Dr. Steven Kinsella, Mr. Joe Keeler, and Mr. Casey Michaelis presented to the Subcommittee an August 8 draft of the Measure E Master Budget including a Master Budget Summary letter dated July 14, 2006, Measure E Bond Program Escalation letter dated February 6, 2006, and a Master Budget Matrix last revised on June 27, 2006. After Subcommittee review at this meeting, the Measure E Master Budget will be presented at the August 8 Board of Trustees meeting as an informational item and at the September 12 Board of Trustees meeting as an action item.

Mr. Michaelis outlined the allocation method used to arrive at the draft budget by project. The process started with the original estimates that were included in the Measure E Bond language. A program contingency, program (soft) costs, and an interim housing program were established. The infrastructure budget was also augmented. In addition, ADA, campus safety, and campus lighting amounts were distributed across each construction project.

Mr. Dover asked if the OE project included both the OE modernization and the interim housing. Mr. Michaelis noted that the interim housing project was now a separate project as was originally discussed last year. In addition, several building renovation projects were lumped into one program budget for purposes of economies of scale in bidding, and also safety and security. The budget for ADA upgrades was allocated to individual renovation projects.

Each project budget was developed by determining hard costs numbers based on a conceptual scope of work to be completed. Items that were identified as "must do's" included code requirements and specific items promised in bond language. Escalation was factored in at 5.5% per year for each project depending upon when the project was scheduled to start construction. In summary, total project costs, including projected interest income, result in a deficit of $8,609,863.

Mr. Washington asked how we will deal with the deficit. Dr. Kinsella and Mr. Keeler identified several factors that may influence the budget and reduce the deficit.

• Projects coming in under budget (both the boiler replacement bid and the infrastructure bid have been under the estimate.)
• State funding for the modernization of the PE building and the Library is pending.
• Interest income may come in higher than projected.
• Rate of inflation may be lower than estimated.
• Emergency state funding is being pursued for the water tank replacement project.
• Change scope of work for all projects.
  • Not recommended.
  • Same level of renovation is desirable throughout the projects.
  • Scope of work would be limited to "must do's" only.
  • If funds are available at the end of the renovation period, it would be difficult to go back and retrofit the first few projects if the scope was reduced now.
  • Try to meet taxpayers' desires when bond was passed.
  • Scope of work can be reviewed and revised at a later time if needed.

1. State Budget - Mr. Keeler referred to the handout titled "Consolidated Summary All Funds, Final Budget FY 06-07. He highlighted that the general fund is a "breakeven" budget. Mr. Dover asked if the ending funding balance met the budget guidelines of 5%. Dr. Kinsella said "yes", and that ours is about 8%.
2. SB 361 - Mr. Keeler reviewed the Community College League of California breakdown of the Governor's Budget dated 7/19/06. In addition, Dr. Kinsella and Mr. Keeler reviewed the impact that the passage of SB361 would have on Gavilan's Budget. The 2006-07 Final Budget presented includes $800,000 of the $1,600,000 equalization funding that may be available to Gavilan with the passage of SB361.
3. Group 3 - Mr. Keeler referred to "Group 3" which is a list of staffing requests generated through the budget process. This list will be discussed, revised and approved through the collaborative process including the Board Budget Subcommittee if additional funding becomes available with SB361. Dr. Kinsella noted that the funds will be spent carefully with a caution for overspending.

The subcommittee agreed to meet as required.