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Originally published: 2013-12-26 17:40:54
Last modified: 2013-12-26 19:10:21

No prescription for ASU health building

by Anna Oakes

Prospects for private partnerships that could aid in the construction of Appalachian State University's new health college building are constrained by site limitations and a challenging retail environment, a consultant advised the university.

Appalachian Regional Healthcare System pledged in spring 2012 that it would donate a Deerfield Road tract near Watauga Medical Center to the university if ASU could secure funding for the College of Health Sciences building by Dec. 31, 2014. ASU leaders indicated in March of this year that they were exploring public-private partnerships as a means to fund the project.

Consulting firm Brailsford & Dunlavey earlier this year conducted a strategic assessment evaluating public-private partnership opportunities at the nine-acre tract, including models combining medical offices, retail space, commercial offices and/or student housing with classroom space, said Randy Gonzalez, ASU associate vice chancellor for development and alumni relations. Gonzalez provided an update on the project to the ASU Board of Trustees Dec. 12.

"A lot of this is work on projections and ideas and possibilities," he emphasized. "Nothing is set in stone."

An estimated $80 million construction cost plus loan interest would require an approximate $4.5 million annual debt service payment, ASU officials have said. The strategic assessment estimated that ASU could potentially receive $800,000 in private revenue per year toward its debt service on the building.

"That is much lower than we were hoping for," Gonzalez said. However, he said, the university and consultant are exploring ways to increase the potential revenue amount, including expansion of the project footprint and opportunities to develop other sites.

Medical offices appear to be the most promising at the site because of existing facilities that are not of high quality or compliant with Americans with Disabilities Act specifications, Gonzalez noted.

The consultant also found student housing to be a viable option. While the town of Boone's recent housing market analysis concluded there is a surplus of student housing units in town, market information indicates there is still demand for newer units with amenities, Gonzalez said.

Gonzalez said retail opportunities face a "difficult environment in Boone" but that the consultant believed a highly customized, destination retailer such as a Trader Joe's could work.

"Each of these needs further analysis -- needs further vetting," Gonzalez said.

ASU founded the College of Health Sciences in July 2010, and it includes more than 15 programs of study, including departments of nursing, social work, communication sciences and disorders, nutrition and dietetics, health care management and health, leisure and exercise sciences.

Gonzalez said tentative plans are for a 220,000-square-foot academic facility, which would house most but not all of the college's programs.

Another challenge is that part of the property lies within a floodway, and "we know we have some work to do there with the town of Boone," Gonzalez said, referring to zoning restrictions.

Even if private revenue opportunities pan out, the project still faces a significant funding gap and need for state support, he noted.

In the past, ASU has received special state budget appropriations to construct new academic buildings on campus, but ASU leaders have emphasized that nothing is certain in today's economic climate. The General Assembly this year appropriated $2 million to ASU for planning of the project -- an effort Board of Trustees Chairman Mike Steinback described as "monumental."

Gonzalez said some have suggested that perhaps an annual special allocation in the $3 million range "may be a more palatable way for the state to fund it." Another revenue option is a student fee, which he described as "politically ... very questionable."

Steinback asked if staff had considered scaling back the academic building with the potential to add onto it later, but Trustee Frank Daniels said he would hesitate to reduce the building size until ASU knew for sure it would not receive sufficient state funding.

Gonzalez said the consultant and university face "a very ambitious schedule" to further evaluate each potential revenue option, look at other properties and develop fundraising goals. And a state appropriation could be difficult to obtain during the 2014 short legislative session, he said.

He said ASU has received "positive feedback" from ARHS about extending the deadline for securing funding past December 2014.