These minutes reflect
discussion and debate at a meeting of a committee of the
Minutes
Senate Committee on Finance and Planning
Computer Science and Engineering
Present:
Charles Campbell (chair), Stanley Bonnema, David
Brown, Steve Fitzgerald, Thomas Klein, Joseph Konstan, Cleon Melsa, Timothy
Nantell, Richard Pfutzenreuter, Terry Roe, Charles Speaks, Michael Volna, Susan
Van Voorhis, Warren Warwick, Susan Carlson Weinberg
Absent:
Calvin Alexander, Brittny McCarthy Barnes, David
Chapman, Daniel Feeney, Michael Korth, Yi Li, Rose Samuel, Thomas Stinson,
Alfred Sullivan, Kate VandenBosch
Guests:
Interim Vice President David Hamilton, Dean Robert
Elde, Associate Vice President Win Ann Schumi, Greg Brown (Office of the
General Counsel), Acting Assistant Vice President Tony Strauss; Associate Vice
President Steve Spehn (Facilities Management)
[In these minutes: (1) incubators and start-up companies; (2) the
financial model of the University; (3) report on Facilities Management; (4) the
University's annual financial report; (4) stadium feasibility study]
1. Incubators,
Professor
Campbell convened the meeting at
Dr.
Hamilton recalled that he had met with the Committee two weeks ago about these
issues and that the discussion begun at that meeting continued today; he wished
to return because the Committee had been presented the materials at its last
meeting and he wanted Committee members to have a chance to think about the
issues. He also distributed copies of
information about University Enterprise Laboratories (UEL) and noted that its
application to be a 501(c)(3) organization (tax-exempt
non-profit) had been approved. He said
he was open to questions.
Mr. Klein asked if Associate Vice
President Strauss (Patents and Technology Marketing, or PTM) had done more work
on the plan mentioned at the previous SCFP meeting. Dr. Hamilton said that Mr. Strauss and others
developed a business plan for the Office of Business Development (OBD) that
would be created in the Office of the Vice President for Research to work with
start-up companies. OBD has nothing to
do with UEL, he said; it will be an entity within his office that reports to
the Vice President; the plans for it have not been made final. He reported that he had circulated a draft
OBD plan to venture capitalists, bankers, and other business people for
opinions. He was surprised that he
received a large number of responses from these very busy people; they were
very interested. They are now trying to
accommodate the suggestions they received.
When the plan is done it will be distributed. He emphasized that OBD had nothing to do with
the incubator; it is like other units in the Office of the Vice President for
Research that report to the Vice President.
How
is it linked, Professor Roe asked? OBD
will have three functions, Dr. Hamilton said.
-- It
will act as a nurturing element for University faculty start-up companies. Such companies often start before they are
ready; in collaboration with the
-- It
will educate faculty in the value of the commercialization of intellectual
property.
-- It
will act as the point at which businesses can come to the University and be
shuttled where they need to within the institution.
Dr.
Hamilton related that he had had lunch with some venture capitalists,
individuals who had nothing to do with biotechnology, people based in the Twin
Cities who want to be more active in investing in start-up companies at the
University. They thought it was a
wonderful idea that the University would help get them in face-to-face
relationships with the faculty. There
will be meetings with
Professor
Konstan said he thought most of what Dr. Hamilton was proposing was
wonderful--the University should connect people with technology--but he had a
question about the OBD and helping start-ups, faculty-led or led by others
drawing on University intellectual property.
Some of the nurturing that OBD might provide could be counter to what
business expects--venture capitalists do not want a business plan, a marketing
plan, and so on. They want a one-page
summary of an idea and then they work with the individual(s) to do the
rest. They want to know what the core
idea is. All the rest of Dr. Hamilton's
proposal, however, makes sense.
Dr.
Hamilton said he did not disagree with Professor Konstan; most venture capitalists
do not want a business plan. If the
University can identify the faculty and the venture capitalist and bring them
together, and let them go, fine. But the
University has seen numerous companies start, but incorrectly, and then they
can't get the venture capitalists to even look at them. It may be that it is past the time when
venture capitalists in
One
problem is getting people to bother to disclose intellectual property,
Professor Konstan said. The disclosure forms are a pain in the neck and
not worth it: If one is not interested in commercialization of intellectual
property, the form will be returned with a request for more work or one is told
there is nothing to be commercialized. It would be ideal, though highly
impractical, if faculty could just e-mail a copy of the papers they submit to
PTM and have someone contact them a week or two later if they think there is
something to patent or license.
