Joint Committee Committee on Capital Development (01/13/2009)

Final
STAFF SUMMARY OF MEETING

COMMITTEE ON CAPITAL DEVELOPMENT

Date:	01/13/2009	ATTENDANCE

Time:	07:36 AM to 08:55 AM	McFadyen	E
		Penry	*
Place:	SCR 356	Schwartz	X
		Sonnenberg	X
This Meeting was called to order by		Bacon	X
	Representative Riesberg	Riesberg	X

This Report was prepared by
	Kori Donaldson
		X = Present, E = Excused, A = Absent, * = Present after roll call

Bills Addressed:		Action Taken:
Discussion About Draft Committee Bills for 2009 Session Department of Personnel and Administration Proposed Legislation FY 2009-10 Controlled Maintenance Requests		Witness Testimony and/or Committee Discussion Only Witness Testimony and/or Committee Discussion Only Witness Testimony and/or Committee Discussion Only

07:36 AM -- Discussion About Draft Committee Bills for 2009 Session

The committee came to order. A quorum was present. Mr. Jeremiah Barry, Office of Legislative Legal Services (OLLS), presented three draft bills for the committee's consideration. Mr. Barry explained the provisions of the first draft bill, "Extend Repeal of CDC." Committee members received a copy of the draft, prepared by OLLS (Attachment A). The bill will extend the repeal date of the Capital Development Committee (CDC) from July 1, 2009 to July 1, 2014.


BILL:	Discussion About Draft Committee Bills for 2009 Session
TIME:	07:36:27 AM
MOVED:	Bacon
MOTION:	Introduce a House bill to extend the repeal date of the CDC. The motion passed on a 4-0 vote with one excused and one absent.
SECONDED:
		VOTE
	McFadyen	Excused
	Penry	Absent
	Schwartz	Yes
	Sonnenberg	Yes
	Bacon	Yes
	Riesberg	Yes
Final YES: 4 NO: 0 EXC: 1 ABS: 1 FINAL ACTION: PASS

Representative Riesberg and Senator Bacon agreed to be the prime sponsors.

07:37 AM

Mr. Barry explained the provisions of the second draft bill, "Waive 6 Month Rule for Federal Funds." Committee members received a copy of the draft, prepared by OLLS (Attachment B). The bill will exempt capital construction projects at higher education institutions that are funded with federal moneys from the requirement that a contract be executed and encumbered within six months after the date of the appropriation.


BILL:	Discussion About Draft Committee Bills for 2009 Session
TIME:	07:38:24 AM
MOVED:	Bacon
MOTION:	Introduce a Senate bill to waive the six-month rule for capital projects involving federal funds. The motion passed on a 5-0-1 vote.
SECONDED:
		VOTE
	McFadyen	Excused
	Penry	Yes
	Schwartz	Yes
	Sonnenberg	Yes
	Bacon	Yes
	Riesberg	Yes
Final YES: 5 NO: 0 EXC: 1 ABS: 0 FINAL ACTION: PASS

The committee discussed whether the proposed legislation needs a safety clause. Senator Bacon and Representative Riesberg agreed to be the prime sponsors.

07:44 AM

Mr. Barry explained the provisions of the third draft bill, "Wildlife and Parks Reports to CDC." Committee members received a copy of the draft, prepared by OLLS (Attachment C). The bill requires the Wildlife Commission and the Colorado State Parks Board to approve real property transaction proposals prior to submitting a report concerning the proposals to the CDC.


BILL:	Discussion About Draft Committee Bills for 2009 Session
TIME:	07:45:24 AM
MOVED:	Bacon
MOTION:	Introduce a House bill to clarify the timing of Wildlife and Parks reports to the CDC. The motion passed on a 5-0-1 vote.
SECONDED:
		VOTE
	McFadyen	Excused
	Penry	Yes
	Schwartz	Yes
	Sonnenberg	Yes
	Bacon	Yes
	Riesberg	Yes
Final YES: 5 NO: 0 EXC: 1 ABS: 0 FINAL ACTION: PASS

Representative Riesberg and Senator Schwartz agreed to be the prime sponsors.

07:46 AM -- Department of Personnel and Administration Proposed Legislation

Mr. David McDermott, State Controller, and Mr. Bob Jaros, Deputy State Controller, both of the Department of Personnel and Administration, proposed new legislation concerning the definition of and review threshold for lease purchases made by state agencies and higher education institutions. Committee members received a summary of the intent and effect of the proposed new legislation, prepared by the department (Attachment D). Mr. McDermott explained that many state agencies currently avoid taking title of property and/or equipment in order to avoid legislative review of lease-purchase agreements. The current review threshold for lease purchases is $50,000 and the proposed legislation would increase this threshold to $500,000. The proposed legislation would also redefine capital lease to conform with the definition in the U.S. Generally Accepted Accounting Principles (GAAP). Mr. McDermott said that if an agency is effectively buying an asset, even if it does not assume title of said asset at the end of the lease term, this transaction should be categorized as a lease-purchase. Mr. McDermott continued by sharing the findings of a survey conducted by the Office of the State Controller about operating and capital leases. Mr. McDermott reviewed the four main provisions of the proposed legislation, including: 1) alignment of the definitions of lease, lease-purchase, and capital lease in statute 2) use GAAP guidelines for the definition of lease-purchase; 3) required review of all leases over $500,000 by the State Controller to ascertain whether a lease qualifies as a lease-purchase; and 4) required legislative authorization for all lease-purchase agreements over $500,000.

