Summary of Proposed Action

SBHE Meeting - March 27, 2014

1. Issue. The arrangement between NDSU and Sanford College of Nursing.

2. Proposed motion. Motion to approve integration of Sanford College of Nursing into

North Dakota State University, with specific approval of the March 7, 2014, Asset
Transfer Agreement and Lease Agreement between North Dakota State University and
Sanford Bismarck.

3. Background information. On November 8, 2013, Sanford Bismarck signed a

memorandum of understanding with NDSU to discuss a partnership for nursing
education. Talks of a partnership began in response to a new Higher Learning
Commission (HLC) requirement that all colleges should become separately
incorporated in order to retain their accreditation. One HLC recommendation was that
the Sanford College of Nursing (the College) explore possible partnerships as an
option to keep accreditation and funding support.

Subsequently, NDSU and Sanford Bismarck negotiated an Asset Transfer Agreement.

In this agreement, NDSU agrees to incorporate the College into the NDSU Department
of Nursing and to acquire all of the assets of the College. The agreement was approved
by the Sanford Corporate Board of Trustees on March 6, 2014, and has been signed by
both parties. The agreement is contingent upon the approval of the SBHE.

If the SBHE approves the transaction, the transfer is scheduled to occur on June 30,
2014. Following the change of control, Sanford College of Nursing will cease to exist as
a separate institution and will resign its separate accredited status with the HLC. The
College would be owned, operated, and managed solely by NDSU under the name
NDSU Nursing at Sanford Health. The College will be operated at its current location in
Bismarck, ND, but it will be integrated into NDSU's Department of Nursing and adopt its
mission, curriculum, assessment, and policies.

All currently enrolled sophomore and junior students will continue their education at the
College and transition into the NDSU program as of fall 2014. Current senior students
will graduate in spring 2014 from the College. All faculty and staff currently employed by
the College at the time of the transfer will become NDSU employees. College faculty
will transition to positions within NDSUs Department of Nursing with their years of
service at Sanford being honored.

The College budget will be part of the NDSU budget. The enclosed five-year budget
projection has been developed to show new estimated NDSU revenues and expenses
for this project. Revenues are based on projected enrollments and associated
tuition/fees. Expenses are based on NDSUs anticipated needs for faculty salaries, staff
salaries, program, operating, and facility costs including equipment costs.

In the Five Year Financial Plan, tuition rates for Fiscal 2014-15 were estimated based
on a 3.28% tuition increase. Each year beyond Fiscal 2014-15 a 3.00% tuition
increase was assumed. Student fee rates for Fiscal 2014-15 were estimated based on
an assumed 5.00% increase each year. Certain components of the overall Student Fee
rate were estimated at $0, because at the time of the forecast it was unclear whether
they would be applicable. But since then, based on further analysis considering the
Pathways model, it was decided to charge all of the Student Fee components to all
students. For purposes of the Financial Plan, since Student Fee revenues are
accounted for separately in local funds, the revenues are offset by expenses so they
have no effect on the bottom line.

Tuition & Fees will go down an estimated annual $3,043 per FTE student in Fiscal
2014-15. No student impact is anticipated due to Sanfords Loan Forgiveness program
or scholarship programs, as those are expected to continue according to the Asset
Transfer Agreement. There may be other minor differences between Sanford and
NDSU in book costs, or incidental fees for services.

The parties have entered into a Lease Agreement with Sanford Bismarck for the
location where the College is currently located (512 N. 7th Street, Bismarck, ND 58501).
It is a five-year lease with two optional five-year renewals. During the first three years of
the first term, NDSU only pays $1 per year for the leasehold interest. In addition, during
the first three years, Sanford will provide all facility operating costs, such as: custodial,
utilities, and supplies to NDSU at no additional cost. For the final two years of the
lease, the cost of the lease will be $20.00 per leased square foot (i.e., 19,376 sq. ft.)
plus $4.00 per square foot for Common Area Expenditures. In the event that NDSU
opts to renew the lease, the rent shall increase at the lesser of 3% or CPI-All Urban
Consumers.

Most of the provisions within the Lease Agreement are routine for commercial leases.
However, it should be noted that the Agreement is terminable in the event that the Asset
Purchase Agreement is not consummated.

