The Capital Budgeting and Disclosure Process

This content provides a comprehensive overview of the capital budgeting and disclosure process, focusing on fiscal years, budget terms, and the sequential steps involved in the capital budget process. It explains the timeline from the Governor's capital budget release to the final approval by the governing bodies. Additionally, it covers the disclosure process, quarterly disclosed projects, and the relationship between operating and planning budgets for different fiscal years.

• Capital budget
• Disclosure process
• Fiscal years
• Budget terms
• Operating budget

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1. CAPITAL BUDGET AND DISCLOSURE PROCESS 9/9/2024

2. FISCAL AND BUDGET YEAR TERMS

3. Fiscal Years, Quarters, Terms FY 2017-18 Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun FY 2017-18 Q1 FY 2017-18 Q2 FY 2017-18 Q3 FY 2017-18 Q4 FY 2017-18 FY18 Q1 FY18 Q2 FY18 Q3 FY18 Q4 FY 18 Q1 Q2 Q3 Q4 3

4. CAPITAL BUDGET PROCESS

5. Capital Budget Process THEC s Capital Budget Request Governor s Capital Budget Proposal Appropriations & Bond Bills (Budget) January: Governor s capital budget released by F&A January TBD: General Assembly reviews, amends, approves capital budget Summer/Fall: Governing boards approve capital budget request; Submit to THEC March/April: Administration s Amendment to capital budget, including Late Disclosures for upcoming fiscal year Late Spring/Early Summer: General Assembly passes Appropriations and Bond Bills; Budgets finalized November: THEC Commission approves capital budget request; Submit to Governor/F&A 5

6. Fiscal Years and Budget Process FY 2017-18 (Operating) Jul Aug Sept Oct Nov Dec Jan Feb Mar Apr May Jun FY 2017-18 Q1 FY 2017-18 Q2 FY 2017-18 Q3 FY 2017-18 Q4 Budget 2018-19 (Planning) Governor s Capital Budget Proposal THEC Capital Budget Request Final Budget Passed July 1, 2017 Administration s Amendment 6

7. DISCLOSURE PROCESS

8. Disclosure, Amendment, and Budget Process FY 2017-18 Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Jun Jul May FY18 Quarterly Disclosure Process (Operating) Two FY Budgets Running Concurrently; Operating In One, Planning for Next July 1, 2017 FY19 Capital Budget Process (Planning) 8

9. Quarterly Disclosed Projects THEC solicits project requests quarterly Amends current fiscal year capital budget Submit a list of projects to bring forward in following quarter to SBC and/or OSA Chancellor/President memo with rationale and DB70(s) with detailed description No TSSBA, G.O., or other bonds Master Plan should support substantive projects THEC reserves the right to hold projects Projects of particular significance Projects requiring state or external approval 9

10. Fiscal Years and Quarterly Disclosure Process Disclose in for quarter. FY 18 FY 19 FY 17 Q1 Q2 Q3 Q4 Q1 Q4 10

11. Quarterly Disclosed Projects All Capital Improvements in excess of $100,000 Capital Improvement means, regardless of Total Project Cost and funding source , that involves: The construction or erection of new buildings or Structures, including prefabricated and modular that are or will be attached to a permanent foundation; The demolition of a building or structure; A Renovation; or A project funded in an Appropriations Bill or Bond Bill passed by the Legislature with outlay dollars, or a project funded with residual funds. Renovation means, pursuant to T.C.A. 4-15-107, the change in the functional use or operation of space ... such that its occupancy changes... Structure means any monument or construction having health, safety, and welfare regulatory considerations; requiring State Fire Marshal approval; or designed to accommodate eight or more people. SBC Policy Item 2.01 DEFINED TERMS 11

12. Quarterly Disclosed Projects All Capital Maintenance projects in excess of $500,000 Capital Maintenance means: Work meeting the definition of Major Maintenance; or Maintenance or construction in a single building or structure, within a six (6) month period or less, and having a Total Project Cost, taking into account all contracts pursuant to which the work was performed, in excess of $100,000 funded by sources other than capital appropriations; or A project funded in an Appropriations Bill or Bond Bill passed by the Legislature with maintenance dollars, or a project funded with residual funds. Major Maintenance means, pursuant to T.C.A. 4-15-107, the repair or renovation of any building or Structure funded by direct appropriations for major maintenance or that is estimated to have a Total Project Cost in excess of $100,000. SBC Policy Item 2.01 DEFINED TERMS 12

13. Disclosed Projects: Annual, Amendment, and Quarterly $500,000 $100,000 Capital Improvement Disclosed to THEC Capital Maintenance $0 Approved by SBC SPA Generally Delegated to OSA and F&A SBC or ESC approval 13

