Cost of deferred maintenance at U of T drops slightly from last year

UTSG’s delayed repairs rise to $478 million

Cost of deferred maintenance at U of T drops slightly from last year

 

The university’s annual report on deferred maintenance reveals that the total cost of repairs required on U of T’s buildings is $549 million, down $2.5 million from last year. The cost of deferred maintenance represents the amount of money in repairs that the university is delaying, typically as a cost-saving measure.

The majority of the liability for this year is at UTSG, which accounts for $478 million, up by $4 million since last year. About five per cent of this figure — approximately $24 million — represents deficiencies that must be addressed within the next year, while approximately $287 million represents deficiencies that must be handled in the next three to five years.

UTSC’s deferred maintenance repairs this year totalled $42 million, down $2 million from last year. UTM accounts for $29 million of the total cost of deferred maintenance, down $4 million from last year’s figure.

The report also stated that the university’s combined facility condition index (FCI) — a number obtained by dividing the cost of repairs required by the cost of replacing the building — stands at 13.4 per cent, higher than the 11 per cent the Council of Ontario Universities last reported in 2015, but 0.5 per cent lower than last year. If an FCI is over 10 per cent, then repairs are needed.

The FCI of the 10 buildings at UTSC is 11 per cent . The 14 buildings at UTM have a combined FCI of 6.7 per cent.

UTSG’s FCI currently stands at 14.7 per cent, down slightly from last year’s 15 per cent. Of the 101 academic and administrative buildings audited for the report, 71 were classified as being in poor condition.

The report also noted that the majority of UTSG buildings were built post-war and have lower construction quality than pre-war buildings and modern, complex buildings on campus. These post-war buildings tend to require a “fundamental renewal of building systems.”

The report also pointed out that the combined internal and federal funding is “approaching” the roughly $28 million needed to reduce the FCI to 12 per cent within 10 years at UTSG. According to the report, the university “can maintain and even start to improve the condition of our academic and administrative buildings [at U of T]” with this funding.

The document also detailed changes to be made to how the deferred maintenance figures are assessed, including shortening the auditing frequency from every seven years to every five years, incorporating costs associated with professional services and consulting fees, and providing more accurate building information.

U of T forecasts $391 million in annual net income, according to new CFO report

Debt expected to rise above $1 billion due to capital projects

U of T forecasts $391 million in annual net income, according to new CFO report

U of T is expected to report a net income of $391 million for the fiscal year ending April 30, 2018. This income shows a decrease of $26 million from last year’s $417 million, according to a report from Chief Financial Officer Sheila Brown to the Governing Council’s Business Board. Net assets are projected to be approximately $5.8 billion, increasing by $313 million from 2017.

The report details revenue, expenses, net income, and net assets for the university. It was prepared using a combination of forecasting methods, including projection to April 30 using current year-to-date figures and estimation based on trend analysis of prior years.

Key assumptions made in projecting these numbers are a 5.4 per cent investment return, an $84 million endowment payout, $100 million in divisional savings, and $444 million in capital asset additions, or property.

Revenue and deficits

Based on the report, U of T’s revenue should be $3.36 billion this year, principally generated through a projected $1.57 billion in student fees. Expenses are forecast to come in at $2.97 billion, meaning U of T is making and spending a little more than it did last year, based on totals of $3.22 billion in revenue and $2.8 billion in expenses from 2017.

A deficit of $95 million is projected for 2018. Last year’s report projected a deficit of $93.9 million, but the actual deficit came in at $59 million.

The deficit is comprised of a $43 million operating fund surplus, with $35 million more in tuition fee revenue earned than in budgeted due to international undergraduate enrolment, $5 million in utilities savings, $4 million in additional government grants, and $3 million in investment returns.

An unrestricted deficit of $138 million in other funds is attributed to the internal debt component of the university’s debt program. These will be repaid over a longer period of time.

