Minutes of the
NIU Board of Trustees
FINANCE, FACILITIES AND OPERATIONS COMMITTEE
June 6, 2001

I would like to welcome you to this meeting of the Finance, Facilities and Operations Committee, the Chair said.  As you have seen, we have a full agenda, including the following action items:  capital projects involving campus street resurfacing, Family Violence Center site and utilities and Holmes Student Center roof replacement; and agreements and contract renewals including Fiscal Year 2002 NIU Foundation professional services, Fiscal Year 2002 Northern Star printing, Fiscal Year 2002 waste management and utilities, Phase II performance contract for campus lighting upgrades, the Art Department lease renewal, and the TCF National Bank agreement; and the Fiscal Year 2003 budget guidelines.  Also, Chair Sanchez said, the Committee will receive information items and reports concerning transactions in excess of $100,000, active capital projects in excess of $100,000, periodic report on investments, Fiscal Year 2002 appropriated budget update, and a debt refinancing status.

Agenda Item 7.b. – Family Violence Center Site Improvements and Utility Extensions - Capital Project Approval
The university received a $2.7 million federal grant to provide a new Family Violence Center.  This building is already under design, Dr. Williams said, and construction is to commence in the next 45 days on a site just west of the convocation center on the West Campus.  However, the university must provide utilities to the site for the facility, because the federal grant only provides for the building itself.  Therefore, it is necessary for us to extend our utilities out to the building, he said.  The requested budget of approximately $3.4 million includes the $2.7 million from the federal government, and the difference of approximately $700,000 would be used to provide the utility extensions.  We should again thank Congressman Hastert, who was very much involved in allowing that grant to come to this institution, Dr. Williams said.  I would like to echo your comment about Speaker Hastert's efforts on our behalf, Chair Sanchez commented.  The Speaker is coming to Chicago next Monday, and I have on my list of things to do to again personally thank him for his support.  Let me add, Dr. Peters said, that in my first year as President, we have been blessed with public officials that support Northern Illinois University at the state level.  But at the federal level, no one could be a better friend to NIU than the Speaker of the U.S. House of Representatives.  I am so very pleased to see in the remapping that NIU remains in Speaker Hastert's district.  He is a true friend to this university and committed to higher education.  Chair Sanchez asked for a motion to approve the Family Violence Center site improvements and utility extensions.  Trustee Vella so moved, seconded by Trustee Skoien.  The motion was approved.

Agenda Item 7.c. – Fiscal Year 2002 NIU Foundation Professional Services Contract
Agenda Item 7.c. is a routine contractual agreement between the university and the NIU Foundation.  Under this agreement, Dr. Williams explained, the Foundation provides professional services in support of raising funds for the university.  This agreement has been in existence for at least 20 years.  Each year, the needs of our Development effort are evaluated and the university comes to an agreement with the Foundation.  The wording of this contract is "Not to Exceed $471,271," he stated. The exact amount, which will certainly be less, will be determined after we have had a full evaluation of the services and needs.  This gives me a chance, on behalf of the Finance, Facilities and Operations Committee, to toss in a thank you for the wonderful job the Foundation has done this past year, Chair Sanchez said, and we are looking forward to continued strong activities and successes.  I do not have to go back too many years to remember that the Foundation looked quite different and its performance was quite different than it is today, Trustee Boey said.  In years past, raising $500,000 in a year was a big time activity.  For NIU to succeed, the Foundation has to succeed.  So, we are certainly very appreciative of Mike Malone and Mallory Simpson, the Foundation Chair and all the committees for all their hard work.  It is not just a social gathering.  I sat in some of those committee meetings, he said, and saw the dedication those committee members had to go to work in order to raise the kind of money that this university needs to go forward.  The Chair then asked for a motion to approve the Foundation contract.  Trustee Boey so moved, seconded by Trustee Vella.  The motion was approved.

