2014 -- S 3040

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LC005778

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2014

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A N   A C T

RELATING TO EDUCATION -- NURSING EDUCATION CENTER LEASE

AUTHORIZATION

     Introduced By: Senators Jabour, Sosnowski, Ruggerio, Goodwin, and Metts

     Date Introduced: May 29, 2014

     Referred To: Senate Finance

     It is enacted by the General Assembly as follows:

     SECTION 1. Chapter 16-32 of the General Laws entitled "University of Rhode Island

[See Title 16 Chapter 97 - The Rhode Island Board of Education Act]" is hereby amended by

adding thereto the following sections:

     16-32-32. Nursing education center lease authorization. – (a) Findings of fact. The

general assembly finds and declares as follows:

     (1) At a meeting duly noticed on March 11, 2014, the state properties committee provided

approval to negotiate a lease for the nursing education center at the former South Street power

station building; and

     (2) The department of administration has proposed a lease (the "Proposed Lease

Agreement"), with a term of fifteen (15) years, with an option to extend the lease for a period not

to exceed two (2) years, for approximately one hundred thirty two thousand four hundred forty

nine (132,449) square feet of space on the first, second, and a portion of the third floor of the

planned renovated and expanded former South Street power station building for the nursing

education center. The term of the lease agreement is anticipated to begin on July 1, 2016; and

     (3) The proposed lease agreement would require the board of education to pay:

     (i) Base rent for the proportionate share of the core building design, renovation and

construction expenses of fourteen dollars ($14.00) per square foot, or one million eight hundred

fifty five thousand dollars ($1,855,000) annually during the first five (5) years of the lease term;

     (ii) Tenant improvement rent for the anticipated cost of developer financing, design, and

construction of the nursing education center space, presently estimated at eighteen dollars and

eighty one cents ($18.81) per square foot per year, or an average of two million four hundred

ninety one thousand dollars ($2,491,000) annually for each year of the lease term, the exact

amount to be determined in accordance with a formula in the lease agreement; and

     (iii) Additional rent for the proportionate share of the actual building operating,

maintenance, and metered utility expenses, estimated at twelve dollars and seventy five cents

($12.75) per square foot, or one million six hundred eighty nine thousand dollars ($1,689,000) for

the first year following the commencement of occupancy; and

     (4) The base rent under the proposed lease agreement would increase to fifteen dollars

and twelve cents ($15.12) per square foot in years six (6) through ten (10), sixteen dollars and

thirty-three cents ($16.33) per square foot for years eleven (11) through fifteen (15), and

seventeen dollars and fifteen cents ($17.15) during the option period. During the option period,

the tenant improvement rent would be reduced to zero dollars ($0.00). The operating expense rent

and metered utilities would be adjusted annually, based on a reconciliation of estimated costs and

actual costs; and

     (5) The proposed lease agreement provides that, during lease year six (6) and after the

end of lease year twelve (12), the board of education would have an option to purchase, as a

condominium unit, that portion of the building leased for the nursing education center, exercise of

such option and the financing thereof subject to general assembly approval; and

     (6) The state shall be responsible for paying the base rent and the tenant improvement

rent, and the board of education shall fairly apportion the additional rent between the university

and the college; and

     (7) The proposed lease agreement provides that no rent is payable until:

     (i) The renovation and construction of the South Street landing project is completed; and

     (ii) The developer has secured a certificate of occupancy for the building, including

specifically the nursing education center space; and

     (iii) The nursing education center space is determined to be completed according to the

project specifications and terms of the proposed lease agreement.

     (b) Approval. The general assembly hereby approves the proposed lease agreement for

the Nursing education center for the space in the former South Street power station building for a

term not to exceed seventeen (17) years and at a total cost not to exceed thirty-four million six

hundred forty-one thousand dollars ($34,641,000) for the base rent; and an amount not to exceed

twenty-five million dollars ($25,000,000), plus the applicable interest and financing costs for the

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tenant improvement rent; and additional rent for the proportionate share of operating and

maintenance expenses and metered utilities.

