Save the Terrace

What is the total cost?

In a nutshell: in 30 years, student segregated fees (seg fees) will generate approximately $230 million.

In the meantime, the estimated cost of the project has evolved as follows:

2005-2008: $147 million
2009: $167.7 million, then to $174.8 million
2011: $182.8 million
2013: $189.8 million, then to $191.8 million

The dates and figures are approximate, but they reflect the basic trend. All of these numbers  are based on publicly available information provided by the Union or the University.

Now, let’s fill in the details to back this claim:

It is an instructive exercise for every person affiliated with the University of Wisconsin Union to contemplate the following simple question pertaining to the renovation project: what is the total cost of the project, holistically? After answering this question, one can further discuss merits and demerits of various decisions that followed in the design process.

So what is the total cost of the project holistically? This is a bit confusing, because the project is compartmentalized in a number of ways. There are the Union South renovation, Memorial Union West Wing renovation (Phase I), Memorial Union East Wing renovation (Phase II), the Alumni Park project and the Lakefront Restoration. Which is included and which is not in any given budget release is sometimes difficult to parse.

Let us for the purpose of this note focus on the Union renovation, by which we mean upgrades and renovation of the buildings. We are then talking about Union South and Memorial Union. The Memorial Union component are further divided into phases, all of which we will include. Part of the confusion stems from the fact that the meaning of these phases appears to have evolved over time. We are not going to include the Alumni Park project or the Lakefront Restoration.  (See pages 14 and 50 in this document for some details on these projects.)

So what is the total cost of these projects? The answer further depends on whether one is talking about the cost based on adding up the seg fee, donations, and other sources of revenue, or the total of the budget for the project (with and without financing charges). Furthermore, these figures depend on when you ask. We have done some searches of publicly available documents to piece together the evolving picture of how the total cost of the project was presented to the public.

A good place to start in understanding the purported total cost of the Union renovation is a Badger Herald article from October 6, 2011 “Glass box is moot without funding,”  where the numbers $80 million for the Memorial Union and $67 million for Union South are quoted. The article did not provide a source for these numbers, but implies that those were the numbers being discussed openly at the time of the referenda in 2005 and 2006.

One can in fact find an official Union website dated as from 2008 quoting exactly that number.

So it appears to be safe to conclude that at least by 2008, the estimated combined cost of the Memorial Union and the Union South renovations was $147 million. This figure also appears in the FAQ page of the campaign pages of the Wisconsin Union Initiative. See also this link.

Now fast forward to 2009. A Badger Herald article “Union South budget goes up” from February 8, 2009 reports that the UW Regents approved increasing the Union South budget from $87.7 million to $94.8 million.  (Also reported in Union South blog.) This  means that the budget  for the Union South part of the project increased from $67 million to $87.7 million to $94.8 million in the period from 2008 to February 2009. We were unable to locate the explanation for the first increase from $67 million to $87.7 million, and would very much like to understand how this was decided and how this was explained to the public at the time. Much of this appears to have happened during the design process of the Union south. The second increase by $7.1 million to $94.8 is suggests that this increase is coming from “other sources”

According to the article, “(Union Associate Director Hank) Walter said about $4 million of the increased funding will come from sources like the Visitor Information Center and campus parking, which account for part of the increased cost. The other $3.1 million will come from funds previously allocated to the renovation of Memorial Union.”

This suggests, however, that the costs have been shifted to increase in parking costs to the patrons as well as borrowing from the Memorial Union. It also suggests that the Union will be get more revenue-conscious, further passing the cost to the patrons. The shortage of abundant, available, and free/inexpensive parking continues to be a serious problem around the campus and there are no workable solution in sight. None of these effects are desirable, a sentiment echoed by Dan Cornelius also quoted in this article. The total cost of Union South at $94.8 million appears to be final, at least according to page 29 of the 2011 4Q Capital Planning and Development Report by the Facility Planning and Management Division of the University. Assuming that the Memorial Union project is still at $80 million, the total cost of the project has increased from $147 million, to $167.7 million, to $174.8 million.