Professor
Konstan said he was also concerned about having two offices, OBD and PTM.
With two offices, it is not clear where the coordination will appear.
Moreover, if there is a new invention, it is not always clear whether the best
way to proceed is with a start-up company or by licensing it to an existing
company--and the two units could compete with one another because they might
each bring a different perspective, one favoring start-ups (OBD) and one
favoring licensing (PTM). Dr. Hamilton said that this is why the business
plan for OBD has not yet been distributed widely: One question is its relationship with
PTM. They are working on that issue; the two units must work together, must
mesh, but the relationship needs to be worked out.
Could not PTM simply be enlarged,
Professor Campbell asked? It is a
branding issue, Dr. Hamilton said. The
"business development" label shows that business development is
something the University is interested in.
The business plan will address the coordination problem, Mr. Strauss
promised. There will be a relationship
between the two units and they really do not have separate missions. PTM encourages start-ups; they are charged to
get technology out into society in the most beneficial way possible, he
said. That could mean a start-up or a
licensing agreement. OBD has a specific
mission: to be sure that
start-ups are done in the right way. PTM
decides whether a start-up or licensing is the right way to go.
There are a lot of good ideas here, Professor Roe said, about how to finance the activity
and how it can be self-sustaining. But
it must be more than self-sustaining, he said.
Most new ideas fail, which is the way things probably should be. What mechanism will there be to allow
companies to fail? They fail in business
and he said he doubted that University faculty will be any different in their
failure rates. The question is one of
mechanism: if the University chooses to
support five out of ten proposed companies, four of the five will fail. He said he agreed with Mr. Klein about the
value of moving in this direction but the issue of the mechanism must be
addressed so there is not a perpetual subsidy.
Dr. Hamilton said there will be milestones and decision points in order
to decide if a company is a success. The
problem is that start-ups are generally long-term propositions; many start-ups
begin and go on for five or six years before proving if they are viable and
mature. That is what the private sector
decides, Professor Roe said. The
University is in the business of marketing ideas. It must be careful about nurturing a company
for five or six years, putting in resources, before deciding if it will get a
return on its investment. The University
will not be putting resources in the companies, Dr. Hamilton clarified. It will provide enough support so the company
can go out in the world and survive; the only allocation from the University at
the beginning will be advice.
There are two levels of success, Mr.
Strauss said. One is that the technology
is converted to a product that is sold (the vast majority in this category
fail; the University hopes that some would be a modest success and one or two
would be a big success). The time span
for these companies is usually
The University's role is marketing
ideas and retaining its intellectual property, Professor Roe maintained. He said he did not see why it needs to help
University faculty be successful in their businesses. He said he would be happy if 3M takes an idea
and goes to the market with it. Dr.
Hamilton agreed, but pointed out that the person who develops a successful
business is not a faculty member--the individual has taken a leave from a
faculty position to get the business set up and going, and then returned later
to the University.
Mr. Klein said that there is need to
recognize a boundary for University activity at the front end of a start-up;
the University's strongest role may stop at showcasing an idea and helping it
get discovered, rather than in helping commercialize the idea. It is in the complexities of the latter
efforts that the percentages work against the University. It is necessary to define the appropriate
role for OBD, and to develop a broad understanding of what the idea of
commercialization means within the University for it to fit within the
University's mission. Perhaps the University should not try to participate in
the classic long-term commercialization itself.
One very significant point, Mr. Strauss
said, is that the reason the University engages in this activity is because it
is part of the basic land-grant mission.
It takes what faculty work on and translates that work into products and
services that benefit the public. He
agreed that the effort must be more than a break-even proposition. The University should not expect this effort to
create the next Microsoft. The reason to
support UEL and to create OBD is to make sure that the efforts are within the
University's mission and better enable the translation from the University to
the outside in ways that are more effective than is currently the case. This is especially true for start-ups. The missing pieces could help enable
start-ups to be more successful. That is
further than he believes it would be prudent for the University go, Mr. Klein
said. Mr. Strauss agreed that it is
pushing beyond what the University has done in the past. Mr. Klein said he would challenge the notion
that the University can do something to increase the success rate of
start-ups. That is not where the
University's skills lie, he said. It may
be more productive to put more money into basic research, an area where the University
has significant experience and expertise, rather than engage in commercialization
activities such as writing business plans where it has limited expertise. There needs to be education of the beginning
entrepreneur, Dr. Hamilton said; they need a business plan and they need to
know if they have a product that can be marketed.
