Rethinking Renewal & Replacement

A needs-based approach ensures a best-in-class approach to campus stewardship

Background

Claremont McKenna College (CMC) had long operated in a culture of “no deferred maintenance” and had a Board of Trustees policy that set aside 1.2 times the annual depreciation expense in a reserve fund for renewal & replacement (R&R). While an admirable program, CMC had no project list or capital plan to support this policy, resulting in existing reserves being depleted by large scale, costly projects. With the addition of the Kravis Center in 2012 (and the anticipation of the Roberts Pavilion), the value of these large buildings sharply increased transfers to unreasonable and unsustainable levels.

Analysis

Claremont McKenna College contracted with Sightlines to conduct a Facilities Benchmarking & Analysis—a detailed assessment of the physical needs of the campus used to support capital planning, quantifying, and prioritizing needs for all buildings on campus through a process that leverages the expertise of Sightlines analysts and CMC facilities staff.

Sightlines’ initial discovery was that the institution had a young campus and a low backlog relative to peers, which suggested that it was a good time to revise the capital reserve strategy and solidify a plan to protect campus assets for generations to come. Sightlines’ detailed assessment of the campus (which has been updated to account for changes to the campus over the years) was used as a basis for developing a needs-based approach for the R&R reserve strategy. The new approach provided a flexible framework to quantify the annual transfers necessary to fully fund the needs of campus, now, and into CMCs future.

Results

The institution’s partnership with Sightlines allowed a needs-based strategy to replace the previous depreciation model. Annual transfers into the R&R reserve are based on being able to fully fund the cost to keep existing campus buildings up to date—a “like for like” model—renewing and replacing assets as they age. Any projects that go beyond this like-for-like renovation scope are reviewed and reapproved by the Board, including consideration of additional funding sources. The modeling of these funds was extended out 30 years.

CMC’s longstanding commitment to maintaining an R&R Reserve Fund is considered a best practice in the industry. The needs-based approach ensures that annual transfers will cover the R&R needs of campus but are more moderate compared to what the transfer would be if the old approach were still in place.

As campus and financial strategies evolve, CMC will continue to have a protected reserve that adequately funds the needs of the campus over time.