Site development: Capital or operational cost?

Here’s how two institutions have approached the decision
By: | Issue: February, 2014
January 27, 2014

In some cases, colleges and universities will opt to fund some site development items, such as landscaping, as an operational cost instead of a capital cost.

But the decision depends on owner needs and should still be made in advance, during the budgeting process for the entire project. Here’s how two institutions have approached the decision:

• Lawrence University (Wis.): Landscaping costs are rarely included in a construction project budget, says Lynn Hagee, coordinator of campus construction. That’s because the university prefers to use a local landscape company. For the Hurvis Center for Interdisciplinary Film Studies, which opened in August 2013, “we entered into a separate contract for the landscaping that included sidewalks,” Hagee says. “It was something we planned for ahead of time and we did it at the same time we did the building contract.”

• St. Olaf College (Minn.): “We try to never use our operating budgets to do work that can be capitalized,” says Peter Sandberg, assistant vice president for facilities. “This can be sort of a mixed bag. On one hand, using operating funds means that we would not have to recognize depreciation. On another, using operating budgets for new work means there is less available for operating everything that is already in place. On still another, because we have been aggressive about capitalization, our depreciation largely funds our annual capital renewal/deferred maintenance.”