Professor Konstan said he read the
documents that had been circulated before the meeting. One said the University will not invest in
UEL but would support and encourage its activities. The other one says the University is
investing a substantial amount of money in UEL.
Which is it, he asked? The
University is not investing in UEL, Mr. Brown said. UEL is a non-profit, so the concept does not
apply. Investment in this context means
support. The University is entering into
a long-term lease (at a fair market rate) as support, and is also making a cash payment over four years that UEL can use for operations. That is very different from the printed
materials, Professor Konstan observed.
Dean Elde said that UEL started as a
joint venture between the University of Minnesota Foundation and the College of
Biological Sciences; the University got it off the ground, got it status. They have been raising money from businesses,
which is being provided as charitable contributions. There were
University dollars involved to help UEL take the first steps.
Professor Campbell said this was a
valuable conversation that needed to continue.
Dr. Hamilton said he valued the discussion and wanted it to continue
because he wanted to dispel any misconceptions.
Professor Campbell thanked Dr. Hamilton and his colleagues for joining
the meeting.
2. Financial Model of the University
Professor
Campbell announced that he has been trying to initiate a discussion of the
financial model of the University but has had a difficult time identifying a
time on the Committee's schedule. He
said that he intends to appoint a subcommittee drawn from this Committee and
perhaps a few others, and will draft a charge and circulate it to the Committee,
if that is acceptable. Committee members
nodded their assent.
3. Report on Facilities Management
Professor
Campbell next welcomed Associate Vice President Steve Spehn to report on
Facilities Management: major programs,
information, and where it is headed.
Mr.
Spehn distributed copies of a set of slides to Committee members. He noted the mission of Facilities Management
(FM) ("responsible for the physical assets of the University to ensure a
quality environment for students, faculty, staff, and visitors in support of
the University's mission of teaching, research and outreach"). He reported that the organizational structure
of FM had been reorganized--flattened--and that it was no longer responsible
for capital project management, which allows it to focus on its core services. In the past FM had a very
decentralized model, most of which has been retained, but some functions have
been centralized in order to increase consistency and accountability. They have kept the zones and people in the
various areas, who understand needs and logistics.
Ms.
VanVoorhis asked Mr. Spehn if FM has created benchmarks for analyzing service
in order to decide if the reorganization has been successful. Mr. Spehn said that the FM call center is
tracking work and preparing reports.
They also had some measures already in place.
FM
has 978 FTE employees and deals with 18 unions (the majority of which are in
the trades). The budget is $160 million,
$120 million for operations and maintenance from the state and $40 million for
Institutional Support Organization from charges for services to departments of
the University. They have eliminated 104
positions and cut $8 million from the budget this year. They lost good employees in the process; 67
of the 104 were custodial or maintenance workers, some with 30 or more years of
experience. How level is the funding,
Professor Speaks asked? It is pretty
consistent, Mr. Spehn said. Mr.
Pfutzenreuter said that there have been increases allocated for new buildings
and utilities, but the general budget has not increased in about ten years. What percentage of the $40 million is from
Parking, Professor Roe asked. Not much,
Mr. Spehn said.
Mr.
Spehn said he wanted to highlight the business applications support unit that
has been established, which will focus on continuous improvement in FM. They know they must change to get better, he
said. They also asked employees for
suggestions on how to improve the organization; they received over 1000 and are
now sorting through them to identify the ones that can be implemented.
Mr.
Spehn reported that Vice President O'Brien set three goals for FM that revolve around stewardship, service, and
accountability. In that context, they
are focusing on four specific goals:
productivity, cost control, customer service and satisfaction, and
employee development and satisfaction.
FM has been reorganized in order to pay attention to these goals and to
the three core businesses: building
services, maintenance operations services, and energy management services. Professor Konstan said there is a balance
between custodianship and getting programming done economically. He has been told he cannot put up a
blackboard himself; University policy requires that FM do it; everyone knows
that rule is not enforced. What is the
balance between doing it right or not doing it at
all? Mr. Spehn said he was less familiar
with the University rule than with union rules.
His goal, he said, is to demonstrate that FM has value in providing service
to departments--to provide the service well and in a timely manner. If graduate students can put up a blackboard
with 2 nails, that is difficult for FM to compete with, Professor Konstan
observed. He went on to comment that
elevators are routinely closed for maintenance and repair--but the lights in
the elevators often do not work. The
approach should be to make all the small repairs, individually not worth doing
alone, at one time when the elevator is being maintained.
Mr.
Spehn reviewed the Brenner report of 1994, which distinguished between
supported and non-supported space. They
refer to the report often because it is a useful tool to understand what FM
provides and what departments are expected to do. "Supported space" is really
academic departments, not space per se.