Agenda Item 7.d. – Fiscal Year 2002 Northern Star Contract Renewal
The Northern Star contract provides for the printing of the paper and is funded through the revenues generated by the Northern Star.  Trustee Vella mentioned that she thought the Northern Star was going on line.  Star reporter Josh Albrecht stated that they were on line and could be accessed at www.star.niu.edu.  The site was redesigned this past year by a student, Gary Norman, who is now working full-time on it.  It is a great page now, Mr. Albrecht said, and everything is up to date.  Chair Sanchez asked for a motion to approve the renewal of the Northern Star contact for FY02.  Trustee Skoien so moved, seconded by Trustee Boey.  The motion was approved.

Agenda Item 7.e. – Fiscal Year 2003 Budget Guidelines
The Fiscal Year 2003 Budget guidelines provide the framework by which the university will put together its budget requests to the IBHE, to the Governor and to the General Assembly for the operations for FY03, Dr. Williams said.  The priorities and the specific allocations of the budget are the result of reviews on the campus and decisions of the President on these issues. 

It is that time of year where we put our prospective budget guidelines together according to the guidelines we receive from the IBHE, President Peters said.  We remain committed to the salary package as our highest priority, and, again, we are asking for a six percent overall.  That was pretty much in line with the plan we had this year, four percent and one percent for critical faculty.  We will add another percent to that from our existing resources.  Also in our budget guideline preparations for this year, we must take into account the significant increase in utility costs.  During this year’s appropriation hearings, in both the Senate and the House, Dr. Williams, was singled out for high praise because of his practices in purchasing petroleum for our extensive motor fleet and bus service as well as natural gas at the wellhead.  Dr. Williams has informed me that we may not be able to get the kind of base prices per unit that we did last year, Dr. Peters said, and we will have to accommodate that in our budget this year.  So, there is a 20 percent increase in utilities to meet the demand.  We continue to work on our academic priorities and technology and distance education.  Obviously, at this point, he said, we are not sure exactly what the state budget is going to be, but we are going to proceed according to these guidelines and ask your approval.  Chair Sanchez asked for a motion.  Trustee Boey so moved, seconded by Trustee Vella.  The motion was approved.

Agenda Item 7.f. – Holmes Student Center Roof Replacement - Capital Project Approval
Bids have now been received for the Holmes Student Center roof replacement.  The bids are a little higher than we had originally anticipated, Dr. Williams said.  While the total bid could be covered under the existing budget, we would like to have a sufficient contingency in case we run into some unforeseen problems.  Therefore, we are asking to amend the budget from $447,000 to $511,600.  The funds will come from the repair/replacement reserve set aside for bond revenue facilities, he said, and we certainly have adequate resources there for this project.  The roof replacement will come with a ten-year warranty.  The design of our roofs has a great deal to do with that since they are flat and do not last more than seven to ten years.  We would get the maximum guarantee and warranty that we can get.  The current roof has lasted longer than ten years through many patching efforts to try to extend that period, Dr. Williams said.  I think ten is the usual warranty today, Trustee Boey said, but the expected longevity is beyond ten years.  Chair Sanchez asked for a motion to approve the Holmes Student Center roof replacement project.  Trustee Vella so moved, seconded by Trustee Boey.  The motion was approved.

Agenda Item 7.g. – Lighting Project Upgrades - Phase II Performance Contract
I am very pleased to again report to the Board that our efforts in pursuing the legislation that allows performance contracting on the university campuses has been a very good experience, Dr. Williams said.  We did a trial project in DuSable that turned out to be very successful.  We then followed that with a project involving 20 buildings.  That is underway now and is moving very successfully.  As a result, we are ready now to recommend to the Board Phase II of our overall upgrades.  Phase II includes 39 additional buildings for which a performance contract will be taken through an RFP process.  Just to reiterate, he said, we are not at risk regarding these improvements.  The contractor actually takes all risk, assuming a return relative to savings generated because of the improvements.  That savings amount is the amount by which they are paid, and the university will share in that once a threshold is met.  I will note, Chair Sanchez said, that when the DuSable Hall project was first suggested, I thought it was folly.  I did not think we could have these kinds of upgrades and have them paid through the savings.  You have proven it is not folly.  And to expand this to 39 more buildings is wonderful for the university.  I compliment you, Eddie.  I do not know who came up with the initial idea, the Chair said, but I think it is wonderful that we are benefiting from that kind of ingenuity.  Ken Pugh and Bob Albanese are the individuals who have been working with this, Dr. Williams said, and we are very pleased with the results.  With the issues involved in trying to raise additional revenue, Chair Sanchez said, to come up with creative ideas like this to address our needs is just wonderful, and I applaud you and the people that have helped implement this.  Chair Sanchez asked for a motion to approve the Lighting Project Upgrades-Phase II Performance Contract.  Trustee Skoien so moved, seconded by Trustee Vella.  The motion was approved.

