June 21, 2004

 

TO:   Board of Regents of Higher Education

FROM:  Rod Sundsted, Associate Commissioner for Fiscal Affairs

SUBJECT: Higher Education Complex - 2500 Broadway


The current Higher Education Complex at 2500 Broadway was financed under an agreement whereby Lewis and Clark County agreed to issue Educational Facility Revenue Bonds in the aggregate principal amount of $4,700,000 to provide funds to finance the costs of acquiring, construction and equipping the facility.  The county agreed to lease the Higher Education Complex to the Montana Higher Education Student Assistance Corporation (MHESAC) and the Board of Regents of Higher Education pursuant to three leases between the County and MHESAC, the County and the Commissioner's Office, and the County and the Guaranteed Student Loan Program (GSLP).  The lease agreement between Lewis and Clark County and MHESAC provided MHESAC the option to purchase the complex at any time subsequent to the issuance of bonds for one dollar plus, to the extent required, a sum of cash needed to discharge all bonds in accordance with the terms of the indenture.  During the 2000 restructuring the rights of MHESAC under these agreements were transferred to the Student Assistance Foundation (SAF).  The Commissioner's lease and the GSLP lease both expire on December 1, 2014.   While the GSLP lease does not have an option for SAF to terminate the lease prior to 2014, the Commissioner's lease does contain a option for SAF to cause this Lease and the Regents rights and interest herein, to be terminated as of December 1, 2002 and each December 1 thereafter during the term hereof upon 12 months written notice to the Regents.

Since 2001 SAF has grown from 63 to 126 full-time equivalent employees.  The recent budget approved by the SAF board provides for the addition of 36 new staff members (23 full-time equivalent employees) by the end of 2004-2005. This growth is the result of increased new business development, consolidation activity, and increases in the MHESAC portfolio.  To date this increase in staff has been accommodated through finishing the basement and the conversion of common space to offices.  There is little flexibility remaining in the facility to add additional office space.  Parking space is also at a premium as there are only 137 spaces for employees and 26 spaces for visitor and disabled parking while the current building occupancy is approximately 215.  Many employees are currently parking on the street off site. The staff increases recently authorized by the SAF board will put further stress on the existing facilities. During their June 2004 board meeting the SAF board passed the following motion:

SAF believes it necessary to explore all options available to it for satisfying SAF's physical space needs in the near and long-term future.  One of the options SAF has available is to exercise its option to terminate the lease on the space currently occupied by the Office of the Commissioner of Higher Education in the building that SAF and OCHE currently occupy at 2500 Broadway. SAF may also want to consider pursuing ways to  occupy the space currently utilized by the Montana Guaranteed Student Loan Program in the same building.  The SAF Board thus requests the SAF President to conduct discussions with the Commissioner of Higher Education and the Director of the Montana Guaranteed Student Loan Program relative to the possible termination of the Commissioners lease and to discuss possible lease assumption discussions with the Director of MGSLP in order to identify the costs and feasibility of these options for SAF.


The OCHE currently occupies 7,924 square feet of designated space and has 2,805 square feet of allocated common space for a total of 10,729 total square feet.  FY04 estimated expenditures including repair/replacement, operating costs, and debt service in the current facility for the OCHE total $138,318. 

 

c:  Commissioner Stearns

  Jim Stipcich

  Bruce Marks