Their rates are reviewed each year; they make no profit, and any surplus
is returned through rate adjustments.
Last year they had a consultant review their maintenance activities (are
they doing the right things, at the right time?) and were found to be within
industry standards. They looked
especially at elevator maintenance and were found to be up to industry
standards, but were told they needed to invest more in elevators because many
of them are old. In terms of charges for
elevator repair, their shop charges $63 per hour; the best outside bid they
received was $102 per hour.
They
are highlighting custodial service in the reorganization; they recognize it is
the most visible service they provide but that it has been treated as a
second-class citizen. He has created a
separate division within FM, the Building Services Unit, to handle custodial
services, waste management and recycling, and asbestos abatement; a new
director is being hired. Custodial services cost $24 million per year and has 468
employees who clean 9 million square feet per day. Each employee cleans about 3500 square feet
per hour, or 25,000-33,000 square feet per day.
They have established the "maroon standards" for what is to be
accomplished by custodians.
Maintenance
Operations includes preventive maintenance, routine repairs, and emergency
services. The priority for work is
safety, liability/risk/exposure, academic programming, environmental system
repairs, long-range plans, and building use intensity (in that order). They spend $34 million per year on maintenance. For preventive maintenance, they follow
industry standards and manufacturer's recommendations. They had, in this area, 147,000 work orders
last year.
FM
support units include the Building Services and Automation Center, which
operates 24 hours per day 7 days per week and provides after-hours back up,
emergency response, and monitoring of University buildings at 50,000 different
points with sensors across campus. They
have increased the number of sensors by 300% since 1995; as things become more
technologically advanced, there are more things to monitor. Other units include the Elevator Shop,
Facilities Records (including, for example, the construction records for Eddy
and Pillsbury Halls), Landcare, Quality and Work Control, and Signs and Graphics.
Mr.
Fitzgerald reported that the Office of Classroom Management works with
custodial services, which are vital to classrooms. Much has been done to improve quality and
service, but the Brenner report specifies the level of custodial support that
is to be provided to classrooms; the funding is well below what is required to
meet that level (and the "maroon standards" are below what the
Brenner report calls for). Mr. Spehn
agreed and pointed out that FM would have to have increased funding to reach
the Brenner report standards. As they
cut the budget $8 million, they avoided service level reductions because they
are trying to do better by being more efficient and more productive--but the
proof will be in the pudding as they go down the path of implementing the cuts.
Professor
Speaks asked if Mr. Spehn could estimate the amount of money that would be
saved in classrooms if faculty and students changed their behavior and didn't
throw trash on the floor (which behavior, Professor Speaks added, he did not
believe would change). Mr. Spehn said he
has heard from custodians that dealing with trash in
classrooms is a big part of their day.
Professor
Campbell thanked Mr. Spehn for his presentation.
4. The Annual Financial Report
Professor
Campbell next asked Messrs. Pfutzenreuter and Volna to review the University's
Annual Financial Report with the Committee.
Committee members were provided copies of a set of PowerPoint slides to
follow the discussion.
The
report has two parts, Mr. Pfutzenreuter said, the audited financial statements
for the year and information for legislators, bond holders, agencies, and
others interested about what the University does beyond what it is in the
financial documents. In summary, the
balance sheet continues to be strong, the University continues to face
challenges related to reductions in state funding, and future financial
strength is dependent on finding new sources of revenue and careful cost
controls.
There
was a slight reduction in the University's net assets between
The
University's revenues during FY 2003 (ending
Operating
expenses increased $118 million (5.9%).
Instructional expenditures increased $35.1 million, research expenses
decreased $10.2 million, public service expenditures
increased $6.7 million. Academic support
expenditures increased $28 million. In
the case of instruction, public service, and academic support, the increases
were largely due to compensation and benefit increases. Professor Konstan asked how faculty time is
allocated. People in the departments code payroll, Mr. Volna explained. There is a lot of unsupported research; is
that accounted for? Every penny of
salary is accounted for and unallocated faculty time is probably in academic
support. Faculty do
not report their time in a way that would allow them to allocate it that way,
Professor Konstan pointed out. They use
whatever data the departments provide, Mr. Volna explained, and do not
second-guess them. Faculty
are recorded as instructional expense.
The question is the balance of the importance of the information versus
the cost to obtain it; the University could say that every faculty member must
account for 40 hours per week, but what value would be obtained? They only try to be sure that the high-level
numbers are accurate for the legislature.
