Recommendation to University of Arkansas Board of Trustees Regarding Fayetteville High School Property

– Presented by Dr. G. David Gearhart, chancellor-elect

As you know, the Fayetteville Board of Education voted recently to accept Superintendent Dr. Bobby New’s recommendation to sell the Fayetteville High School to the University of Arkansas at a price of $59 million. This would include approximately 40 acres and all the buildings, including the high school, administration building, Bates Elementary School, and athletic facilities. The property is contiguous to the main campus of the university.

We have spent many, many hours analyzing this offer and deliberating about our future needs and the prospect of acquiring this property. A team from Facilities Management has toured the buildings and site and reviewed the pluses and minuses of such an acquisition and the financial implications to the university.

Student leadership, deans, vice chancellors, and members of the Board of Trustees also toured the facilities to gain a better understanding of the potential acquisition.

Dr. White and I are prepared to make a recommendation to the president and Board of Trustees at this time.

Before making that recommendation, let me mention a number of important considerations that are key components of this major decision:

• It is important that the board and president, as well as the public, know that we have taken the responsibility of this recommendation very seriously. We have talked to many groups and interested persons on both sides of the equation in an attempt to air all sides before coming to you today. We fully understand that not everyone will agree with the recommendation, but we have tried to do what is ultimately in the best interests of the university, which is our first and foremost responsibility.
• We worked very hard to remain neutral during the discussion and debate about the need for a new high school, believing that was the province of the Fayetteville Board of Education. We maintained the position that the Board of Education must act before we could respond appropriately. We did not want the board to feel the university was making their decision for them by tendering an offer before they had reached a decision to sell.
• We believe that the land is in many ways more valuable to the university than the numerous facilities that presently exist and must be maintained. While we will be able to use much of the space in the buildings and athletic fields, we know that we cannot utilize all of the space in the immediate future and the acquisition must be viewed as a long-term decision. It is the purchase of the property contiguous to campus that may be more valuable to us—certainly in the long term. This value will depend to a large extent on our ability to grow our enrollment and expand our research and public service capacity. It is vital that we view this acquisition for a 10- or 20-year term before its benefit can be fully realized.
• The land was appraised at $5.8 million of the total appraised amount of $56,400,000. Both the UA appraisal and the Board of Education appraisal focused predominately on the value of the facilities.
• Bates Annex, the former elementary school, is over 50 years old and the high school over 55 years old. While most of the major HVAC and building exterior systems appear to be in reasonably good shape and some of the interior spaces have been renovated in recent years, the spaces are not necessarily designed and configured optimally for immediate university use nor do some of the building systems have the full expected lifetime remaining.
• Based on the age of the facilities and the point in the life cycles of systems, as well as the need for reconfiguration of the space for our use, Facilities Management calculates that we may need to invest as much as $11 million over the next few years in the facilities. Included in this estimate are major system allowances for exterior closures, roofing, interior construction, interior finishes, plumbing, HVAC systems, fire protection, electrical systems, and conversion of spaces into useable higher education spaces such as the cafeteria, library, and common student areas. The short explanation is that purchasing the property does not give us “move-in” space, and we would need to make some considerable investments as well as be prepared to invest in capital renewal along the way.
• President Sugg and members of the board, we do believe it is in our best long-term interest to acquire this property and we recommend purchasing it from the Fayetteville Board of Education. However, we do not recommend the purchase price of $59 million. Based on the analysis explained previously, we recommend the board tender an offer of $50 million and authorize the administration to enter into negotiations with the superintendent regarding certain contingencies—such as lease costs after purchase, which should equal bond-debt costs; the continuation of necessary maintenance costs during the lease arrangement; as well as critical capital renewal and addressing any major deferred maintenance issues.
• We are also very aware of the financial burden any acquisition of this magnitude will place on our students due to an increase in fees. We have carefully weighed this issue and made every attempt to lessen the impact by phasing in any increase in fees to amortize the debt load.
• We further recommend that the purchase be contingent on raising the recently approved facility fee by $2.00 per semester credit hour for the next four years for a total phased-in fee of $10.00 per semester credit hour. This fee should totally amortize the long-term debt and future tuition increases should not be used for the purchase of the property.