PHOENIX – The University of California would issue $400 million of bonds as part of a proposed $1.1 billion public-private partnership to expand the campus of the University of California, Merced, according to a report the state Legislative Analyst's Office issued Wednesday.
The legislature has until April 1 to consider the proposal, which would aim to double the newest University of California campus's facility space by 2020. Under the plan, enrollment on the Merced campus would grow from 6,000 to 10,000 full–time equivalent students during that time. A private sector partner would co-finance the project as well as design, construct, operate, and maintain the facilities.
The LAO report is designed to give the legislature a rundown of the proposal's financial impacts and provide suggestions for factors it needs to consider when deciding whether or not to move forward. In this case, the LAO suggested, the legislature must consider how quickly it wants to grow UC enrollment and whether it wants to adopt this format of P3 or a more traditional approach to delivering the project.
The UC Regents approved the plan in November.
Opened in 2005, UC Merced was always expected to grow to accommodate rising enrollment in the system. Since 2001, the state has issued over $350 million in bonds to develop the campus site and construct facilities. Over the last ten years, UC Merced has received a steady increase in applicants, the report said, and every year more admitted applicants enroll at the campus. It remains the smallest campus in the UC system.
The UC has said that a P3 would deliver the project more quickly at lower cost while transferring some risk to the private sector. Under the partnership, the partner would design and construct the facilities. The UC would issue $400 million in bonds for construction of the state–eligible facilities, while the partner would finance the remaining $127 million for these facilities. UC and the partner also would share responsibility for financing the facilities that are not state–eligible. The UC would pay the partner for the construction costs in three installments upon completion of certain construction milestones. The UC has said that this payment schedule would provide an incentive for the partner to complete construction without delays. Annual debt service for the bonds would be $21 million, the LAO said.
The LAO report recommends that the legislature hold early hearings on the project.
"Given the size, scope, and complexity of the Merced proposal, we recommend the legislature hold hearings in late February or early March to discuss the proposal and convey any concerns to the administration at that time," the report said.