P3 Higher Education Summit

It’s a pleasure to be with you today.

I have only been in my position as Chancellor of the University of California Merced, the UC’s youngest campus for three months. However, I am proud to have worked alongside my predecessor Chancellor Dorothy Leland over the past five years to advance UC Merced’s remarkable growth – and to share an update on what has been accomplished so far.

If you were to visit UC Merced today, you might notice two things. First, the distinctive hum of construction activity.

Just 10 months from now, we are poised to receive the final set of academic, residential and student life buildings from our large multi-year P3 campus expansion, also known as the Merced 2020 Project.

Second, you would immediately notice the energy and vitality of students, faculty, and staff and how the growth of the campus feeds this positive energy.

Just over 73% of our 8,200 undergraduates are first generation students and nearly 65% receive Pell grants — federal aid for low-income families. In fact, we are # 1 in the United States for percentage of students receiving financial aid.

Perhaps more impressive is that, when US News looked at the students who enroll at UC Merced, we are # 1 in the country — #1 — for student outcomes, which takes into account graduation rates and other factors tied to creating social mobility.

It is clear how transformative this academic success is to them personally, for their families, and for their communities.

And the drive of our students is amplified when you add nearly 700 ambitious graduate students and more than 400 committed, talented faculty to the mix.

Many of them have chosen to start their academic careers at Merced precisely because they were attracted by the prospect of building a new research university alongside serious and committed undergraduates.

Chancellor Leland liked to call UC Merced a “special place.” It is certainly unique in the annals of American higher education.

But getting to this point required addressing some very real structural and capital challenges.

When UC Merced opened in 2005, the expectation was that the campus would grow in the traditional, steady and incremental fashion of its sister UC campuses.

Yet with the onset of the Great Recession in 2007, that path forward become a lot rockier.

Building a new research university almost from scratch, in a global economy, and amidst California’s rapidly changing demographic context is hard enough. Building a campus at a time when traditional funding for capital facilities and long-term maintenance was not available made it even harder.

Our fellow UC campuses, some of which were founded between 50 and 60 years ago, were launched with State funding to build their educational research facilities, with no impact on their balance sheets. In the case of Merced, just fifteen years old, the State has not issued a GO bond for higher education since 2006 and suspended lease revenue bonds for higher education in 2011, precisely the period of Merced’s creation and dramatic growth.

An additional challenge we faced is that, even for buildings that have separate revenue streams, such as dorms or dining facilities, we could not construct these in a traditional, serial manner. Merced was constructed on an undeveloped “green field” several miles from the city, and the costs of infrastructure overwhelmed the construction costs of one facility. We had to spread these costs across a broader footprint. Thus, both the demand for growth and the need for economies of scale drove us to one extremely large, unified project, basically building an entire generation of campus buildings in four years!

After intense planning and negotiation, we ultimately agreed on what’s technically known as an Availability Payment Concession model to add 1.2 million gross square feet of buildings and infrastructure over the course of 3 years of construction and then maintain them through 2055.

The headline is that the project is on schedule and on budget.

But when the full story of UC Merced’s growth is written, some early decisions will prove to be critical:

First, during its formative stage, UC Merced adopted a discipline of self-limitation that was communicated throughout the academy, the student body and staff: Going forward, UC Merced would only build what it could afford to maintain.

Second, we developed a governance structure that has provided steady leadership and stakeholder representation at key decision points during implementation and construction.

For us, as a young research university with a long life ahead of it, the calculus for what we could afford had to focus not only on construction but on ongoing maintenance costs.

In essence, UC Merced’s mission to nurture teaching and research excellence would be in jeopardy if we found ourselves in 2030 or 2040 burdened by the silent accumulation of deferred maintenance and insufficient operating funds.

So, by including the consolidated cost of operations and maintenance over the next 30 years, we were able to make holistic, informed and predictable decisions about the scale of construction we could afford in order to educate 10,000 students and gauge the critical staff and faculty drivers that shape the University’s costs.

With that long-term information in hand, we were able to work with our development partner at Plenary Properties Merced to develop a sound business case, funding mechanism and schedule for an aggressive three-phase delivery that began in 2018 and will be complete in 2020.

• Completion of our new dining facility and the first residential buildings occurred in time for the Fall 2018 semester. And our development partner has completed a year of maintenance.
• In September, two state of the art research buildings opened.