Debt projections

U of T places its outstanding debt at $1 billion, whereas its debt policy limit, or the amount it can borrow, stands at $1.5 billion. The Business Board approved $1.26 billion in allocations, which includes borrowing and contingency for donations, targets, and pledges, leaving $241 million remaining for future allocation throughout the next four months.

The annual debt strategy review states that debt “primarily supports capital projects and pensions.” Over the next five years, the review estimates that approximately $560 million of additional debt will be needed for capital projects that have not yet been approved by the Business Board but that are under consideration.

Some of these capital projects include a second instructional centre at UTSC, renovations to some Arts & Science buildings at UTSG, and the Landmark project to renovate front campus.

“In assessing the appropriateness of a debt strategy, we considered the need for debt together with the need to remain affordable, and for debt servicing to continue to be financially responsible,” reads the Debt Strategy Review.

By April 30, 2023, the debt policy limit is projected to increase to $1.85 billion to accommodate these new capital projects. Moody’s Investors Service gave U of T an Aa2 credit rating, which is unchanged from recent years, meaning U of T fulfils its financial commitments and repays the money it borrows in an effective and timely manner.

Governing Council Business Board releases reports on endowment, capital projects

Recommendation for revision of workplace harassment, violence policies also presented

Governing Council Business Board releases reports on endowment, capital projects

On October 10, the Business Board of U of T’s Governing Council held its second meeting of the 2017–2018 academic year at Simcoe Hall. Comprised of 42 members, the Business Board is responsible for monitoring the cost-effectiveness of the university’s resource allocation and approving its business policies and major transactions.

Among the 22 slated agenda items for the meeting were the annual endowment financial report for the previous academic year, revisions to the Workplace Harassment Policy and Workplace Violence Policy, and the status of capital projects on campus costing over $2 million.

The endowment report, presented by Sheila Brown, U of T’s Chief Financial Officer and a member of the University of Toronto Asset Management Corporation (UTAM) board, states that as of April 30, 2017, the university had “over 6,000 individual endowment funds totalling $2.4 billion market value,” a net increase of $282 million from the previous term.

Established in 2000, UTAM oversees the management of U of T funds, which includes the university’s endowment and pension funds. U of T is the only Ontario university that owns a distinct not-for-profit for investment management; other universities use their governance committees and staff members.

According to Elizabeth Church, the university’s Issues and Media Strategist, “the Business Board sets the targets for investment returns and risk tolerance. The responsibility for asset allocation is delegated to the administration and then further delegated to UTAM.”

The largest contribution to the increase in endowment funds was the university’s investment income, totalling $341 million. In comparison, the 2015–2016 academic year’s investment income totalled $13.1 million. In the latest Endowment Annual Financial Report, Brown attributed the approximate $327.9 million increase in investment income to a “favourable” investment market, compared to “years, such as 2015-16, when investment markets are poor.”

In the 2016–2017 academic year, the university also received $36 million in endowed donations and $8 million in transfers from its unrestricted funds, while it incurred net losses of $22 million on fees and expenses and $81 million on spending allocation.

The endowed donations comprise part of the $2.24 billion raised by the Boundless campaign, surpassing the campaign’s original $2 billion goal six months ahead of schedule. According to its website, the Boundless campaign “is a transformational fundraising effort that embodies the University of Toronto’s bold vision for the future.” Its three priorities are strengthening the university’s role within Toronto, establishing strong international partnerships with leading institutions globally, and reimagining undergraduate education.

Amendments to the Workplace Harassment and Workplace Violence Policies were also presented for recommendation at the Business Board meeting; if applicable, approval will be decided on October 26 by the Governing Council. The amendments “add specific references to the Policy on Sexual Violence and Sexual Harassment and the Sexual Violence and Prevention Centre.”

