Policy 71 - Capital Funding for Construction and Renovation Projects

Approved Board of Governors 2006.1

CAPITAL FUNDING FOR CONSTRUCTION AND RENOVATION PROJECTS

1.  Construction and renovation projects will be funded and managed in accordance with Policy 113, Policy on the maintenance, refurbishment, alteration, renovation, new construction, leased buildings.

2.  Every effort should be made to secure 50% of the funding of any project from external sources, either immediately or over time (e.g. ancillary revenues). Fundraising is not considered an external source until a pledge has actually been received.

3.  All costs for a new construction or for renovations to faculty space which meets University criteria and conditions which relate to space usage will be shared 50% by the Faculty and 50% by Central Administration. The cost of fit-ups as well as renovations to the shell space will be included in the costs.

4.  The amount which is not recoverable from immediately identified sources for the total project will be assumed to be a debt to be shared 50/50 with faculties. Any funds raised, which are not externally restricted for another purpose, will be used to reduce the debt on the same 50/50 basis.

5.  The project budget will include the cost of interest during construction. These costs are capitalized as required under Generally Accepted Accounting Principles.

6.  Financing will occur as expenses are incurred, once the project is approved. Once funded, the interest accruing on the debt and the repayment of capital will be charged as follows:

  a.  Interest on debt financing and on outstanding pledges: Central Administration

  b.  Capital repayment: 50% Central Administration, 50% Faculty

7.  Amortization of the debt incurred for construction and renovations will be calculated on a straight line basis and will be based on the ability to pay as well as the life of the asset, on a case by case basis. Guidelines for amortization schedules are included in Appendix A.

8.  It is understood that ancillary and self-financing services and programs will pay for 100% of construction and renovation projects.

9.  It is understood that services will pay for their construction and renovations based on their ability to pay, evaluated on a case by case basis.

10.  For projects exceeding $5M a preliminary project budget will be submitted to the Executive Committee of the Board prior to detailed design identifying the expected project costs and the expected sources of funding. A final project budget and funding proposal will be submitted to the Board of Governors for approval prior to issuing tenders for construction.

11.  For projects exceeding $1M and under $5M, a preliminary project budget will be submitted to the Executive Committee of the Board prior to detailed design identifying the expected project costs and the expected sources of funding. A final project and funding proposal will be submitted to the Executive Committee of the Board for approval prior to issuing tenders for construction.

12.  For projects under $1M, preliminary project budgets will be prepared and included in the annual Capital Budget submitted to the Board of Governors, for approval.

13.  Once a final project budget has been approved, it is expected that management will take the necessary action to bring the budget in on time and on budget. Progress reports will be provided at every meeting of the Executive Committee.

14.  To limit the extent of risk:

  a.  All projects will be fixed sum contracts unless otherwise approved by the Executive Committee of the Board.

  b.  No project will proceed to construction without a balanced budget and an adequate contingency.

  c.  Calls for tender will include options which could be considered for elimination or downgrading in quality if necessary for budget reasons.

15.  Exceptions to the above policy must be approved by the Administrative Committee.

Published March 27, 2006

(Office of the Vice-President, Resources)

Appendix A

The following provides a guideline for the amortization of debt for construction and renovation projects:

Debt incurred   Amortization period (on a straight line basis)

$1.00 to $200,000   Expensed in the year
$200,001 to $500,000   2 years
$500,001 to $1,000,000   5 years
$1,000,001 to $3,000,000   10 years
$3,000,001 to $8,000,000   20 years
over $8,000,000   30 years

The maximum amortization period will be 30 years.

Back to top