07:55 AM

Mr. McDermott continued his presentation about the proposed legislation. He responded to questions from the committee about the review process required by the proposed legislation. Mr. McDermott said the legislation would not make significant changes to the existing review process except that it would require a review for those projects that are, in effect, capital-lease purchases, but previously have not been categorized as such because the agency has not taken title to the asset at the end of the lease term. Representative Riesberg expressed his reservations about the jump in the review threshold from $50,000 to $500,000. Mr. McDermott said the effect of the legislation will actually be tighter control over lease-purchase transactions because his office will now review all transactions over $500,000.

08:04 AM

Discussion continued about the intent of the proposed legislation. Mr. McDermott addressed a question about the existing legislative authorization process required for lease-purchase agreements. Discussion ensued. Mr. McDermott spoke to the revisions and conforming definitions needed in statute. Mr. McDermott addressed additional questions about the definition of lease-purchase versus the definition of operating lease. Senator Schwartz said she would like the General Assembly to be aware of when agencies independently enter into certificates of participation agreements. Representative Riesberg concluded the presentation by remarking that the committee will review the proposed legislation after it is introduced.

08:15 AM -- FY 2009-10 Controlled Maintenance Requests

Mr. Larry Friedberg, State Architect, Mr. Rod Vanderwall, Manager of Energy Programs, and Mr. Mike Karbach, Manager of Real Estate Programs, all of the Department of Personnel and Administration, presented the Office of the State Architect's annual report to the committee. Committee members received a copy of the Office of the State Architect's annual report (on file with Legislative Council Staff). The executive summary is appended as Attachment E. Mr. Friedberg briefly explained the statutory responsibilities of his office. Mr. Friedberg gave an overview of the lay-out of the annual report. He then reviewed the current replacement value of the inventory of state-owned General-Funded buildings, the total gross square feet of all state-owned building, the number and age of buildings, and the facility condition index scores of state-owned General-Funded buildings. The facility condition index (FCI) is a numerical score from 0 to 100 that reflects the current overall condition of a building. In response to a question about the FCI of state buildings, Mr. Friedberg clarified that the target score is 85, but many state facilities are not at this level. He explained that a building's score decreases, on average, 1 to 2 points per year. Mr. Friedberg responded to a question about an average FCI score for all state facilities and said that an average does not exist for all facilities, but there is an average for each state agency and higher education institution.

08:25 AM

Discussion continued about the FCI score of the state's inventory of General-Funded buildings. Mr. Friedberg said that the committee has adequately addressed life-safety concerns in past years through the funding of controlled maintenance projects. He added that the goal is to fund 1 percent of the current replacement value of all state-owned General-Funded buildings for controlled maintenance needs. Mr. Friedberg explained the table and graph on page 3 of the executive summary (see Attachment E).

08:34 AM

Mr. Friedberg continued his explanation of the table and graph on page 3 of the executive summary. He addressed a question about whether past state funds have been spent on buildings with a poor FCI rating. Mr. Friedberg summarized the controlled maintenance recommendations and funding over the past 13 years and reiterated his belief that the most critical life-safety controlled maintenance projects have been funded.

08:40 AM

Mr. Friedberg summarized the FY 2009-10 controlled maintenance funding recommendation of $81.9 million for 135 projects, including 35 Level I projects, 61 Level II projects, and 39 Level III projects. He said the five-year estimate of need for controlled maintenance funding is $525.4 million.

08:44 AM

Mr. Vanderwall addressed a question about how energy needs are considered during the prioritization of controlled maintenance projects. He explained that energy performance contracts are an alternate funding source that can be used to finance controlled maintenance projects that increase the energy efficiency of buildings. To date, about $18 million has been funded for energy performance contracts, including 15 controlled maintenance projects.

08:48 AM

Mr. Karbach reviewed the number of acquisitions and dispositions of real property during FY 2007-08. He also gave an overview of the number of lease agreements in effect between state agencies or higher education institutions and third parties. He spoke briefly about market changes leading to reduced rental rates and possible cost-savings that can be realized by the state when entering into new leases. He also referenced the Capitol Complex Master Plan, which will help the state identify possible cost savings through the co-locating of state agencies. Mr. Friedberg responded to a question about the Judicial Complex and the realization of possible lease-cost savings in the future. He said the state won't realize any savings until 2015 when construction of the new building is complete. Mr. Vanderwall responded to a question about whether roofs can be included in energy performance contracts and said that energy performance contracts do not include structural work but may include ancillary needs related to energy, such as insulation.

08:55 AM

The committee adjourned.