Universities Try a Variety of Funding Types

By Adrian McDonald

The University of Washington will request $194 million from Olympia for new construction and renovation in 2007-09, but that hardly covers the cost of all the ongoing construction projects.

"Funding has become amazingly complex in the last 10 years," said Jill Morelli, director of facilities for the UW School of Medicine. "Every project is different, and the funds come from a combination of sources. You have to have all the partners at the table at once."

In the end, a mixed bag of bonds, grants, donations, lease agreements, public money and various private income sources get university projects built. Here is a look at three UW construction projects and the funding sources that make them possible.

UW Medicine South Lake Union Campus, Phase Two 300,000 sq. ft. $106 million

The largest single construction project for the UW right now will not be owned by the university. Instead, the three-phase biomedical research complex in the South Lake Union district of Seattle is being developed by private real estate firm Vulcan Real Estate Inc., which is owned by local financier and co-founder of Microsoft, Paul Allen. Vulcan is in the process of custom-building two city blocks worth of research, laboratory and office space for the UW School of Medicine, which the university will lease on a 35-year contract.

Sharon Coleman, development manager for Vulcan Real Estate, said the UW's long-term lease was not something the company normally does with its other tenants, but "the UW needed a very long-term commitment to get these buildings built. We were willing to do that because we thought the UW would be a great anchor tenant in the area."

Vulcan owns a large proportion of the properties in South Lake Union and ultimately hopes to reinvent the historically industrial district as a dense grid of apartment and condo towers mixed with biomedical research buildings and other mixed-use space.

In recent years, Vulcan has developed properties for the Seattle Biomedical Research Institute, Children's Hospital and Merck/Rosetta.

The Bill and Melinda Gates Foundation also expects to break ground soon on a research center nearby, independent from Vulcan.

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In January 2005, Vulcan completed the first phase of the UW's new complex, a $29 million renovation of the former Washington Natural Gas office building. That was a four-story structure with 110,000 gross sq. ft. at 815 Mercer St. Phase two, designed by Perkins+Will Architecture of Seattle, will be all-new construction and will take up the remainder of the block at 815 Mercer. The building will be five stories tall with a three-level below-grade parking garage, housing 200,000-sq.-ft. of research and laboratory space and 100,000-sq.-ft. of office and dry lab space.

General contractor Sellen Construction of Seattle broke ground in May and plans first occupancy by June 2008.

Phase three is still only an option for the UW but includes the entire block west of the first two phases. The university is evaluating the project, and has not yet hired an architect.

Business School Facility 240,000 sq. ft. $120 million

Five years ago, the UW Business School began negotiations for a new facility that would expand and update its current operations in the badly aging Balmer Hall, a building designed and built in the early 1960s. Recently, a proposal for major new construction has gathered momentum.

"The management education market is highly competitive," said Steven Hatting, the business school's assistant dean for external relations. "We have great teachers and a supportive business community, but our facility is a liability."

Hatting said Balmer Hall's shortcomings range from small classroom size to outdated multimedia capabilities to general aesthetics.

The school hired Seattle architects LMN to design a new facility, which would take shape in two phases. The first would be a new $80 million complex of three buildings for a total of 180,000-sq.-ft., and the second would raze Balmer Hall and replace it with a 60,000-sq.-ft., $40 million facility.

Because the school could not rely on the state for core funding on the project, it turned to private donations. In 2001, it set out to bring in $80 million for the first phase solely from benefactors. The university itself will contribute the remaining $40 million for the second phase from its revenues, possibly offset by some state contribution.

To date, the school has raised close to $42 million toward the first phase.

Donors include corporations and private foundations. To speed up the first phase, the business school will probably issue a $20 million bond through the university's Treasury Office, which has some latitude granted by the state to issue debt. The school would pay off the debt with revenue from its executive education program for high-level managers and corporate VPs, which Hatting said has "more of a profit margin" than others.

Architectural details on the new buildings are still unclear, though the university will require that they fit with other buildings on campus. Officials expect the design will be heavily influenced by the existing Bank of America Executive Education Center. Completion is set for the first phase by 2010 and the second by 2012.

Harborview Expansion 656,000 sq. ft., $295 million

For more than 20 years, the UW has managed Harborview Medical Center on behalf of King County in a university/government relationship that has stood as a model for public hospitals across the country.

Harborview has long been considered the premier trauma care center for a region covering Washington, Alaska, Idaho and Montana. In addition to its management role, the UW also leases 57,000-sq.-ft. of research space at the facility.

In September 2000, county voters passed a $193 million bond issue to fund a major renovation and expansion of the complex. The plan includes the demolition of one aging building, construction of two new buildings and a parking garage, and earthquake stabilization throughout the campus.

The UW's Capital Projects Office is the project manager for the expansion, serving as a kind of owner's representative for King County. However, major decisions such as funding are made by an oversight committee consisting of representatives from the county, the university and Harborview.

Because a bond issue could not be expected to cover all projected costs, the remainder of the funds come from interest earnings on Harborview investments and rent from the hospital's tenants. The new parking garage will be covered by parking income from the existing garages.

Only one of the two buildings is currently under construction, an 11-story, 240,000-sq.-ft. inpatient facility. The university hired Turner Construction of Seattle as general contractor/construction manager for the project.

Turner still holds the contract for the second building, though it is currently in suspension. The building, located at Ninth Avenue and Jefferson Street, would house 190,000 sq. ft. in five stories above ground, with a five-level, 226,000-sq.-ft. parking garage for 630 cars below grade.

Crews started excavation and site preparation on Ninth and Jefferson but stopped when the oversight committee considered going forward with a plan to develop an additional 200,000-250,000 sq. ft. on the east half of the site.

"We're currently re-evaluating to see if we can use a different delivery model to finish the Ninth and Jefferson project," said Elise Chayet, director of planning for Harborview.