Penn State is embarking on an ambitious housing renovation project.

I have questions.

Architect rendering of the planned East Halls renovations that include Stone and Snyder Halls at University Park campus. Photo credit: Penn State University

As the leaves turn here in Happy Valley, my thoughts have been lingering on the dormitory renovations scheduled for the East Halls housing community.

East Halls is an on-campus building complex that sits in the northeast section of University Park near Beaver Stadium. The 16 dormitory towers are home to approximately 5,000 Penn State undergrads and include two recently constructed buildings and 14 1960’s-era buildings which have all received scheduled maintenance over the years.

At some point, however, old residence buildings need major overhauls and Penn State has a plan.

The most recent phase of East Halls renovation projects are divided into two groups: Bigler, Curtin, and Packer Halls, and Stone, Hastings, and Snyder Halls. Together they comprise 414,000 sq ft of living space and 1,585 beds. In my role as a responsible fiduciary I have a list of questions when presented with proposals for large expenditures:  

1) What mission of Penn State is being furthered by this project, and where does this mission fall with regard to the highest priorities of the University?

·  The mission being served is to provide quality on-campus housing to our large in-residence student population. This is a high-priority mission.

2) Is this project the best way to further this mission?

·  Renovation of the aging East Hall dormitories is, in my opinion, a reasonable route to take to fulfill this mission.

3) Does this project maximize the benefits we are receiving relative to the costs incurred?  In other words, are we getting ‘the most bang for the buck’?

·  Unfortunately the ‘bang we are getting for our buck’, or perhaps more appropriately the costs we are incurring for the scope of the project, appear to me greatly overpriced.  And that is a problem.

By my reckoning, nearly all of our Big Ten cohorts—many of whom also went through significant enrollment booms in the 1960s—are dealing with the need to renovate housing units.  Looking for comparables to base my analysis on, I found that the University of Wisconsin/Madison is in the middle of a similar project that is almost identical to the East Halls project in mission, timing, scope, and project parameters.

Wisconsin is renovating student housing of the same vintage as East Halls: Witte Hall and Sellery Hall, each of which is comprised of multiple dormitory towers (read more here, here, here, here, and here for details). Both project scopes include the same main points:

·  Renovation and refurbishment of 1960’s era concrete dorm towers. This existing housing has had periodic maintenance but no major changes to the footprints or infrastructure since originally constructed.

·  Major updates to the heating, ventilation, electrical, and plumbing systems including the installation of air conditioning, and replacement of all windows and exterior glass with energy efficient products.

·  Bring all buildings up to current ADA standards. 

·  Update student rooms while keeping the same square footage per room (approx 190 sq/ft).

·  Renovate the common and shared bathroom facilities, and update student common spaces (recreation, kitchen, study spaces, etc)

I will note one major dissimilarity: Wisconsin plans to add new housing floors to the tops of the current structures, which students will occupy while renovation work is done below. This adds complexity to Wisconsin’s project, which should theoretically should add more cost. Penn State, on the other hand, will not be adding any new student rooms and the buildings will be vacant during construction work.  

While both projects are similar in mission, scope, and timing, the costs are dramatically different (see graphs below, click here for supporting documentation).

Obviously, I have questions.

You might be thinking: C’mon Barry, aside from Penn State paying double for the same work, what’s the big deal here?

That’s not an unreasonable question. The underlying fundamentals work like this: unlike more common Operating Budget expenses like maintenance, Capital Budget expenses—for construction and major renovation projects—are accounted for in a separate ledger and are one time expenses. 

Due to their size, however, most of these types of projects are financed by taking on debt.  Debt that must be repaid, with interest, year after year.  The payments we need to make on those debts impact how much money we have to meet all of the other needs of the University. As those debts accumulate and become more expensive, we cannot add one capital project on top of another without careful scrutiny.

Approval of this project came before the Penn State Board of Trustees today, November 11th 2022. I was the sole ‘Nay’ vote for the reasons presented.

Every other trustee voted ‘Yea’ and the project was approved.

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As a member of the Penn State Board of Trustees, I will from time to time be made aware of certain confidential information.  I will also engage with Trustees and administrators in private, off-the-record conversations, with the expectation of privacy on both parties. I take these expectations seriously, as they are required in order to catalyze important discussions.

As a fiduciary, it is also important that I engage in conversations with all stakeholders of the University. Stakeholders like you.  Discussions will involve publicly available information and issues before the Board, as well as my personal thoughts, concerns, and ideas. I also will continue to solicit your thoughts, concerns, and ideas, and plan to engage in meaningful conversations with you on those topics. I hope that you will continue to share your concerns and ideas with me.