14. Disclosed Projects: Annual, Amendment, and Quarterly Two separate, but in-step processes: Disclosure Approval Capital Improvements $0-99,999: $100,000-499,999: $500,000+: No disclosure Disclosed to THEC Disclosed to THEC Delegated to SPA Delegated to OSA and F&A SBC or ESC approval Capital Maintenance $0-99,999: $100,000-499,999: $500,000+: No disclosure No disclosure Disclosed to THEC Delegated to SPA Delegated to OSA and F&A SBC or ESC approval 14

15. GENERAL REMINDERS AND SBC POLICY ITEMS

16. Project Expiration Projects good for two fiscal years from disclosure or approval Capital Budget: It is the legislative intent that the listed institutions initiate these projects within the next two years. Project in FY2017-18 Budget good for 2017-18 and 2018-19 All non-SBC approved FY2016-17 projects expire June 30, 2018 Quarterly and Late/Additional disclosures are not exempt Quarterly projects are effective in the current (operating) fiscal year E.g., Projects disclosed in anyquarter of FY18 are good for 2017-18 and 2018-19 Various timelines, dependent upon time of approval or disclosure Disclose FY2019-20 project by July 2018 to THEC for approval by the General Assembly in Spring 2019 (~12 mo planning), effective July 1, 2019. Good for 2019-20 and 2020-21 (active for 24 mo) Disclosed project for Q4 of FY2017-18 good for 2017-18 and 2018-19 (~15 mo) Bonds expire, too! 16

17. SBC Policy Reminders, Reporting Item 2.01.C: Capital Maintenance [is] within a six (6) month period or less, and taking into account all contracts pursuant to which the work was performed in excess of $100,000. Item 2.01.D(1): It is the express intent of the Commission that Capital Project work will not be split into separate projects to avoid any thresholds. Item 2.03: each SPA shall submit a document indicating the status of all items approved by the Commission, including under the delegated authority of the Commission, in a form approved by the State Architect on a quarterly basis. (A) Capital Projects; (B) Land Transactions; (C) Acquisition and (D) Disposal Leases; and (E) Other Items 17

18. SBC Policy Reminders, Reporting Item 2.02.A(2): The Commission has authority to approve and supervise improvements by a Higher Education Foundation where it is the documented intent of the Higher Education Foundation to transfer the real property to a Higher Education Institution and the cost is in excess of $500,000. Furthermore, no contract for the improvement Property by a Higher Education Foundation shall be awarded until the project has been submitted to and approved by the Commission. Item 2.04.D: In the event of an emergency requiring a Capital Project at a State-owned facility that is not used by a Higher Education Institution, the Commissioner of Finance and Administration has the authority to approve any emergency repairs, with the written consent from at least one of the Constitutional Officers. Higher Education Institutions are responsible for their own emergency response procedures, a copy of which shall be kept updated on the website of the Office of the State Architect. 18

19. SBC Policy Reminders, Reporting Acquisition (Generally) 7.01.A: All leases (i) where the rent due to the lessor under the lease is in excess of $150,000 per year or (ii) where the term of the lease, including all renewal and extension options contemplated in the lease, is greater than 5 years, must be approved by the Commission prior to execution by the State. 7.01.B(3): Each SPA shall procure leases using a form of request for proposal (including pro forma lease) that has been previously approved by the Commission unless advertisement is not required. 7.01.C: Additional Higher Education Requirements. All leases with annual rents in excess of $150,000 or with terms greater than five (5) years procured by a SPA that is a Higher Education Institution must be submitted to the THEC for review, analysis, and approval, prior to the issuance of any advertisement of space needs. Disposal (Generally) 8.01.A: Acquisitions and dispositions of interests in real property shall be submitted to the Executive Sub-Committee prior to any commitment to complete a transaction. STREAM handles property disposals (fee, lease, easement, etc.) 19

20. TIPS (AND TRICKS!)

21. Tips (and tricks!) Disclose! Disclose early! Disclose generously! Disclosing projects does not bind an institution to anything. Confer and regularly update your Master Plan! THEC has streamlined process for master plan updates and amendments. Consider project cost and scope as early as possible; discrepancies solicit questions. Phased or Phasing: Many projects are phased projects (e.g., Building X Wings Renovation: Wing 1, then Wing 2), while you may decide to phase others/subprojects (e.g., Wing 1 Renovation: Planning, then Design/Construction). How to disclose? Always disclose full project for budget. May disclose quarterly planning project as necessary. Never break-up project scope; perception is to avoid thresholds. A root project does not exist full project scope and cost should always be disclosed initially. Keep project names consistent. 21

22. Tips (and tricks!) Call us first! We are here to help to provide guidance to share context and to be an advocate. Keep us informed. 22

23. Patti Miller, Architect Chief of Facilities Planning (615) 741-5289 patti.miller@tn.gov Taylor Odle, Assistant Director Fiscal Policy and Research (615) 253-8873 taylor.odle@tn.gov