Professor Speaks urged that they not try to account for faculty time on
an hourly basis.
Mr.
Pfutzenreuter reviewed the new reporting requirements for affiliated
organizations (GASB Statement No. 39) (discussed in depth at an earlier meeting
of the Committee, requiring University reporting and involvement in the
financial statements of those organizations).
They are still trying to decide how to treat the affiliated
organizations. There are many small ones
that are not a problem, but there are some large ones--the Foundation, the
practice plans--that people who read the financial statement might assume the
University controls (which it does not).
This is not a reporting requirement that higher education wanted; the
Big Ten opposed it. But it was imposed
and the University will follow it. Affiliated organizations are nervous about
their autonomy; the University will try to meet the spirit and letter of the
law without intruding on the organizations.
Separateness is important to donors and others, Mr. Pfutzenreuter
commented, and there is a task force looking at these issues.
The
financial report is a backward-looking report, Mr. Volna told the
Committee. He suggested that Mr.
Pfutzenreuter's reports are more prospective and provide better information to
the Committee for decision-making purposes.
Professor Roe expressed surprise at the sources of non-instructional
revenue. Mr. Pfutzenreuter said the
Committee should talk about "out of the box" thinking and should put
it on its agenda. The vast majority of
the revenue to the University, excluding tuition and state funds, comes for a
particular reason--and even tuition comes because of instruction. The funds are not fungible or able to make up
for losses in state funds.
Professor
Campbell thanked Messrs. Pfutzenreuter and Volna for the report.
5. Stadium Feasibility Study
Professor
Campbell welcomed Vice President O'Brien, who joined with Mr. Pfutzenreuter in
leading a discussion of the stadium feasibility study. Mr. Pfutzenreuter distributed copies of the
feasibility study and two additional handouts.
Vice President O'Brien began by reading a statement to the Committee, as
follows in part (she and Mr. Pfutzenreuter shared the explanations, and some of
the material is repeated as part of the conversation that followed Vice
President O'Brien's prepared remarks).
On December 8, the
University released the results of a privately funded study to assess the
feasibility of building a new campus football stadium with a substantial amount
of private funding. The study concludes that it may be feasible to build a
50,000-seat stadium at a total projected cost of approximately $222 million. It
would take about four years to complete. This does not represent a decision to
build a new stadium. Rather, it is a first step in a broad examination of all
options for the Gopher football program.
We are joining you
today to discuss the recommendations of the feasibility study and to get your
feedback. Consultation with members of the University community, neighboring
residents and businesses, and other public entities is critical to this
process. We want to know what you think about this option as well as other
options for our Gopher football program. The
The study builds
on the work that was done last year with the Minnesota Vikings on a joint,
on-campus stadium.
A number of
consulting firms that worked on that project also worked on this one, thereby
saving significant time and resources.
The study began in
mid-summer. It cost $145,000 and was funded entirely with private funds.
The study is
intended to answer the questions:
- What would be an appropriate size and
type of stadium?
- What would it cost to construct and
operate?
- What is the revenue potential?
- How could it enhance the sense of
campus community?
The University’s
involvement in the stadium debate really began in December of 2000 when the
Vikings and Sports Facility Commission approached the U with partnership
offers.
Then in 2002 the
Legislature requested that University work with Vikings on a joint-use,
on-campus stadium. The University worked closely with the Vikings on this idea
until the University and the Vikings concluded that a shared on-campus facility
was not workable.
The University
began work on an on-campus stadium feasibility study in this August, and the
Board reviewed guiding principles for this option at its November meeting.
The Board of
Regents reviewed the study at their December 2003 meeting.
While our academic
mission and priorities remain paramount, there are several reasons why we must
examine stadium options at this time. The issue of a stadium is not going away
and it is imperative that the University engages in long range planning now.
The lease at the Metrodome expires after the 2011 season and the Metrodome's
future is uncertain. In addition, new
stadiums take 4-5 years to plan, design, finance, and construct.
The University is
a Division I, Big Ten institution with a long history of providing exciting
football to millions of fans in
And, stadiums are
very likely to be discussed at this legislative session. It is in this context that the University
must be prepared to represent its interests. Also in November Governor Pawlenty
formed a commission to review stadium proposals for the professional teams.
Our focus today is
on a NEW ON-CAMPUS STADIUM, but even as we release this study, we are keeping
our options open. Other options include continued use of the Metrodome and a
new off-campus shared stadium with the Vikings. The U of M is first and
foremost a great academic institution—one that has taken significant budget
cuts and has put great energy into maintaining its academic priorities. We must protect this academic heritage and
profile, but it is also important for us to be exploring our stadium options at
this time.
