Property Control System Manual (PCS)

Effective: 1/27/1993

Revised: 7/1/2012

PCS 215: Land/Building Purchase and New Building Construction

Purpose

To outline requirements for purchasing land or buildings and for constructing new buildings

Sources

United States. Office of Management and Budget. OMB circulars A-21 and A-110

Arizona Board of Regents Policy Manual - 7-303

Property Control

Financial Services

Department of Facilities Management

Purchasing and Business Services

Policy

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Prior Approval

Land and Building Purchases

Land and building purchases must have prior approval from the Board of Regents. All construction, repair, and maintenance projects expected to cost more than $105,000, regardless of the funding source, must have prior approval. If the original estimate was expected to be less than $105,000 and the final estimate exceeds this amount, the Board of Regents must approve the project before construction.

Capital Improvement Projects

Capital improvement projects must have prior approval from the Board of Regents regardless of cost.

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Ownership of Real Property

Real property purchased by ASU is legally owned by the Board of Regents. This property must be appraised before purchase. Emergency purchases may be made without prior Board of Regents’ approval provided certain conditions are met. Board action following purchase may be required.

Real property may consist of the following:

Land (Object Code 7890 01)

1. Acquisition by Purchase - Land purchased by the university is recorded at cost. The cost includes legal, title, and broker’s fees, landfill, clearing, grading, and other costs necessary to prepare the land for its intended use.
2. Acquisition by Gift or Bequest - Recorded at the fair market value at the date of the gift (appraisal will usually have been completed).
3. Acquisition through Eminent Domain - Recorded at the amount of the court award made to the landholder(s).

Improvements to Land Other than Buildings (Object Code 7890 06)

This category consists of land improvements outside the periphery of the building. Improvements to land, other than buildings, which are required to make land ready for its intended use, are capitalized if the aggregate expenditure is $100,000 or more per project.

This category includes: roads, walkways, tunnels, utilities, drainage systems, landscaping, parking lots, tennis courts, athletic fields, fences, curbs, streetlights, and other similar items. The capitalization criteria are the same as those used for building capitalization.

Buildings/Building Components (Object Codes 7890 11– 99)

1. Buildings (7890 16). The cost of buildings (permanent structures housing persons and personal property) is the construction cost of the building shell and its components. Examples of construction costs include, but are not limited to, building materials, building permit fees, subcontract fees, rent for property, to complete construction, operating and maintenance costs for property, site preparation, compensation for work performed, and cost of supplies consumed in the construction. Capitalization of associated costs takes place as the costs are incurred.
2. Building Components (7890 11). Building components are items permanently attached to the building shell necessary for the building to be used as intended. Building components are either integral to the building or cannot be removed without damaging the building or component. Examples of building components are plumbing systems, electrical wiring, and air-conditioning duct work.
3. Building Additions (7890 11). New additions to buildings resulting in additional square footage are capitalized regardless of the dollar threshold.
4. Renovations (7890 11). Major building component replacements or renovations of a building that extend the original life of the building and/or increase its value to the university are capitalized for projects involving expenditures of $100,000 or more.
5. Demolition Costs (7890 16). The cost of building demolition in preparation of new construction is added to the cost of the new building as “site preparation costs” (7890 16). If new construction is not planned, the demolition costs are not capitalized.
6. Planning (7890 21). Professional services and fees incurred with construction and remodeling (e.g., architects’ fees, construction and management fees, and engineering studies).
7. Building Fixtures (7890 95). Fixtures must be able to be removed without extensive alterations to the building structure and cannot be so affixed as to be legally considered part of the real property. Examples include carpeting, shades, shelving, bulletin boards, and lab benches bolted to the floor. These are capitalized if the total expenditure is $100,000 or more, per project.

Procedure

Property Control establishes a separate and complete inventory record for each distinct unit of real property. A separate building record is established immediately after title is acquired for a new tract of land or building, or construction of a new building is completed.

The department submits a memo and a proposal to University Real Estate Development Office justifying the use and funding source of the land or building being purchased.

Note:

The University Real Estate Development Office is distinct from Property Control.

The University Real Estate Development Office submits proposals to the Board of Regents for approval, if applicable. When approval is granted, the University Real Estate Development Office:

1. selects or advertises for engineers, architects, and other professionals needed to acquire the property

   and

2. negotiates the purchase price and terms of the acquisition.

Once the property is acquired, Facilities Management:

1. assigns a unique identifying building number to all new buildings (the numbers of retired buildings should not be reassigned)

   Note:

   The building number is used as a reference for future additions or improvements. Future capital renovations are added to the building inventory record based on PCS 103, “Remodeling and Other Building Costs.”

2. assigns room numbers and prepares floor plans for each new building

   and

3. maintains a record for each unit of real property to include the area, volume, floor plan, type of construction, utility system, maintenance record, and original architectural drawings and construction specifications.

Property Control records all capital costs, including additions and improvements, to the appropriate building record, provided they comply with PCS 101, “Plant Acquisitions,” and PCS 103, “Remodeling and Other Building Costs.”

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