Alan Freeman is director, planning, design, and construction, at San Jose State University, San Jose, California. He is president of the Society for College and University Planning and can be reached at email@example.com.
Traditionally, capital funding for state and private institutions has followed a very staid and predictable path. For the public institution this path is mainly the use of state obligation bonds. These bond measures are always at the whim of the voters and are not, by any means, a sure and steady source for capital funding.
Depending on the size of the state's public higher education component, the bond measures are generally not substantial enough to support all the needs, not to mention wants, of the state institutions. Furthermore, these scarce resources not only have to support the capital construction of the projects but are also utilized for planning and design.
In addition, many states utilize these bonds to support the mitigation of hazardous material within facilities, telecommunication projects, and seismic upgrades. In addition, all renovation projects are drawn from the same fund source. All these projects drain the funding pool to the point where many campuses wait up to ten years to see a capital project come to fruition. Thus, it makes it difficult for a campus to meet its capital need, in a reasonable time period, especially during growth periods on the campus.
Private institutions must rely on capital funding campaigns. With the exception of the few major, well endowed private institutions, this is a difficult and onerous process. The cost for facilities to remain at the cutting edge of technology and attract the quality faculty and students that the campus desires can often be overwhelming.
Because of the cost of construction, maintaining a current level of technology and providing platforms for new modes of information delivery by the faculty has brought about a great strain on funding capital projects for campuses across the country.
Tied with the above is another major factor facing institutions of higher education: the "second wave" phenomenon of new students and their impact in many states. That is, the children, and in some cases, the grandchildren of the Baby Boomers. In California, the impact of this second wave will have an enormous effect on the capacity of our higher education institutions. One way the state of California is coping with this phenomenon is to have the University of California System and the California State University System go to year-round operations. This reduces the need for additional facilities and better utilizes the state's existing facilities. This can solve only part of the growth problem. It cannot resolve the need to modernize, renovate, and keep up with technology. Those problems remain.
Value of Land
How then can an urban campus identify the needed capital resources that are required to meet all the current demands and strains on the campus. One answer lies at the very foundation of the campus-THE LAND! A campus often lists its assets in the traditional manner; its facilities, its equipment, its faculty, etc. However, the one overlooked asset is the land upon which the urban campus is built.1 Depending on the actual location of the campus, with respect to other urban activities, this land has varying degrees of value.
The value of the land is, of course, closely related to the proximity of the campus to the urban core. The closer the parcel to the core the greater the value of that parcel. Distance to the core location may be mitigated by the connectivity to the core. In urban geography the land values on a diagrammatic basis often take the shape of a spider web with the main corridors of transportation increasing the value of the land along that corridor, even as one moves away from the central business district.
Secondary land value peaks occur at points away from the core but in secondary business/retail parcels. Again, these secondary peaks are always associated with transportation corridors.
An institution in close approximation to the core often provides a transition zone between residential zones and the central urban core itself. This locational aspect is not unique to universities but is shared by many urban institutions. There can be a symbiotic relationship between the university and the core. Many of the graduates of an institution in the field of business and engineering are often employed in corporations located near, or in, the core.
San Jose State University is located immediately to the east of the central business district (CBD) of the city of San Jose. The university employs approximately 3,000 faculty and staff and has an enrollment of approximately 27,000 students, making it the fifth largest campus in the California State University System. It is the single largest employment center within the CBD of San Jose. San Jose is the third largest city in California and the eleventh largest in the United States. Most people recognize San Jose as being in the heart (or as city officials like to refer to the city as the capital) of "Silicon Valley."
Between 1989 and 1994 San Jose received approximately $15 million in state bond funds for capital construction. Most would agree that this is not an exorbitant amount to spend on a campus for renovation, growth, and technology over a five-year period. Between 1995 and 2000 a major jump occurred in the state capital allocation to the campus. This was combined with a number of donor-funded projects. As can be seen in Table 1, the campus realized close to $100 million in capital projects.
