Bills might reduce UNC project costs

UNC-system schools would be able to purchase equipment using a special form of debt under twin bills filed Thursday in the state legislature.

Both measures would allow the system’s Board of Governors to issue special obligation bonds — the same mode through which it funds many construction projects — for the purchase of things like air-conditioning units and other major equipment.

Special obligation bonds are certificates of debt issued by state agencies, such as the UNC system, to help fund capital projects.

They’re advantageous because they act similarly to low-interest loans, helping to draw investors and allowing universities to be more cost-efficient.

“What this legislation would do is it would allow us to use the same funding mechanism to take advantage of this low interest rate and bonding authorization to purchase equipment to do renovations to nonstate buildings,” said Mark Fleming, the UNC-system lobbyist.

Reducing equipment expenses could help offset recent increases in construction costs that have threatened to overrun project budgets at campuses across the state.

As the state’s economy has improved, construction has boomed — causing increased demand, and increased prices, for goods such as steel.

Brad Wilson, BOG chairman, said special obligation bonds for equipment would help keep costs to a minimum.

“It’s just an idea that we recognize will bring greater efficiency and economy,” he said.

But the proposal isn’t a green light for the BOG to exercise authority.

For starters, the board would not be able to issue bonds exceeding more than 5 percent of a university’s revenues.

Fleming said the cap is meant to reassure the legislature that the BOG will not rack up a huge deficit through its equipment purchases.

“It sets a limit for how much money we could have out there under this,” he said.

“So we wouldn’t have too much debt.”

The bills also call for the BOG to submit project proposals for improvements it wants to fund with special obligation bonds.

That is standard protocol for all construction-related projects, Fleming said.

“Everything we do, whether we are using state money or nonstate money, we have to get approval,” he said.

The bill was the third item on the BOG’s nonbudget agenda for the General Assembly — and Wilson said he’s pleased that it’s now before lawmakers.

“We’re in full support of this bill,” he said.

So far, the only action the General Assembly has taken on the bills is to refer them to the finance committees in each chamber.

Debate on the bills will come later in the session, but Fleming said he is optimistic about their chances.

“The legislature has given us more and more flexibility and has allowed us to run the campuses like a business and run things more efficiently,” he said.

Ultimately, Wilson said, the bills are good ones that will exert a positive influence on the system.

“It’s designed to save money and speed up processes, and we think it will do both.”

Contact the State & National Editor at stntdesk@unc.edu.