The timeline is short — too short for Northern New Mexico College to have notified the state Higher Education Department about their plans for a residence hall — and definitely too short for the college to wait for approval. In fact, nowhere in the timeline presented during a special Northern New Mexico College Board of Regents meeting Nov. 21, was the state mentioned.
On Sept. 26, the Board entered an agreement with the development company Monument Collegiate Housing. Under the agreement, Monument would create a facilities master plan for Northern and conduct a feasibility study for building student housing at the Española campus. In addition to presenting the positive results from the feasibility study at the meeting, Monument also presented the following timeline for construction: During the first week of December, Northern will hold a groundbreaking ceremony for the new residence hall. By the beginning of January, construction will begin for the housing facility. By Aug. 14, students will be moved in, living in the facility and attending classes at Northern.
“I am the head of the capital projects committee and I haven’t heard anything. Northern has not submitted anything to us, unless it came in within the last day,” Chair of the Capital Projects Committee Gerald Burke said in a Nov. 22 interview.
The Department’s website lists the process all institutions must follow for capital projects. The first step is to update their five-year master plan. After it’s updated, the institution will then determine the type of funding needed to complete the project. Northern decided not to ask for legislative funding. In this case, the process states, “Institutions must submit all capital projects, even those funded from sources other than legislative appropriations.”
Burke said not all institutions receive funding through the traditional means, such as general obligation bonds. However, as of late, the University of New Mexico went through a method similar to what Northern is contemplating, using a public-private partnership to fund the construction.
“The model that UNM used did not need to go through Higher Education, but a larger research university has more of an exception than a regional college,” Burke said.
At the Nov. 21 meeting, Regent Alfred Herrera asked Northern’s financial consultant if notifying the state or the New Mexico Finance Authority should not be done at this time, rather than later.
“I guess I’m wondering, does the Finance Authority need to be involved right now if we’re ultimately going to be knocking on their door?” Herrera asked. “The Board’s made the decision, you want housing and you want housing opened by Aug. 1 or Aug. 31. If that’s the ultimate deadline — NMFA, we don’t have time to deal with them. We don’t have time to deal with the HED or the state board of finance, which would be part of that process,” Northern’s Financial Consultant Paul Brown said.
Because of the tight timeline, Brown said it would take too much time to go through the Higher Education Department — he estimated around four months.
“I think you’re OK. I have a sense there’s no desire to go through the HED. I think you’re going to spend a lot of time justifying why you need this (housing). This is an avenue around all those state approvals. Really, it’s up to be the Board of Regents. If you want to do all that tough work or if you’re trying to control your own destiny to get housing built and get on with it, this is a different avenue,” Brown said.
The avenue was described by Monument’s Vice President of Operations John Petelik during the meeting. He said the hard cost of building the first residence hall would be $9.8 million. The total cost, including legal fees, project management, finance management, reserves and the state gross receipts tax, is estimated at $15.2 million.
What this price will get Northern is a three-storey building with 144 beds arranged in an upperclassmen, apartment style. Monument has been working with architectural firm Luckett and Farley and has chosen this as the architectural design firm for Northern’s residence hall. Eric Andrew, who is leading the project, said for phase one, only one housing facility would be built. For the full build-out, three facilities would be built: freshman housing, upperclassmen housing and family-style housing. Andrew said the first phase will be an upperclassmen dormitory because the apartment-style will cater to freshmen as well as family.
In order to pay for this, Northern will take the first step by signing the second phase of the contract with Monument. The item was up for review and approval at the Nov. 21 meeting, however, no action was taken. Another special meeting was scheduled for Nov. 27.
If the first phase of the contract is approved, Petelik said the college has three options for financing. The first would be a private bond.
“The pros to that is that we could do it very quickly in a private capacity and it has a very low cost of capital. The down side is that it requires a longterm master lease, which provides a lot of problems state approval-wise and other considerations. And it might have had a different effect on the college credit rating that we weren’t anticipating,” Petelik said.
The second financing option would be using government programs, such as a loan with the United States Department of Agriculture or the New Mexico Finance Authority, Petelik said. While both programs have very generous rates, choosing government programs for financing would “impact the schedule,” he said.
The third option would be “traditional financing,” or a debt and equity component. The plus is that it wouldn’t require a longterm lease, but the down side is that requires a higher cost of capital, he said.
The combination Monument settled on was to use traditional financing to “get in the ground and get the project rolling to reach the deadline,” he said. However, traditional financing would not be used throughout the project’s lifetime.
Monument and Northern would take would create a non-profit, special-purpose vehicle comprised of a bank loan for approximately $11.4 million, and would also include a separate outside investor comprised of $2.6 million, Petelik said.
“This gives Monument the ability to construct the buildings,” Petelik said.
After construction, the buildings would be leased back on a 5-year master lease to Northern, which would then operate the housing units, rent them out and pay rent to the non-profit. As the operator of the building, Northern would also be responsible for maintenance and utilities, Petelik said.
However, the second component of this plan, is Northern buying-out the outside investor within five years.
Monument President Tim Pitcher said the rent for the first housing unit built, the upperclassmen apartment-style unit, would be $6,400 to $6,800 per student for the entire year.
Northern Vice President of Advancement Ricky Serna said in a Nov. 22 interview, Northern would only look at a bond for financing if the rental fees collected did not fully pay back the outside investor. This is highly probable, Serna said.
If the rates were lowered, Northern would look at the issuance of bonds in order to make the residential facility sustainable.
Serna said he does not think the tight timeline is creating any issues for Northern in terms of financing or any other way.
“We believe that in order for the building to be full, we need to open the doors in the fall semester, otherwise, we don’t see enough enrollment in spring semester,” Serna said.
He said as far as the various details being brought up, the tight timeline was not creating these details, but merely forcing Northern to deal with them at a quicker pace.
“The details are going to be in place no matter what. The details aren’t brought about by the timeline,” Serna said.