The Business Board also released the Report on Capital Projects as of September 15, 2017. Of the nine properties undergoing construction listed in the report, the overall total project cost (TPC) budget is at least $342,026,121, with the Faculty of Architecture cost remaining in camera. The UTM Deerfield Hall North Building Phase B has the largest TPC budget on the list at $120,086,121; it is currently 49 per cent complete and slated for completion in September 2018.

The UC Revitalization project, set to start in 2018, and the renovation of the Davis Building’s Meeting Place in UTM are two major capital projects that will start this academic year.

U of T’s debt remains at $1 billion

Numbers reported to Business Board show $11 million increase since July 2015

U of T’s debt remains at $1 billion

The University of Toronto’s debt sits at a cool $1 billion dollars as of August 31, 2016, according to the status report on debt presented to the Business Board on September 22.

The $1 billion debt has remained a constant figure in the university’s financial record since June 2014, when the outstanding debt initially surpassed $1 billion. The total amount of debt has fluctuated only marginally since then, sitting at $1.012 billion in July 2015. The actual outstanding debt for the University now totals $1.023 billion, an $11 million increase from the 2015 figures.

The university allocates a debt limit of 5 per cent of the University’s annual expenditures. The status report shows that the actual outstanding debt currently sits at 3.5 per cent of expenditures, well within the Business Board’s $1.5 billion limitation for the 2016–2017 year.

Of that 3.5 per cent, 1.2 per cent comes from internal loans. This includes the university’s pension debt — $121 million — which totals 0.4 per cent of the internal loans. The remaining 2.3 per cent stems from external debts, due to institutions outside of the university.

Of the university’s external debt, $715.8 million is tied up in external debentures, which are unsecured loans without the backing of assets. This is a slight decrease from the $717.6 million outlined in the February 2016 status report on debt.

The report notes that net allocations, borrowing that is approved by the Business Board, stood at $1.2 billion up to August 31, with $220.1 million available for future allocation. This amount includes an allocation change of $1.9 million.

U of T financial reports show decrease in endowments, income

University’s credit rating stronger than Province of Ontario’s

U of T financial reports show decrease in endowments, income

The university’s financial report and report on debt were presented to Governing Council’s Business Board last month, revealing decreased income and endowment figures.

Net income for the university fell 26.8 per cent to $210.6 million and the university reported almost $2.10 billion in endowments, which is a 2.1 per cent decrease from the over $2.14 billion that was reported last year. U of T’s pension plan’s deficit increased from $617.4 million in 2015 to $797.4 million in 2016. The university attributes this increase to investment returns on pension plan assets falling below expectations.

Demand from students to study at U of T remains high, with student enrollment increasing by 3.51 percent from 2015 to 77,130 students in 2016. Revenues from student fees reached $1.292 billion.

With the rise in student population, the limits of the university’s infrastructure have been pushed. Repairs and maintenance costs went up 16.3 per cent while materials and supplies costs increased by 6.9 per cent from a year ago.

The university also spent a substantial amount on its investment in the MaRS Phase 2 project. In September 2015, the University of Toronto partnered up with the Government of Ontario, MaRS and Johnson & Johnson, a consumer packaged goods manufacturer, to establish JLAB, a business incubator that is designed to accommodate up to 50 bio-medical start-ups. The 40,000 square foot facility will occupy a floor of the MaRS West Tower and will compose 75% of laboratories and digital equipment while the rest of the space will be dedicated to collaborative work spaces.

The report paints an optimistic view of the financial outlook in 2017 stating that: “Revenues are expected to increase modestly over the next several years as a result of continuing growth at the Scarborough and Mississauga campuses, graduate expansion, and increasing international enrolment.”

According to the status report on debt, U of T’s total debt for the year came to $992.5 million. Much of it consisted of future obligations to bond payers. As well, the university’s credit ratings are Aa2 (Moody’s), AA+ (Standard & Poor’s) and AA (Dominion Bond Services), which ranks the university as a strong investment-grade credit; two credit rating agencies rated the university above the province of Ontario.