We believe both of
these options will present challenges, but we’re not ruling them out. It would likely cost the University $6 to $10
million per year to operate the Metrodome on its own. More work must done on these options.
Site: The stadium
would be located on University’s
District: There is
environmental remediation that will need to be completed on the site. As well,
Stadium: The
recommendation is for an open-air, horseshoe-style, 50,000-seat stadium. The
facility could be expanded to 80,000 seats. Seating would be a mix of
chair-back seats and benches, including a variety of premium seating options.
The facility includes a 30,000 square foot indoor club, a hall of fame, team
facilities, media facilities, and marching band rehearsal and storage space.
The brick façade and overall design compliments the campus environment,
creating a collegiate look and feel.
Parking: There are
17,000 existing parking spaces at or near the University—a sufficient number to
meet the projected game day requirements. The existing 2,700 parking spaces on
the proposed stadium site would be replaced at that location.
This stadium will
be a modern, enduring—but modest—facility, which could also be used for
recreational sports, soccer, and other activities. This is a place that could
become a symbolic and important center for campus life. A place the student body could gather with
family, faculty and friends for all-University events such as convocation and
graduation.
$222 million is
our very best estimate for the TOTAL project cost, not just the cost of the
stadium. We’ve approached budgeting for this project in a deliberate and
thoughtful way – but much work remains to be done. John Wooden once said - “If you don’t have
time to do it right, when will you have time to do it over?”
Site: $17 million
- environmental remediation and land acquisition required for reconstruction of
District: $25.1
million - utility infrastructure, street improvements (realign
Stadium: $180.1
million. [$160 in construction costs or “hard costs” and $20 million in
non-construction costs or “soft costs” – design fees, project management,
permits, etc.] Includes
all costs for design, construction, furnishing, and equipping the stadium
structure and field.
Our focus is on
new revenue opportunities including substantial private fundraising. No single
source of funds will be sufficient.
•
Private /
Sponsorships: Expect a substantial
amount, much not available but for bringing Gopher football back to campus. This
is the only stadium project under consideration that will be substantially
privately funded, saving taxpayers money. Example: Scoreboard = “sponsorship”
possibility.
•
Stadium: Some additional revenue possible for project costs
(paying off construction bonds).
•
Students: Need to explore options with students. Tradition and
history of students, faculty, staff and alumni supporting non-academic
projects. (Northrop Auditorium and Memorial Stadium)
•
Claims: Hope to recover some environmental costs from former
owners. Also federal and state clean-up programs.
•
Parking: Possible $900,000 a year in additional revenue.
Substantially
funded through non public sources but . . . we will be part of any discussions
at the capital about stadium projects and we’re not closing the door to public
sources of funding, if that is something lawmakers are interested in
supporting.
Governance and
Management: We will control of all aspects of stadium development and
management. The University will control all aspects of the
governance, design, development and ongoing management of the stadium.
A business plan
is outlined in the feasibility study
to assess local market to determine stadium capacity and estimate new revenues
and expenses
-
Estimates net
average annual increase of $3.5 million
-
Assumes capacity
attendance for six games per year (no other revenue-generating events)
-
Assumes a 12.5%
one-time ticket price increase and 3% annual revenue and expense inflation
-
Financial
projections based on other collegiate and professional sports venues, Metrodome
actuals, and consultants’ general industry knowledge.
-
A more detailed
revenue and market analysis will be required to validate assumptions.
-
Assumes no other
revenue generating events (e.g. monster trucks)
Next Steps:
Right now, these
ideas are being presented to you for feedback, and to the broader community for
discussion and consultation.
•
We will monitor
the Governor’s Stadium Screening Committee and be available should they request
our input.
•
We will continue
to review alternative stadium options and do our due diligence to collect
information and explore all options.
•
The Board of
Regents will continue to discuss the stadium issue in future meetings.
•
And we will
continue to refine our funding options for an on-campus stadium.
As President
Bruininks emphasized, a well-planned, collegiate-feeling stadium on-campus
could create true Big Ten experience, build community pride, generate
substantial private funding, help save public resources over the longer term
and create new, ongoing revenue streams.
It would be a home
for our marching band, a place for soccer and recreational sports and a
possibly a place for academic activities.
In conclusion, I
would say that in addition to being a great place to play football, this is an
opportunity to create a vibrant new center for student and community life on
campus. This is an exciting opportunity and is our preferred long-term stadium
option at this time.
