, Instruction
Margaret Ford Fisher, President, Northeast College
Fena Garza, President, Southwest College
OTHERS PRESENT
Kim James, System Counsel, Bracewell & Giuliani
Clarence Grier, Financial Advisor, RBC Capital Markets
Barron Wallace, Bond Counsel, Vinson & Elkins
Karun Sreerama, Master Planner, ESPA
Other administrators, citizens and representatives from the news media
CALL TO ORDER
Mr. Schechter called the meeting to order at 11:36 a.m. and declared the Committee
convened to consider matters pertaining to Houston Community College as listed on the
duly posted Meeting Notice.
Mr. Schechter apprised that the committee was appointed by the Board Chair to review
financing issues relating to construction, real estate and maintenance. He noted that the
focus of the meeting was to review the immediate needs and apprised that the
committee would make a recommendation to the full Board.
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Strategic Planning Committee – May 14, 2010 - Page 2
Mr. Schechter apprised that options for funding the immediate projects are available;
however, a decision to do nothing could risk a reduction in the bond rating.
Mr. Schechter presented the Committee with an Executive Summary that was provided
by the Financial Advisors regarding funding options and strategic planning of capital
projects. He noted that there is approximately $26 million in construction and acquisition
needs as well as system-wide maintenance and repair costs. Mr. Schechter asked Dr.
Tyler to provide an overview of the funding needs.
ALIEF PROJECT – EARLY COLLEGE HIGH SCHOOL AND PARKING LOT
Dr. Tyler apprised that the Board approved approximately $13 million to build the Alief
Early College High School and parking lot. He noted that the Board also approved the
purchase of the Planned Parenthood and Rosalie properties. He informed that the
resolution allows for refunding of the cash utilized for these projects; however, the
funding must have two separate mechanisms and asked Barron Wallace, Bond
Counsel, to elaborate.
Mr. Wallace apprised that the Public Facility Corporation (PFC) could not be used if the
project has not yet been purchased.
Mr. Schechter inquired if revenue bond notes could be used for Alief. Mr. Wallace
informed that using revenue bonds is an option.
Mr. Schechter asked the total amount that the cash equivalent reduction by the end of
August if the projects are funded through cash. Dr. Tyler noted that it would be
approximately $17 million.
PLANNED PARENTHOOD PROPERTY
Mr. Schechter asked Dr. Tyler to elaborate on the renovation project for the Planned
Parenthood building. Dr. Tyler noted that the renovation cost would be $3 million;
however, the project would alleviate $600,000 in annual lease costs at 811 Dallas and
would also provide additional parking for students. Dr. Tyler noted that the total payback
on the building without any additional enrollment would be approximately $12 million.
Mr. Austin noted that debt service would be approximately $295,000 monthly, which
would be more economical. Dr. Tyler noted that the cost for acquisition of the funds is
approximately $1.5 million.
Mrs. Sane asked if the maintenance of the building is included. Dr. Tyler noted that the
building adds approximately 60,000 sq. ft. and noted that there is currently a cost for
maintenance on the current leased space at 811 Dallas.
Dr. Tyler noted that one building will be torn down and apprised that the goal would be
to build surface parking on some of the remaining space. Mr. Schechter asked if the
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Strategic Planning Committee – May 14, 2010 - Page 3
second building could be used in any capacity instead of tearing it down. Mr. Karun
Sreerama, Master Planner, apprised that he would recommend demolishing the building
under discussion.
Mr. Schechter summarized that the estimated cost savings for the college would be
$300,000 annually and will provide additional parking for students at HCC Central.
ROSALIE PROPERTY
Dr. Tyler provided an overview of the property projects. He noted that the settlement
has been completed on both properties. He noted that the goal was to acquire the
property for mixed-use purposes and to place a power plant on it in the event there are
other incidents similar to Hurricane Ike.
(Mrs. Flores arrived at 12:05 p.m.)
Mrs. Sane referenced the acquisition of land and asked for the timeline and
development cost. Dr. Tyler apprised that the Board approved a maintenance project
under Chevron that would generate sufficient revenues; however, other alternatives
have not been decided.
Mr. Schechter noted that the inquiry is not a portion of the financing issues under
discussion and reiterated that the purpose of the meeting is to address funding needs
for the noted projects. Mr. Schechter apprised that the Financial Advisors have advised
that if no action was taken, the college could risk a decrease in the bond rating.
Mr. Austin summarized that the discussion relates to three projects (1) Alief Early
Challenge High School, (2) Planned Parenthood Building, and (3) Rosalie Properties.
ESTIMATED MAINTENANCE COST
Mr. Schechter asked Mr. Sreerama to provide an overview of the $26 million in
maintenance cost. Mr. Sreerama apprised that the maintenance includes buildings that
need attention and provided Year 1 Deferred Maintenance Costs by College as of May
2010. He noted that there may not be any buildings that need immediate action;
however, maintenance should not be prolonged until next year. He noted that the
objective is to be proactive as oppose to waiting, which would run the risk of having to
close the buildings for repairs.
The following projects were discussed:
•
Angela Morales Building (Southeast College)
Mr. Schechter expressed concern that the replacement cost is approximately
$2.7 million and the cost for repairs is estimated at $525,000. Mr. Sreerama
apprised that the information on the spreadsheet regarding the cost to replace
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Strategic Planning Committee – May 14, 2010 - Page 4
the building is incorrect. Dr. Tyler noted that his calculations at $275 per sq. ft. for
construction would be approximately $17.8 million to replace.