Let us now turn our attention to the Memorial Union Renovation.

Among the comments to the Badger Herald article from October 6, 2011 “Glass box is moot without funding,” one finds the following comment by the Wisconsin Union Communications Director Marc Kennedy:

The number presented by Marc Kennedy appears to be consistent with the $94.8 million figure reported in 2011 by the FPM report for the Union South portion of the cost. It seems slightly disingenuous not to acknowledge the $67 million and the $87.7 million figures from the previous iteration, which was one of the main points of author of the Badger Herald article. In fact, the increase in Union South budget by $20.7 million is one of the bigger jumps in the evolution of the cost estimate.  Taking the figure quoted by Marc Kennedy at face value, the budget of Memorial Union has also increased from $80 million to $88 million. This means that the total is now $182.8 million, with student seg fees paying for $126 million, or 69%, which is much higher than the 58% figure used to advertise to the students.

These figures appears to be corroborated by what was presented in http://unionreinvestment.wisc.edu/?page_id=21, which at the time, displayed the following content.

It appears, however, that these details have since been removed from the site http://unionreinvestment.wisc.edu/?page_id=21. The pie chart had a glaring math error: the student portion is really 70% of the total cost ($126 million out of $179.8 million). Yet the website still claims that “students fees will cover up to 58% of construction costs.” The same pie chart, however, appeared originally as part of the Student Union Initiative Campaign.

It is also interesting to compare these figures to the March 2011 minutes from the final approval by the Union Council (no longer available online)

which shows a separate category they refer to as Phase III. The Memorial Union portion of the projected cost is listed as $110 million in this portion of the minutes. (Also, what is the “Campaign Plan Draft” which includes all details and components of the project?)

We did not find satisfactory account explaining the discrepancy between this number which includes the so called Phase III component and the numbers quoted by Marc Kennedy earlier. The reference to Phase III do not appear in future documents. It appears that some of what was intended for Phase III was re-allocated as parts of Phase I and Phase II.

More recently, in the May 31, 2013  Wisconsin State Journal article quotes the cost of Phase II of the Memorial Union renovation at $42 million.  This appears to be consistent with the figure reported in page 43 of the 2011 4Q Facility Plannaing and Management report, but is an increase by $9 million from the $33 million quoted earlier by Marc Kennedy.  This brings the total to $189.8 million which is significantly more than the $147 million quoted in 2008. There are other costs such as $2 million for the Glass Box which is not included in that total. If included, the total cost is now $191.8 million. (Also, at one point, the $52 million for phase I which is understood not to include the $2 million for the glass box, has increased to $53 million in some accounts. We have not found documentation explaining this increase for the time being.) (Note added: the approval via e-mail vote to increase Phase I from $52 million to $53.2 million was reported in the September 2012 Union Council meeting minutes. Some discussions leading to this vote can be found in the August 2012 Union Council meeting minutes.)

There are various questions people should be asking regarding these apparent increases

1. What were the increases for?

2. What funding is paying for these increases?

3. Even if some of the costs are passed on to program revenues, does this mean it will drive the prices of food and concessions at the Union or otherwise stress the Union programs financially as well as subject patrons to cuts in amenities such as parking spaces

4. What body approved these increases? One important additional information is that the design committee have been disbanded as of the summer of 2011.

Another important angle for people to consider is the fact even with these increases, the Memorial Union renovation project is over its budget. This means that they are not doing some of what the design committee had originally intended to do.  This raises more subtle questions regarding the priority assigned to parts of the project being funded and unfunded. Starting from a long wish list presented by the community and selectively funding parts of the wish list can potentially be used as a tool to impose certain priorities while maintaining the appearance that the design process is open to public inputs.

Finally, let us compare these numbers to the funds available on the revenue side. Let us specifically explore the meaning of the claim of student fees covering 58% of the construction costs. According to the data provided by Marc Kennedy, the Seg Fee contribution from Union South, Memorial Union Phase I, and Memorial Union Phase II adds up to $126.2 million. That is more than 58% of $182.8 million.

