University looks for savings from upgrades

Months before Southeast Missouri State University knew how much of its annual funding request would be cut due to Missouri's current budget crunch, it embarked on a major program of cost-cutting and energy-saving improvements across the campus.

Last fall, the university's board of regents approved spending nearly $19 million -- including financing costs -- for improvements that are expected to produce savings of more than $21 million over the next 20 years.

Major components of the overall savings plan are replacing nearly 30,000 fixtures with energy-efficient lighting and upgrading the university's power plant so that it can once again generate electricity. Another part of the project involves cost-saving modifications to toilets and faucets.

Clearly, the university hopes its cost-cutting program will help offset some of the budget cuts it has endured this year. At the end of this year's legislative session, Gov. Bob Holden drastically reduced funding for higher education to balance overall state spending plans. As a result, the university has embarked on several more efforts to cut costs (staff reductions, unfilled positions) and increase revenue (two sizable increases in tuition and fees this year).

Unlike previous efforts to reduce operating costs, the university has linked this most recent round of spending to a guaranteed-savings performance contract. Last October, the university contracted with Johnson Controls of St. Louis for the first phase of the cost-savings project. In February, regents approved a 10-year, $13.4 million contract with Johnson Controls to make the necessary improvements that are expected to produce sizable energy savings. Under the contract, if anticipated savings of about $1 million a year aren't met, Johnson Controls will be required to pay the difference.

Spending $19 million to save $21 million over an extended period of time may, at first blush, seem like little more than a trade-off. But a major portion of the funding to pay off bonds that will be used for the cost-saving project is coming from funds that otherwise would have been spent on equipment-related maintenance and replacement costs anticipated over those 10 years.

Still to be determined is the cost benefit of more improvements to the power plant. While the latest upgrades will allow the university to supply its own electricity at a fraction of the cost of buying power from AmerenUE, the power plant has a long and costly record of improvements and repairs over the past dozen years or so.

For the past two years, the power plant has only been generating steam for the campus' heating and air-conditioning needs. In all, the university's spending on the power plant since the early 1990s amounts to millions of dollars to repair equipment and meet federal and state regulations.