Agenda Item 7.h. – Material Distribution Center Commodities, Parts and Supplies Bids
Dr. Williams stated that the Material Distribution Center agenda item was a routine item that provides for expenditure authority in the amount of $360,000 for parts for the university's Physical Plant area.  Chair Sanchez asked for a motion to approve the Material Distribution Center item.  Trustee Boey so moved, seconded by Trustee Vella.  The motion was approved.

Agenda Item 7.i. – Real Property - Lease for School of Art
This is a five-year lease agreement for the old Wurlitzer property.  The university has been utilizing this property for the School of Art for the last five years, Dr. Williams explained.  This provides an extension to that lease.  It will also provide additional space during the renovation of Altgeld Hall.  The terms and conditions of the lease include a three percent increase in the rate paid in previous years.

Trustee Skoien asked Dr. Williams if any consideration had been given to getting a cap of some kind on these types of leases, because the owners' costs are generally fixed and do not really increase with CPI.  In all of these leases, even where we lease property out ourselves, Dr. Williams said, we have a clause that allows some form of escalation.  We have not had to worry about it in recent years, but we will look at that as a possibility.  Chair Sanchez asked Dr. Williams if he would explain what they were referring to in this conversation about caps and CPI for those who might not know.  Dr. Williams stated that the Consumer Price Index is a way in which the marketplace measures the general increase or decrease in the cost of goods and services.  Over recent years, he said, the CPI has been less than three percent per year, and that means that costs are not going up.  Those in the real estate business usually use factors of this type when they are trying to fashion leases and "hedge their bets" in long-term agreements.  In the leases for space that we enter into, Dr. Williams continued, we try to have some mechanism that will protect us if the cost of goods and services, in particular, utilities or the like, grow to such an extent that we need to have some relief in the lease itself.  Chair Sanchez asked for a motion to approve the real property lease for the School of Art.  Trustee Boey so moved, seconded by Trustee Vella.  The motion was approved.

Agenda Item. 7.j. - TCF National Bank Agreement
The Board of Trustees entered into an agreement with TCF National Bank that provides for banking services on the campus, including ATM’s positioned across the campus.  The first five years of this agreement have been completed, Dr. Williams said, and the experience has been a very good one.  It has been reported to me by Ms. Shinham that the bank has been very supportive of NIU in many aspects of our operation and support and that our students really appreciate the service.  NIU is given, under this agreement, a certain dollar amount per every account opened by our students at this site.  TCF pays rent for space in the building as well as for the ATM’s.  I think it is a positive for the operation of our Holmes Student Center as well as a positive for our students, he said.  Dr. Williams stated that the university requested approval of this five-year renewal option negotiated in the initial contract.  Chair Sanchez asked for such a motion.  Trustee Skoien so moved, seconded by Trustee Boey.  The motion was approved.

Agenda Item 7.k. – Waste Management and Utilities Amendment to FY01 Contract Removal of Waste and Recycling Materials from NIU Campus
Dr. Williams reported that waste management and utilities was originally a presidential approval item under $250,000.  This item is an amendment to the existing contract, which extends it beyond the presidential approval level.  It is for the current year, he said, and we ask your concurrence on the amended budget of $290,000.  In response to a question from Trustee Boey, Dr. Williams commented that this request was the result of a combination of price increase and volume.  I think that the Board should be prepared to start seeing contracts that involve vehicles, such as the Waste Management contract, to start reflecting the higher fuel rates, he said.  Chair Sanchez asked for a motion approving the FY01 amendment to the waste management and utilities item.  Trustee Vella so moved, seconded by Trustee Skoien.  The motion was approved.