If one simply estimates the total of approximately 40,000 students pay $96/semester for 30 years, that comes out to about $230 million. ($223 million if one accounts for the 2 years for which the seg fee is $48/semester)

What explains the difference between $126.2 million and $230 million? This is a very important question that everyone should be asking.

Another related question: are students on hook to pay more than 58% if the Union fails to raise funds from private donors?

Is the Union basically taking out a 30-year mortgage of $189.8 million to be paid over 30 years? If that is the case, the total cost of the project could reach nearly $400 million, assuming a low construction-loan interest rate of around 5%. The total amount of financing fees are never mentioned.

One additional point worth noting is the source of the so called “Program Revenue.” The June 2009 budget of the Union linked from ASM shared governance blog page shows that their total revenue was approximately $35 million, out of which approximately $15 million came from Seg fees. If this is taken into account, it would seem that the proportional share of student Seg fee funding the project will get even larger.

So in a nutshell: in 30 years, Seg fees (the part specifically earmarked for the building projects) will generate approximately $230 million.

In the meantime, the estimated cost of the project has evolved from

2005-2008: $147 million
2009: $167.7 million, then to $174.8 million
2011: $182.8 million
2013: $189.8 million, then to $191.8 million

(and whether or not this includes finance charges, i.e. loan-interest paid by the State of Wisconsin to its bondholders is not clear)

Why the increases? Is it fair to expect that voters approving the referendum in 2006 and saw this campaign would anticipate and accept the difference between $147 million and $191.8 million (a 30% increase) and that students would only pay 58% of the total cost? What priorities are reflected in the changes? Should the Union be held to a figure they cite at each instances and be expected to account for the differences clearly, thoroughly and publicly? Why are the $96 seg fee set at the level to raise as much as $230 million when some figure between $147 million and $191.8 million is the estimated cost of the project? If some of these costs are finance charges, shouldn’t that be included as part of the cost of the project, and isn’t it appropriate to credit the students as contributing more than 58%? Or, on the contrary, has the Union, though the referendum in 2006, afforded themselves the flexibility to absorb the cost of this project up to $230 million though seg fees?

Phase II of the project is unfunded as of yet, and with the current political climate and budget austerity in state government, there is a chance that none of Phase II will occur without more creative fundraising. We will probably continue to see ever escalating prices for everything at the Union and penny pinching in other areas in the foreseeable future. This is a departure from the historical tradition of the Wisconsin Union, which was one of the first establishments to provide inexpensive meals to students and has always been a low-cost alternative for its members.

Finally, in passing, let us comment that seg fee contribution to the Union operating budget has also increased over years. Some data were available for 2004 and 2011-2013. It should be interesting to follow this up with a thorough study on the seg fee trend, total revenue, and overall budget for all of the years that Union has been in operation.

Week of 05/13/13:
• Complete asphalt paving along Shoreline from Lake St. to Union Terrace.
• Shoreline path will re-open for Graduation Weekend!
• Install Brat Stand countertops, equipment, and retractable canopy.
• Begin erecting Sunset Lounge structural steel.
• Begin drywall in OPO/Hoofers.

Week of 05/20/13
• Install utility tieins for Brat Stand and beverage cooler.
• Pour south mechanical room slab on grade.
• Pour exposed aggregate site concrete on the OPO/Hoofers concrete deck.
• Tape and finish drywall in OPO/Hoofers
• Pour Sunset Lounge concrete slab on structural deck.

 Terra Engineering & Construction and Lunda Construction have teamed up and began work this past week on the installation of the new Alumni Pier. There are two parts to the pier, a permanent wood decked pier extending north from the Shoreline and a floating dock with public boat slips that will extend to the east from the end of the pier. Lunda will be installing the pipe piles that will be driven 23 ft. into the lake bed using the hydraulic hammer shown in the attach photo.

This hammer is operated by the crane which is sitting on a floating barge on the lake. This crane will also be used to install the framing for the permanent portion of the pier and wood decking in the coming weeks. The noise associated with the repetitive hammering necessary to install the pipe piles will be gone by the end of the week!