     16-32-33. Financing of alterations. – (a) Findings of fact. The general assembly finds

and declares as follows:

     (1) The department of administration's proposed lease agreement grants to the board of

education the right to finance the tenant improvements itself, without availing itself of the

provision of developer financing as contemplated in the proposed lease agreement, if such an

alternative method is determined to be advantageous and in the best interest of board of education

and the state; and

     (2) The exercise of the board of education's option to finance the tenant improvements

will thereby eliminate tenant improvement rent (encompassing construction and design costs)

during the term of the proposed lease agreement, provided that the proceeds of such financing are

available to the developer no earlier than the rent commencement date in the proposed lease

agreement which is when the renovation and construction of the South Street landing project is

completed and the developer has secured a certificate of occupancy for the building, including

specifically the nursing education center space, and the nursing education center space is

determined to be completed according to the project specifications and terms of the proposed

lease agreement and no later than six (6) months thereafter; and

     (3) The alternative tenant improvement project costs to be financed for the nursing

education center are anticipated not to exceed twenty-five million dollars ($25,000,000), plus

costs associated with the issuance of such financing; and

     (4) The term of such financing would not exceed fifteen (15) years, with provisions made

in the structure of the financing to permit early payment of the outstanding amount of such

financing, if the option to purchase in the proposed lease agreement is approved and executed

during either of the two (2) time periods when such an option is exercisable under the lease

agreement; and

     (5) Because of the use of Federal Historic Preservation Tax Credits applicable to the

tenant improvement work for the nursing education center, taxable rate financing must be

employed at a rate not expected to exceed eight percent (8.0%); and

     (6) The resulting annual debt service associated with the state financing of the nursing

education center is expected not to exceed three million eight hundred three thousand dollars

($3,803,000) annually and forty-eight million two hundred four thousand dollars ($48,204,000)

for the duration of an up to fifteen (15) year term.

     (b) Approval. The general assembly hereby approves alternative financing not to exceed

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twenty-five million five hundred thousand dollars ($25,500,000), including twenty-five million

dollars ($25,000,000) for the estimated tenant improvement project costs and five hundred

thousand dollars ($500,000) for the estimated cost of financing.

     16-32-34. Financing of technology, fixtures and furnishings. – (a) Findings of fact.

The general assembly finds and declares as follows:

     (1) The university's college of nursing and the college's nursing school, and personnel

from both institutions who support networking and instructional technology have worked closely

with the developer's architectural team on the complement and configuration of the instructional,

simulation, and practice lab configuration of spaces through the schematic design phase of the

nursing education center facilities, with the objective of achieving a technology rich, realistic,

high-caliber learning and training experience for nursing undergraduate students, graduate

students, and those practicing nurses seeking higher levels of certification and training; and

     (2) The manner in which the facilities are furnished and equipped is an extremely

important aspect of assuring that the completed and occupied nursing education center exceeds

the educational and training expectations of students and faculty when it opens and into the future

with opportunities for expanded use by other higher education institutions, hospitals, and medical

institutions for medical students, pharmacy students, physician assistant students, medical

technician trainees, as well as nurses in a simulated "Smart Hospital" physician offices, and home

care settings; and

     (3) The initial and continuing success of a teaching and learning center such as this is

highly dependent upon the quality and sophistication of the equipment, including computerized

mannequins, interactive audio/visual, realistic hospital beds with support systems, and video

recording systems to enable post-training review and critique of experiential learning experiences,

fixtures, and furnishings that are acquired and deployed to outfit both the formal teaching and

simulation facilities, as well as the traditional classrooms, gathering, meeting and faculty office

spaces; and

     (4) Architects and consultants on the developer's design team focusing on the nursing

education center have provided a detailed inventory and pricing analysis of the equipment,

fixtures, and furnishings, on a room-by-room basis, recommended to meet the objectives of the

shared nursing education center; and

     (5) The investment in technology, equipment, fixtures and furnishings is projected to cost

ten million fifty thousand dollars ($10,050,000) and the intent is to secure lease/purchase

financing through the issuance of certificates of participation in order to spread the cost of that

investment over ten (10) fiscal years, at an anticipated non-taxable interest rate estimated not to

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exceed seven percent (7.0%); and

     The resulting annual debt service associated with the state financing of the technology,

equipment, fixtures and furnishing is expected not to exceed one million four hundred ninety-

seven thousand dollars ($1,497,000) annually and fourteen million nine hundred fifty thousand

dollars ($14,950,000) for the duration of the term of financing; and

     (b) Approval. The general assembly hereby approves lease/purchase financing not to

exceed ten million five hundred thousand dollars ($10,500,000), including ten million fifty

thousand dollars ($10,050,000) for the estimated cost of technology, equipment, fixtures and

furnishings and four hundred fifty thousand dollars ($450,000) for the estimated cost of

financing.

     SECTION 2. This act shall take effect upon passage and shall be limited to debt issued

prior to January 1, 2018.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO EDUCATION -- NURSING EDUCATION CENTER LEASE

AUTHORIZATION

***

     This act would authorize a lease agreement between the state and the developer of the

South Street power station redevelopment for the construction of a joint nursing school operated

by Brown University and the University of Rhode Island and the financing of the cost of certain

alterations to the structure and purchase of furnishings which would be the property of the school.

     This act would take effect upon passage and would be limited to debt issued prior to

January 1, 2018.

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