Agenda Item 7.l. – Waste Management and Utilities Amendment to FY02 Contract Approval for Removal of Waste and Recycling Materials from NIU Campus
Agenda Item 7.l. is the Fiscal Year 2002 contract for waste management.  As you can see, Dr. Williams said, we have escalated that amount to an estimate of $350,000.  Obviously, we will hope the actual costs will come in under that number.  Chair Sanchez asked for a motion to approve the FY02 contract for waste management and utilities.  Trustee Boey so moved, seconded by Trustee Vella.  The motion was approved.

Agenda Item 7.m. – Fiscal Year 2002 Salary Increment Allocation Guidelines
The salary increment guidelines used to allocate salary increments for any given fiscal year is a routine item required by Board Regulations, Dr. Williams said.  This year we delayed bringing the guidelines to the Board due to the uncertainty of what would happen to the recommendation in the legislative process.  Fortunately, we are very pleased to report that the six percent salary increment the President submitted and argued through the legislature was retained through the process.  As a result, Mr. Cunningham and his staff, working with the senior cabinet of the university, have refined and prepared the allocation guidelines by which that salary increment will be allocated throughout the campus, and this process has begun. 

This was an information item in the Academic Affairs Committee meeting this morning, President Peters said. The higher education budget was passed by the General Assembly recently, and the gubernatorial signature is expected before July 1.  This is perhaps one of the best budgets that higher education has received in the state of Illinois, even in view of the economy, which is not as strong as it was last year and revenue projections have not been as good.  I am particularly pleased that our top priority, and my top priority, he said, which is salary for faculty and staff at the level of four percent for base merit and an additional two percent of which one percent is contributed by our own funds for the retention of critical faculty and staff, has passed.  It is a very good thing that the legislature did and the Governor recommended.  And I appreciate the support of the Trustees and others and our lobbying groups, the President said, in getting this passed.  This is very good because critical faculty and staff are at the heart of a great university.  Chair Sanchez asked for a motion to approve the FY02 Salary Increment Allocation Guidelines.  Trustee Vella so moved, seconded by Trustee Boey.  The motion was approved.

Agenda Item. 7.n – Auxiliary Facilities System Debt Approval and Authorization to Proceed
This is a follow up of the item that was brought before this committee at our last meeting, Dr. Williams said.  At that time, we asked the Board for authorization to review and investigate the potential for refinancing our debt.  We have engaged underwriters, underwriter counsel and bond counsel to assist us in evaluating the market and evaluating our debt to see if restructuring would be advantageous, he said, and we are still in the process.  The recent reductions in interest rates have been welcome and certainly make refinancing even more attractive.  We are still evaluating that, but we are getting to the juncture where we believe there may be another slight reduction by the federal government, which might give us the threshold we need.  In order to have the necessary resolutions in place if the market allows, this recommendation requests approval of resolutions that would allow the refinancing to proceed, but subjects that approval to the final review and concurrence of the Chair of the Board of Trustees as well as the Chair of the Finance Committee in conjunction with the approval of the President and of the Treasurer of the Board.  So, there still will be another look at this from the Board's perspective before we make a final decision to move forward, Dr. Williams reported.

In addition to the basic resolution, he continued, we are also requesting an addendum which provides for an amount not to exceed $5 million for revenue that would be available to pursue improvements in the West Campus area as well as to existing bond revenue facilities.  This is just another strategy we want to bring to the Board for approval in the event that the economic and financial advantages are in place to allow us to shape the refinancing in order to achieve this end.  These will be 30-year bonds.  We have done refinancing before, Trustee Boey commented, and it is certainly sensible to do it now given the way interest rates are dropping.  That is correct, Dr. Williams said.  Some of our bonds cannot be refinanced because of the bond covenant, so it is a question of looking at the entire debt, going through and determining which it is economically feasible to refinance and then putting everything into a summary form and looking at the bottom line.  In reply to a question from Trustee Skoien, Dr. Williams replied that the underwriter for this refinance is Griffin, Kubrik, Stevens and Thompson.  What we do in these cases, he said, is go through a competitive RFP process and do an evaluation of the proposals based on their experience in dealing with higher education, their experience in the market itself and their reputation.  Through that process, we try to identify those vendors that provide us with the best service for the dollar requested.  It is not driven just by low bid but by a full evaluation of the vendor.  Chair Sanchez asked for approval of the base resolution as well as the addendum to the resolution.  Trustee Boey so moved, seconded by Trustee Skoien.  The motion was approved.

