All university capital projects with a budget greater than or equal to $5 million should be managed and recorded within the university-wide capital plan. This plan provides the Capital Council with an integrated and strategic roadmap of intended projects to guide the allocation of financial resources in support of Strategic Visioning and campus planning efforts. All projects are tagged for alignment with Vision 2034 Impact Areas and Commitments to ensure concurrence with U-M’s mission, vision, and values.
The capital plan is intended to be fluid allowing for consistent feedback from U-M units to capture the latest thinking and planning efforts taking place across the university. It is published monthly and reviewed by the Capital Council Working Group and the Capital Council to understand project updates and capital priority changes. Regular reviews with the working group and quarterly reviews with units ensure proper resource planning and allow for capital data to be up to date with project statuses and projected timing.
Capital plan phases
Potential future
Highly speculative and undetermined whether the project will proceed
- Potential capital need is identified by unit (e.g., Michigan Medicine, Provost, Student Life, etc.), following its Executive Officer's (EO) internal capital project process. EO/unit then notifies Capital Planning team for inclusion on UM-wide capital plan.*
Unit will identify basic project information including alignment to capital priority, ideal timing for project construction start/end, budget parameters, and potential funding sources. - Unit engages AEC for project study to define programming, schedule, and high-level costs.
Projects beginning study with an estimated budget greater than $5M will be reported to Capital Council for awareness. - Unit and AEC conduct study to refine scope and programmatic goals. This process is interactive and can be lengthy depending on the complexity of the project and available potential funding.
In pipeline
Project likely to start construction within five years
- Based on study results, EO/unit decides whether or not they want to proceed with project; if yes, funding sources and desired construction start date are further refined by unit/AEC.
Unit's EO or delegate provides approval to move forward with design and notifies AEC and Capital Planning team for capital plan updates. - AEC Project Form approved and routed to all stakeholders.
Capital Planning team drafts a Financing Letter (i.e., funding agreement) if project utilizes multiple funding sources, debt, or central/Provost resources for project. - AEC identifies design and construction timeline and notifies unit and Capital Planning team.
This timeline informs potential Regent approval date, which is used to determine appropriate Capital Council Endorsement date.
Up for endorsement
Up for endorsement by Capital Council within one year (based on projected Regent approval date)
- Once timeline is agreed upon by AEC and unit, and sufficient progress has been made on the project, AEC submits graphic summary to Capital Council Working Group (CCWG) for preliminary scoring (four months prior to Regent approval date).
CCWG evaluates project characteristics relative to scorecard and identifies key questions and improvement opportunities for the unit to consider. - CCWG iterates with EO/unit to validate score prior to Capital Council meeting.
- Formal Capital Council endorsement takes place two months prior to Regent approval date.
If project is endorsed, CCWG will provide an official Endorsement Form to the EO/unit indicating projected Regent approval date.
If project is not endorsed, CCWG will provide the same Endorsement Form indicating specific project areas that need to be refined.
Endorsed
Fully endorsed by the Capital Council
- Project may proceed to Regent approval.
- Project starts full design and moves to phase II, schematic design, Regent approval if required.
- Project completes design and starts construction.
*The Capital Planning team meets quarterly with Athletics; EVPCFO Office; ITS; Logistics, Transportation & Parking; Medical School; Michigan Medicine; Office of Campus Sustainability; Provost’s Office; Student Life; UM‑Dearborn; UM‑Flint; and Utilities to review division-level capital plans and capital priority changes.
The above timeline depicts a very linear process, and is representative of a successful study and project from beginning to end. This may not be the case for all studies and potential future projects. Some studies may not result in a project at all or a materially different project from initial scoped need.
Funding sources
The following funding sources are typically used to support capital projects, depending on availability. NOTE: A project may only proceed to the Capital Council endorsement phase when all project funding is identified; self-funding a project does not guarantee endorsement.
Unit resources, gifts, and grants
Typically, there are more high-priority capital needs than currently available central funding resources. As such, units are expected to contribute to capital projects as much as possible by using unit resources (if available) and securing external funding (gifts or grants) to support their capital needs.
Central resources
Given the unpredictable economic climate, central resources are often limited and may not be available for capital projects. If central resources are available, the Office of the Provost and/or the Treasurer’s Office will work with the unit to ensure funding is committed.
Office of the Provost resources
The Office of the Provost oversees two sources of funding to potentially contribute to an overall financial plan for the unit's capital project.
- The Capital Renewal Fund is a funding mechanism built into the budget and space charging model, and it generates funds for the Provost to direct to major capital projects.
- The Provost Capital Fund is a loan program overseen by the Provost, and it consists of long-term debt financing with discounted interest rates available to qualifying units for capital projects as an additional source of financing. For more information about these funds and process, refer to the Provost major capital project review process.
Debt financing
Approval of debt financing requires a rigorous funding plan from the unit (operating forecast and capital plan) to demonstrate the unit’s capacity to pay debt service. Approval of the use of debt for capital projects is made by the EVPCFO in consultation with the president and treasurer.
Key principles of debt financing include:
- The Treasurer’s Office is responsible for obtaining external financing and uses a central bank structure to take a portfolio-based approach to efficiently manage the cost of capital and related financial risks of the capital-related debt portfolio.
- The Treasurer’s Office manages the actual external debt service payments of each debt issue to ensure compliance with debt repayment terms.
- Units approved for debt financing to support a capital project are assigned an internal payment schedule, typically with fixed interest rates to decrease volatility in budgeting for debt.
- NOTE: The Treasurer’s Office has overall and exclusive responsibility for issuing and managing U-M’s debt (including bonds and commercial paper, loans, lines of credit, letters of credit, and similar financing obligations) issued in the name of the Regents of the University. Treasury Services: Banking, Debt Issuance and Credit Card Acceptance—SPG 519.01.
- For more information on debt financing or to inquire about obtaining a loan, please contact the Capital Markets team and the Capital Planning team.
Central interest earnings for deferred maintenance and infrastructure projects
Central interest earnings are periodically used to fund deferred maintenance and infrastructure projects for General Fund units.
Facilities and Operations (F&O) maintains an inventory of condition assessments for all assets owned by U-M. A deferred maintenance plan related to those assessments is prepared and monitored by F&O. Projects are prioritized based on numerous factors related to risk; the assets’ importance for academic, research, or student life; and other factors.
State of Michigan capital outlay
Each year, the State of Michigan requires state agencies, universities, and community colleges to submit five-year capital master plans to the Department of Management and Budget and the Joint Capital Outlay Subcommittee. Each plan must include prioritized capital project requests, special maintenance needs, and other information about their facilities. Plans are typically submitted each October.
Although the State of Michigan requests annual submissions of capital project needs, state funding is not always available. Funding amounts, availability, and timing vary from year to year, and are directly related to the state budget situation. In addition, when the State of Michigan provides capital outlay funding to the university, it requires U-M to contribute funding to the capital project(s) as well. Due to the unpredictable nature of the state’s Capital Outlay program and the requirement for universities to match state capital outlay funds, U-M depends on other primary sources of funding to fund its capital projects.
At U-M, the provost, in consultation with the vice president for government relations and associate vice president for facilities and operations, identifies projects for state Capital Outlay consideration based on the priority to the institution and the state. Typically, only one project per year is submitted for consideration.
For questions about the university-wide capital plan, unit dashboard, capital planning support, or pro forma modeling and resource planning, please contact the Capital Planning team.