San Jose State University Capital Projects, 1995-99
|1995||Garage Access Improvements $525,000|
|Energy Mgmt. System $154,000|
|Fire Alarm (Campuswide) $65,000|
|Wahlquist Life Safety $1,759,000|
|Falling Hazards Mitigation $307,000|
|MacQuarrie Hall Asbestos Abatement $1,700,000|
|1996||Pedestrian mall Landscaping $3,750,000|
|Boiler Retrofit $1,000,000|
|MacQuarrie Hall Asbestos Abatement $1,660,000|
|1997||Morris Daily Seismic Upgrade $941,000|
|1998||Duncan Hall Seismic Upgrade $2,220,000|
|Sweeny Hall Seismic Upgrade $798,000|
|Infrastructure Improvements I $28,090,000|
|Stadium Widening * $2,014,000|
|1999||Business Classroom Renovation ** $19,217,000|
|Child Development Center * $3,060,000|
|Wahlquist Demolition / Relocation $25,000,000|
|New University Police Department* $4,648,000|
|Bike Enclosures* $220,000|
|Campus Gateways* $1,411,000|
|Bldg. BB $600,000|
|Baseball Field Improvements * $400,000|
|Total 1995-99 $99,539,000|
Two projects, infrastructure improvements I and business classroom renovation accounted for almost one-half of the funded projects. A third project associated with the new joint library project (Wahlquist demolition and relocation) accounted for an additional quarter of the funding. This was a major shift from the previous five years. In the year 2000, additional funding in the amount of $57 million was realized for the construction of the library. Finally, an additional $19 million will be allocated to the campus in 2003 for the secondary effect (renovation of the old Clark Library) of the joint library project.
However, the university still needs to provide single occupant offices to the faculty, improve outdated classrooms, make technology on campus reflective of its location, and prepare for the wave of new students entering the higher education community of California. Table 2 is a list of projects that the university would like to undertake in the next ten years to meet its programmatic needs. This does not include the housing project now in the design phase that will replace the existing 2,100 beds with a total of over 5,000 beds-funded through bond sales from a 501(c)3.
The estimated cost of the housing project is over $600 million. The combined estimate for the projects listed in Table 2 is approximately $600 million. How can San Jose State acquire funding for all these needed projects when it needs to share the resources of the state bond initiatives with 22 other California State University campuses, the University of California campuses, and the community college system for the state? The answer is simple. The campus will leverage the land upon which it is built.
The classroom/office development project is estimated at $400 million. It is this project that will pay for itself while at the same time generating revenue that can support the remaining projects listed in Table 2 or provide seed money for these projects to meet the university's programmatic needs.
Table 2. Projected Capital Estimated
|New Telephone System||$6,000,000|
|Historic Housing Renovation||$3,000,000|
|Spartan Complex Renovation||$19,643,000|
|Ducan Hall Renovation||$67,156,000|
|Art Building Addition / Renovation||$21,217,000|
|Performing Arts Theatre||$30,000,000|
Working with a real estate attorney on its joint library project, the university was advised of the potential value of its land within the city of San Jose. Although this is not a new concept for a campus, it is new with respect to a land-locked public urban institution.2 This is something that the university was somewhat aware of, but never realized the full potential as a source of capital funding.
San Jose is the heart of Silicon Valley, and the university lies adjacent to the core (See Map 1 ). Development is moving toward the university on the core's east side. A current city project in the design phase is the Richard Meier Civic Center located one-half block north of the campus. The city's light rail system is proposing construction of an alignment to the immediate north side of the university along San Fernando Street. In addition, Bay Area Rapid Transit (BART) is planned to be located below grade along the same street as that of the light rail. BART will connect San Jose directly to San Francisco and Oakland. Major corporations, such as Adobe, Netscape, and Abovenet have located in the core of San Jose.
It is along this major corridor, San Fernando Street, that the university is proposing a major classroom/office complex. The project calls for the development of approximately 1.8 million square feet of "Class A" office space. Class A office space is defined as a quality office complex of approximately 350,000 square feet that demands quality location, quality finishes and amenities and, as such, can demand the highest rents.
In addition, the project will generate over 500,000 square feet of replacement classroom/faculty office space. The total project cost will be approximately $620 million.
As the university reviewed the tenant space under construction in Silicon Valley, the same central theme seemed to appear with each corporate development. They were all developing a "corporate campus." Why not provide a true campus for these potential tenants with all the major campus amenities available to the corporation instead of creating an artificial campus. At the same time the university would replace a number of its older, tired buildings with new, state-of-the-art facilities. Instead of one-third of the faculty sharing offices, it could generate enough additional office space to provide each faculty member with his or her own office.
The rent paid by the tenant would be the source of income to retire the bonds needed to build this facility while at the same time generating enough revenue to use seed money or total project funding for many of the proposed university projects.