Legislative Update
Dr. Williams asked Ms. Kathy Buettner to give a legislative update as well as an update on the Fiscal Year 2002 budget request.  Before I begin, Ms. Buettner said, I would like to add my personal thanks to the staff here at Northern and to each and every Trustee.  I have probably called you more than you want to hear from me in the last three months.  It has been very helpful to me, and I appreciate all the time you have taken out of your personal schedules to help us pass this budget in Springfield.  This has been a very arduous budget year, but we have very good things to report.

As you just heard, Ms. Buettner continued, it is a very good budget for NIU.  We are very pleased with the General Fund side of the equation.  In general, public universities statewide received a $1.5 billion allocation out of the General Funds in Springfield, an increase of nearly $87 million over FY01.  This is the largest dollar and percent increase in General Fund appropriations for public universities during the last decade.  This allows us to fully participate in the Board of Trustees biggest priority, she said, the salary program that the President outlined earlier.

Overall, from a statewide perspective, the budget approved by the General Assembly included $2.7 billion in General Funds for higher education operations and grants, which was an increase of $157 million, or 6.3 percent over FY01 appropriations.  We ended up going back to the Board of Higher Education’s recommendations.

Those of you who were at the Committee meeting in March heard that the budget levels had dropped slightly in the Governor’s allocation for actual expended dollars at the university level, Ms. Buettner said, although the number was larger in terms of appropriations to higher education because of the additional costs in the health insurance fund for higher education employees.  At the end of session, the $23 million originally set aside in the Governor’s budget for this issue was reduced to $14.8 million, which allowed a return to the Board of Higher Education’s levels of funding, giving a net increase of 5.7 percent, or $142 million statewide for all of higher education.  The universities received $87 million of that.  When the Governor first ran for office, he pledged to set aside 51 percent of all new revenues.  That was especially important this year, since it was a tighter budget year than we have had in the last two or three years in Springfield, in large part due to the economy.  Estimates indicated that there would be $900 million in new revenue growth statewide this year.  So, the Governor and the legislative leaders agreed to hold $460 million of that $900 million in reserve for educational purposes, and we are very grateful for that.  The code agencies did not fair quite as well as the universities did, in large part due to that commitment the Governor and the legislature made to put 51 percent of all new revenue into education in general.

In a comparison of the NIU Board of Trustees budget request, the IBHE recommendations, the Governor's recommendations and the final FY02 appropriation, Ms. Buettner said, an itemized list with cost and salary increases broken out, shows the budget breakdown.  Let me point out that this is the first time since I began working here at Northern in 1995, that we actually ended up with any utility increase whatsoever, she said, so we are very pleased to get three percent for utilities this year as well as three percent for the library.  Deferred maintenance, a very high university priority, stayed flat at $291,000 in General Revenue, and we are grateful for that support.  Most of you know that Dr. Williams works very industriously during the year to get that number up, Ms. Buettner said, and usually our deferred maintenance is significantly higher than just our General Fund support at the end of the year.  So, this is what the state is actually putting into deferred maintenance on an annual basis at Northern; but there is a lot of other funding that goes into that as well from other programs.  Earlier this year, Interim Provost Waldeland highlighted the importance of enhancing our science and math curriculum and establishing a writing center.  Funding was established for both projects as a result of the passage of this budget.

Finally, Ms. Buettner said, I wanted to point out a couple of other things.  Last year, I reported that the university had received the first year of a three-year commitment for a grant to open the legal aid clinic in Rockford named after Trustee Giorgi Vella's father, Zeke Giorgi.  We were very excited to do that, and we received the grant in a roundabout way last year.  This year we were able to get the grant directly appropriated to the university and sidestep the Department of Commerce and Community Affairs (DCCA), which was helpful from a management and operations perspective.  Our budget was lump summed again this year except for this particular grant.  We are very pleased and looking forward to even further enhancing that center as a result of these funds.