Vice
President O'Brien concluded by saying that the University had decided about a
year ago to explore the possibility of an on-campus Gopher football stadium,
after it became apparent that the joint-use stadium with the Vikings would not
work.
Discussion
touched upon a number of points.
-- There
will be ample parking, Vice President O'Brien said; Mr. Pfutzenreuter said they
used industry-standard ratios to determine how much would be needed. All of the existing spaces will be replaced
on the site, Ms. O'Brien said, and will be used as they are now. That would not have been possible with a
joint-use stadium with the Vikings.
-- Professor
Speaks said he was trying to relate the 50,000 seats to demand. Current reports of attendance include tickets
sold but seats not occupied, the band, vendors, teams,
and everyone else. What is the average
turnstile attendance--and so what is the demand? Ms. O'Brien said she believed the actual
attendance at games was in the 35,000 to 36,000 range. If so, Professor Speaks said, it would
require a considerable increase in interest or demand to fill the new
stadium. The real question is what is in
the business plan, Professor Campbell said.
They
developed the 50,000 number in two ways, Vice President O'Brien explained. First, they looked at the current number of
seats sold (a 10-12% bounce in attendance was experienced elsewhere at a new
facility). Second, they looked at the
draw factor in the metropolitan area.
50,000 is not a stretch, Mr. Pfutzenreuter said; the idea is to make the
seats high demand and to see scarcity.
Even in the final years at Memorial Stadium, attendance averaged in the
30,000s, at a time when there were a lot fewer students living on or near the
campus. But there is a counter-trend,
Professor Campbell said; in that day, most males played football; now many of
them play soccer. The new stadium can be
used for soccer as well! Vice President O'Brien exclaimed.
The
$222 million cost of the stadium can be divided into three pieces, Mr.
Pfutzenreuter explained:
-- $17 million for site preparation, the
vast majority of which is environmental cleanup, and some for land acquisition,
so that there is a clean site ready to work on;
-- $25.1 million for district
improvements (realigning roads, signals, parking, etc.); and
-- $180.1 million for the stadium, of which
about $160 million is for the stadium and $20 million is for permits, the
architect, and so on.
If one built a stadium that had all bench seats, no
premium features like club seats, suites, and the like, how cheaply could it be
built, Professor Konstan asked? Mr.
Pfutzenreuter said he did not know.
Professor Konstan tried the question from another angle: Is there a point at which one can balance the
cost of constructing the premium features and the expected revenue from doing
so--do the features bring in enough revenue to pay for them? They do, Vice President O'Brien said. One simply would not build a stadium in this
day and age without those features, Mr. Pfutzenreuter added.
They
visited a number of stadiums, Vice President O'Brien reported. Georgia Tech has a stadium in an urban setting
and it fits in well. If one took the
The
project contingency of about 5% seems too light, Professor Speaks said. Both Mr. Pfutzenreuter and Ms. O'Brien agreed
that the number may be too low.
Why is there not a significant disincentive to park in
the Fairgrounds parking lots, Professor Campbell asked? The University will encourage parking there,
Mr. Pfutzenreuter said, by providing a site for tailgating and free bus service
to the stadium. This stadium is for the
students, he said, and related a story about his son moving on campus as a
freshman this past fall and that his move-in day coincided with the first
football game of the season. Mr. Pfutzenreuter commented that his son who would
never dream of going downtown to the dome on his first day on campus--he wanted
to make friends and walk around campus that day, not head off campus. If
there had been an on-campus stadium and a game that day, he would almost
certainly have gone to a football game.
Professor
Roe asked if there were any benchmarks that might provide insight on the
funding possibilities. Mr. Pfutzenreuter
referred to one page in the stadium feasibility study and noted several possibilities: private contributions (the University
Foundation is assessing the potential for raising money, including for
preferred seating and sponsorships), legal claims and settlements (compensation
from parties that contaminated the site, or state and federal environmental
clean-up funds), stadium-based revenue (tickets, concessions, etc.), and
parking (increased game-day parking).
Would the stadium be fully financed by these four? It would not, Mr. Pfutzenreuter said, but
there is no strategy to pursue public funds.
The legislature may do something about stadiums, however, and if so, the
University will request assistance; if the legislature can provide funding to
wealthy private individuals, it should also provide funds to its public
Division I university.
People
have asked why the University does not stay in the Metrodome, Mr. Pfutzenreuter
said. The University has been informed
by the Stadium Commission that it would cost about $7 million per year to
operate the dome if the University were the sole tenant. There is also significant deferred
maintenance on the building. Could the
University get other events? It is
doubtful, he speculated, with various newer facilities around the Twin
Cities. The University would inherit a
white elephant. No one at the
legislature believes the Metrodome would stay if other stadiums are built; the
goal is to get the land back on the tax rolls.