•
Gulfton Center (Southwest College)
Mrs. Sane asked about the plans for the Gulfton Building. Mr. Sreerama noted
that the replacement cost is greater than the cost to renovate.
•
Northline (Northeast College)
Mrs. Flores apprised that the Pinemont lease will expire next year and noted that
consideration must be given to identifying a replacement location. Mr. Schechter
noted that consideration will be given to the concern in the near future; however,
the current discussion is the previously mentioned issues.
•
San Jacinto (Central College)
Mr. Schechter asked how much of the $12 million for the San Jacinto building
would be absolutely required. He requested that administration review the San
Jacinto building to determine the necessary costs for the building to remain
operational this year.
•
JBW Building (Central College)
Mr. Schechter requested additional information regarding the building and
renovation costs. Mr. Sreerama noted that the building will need an elevator and
other ADA requirements. He noted that the majority of the cost is for mechanical
and electrical costs.
Mrs. Sane asked if the trailers at the Stafford campus are part of the list and asked how
the conditions would be addressed. Mr. Sreerama apprised that an assessment was
completed; however, it was his understanding that the trailers would to be disposed.
Mrs. Sane requested an assessment for Stafford.
Mr. Schechter noted that if action is to be taken regarding the funding needs, it needs to
be done by May 30, 2010 to prevent a decrease in the bond rating.
Mrs. Perez requested a breakdown on the costs for the Southeast buildings.
(Mrs. Flores and Mrs. Sane left at 12:58 p.m.)
FUNDING OPTIONS
Mr. Grier elaborated on the funding options available to address the immediate needs.
Clarence Grier, Financial Advisor, apprised that the funding could be completed with
revenue bonds or through the Public Facility Corporation (PFC).
Mr. Austin recommended possible adjustments in non-necessary budgetary allocations.
Dr. Tyler noted that there is a positive return on the investment with alleviating the 811
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Strategic Planning Committee – May 14, 2010 - Page 5
Dallas lease. He noted that the realized savings could be used to buy down the cost of
the debt.
Mr. Schechter inquired what would be the reason for utilizing revenue bonds or going
through the PFC as opposed to using only bonds.
Barron Wallace, Bond Counsel, apprised that there are certain coverage requirements
regarding revenue bonds and noted that the PFC allows for more flexibility.
(Mr. Austin stepped out at 1:19 p.m.)
Mr. Grier noted that the project fund amount options are $78 million ($26 million for
immediate necessary maintenance and an additional $52 million for other future
maintenance projects); however, there is a disadvantage in drawing down funds that will
not be used immediately.
Dr. Tyler noted that if the interest increases one percent, the cost would be
approximately $1 million. He noted that the option of increasing the draw provides the
flexibility of completing other projects. Mr. Grier noted that the first year could be interest
only.
Mr. Schechter mentioned that a 5% reduction for state appropriations and 5% reduction
in tax collection could possibly be required. Dr. Tyler noted that 5% reduction has
already been taken out of the budget. He noted that these funds are normally used for
maintenance fees.
Dr. Tyler informed that revenue can be generated from using the Alief Early College
facilities for additional class space in the evenings. He noted that with four hundred
students, approximately $1.3 million dollars would be generated with a net profit of
$425,000. He noted that revenue could also be generated by increasing the average
class size in that increasing the average class size by one student would generate $4.5
million dollars in net revenue.
Mr. Austin requested an econometric model on the addition of students.
Dr. Tyler noted that the goal is to increase the average class size to 23 students and
noted that if accomplished, $12 million could be generated.
Mr. Austin noted that his recommendation would be to expand the college’s market
share and diversify. Dr. Tyler noted that this is one of the options to possibly expanding
services and products offered. He noted that each option could be reviewed for
presentation to the Board.
Mr. Austin noted that it would be good to show the Board that the goal is not only to
spend funds but to bring in revenue as well. He noted that there should be a review of
the highest and best ways to sell services.
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Strategic Planning Committee – May 14, 2010 - Page 6
Dr. Tyler also apprised that the Cost Savings/Revenue Plan developed by the
Chancellor is another option for reducing the costs.
Mr. Austin noted that he would like to see a benchmark model of what other community
colleges are doing across the country.
Mr. Schechter recommended that the administration provide a one page summary on
what is needed and the recommendation for covering the cost. He noted that it should
only include immediate needs.
Mr. Schechter noted that the committee must decide on if the recommendation to the
full board is $26 million or $52 million in funding for maintenance. The Committee
concluded that the recommendation to the Board should be approximately $78 million,
which would include the $26 million for immediate purchases and $52 million for
maintenance.
Motion – Mrs. Perez and Mr. Austin seconded to recommend issuance of certain debt
obligations, including public facility bonds, revenue bonds and maintenance tax notes to
fund immediate System District projects including but not limited to (a) Alief Parking
structure and Early College High School, (b) certain real estate and facility acquisitions;
and (c) deferred maintenance projects, in an amount for net proceeds not to exceed $80
million. The motion passed with a vote of 3-0.
With no further business, the meeting adjourned at 1:57 p.m.
Minutes recorded, transcribed & submitted by:
Sharon R. Wright, Manager, Board Services
Minutes Approved:
June 29, 2010