Two other issues I wanted to bring to your attention, Ms. Buettner said, that were not on this chart are some issues that fall under NIU's participation in the Venture Tech program that the Governor talks about.  We are participants in two major consortia statewide, both through the Physics program.  The first is the APS, Advanced Photon Source Consortium, based at Argonne.  Northwestern University is the lead agency and the University of Illinois, Northern Illinois University, the University of Chicago and Southern Illinois University make up the five universities involved in that consortium.  The second consortium is ICAR, the Illinois Consortium for Accelerator Research, which is run out of Fermilab.  I have been working with Northern's Physics program since I began working here on the APS, and we started ICAR last year.  The lead agency on that project is the Illinois Institute of Technology, and the University of Illinois at Urbana-Champaign, Northwestern University, the University of Chicago and Northern Illinois University are involved in that program as well.  These are very important consortiums, and we have been able to educate the policy leaders in Springfield over the years about the advantages of the research not only for the universities and for Illinois, she said, but for the nation as a whole.  The APS program received $3 million to fund its fourth of a five-year commitment, and ICAR received $2.5 million to fund its second of a five-year commitment.  When these two grants are added together, Northern's share is a little over $1 million a year for the research going into those two programs.  They are very important to the university and indicate our participation in the venture tech program as well.  In the last couple of weeks, they disappeared; so, we had to work aggressively with our colleagues to get them back into the budget, she said.

In concluding my remarks, Ms. Buettner said, the other issue I wanted to point out was my work with the Dean of the Graduate School, Jerry Zar, on enhanced funding for the Consortium for Educational Opportunities.  This is a minority graduate program that encourages minority participation in graduate level instruction statewide.  It has been in existence for years but has not been very well funded.  This year, with the leadership of Rep. Judy Erwin, Rep. Dave Wirsing on the Higher Education Committee in the House, and the Board of Higher Education, we were able to increase that funding by almost 25 percent.  We think this will be a very positive thing long-term for higher education and minority enhancement and opportunities.

On the capital side, Ms. Buettner reported, we are very pleased to report that we have received commitments for NIU's top two priorities, the chiller funding and Altgeld Hall, that will be funded out of the rather large discretionary funds available in the budget that was passed last week.  There is significant funding in each caucus available and also at the Governor's level.  We have received very strong multiple commitments to take care those two projects.  Again, she said, I want to thank the Board for all their help on that.

I would like to comment just a bit here, President Peters said.  If you look at this spreadsheet from a programmatic perspective, he said, what a wonderful budget this is, because we do have library increases back in and increases in utilities, but that salary figure is going to help us tremendously.  Then look at the programmatic aspects, what we are going to be able to do for our Writing Center and these other activities.  I called our new Provost, Ivan Legg, in Memphis, to give him a blow-by-blow of this budget, and I understand where he was coming from because I came from the same state he is now leaving, where we had seven years of flat budget.  When I went through this, I heard nothing on the other end of the line, so I said, Ivan are you still there?  He could not speak.  He was just so elated that we are going to have this injection of funds.  Also, I want all the Trustees and the NIU community to know that this does not just happen.  It takes the work of all of us, and I am appreciative of the Trustees.  But in my many years of experience and lobbying, the President said, we have the best Government Affairs staff here at Northern that I have ever worked with, led by Kathy Buettner and Ken Zehnder and our contract lobbyist, Craig Burghart.  I want to personally thank you and your staff, Kathy, for what you have done.

For those of you who do not know how physically taxing Kathy's job is, Trustee Boey said, during this long season, she suffered the same shoulder injury that professional baseball pitchers suffer.  My point in bringing it up is that throughout all this – and this is so typical of the staff we have, Kathy is just one example – even though she was physically disabled, her left arm was still dialing the telephone, calling each one of us and calling whoever else here and in Springfield.  But, I want to echo what President Peters said about Kathy and the rest of her staff, because I know the rest of you have worked through the same kinds of problems, whether physical or fatigue.  Thank you for the great job you have done in seeing NIU through, Trustee Boey concluded.  This is a chance to thank all of you.  I think that reflects the sentiments of the entire Board, Chair Sanchez agreed.  Our thanks go to Trustee Boey and President Peters, who put it so well.

Respectfully submitted,

Sharon M. Mimms
Recording Secretary