The utility costs at the Metrodome are about $3 million per year, Vice
President O'Brien added.
Mr.
Pfutzenreuter also noted that only the west side of the stadium is actually a
building; the rest is a concourse that can be closed down.
Professor
Speaks commented that he feels like he is wearing his daddy hat: "the kids get to the point where they
wear me down and I say 'to hell with it, go ahead and do what you want
to.'"
The
cost of the stadium is higher than was expected, Professor Campbell said. One of the stadium principles adopted by the
Board was that funding for a stadium would not compete with the University's
academic mission. Given the level of
fund-raising that would be required, and that public funds may be needed, it is
difficult to see how the stadium would not have an impact on the academic
mission. Mr. Pfutzenreuter said that if
there were a $7 million public subsidy, perhaps from a hotel tax or metro sales
tax or car rental fees, for a Vikings and/or Twins stadium, that would support
about $100 million in debt service--and that money would not be otherwise
available.
Professor
Konstan said he was concerned about the second principle adopted by the Board,
that the there be no financial risk to the academic mission. In particular, he wondered about the revenue
estimates. The average ticket price,
including student tickets, seems to be between $25 and $30. Moreover, he was shocked that the budget
anticipated people pay a $1000-per-year premium for club seating--this is over
$150 per game, while the Minnesota Wild charges a premium of only about $10 per
game for club seats at
The
compelling piece for her, Ms. O'Brien said, is that there could be no place to
play Gopher football after 2011 unless it is in some distant suburb. Athletic Director Joel Maturi has said that
to align University athletics with the academic enterprise, the games should be
on campus.
Many
may feel that he is an opponent of athletics, Professor Speaks commented, but
that is not true. He said he is,
however, bothered by some of the rhetoric.
The key to filling the stadium is a good product, and the stadium will
not be filled without a good product (that is, a winning football team). He said he was adamantly opposed to a
joint-use stadium on the campus, and would prefer to see a not-lavish on-campus
stadium, but this is terrible timing, with no salary increases, budget cuts,
tuition increases, and so on.
Is
this stadium being discussed without the participation of Mr. Sanford, who had
proposed to donate $35 million, Professor Campbell asked? It is, Mr. Pfutzenreuter said. The President committed to a discussion of a
stadium before Mr. Sanford entered the picture.
Professor
Konstan said he would love to have a stadium on campus but was afraid of the
risk. What about following the model of
the Minnesota Wild, who had tickets sold and payments
deposited, and commitments to expensive seats, before they built a
stadium? Mr. Pfutzenreuter assured the
Committee that as long as he was in his position, he would not support starting
a project and taking on debt unless the University knows it has the money. He said he would never recommend taking on
debt on speculation. And the Committee
should hold the administration to that position, he asserted.
Vice
President O'Brien said that the President believes there is a window of
opportunity for facilities, notwithstanding the fact that this is a bad time,
and represents the best chance the University will have for bringing football
back to the campus. It may be that in
18-24 months, the University will realize the University cannot do it, so will
have to go to plan B. But the President
and Regents have expressed the belief that the University should make its best
shot.
Is
there any firm idea about the percentage of the $222 million that could be
derived from sponsorships or donations, Professor Speaks asked? That is something Mr. Fischer at the
Foundation is talking to people about, Mr. Pfutzenreuter said.
Professor
Konstan inquired about the schedule for making decisions. Vice President O'Brien said the University could
initiate project organization and environmental review as in the feasibility
study draft schedule prior to a commitment to the project. Discussion is now underway about when the
go/no-go point will be. This is, she
emphasized, truly a FEASIBILITY study, and they are developing a fund-raising
plan now. There will have to be an
environmental impact study, Mr. Pfutzenreuter said, which will mean spending a
little money. Moving to design and land
purchase are bigger steps. So this
possible, projected, fantasy stadium will move forward when the money is on
hand, Professor Speaks concluded. Mr.
Pfutzenreuter agreed, saying that even when the University buys the land and
conducts the EIS, it may recognize that the project will not be feasible. The deadline is really 2011, Professor Roe
said; Mr. Pfutzenreuter said it would take 4-5 years to build the stadium, and
if the University waits, it will be more expensive.
Professor
Campbell thanked everyone for coming early and staying late and adjourned the
meeting at
--
Gary Engstrand