The American Society of Civil Engineers, in its “Failure to Act: The Impact of Current Infrastructure Investment on America’s Economic Future,” study, says it would take $1.7 trillion to correct the current infrastructure deficit in the United States and an extra $160 billion per year to meet infrastructure needs through 2020. While this is not inclusive of our higher education infrastructure needs, it is an indicator of how crucial infrastructure is needed across America for everyone. If we look at specific needs of colleges due to enrollment we can lean on the National Center for Education Statistic’s Projections of Education Statistics to 2022 that shows college enrollment rising by 14% through 2022 — about a third the pace of the past decade, but still aggressive given the declining number of traditional college-age Americans.
This means not only do universities need student housing, they need a diverse offering to support their mixed student body: incoming freshman, transfer students, international student, and students with families. Adding these people to the current college campus not only increases the need for housing but utilities, parking, walkways, traffic patterns and roads, classrooms, teachers, the list goes on.
Let’s take our recent student housing in North Miami at Florida International University, Bayview Student Living. When Servitas was selected as the developer, we worked with the school to make several infrastructure improvements to their Biscayne Bay campus where the 410-bed project was to be located. Through that partnership, Servitas provided additional electrical infrastructure to handle the increased power demand. Additionally, Servitas built the building’s foundation to an 11-foot minimum elevation above the adjoining bay water level for storm surge and enhanced local drainage. We also helped build new parking lots and classrooms for the entire Biscayne Bay campus’ use.
Perks of P3 Financing
What’s the benefit of investing back into the education system? Historically, tuition, state grants, and fundings, and donations were the limited sources of funding the university systems could invest into infrastructure needs. With P3s, the university is able to diversify their income streams, increasing the amount of cash flow available for budgeting, without having to raise tuition for the students. The school receives increased funding for research, raises the level of facilities and staff, and can increase the credit rating of the school which allows the school to secure funds more easily on future infrastructure improvements. With a P3 model, it is not necessary to go through additional government reviews or budget approvals. This freedom also allows the school to be eligible for more government grants and increases their ability to secure corporate sponsorships. Each of these improvements means better recruiting and retention on the student body.
All this is done at less risk to the University via the P3. Instead of the school taking a hit on their credit rating, utilizing their current funding, or securing a private loan, the school can avoid the construction risks such as budget overruns or defaults by contractors that any construction project might encounter. This can increase the university credit rating since there is no contractual liability back to the school and added cash flow from the project goes to the university benefit.