After discussing the concept at the vice president's facility group, the vice president took the concept to our president. The president agreed that the opportunities this project offered should be investigated further. One of the first actions taken was to undertake a "Development Master Plan." That is, the campus, working with its master plan consultant, reviewed the existing campus master plan and determined those areas on the campus that would be suitable for development while at the same time maintaining the integrity of the campus.3 The master plan consultant held several charrettes among the faculty and staff to receive input. Working with the Office of Planning, Design, and Construction, the "Development Master Plan" was formulated that identified those sites on campus suitable for development (See Map 2 ). In addition, the university's 5,000-bed housing project was included in the master plan. This document then was prepared and incorporated into an Environmental Impact Report (EIR) in compliance with the California Environmental Quality Act (CEQA).
Concurrent to the work on the EIR a developer was selected following interviews with six California developers. The team now consisted of the vice president for administration and finance's facility group, the real estate attorney, and the developer. Once the developer was selected, a Request for Qualification (RFQ) was prepared in order to select an architect for the initial design of the classroom/office complex. After reviewing the RFQs and interviewing a short list of firms, a major architectural firm from San Francisco was selected as the shell architect. Working with the team and the master plan consultant, it was decided that the project could sustain approximately 1.8 million square feet of tenant office space distributed in five "Class A" buildings and over 500,000 square feet of replacement classroom/faculty office space, for a total of 2.3 million square feet of new construction.
A pro forma was developed in order to ascertain the feasibility of the project based on initial estimates and revenues. The project used an estimated lease rate slightly below that of the private sector market. This proved to be a viable pro forma budget and the team proceeded. The budget was such that the university-by selling bonds through an auxiliary arm of the institution, a 501(c)3-could construct the project and pay off the bonds in approximately 12 years. This would also provide a generator of funds for the university to use on other capital projects. Thus, the university would be able to leverage its land in order to strongly supplement the state's capital funding.
Numerous charrettes were conducted regarding the configuration and siting of the five buildings. In-depth discussions were conducted about the phasing schedule that would have to be implemented and a great deal of time and energy was devoted to the "parking problem" that would result from such a project. Scenarios and solutions were developed. The ideas were presented to the president and to the Faculty Senate in order that all the university community would be informed and included in the process.
The conceptual project was then presented to the trustee's of the California State University System in order to obtain approval to proceed on a feasibility study. Approval was given and the university, along with its team, proceeded on the project. However, the trustees wanted assurance that the project was affordable before allowing the university to proceed beyond the feasibility phase. The university was fully aware of its position and the indebtedness that it was obligating to the trustees. Based on this understanding, the university knew that it had to have a "tenant in hand" before proceeding into construction.
A tenant was identified. It was a major international corporation looking for a million square feet of contiguous space. Negotiations proceeded with the potential tenant. The tenant was very much intrigued with the idea of having a "corporate campus" located on a university campus. The ability to utilize the engineering and mathematics faculty along with the students was a major bonus for them. The location adjacent to the central city core was an exciting benefit.
Unfortunately for the university, the commercial real estate market in the Silicon Valley contracted in the first quarter of 2001. The tenant withdrew their initial offer. However, they emphasized to the university how extremely interested they were in the plan and would come back once the market turned around.
There is no doubt in anyone's mind that the concept of a shared tenant/classroom/faculty office space located on the campus is a feasible and exciting idea. The university is proceeding to develop a schematic design for the entire buildout in order to be ready to pursue possible tenants when the technology sector turns around in the market. It is the university's desire to build the 1.8 million square feet of "Class A" office and 500,000 square feet of replacement classroom/faculty office space. It is a strong idea whose time has come.
What lessons for an urban campus has this experience at San Jose State University provided that can be transferable to other urban institutions? Following are the most obvious points that an urban institution should consider:
The benefits of the experience for San Jose State University have been immeasurable. The university has gained a much stronger understanding of its own resources and potential funding opportunities as well as its potential to support capital projects. The university also learned quickly that a campus does not necessarily have the personnel to provide the expertise necessary to undertake a project such as described in this article. That is why it is imperative that the appropriate planning and design professionals be brought into the process early on. This means that the institution has to face some initial costs that could possibly be retrieved from the project once the project becomes reality.
As stated above, San Jose State University firmly believes that this project will become "real" once the technology market returns. The university will be ready to immediately proceed into the market with all initial planning, schematic shell design, and marketing in place.