The Virtue of an Oil Change: Why Investing in Regular Maintenance of Real Estate Assets is Good Financial Stewardship

Source: FSB

Maintenance is one of those things most people only notice and appreciate when it isn’t happening. For this reason, it is not uncommon for organizations and governments to defer plans for long-term maintenance, which can result in emergency renovations and fiscal disadvantages.

According to FSB Engineer and Civic Market Principal John Semtner, each new building or renovation presents an opportunity to set a new, proactive precedent for maintenance.

“Think of maintenance like performing oil changes,” said Semtner. “You don’t only get an oil change for the first year you have a car. You get them as ongoing maintenance. The same goes for real estate. Ongoing maintenance will help you save long-term dollars and avoid emergency situations.”

Semtner recently participated in an interim study organized by the Oklahoma Senate Appropriations committee. The topic of the study: maintenance of state-owned properties. FSB managed the architecture and engineering aspects of the Oklahoma State Capitol building’s $245 million renovation, expected to be completed in 2022.

By the time FSB was engaged, the Oklahoma State Capitol building was suffering impacts of some significant deferred maintenance, including crumbling exterior, failing mechanical systems and outdated meeting offices and spaces. As the firm’s civic market principal, Semtner shared FSB’s findings in order to support his recommendations that the Capitol building and surrounding agency and office buildings be more regularly maintained.

“There are processes in place today that identify large ticket maintenance items, but there’s not dollars being assigned to them until it’s too late,” Semtner said. “That’s what happened with the Capitol. It got to the point where it was necessary to use emergency funds to wipe the slate clean and start over.”

Semtner said costs are higher in emergency situations because extra measures and expenses must be incurred to keep the building operational and expedite the sourcing of materials. Another state government example, the Department of Corrections, had facilities with deferred maintenance that was so severe that a five-year $100-million bond was needed to address the problems. The facility repairs would not have been nearly as expensive, he said, if a systematic maintenance plan and allocated annual budget was in place.

Joining Semtner to present at the interim study were Dan Ross, involved with capital assets management at the Office of Management and Enterprise Services (OMES), the state agency tasked with building management of all state-owned properties including the Capitol, and Gino DeMarco, deputy executive director at the Oklahoma Tourism and Recreation Department.

The engineer praised the OMES Capital Improvement Plan that places maintenance on a schedule and annually allocates part of the state’s budget to ongoing maintenance of the state’s real estate assets. Semtner said OMES’ plan is essentially devised to help the state budget for the “oil changes” that would prolong the lives of new mechanical systems and facades and in doing so will avoid, or at least delay, costly renovations long-term. It includes recommendation to invest in the upkeep of the State Capitol and agency buildings and to address mission-critical deferred maintenance in agency buildings.

As part of his presentation, Semtner also imparted his experiences and lessons learned on other comparable projects in which he has been involved. He is a board member for Santa Fe Family Life Center, a nonprofit fitness center designed to serve the entire community, including disadvantaged youth and people with disabilities. Although Santa Fe, like any nonprofit, had competing needs in its annual budget, he recommended they more proactively invest in regular maintenance of the building.

“When people budget for capital expenditure items, it can often be an unused budget and can become a target to be reduced or redirected to fund other needs.” Semtner said. “Even so, it’s always recommended to prioritize maintenance and put it on a schedule to budget around,” “Most times, you’ll be glad you did – because you never know when problems will begin.”

Today, thanks to regular maintenance, The Santa Fe Family Life Center’s operational expenses have been dramatically cut – the small-dollar investments led to a 40 percent decrease in energy bills. That reduced expense has paid off the maintenance investment and allowed for those budgeted funds to be diverted to other opportunities. Membership at the nonprofit has increased in part thanks to the regular updates of fitness equipment and facilities.

Semtner said he appreciated the opportunity to serve his state by participating in the interim study.

“At FSB, we regularly discuss maintenance with our clients, and recommend that they incorporate it into their budgets,” he said. “It was an honor to speak with this group of lawmakers who are facing many critical issues for our state, and to share my experience and the significant long-term fiscal benefits that can be realized from taking care of its existing real estate assets.”

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