HSU’s $11.4M repair plan outlined for state legislators

Henderson State University plans to spend $11.4 million on repairs to boilers and other infrastructure, using energy cost savings to repay the project’s loan.

The university signed a contract for the project years ago but was unable to continue pursuing it this fall after previous financial leadership reduced the university’s capital improvement authority to only $1 million.

The university had the authority to spend $50 million last year, said Arkansas State University President Chuck Welch. He said he doesn’t know why former university leadership decreased the authority as much as it did.

The university wants to increase its authority by $20 million, giving it extra room in case of emergencies, Welch said.

Shane Broadway, ASU System vice president for university relations, represented Henderson State before Arkansas lawmakers Tuesday as a part of their consulting agreement with Henderson State. He presented the $20 million increase in capital-improvement expenditure authority before the Arkansas Legislative Council.

The biggest issues for Henderson State are the boilers and chillers that have reached the ends of their life cycles, Broadway said. The women’s dormitory didn’t have hot water on move-in day, he said after the meeting.

“Right now, probably on a weekly basis … they’re having to call out someone to repair, put duct tape on something to keep them going,” Broadway told lawmakers.

Welch said Henderson State officials had scheduling conflicts and could not attend Tuesday’s meeting. He said making Henderson State a part of the ASU System is an option but that the system’s work so far is focused on the immediate issues at the cash-strapped Arkadelphia university.

Welch told KASU Radio in August that Gov. Asa Hutchinson reached out to him and asked him to help out Henderson State University, after a similar request made to Welch by former Henderson State President Glen Jones Jr. Welch told the radio station that Henderson State joining the ASU System is feasible and that many people have voiced support for such a merger. Welch was president of Henderson State until taking over the ASU System in 2011.

Henderson State has estimated a total fall enrollment of 2,536 students, down 43 from last fall. The university has faced a multimillion-dollar budget deficit and received a $6 million zero-interest loan from the state earlier this year that it must begin repaying next year.

Jones resigned as president in July, and university trustees signed an agreement at that time with the ASU System to provide consulting to help the university turn around its finances, among other things.

The Arkansas Legislative Council’s Review Subcommittee heard Henderson State’s proposal Tuesday afternoon, and lawmakers had few questions. The matter was considered “reviewed.” The subcommittee reports to the full council Friday.

The council is the legislative body that meets between legislative sessions. The council “reviews” actions of state entities, such as public higher-education institutions, but state entities have on occasion proceeded without approval.

Only one lawmaker, Rep. Jim Dotson, R-Bentonville, asked questions of Broadway, wanting to know what the university would save and whether the university had been planning the project.

The loan is in the form of a “capital lease” agreement, financed by energy cost savings rather than revenue associated with the project.

The project, as outlined in an August report to Henderson State trustees, would save the university hundreds of thousands of dollars annually while the university would make annual $825,930 loan repayments for 20 years with 3.7% interest.

That outline was for a loan that would total $16.5 million for about $16 million of work.

The university already owes $4.5 million to contractor Johnson Controls and would spend another $11.4 million on additional work.

The work would improve the efficiency of university equipment and reduce the need for maintenance, and those would combine to save the university money. What the university doesn’t spend on the equipment would be used to pay back the loan.

The university projects total savings of $17.1 million, offsetting the $16.5 million in loan repayments and providing additional savings. After accounting for nearly $200,000 in measurement and verification in the first five years, the university would ultimately save about $350,000.

Welch told Henderson State trustees in August that the ASU System originally did not want to proceed with the energy performance project but felt they must continue with it, upon discovering that the project is already underway and the contractor is already owed $4.5 million.

The $1 million authorization for capital expenditures this year would not allow the university to proceed with that, Welch said Tuesday.