Agency: Capital Budget

Line Item: Capital Improvements

Function

Capital improvement projects are defined as costing less than $2,500,000 to improve an existing facility, or less than $500,000 to construct a new facility. These projects are sometimes refered to as "Alterations, Repairs and Improvements' (AR&I). Capital improvement funds may not be used for program equipment or routine maintenance.

Capital improvements must be funded before any new capital development project can be approved. During the 2001 General Session the Legislature increased the minimum improvement funding formula from 0.9 percent to 1.1 percent of the replacement value of all state buildings. As revenue projections went unmet in FY 2002 and FY 2003, the Legislature amended statute to allow for more flexibility. The change allowed the Legislature to fund the program at the original 0.9 percent level during times of budget deficits.

DFCM's Facility Condition Assessment Program has identified $250 million in 'immediate' repair needs to buildings and infrastructure, and $1.3 billion in needs over the next ten years. Even though funding for capital improvements will almost always climb to new highs each year due to inflation and new facilities coming on line, it alone cannot address all issues, since many facilities have significant problems. Nearly forty percent of Utah's facilities are over twenty-five years old.

Some maintenance backlogs are eliminated through renovations or replacements of older buildings. Therefore the Legislature has focused on using capital development funds to replace aging and worn space that is contributing to the existing backlog. This helps the state's bond rating, and recognizes the fact that capital improvements alone cannot alleviate the maintenance backlog.

Utah's system of funding capital improvements based on a percentage of replacement value is a nationally recognized way of keeping pace with growing needs, though it cannot eliminate the backlog of 'immediate' needs by itself. Utah is not alone in carrying large backlogs, but we address them in a timelier manner than many states due to the capital improvement program.

Intent Language

The Legislature intends that, of the funds provided by Item 55 of Senate Bill 1, State Agency and Higher Education Base Budget Appropriations (2008 General Session), the State Building Board direct $1,000,000 in addition to the proportionate share to improve National Guard armories. (House Bill 2, 2008 General Session.)

DFCM set aside $1,000,000 for statewide armory upgrades as required by the intent language, in addition to another $1.8 million allocated for targeted armory projects.

Funding Detail

As construction costs have escalated since FY 2005, so too has the replacement value of the state's buildings, which in turn has led to large funding increases to this line item. Funding increased from $44 million in FY 2005 to $73.1 million in FY 2008. A budget deficit in FY 2009 led the Legislature to reduce the FY 2009 appropriation by $15 million, from $82.8 million to 67.8 million.

Since more than half of the square footage owned by the state is in higher education, over half of all capital improvement funding goes to projects that benefit higher education and the Utah College of Applied Technology. In FY 2009 the Building Board approved $46 million for higher education improvement projects (later reduced to $37 million in the 2008 Second Special Session). This is money that is not always accounted for in considering state support of education even though students benefit directly from the program.