Sanford College of Nursing must surrender its accreditation when it merges with NDSU.
NDSU has already filed an application for accreditation with the Higher Learning
Commission.

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The enclosed Sanford Graduates Employment Statistics shows that most graduates of
Sanford College of Nursing have been employed by Sanford Health. Most Sanford
College of Nursing students have participated in the Sanford tuition loan program. The
students received up to $12,375 over 2 years in tuition loans that were cancelled
through two years of employment at Sanford, which induced most graduating nurses to
seek Sanford employment.

As part of the arrangement, Sanford will receive the following:

For not less than fifteen years, the NDSU nursing program in Bismarck shall be
referred to as NDSU Nursing at Sanford Health.
NDSU will expand its existing Community of Interest board to include
appropriate Sanford representation. Sanford shall be permitted to appoint its
CEO and Chief Nursing Officer (or their designees), although additional Sanford
designees may be appointed.
NDSU shall (1) work cooperatively with Sanford to locate teaching opportunities
for Sanfords clinical staff and provide adjunct status at NDSU to such faculty;
and (2) prioritize placement of students of NDUS Nursing at Sanford Health at
Sanford facilities for clinical training based upon capacity.
NDSU shall provide Sanford access to such books, records, financial statements,
student records and such other records as reasonably necessary relating to the
transferred assets to the extent allowed by the states open record laws.
NDSU agrees that students at NDSU Nursing at Sanford Health are anticipated
to be placed in clinical training at Sanfords medical facilities and will receive
priority placement in such facilities based on capacity and scope of programs
available at Sanford. Sanford agrees to work cooperatively with NDSU to
provide a sufficient number of clinical training sites, student rotations, and
preceptorships to meet the student enrollment needs of NDSU Nursing at
Sanford Health. To the extent Sanford is unable to accommodate students due
to lack of capacity or availability of a specific program, NDSU may explore
placements outside of the Sanford network.

4. Financial implications. The five-year budget projection is enclosed. During the first
three years of the program, it is estimated that tuition revenues and payments from
Sanford Health will cover expenditures. However, beginning in year 4 and thereafter,
with the added rent payment to Sanford and associated facility operating costs, state
funds would be needed to support the program. At that time, about 79% of the
appropriated funds would be from tuition income and the remaining 21% from state
general funds. It is not unusual for state funds to be used in support of programs that
are delivered to meet industry needs. This already occurs in the Fargo Sanford
program, for programs such as John Deere or Bobcat.

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5. Legal/policy issues. SBHE Policy 403.1, which requires Board approval for all new
programs of study may apply. Paragraph 1 states:

Board approval is required for all new programs of study that designate a
focused collection of instructional/learning activities the completion of which
signifies a level of competence which the awarding institution so designates by a
notation on the front of the student transcript. Board approval is required for all
requests for appropriations in support of new programs.

b. SBHE Policy 909 requires Chancellor approval of all five-year leases.

However, because he is currently serving on the Sanford Bismarck Board of Directors,
he is requesting that the SBHE act on the proposed lease. Paragraph 6 states, in part:

A lease of real property from another entity by the system office shall be
approved by the chancellor and a lease of real property by an institution from
another entity shall be approved by an institution officer delegated that
responsibility pursuant to institution policies. All leases of real property requiring
expenditure of public funds by the system or an institution must be limited to the
current biennium for which funds have been appropriated or include a termination
clause permitting termination at the end of the biennium if appropriated or other
available funds are insufficient to continue the lease payments. Leases shall be
executed by the institution's president, chief financial officer or other officer
delegated that authority by institution policy or procedures. In addition to approval
by an institution officer delegated such responsibility, an institution real property
lease or lease renewal, including transactions under a master lease or an
operating lease related to or part of a real property lease, requires chancellor
approval if:
a. A lease entered into by NDSU or UND provides for total payments by the
institution, including lease or rental, interest and all other payments over the
lease term, of $500,000 or more; . . .
c. The lease term is five years or more.

c. SBHE Policy 902.12 would appear to apply because it requires SBHE

approval to name a campus building:

The Board has final authority to name campus buildings, building additions,
auditoriums and stadiums. Authority to name individual classrooms or lecture
halls, meeting rooms, dining areas, athletic fields (including fields with minimal
improvements such as bleachers, concessions areas and locker rooms) and
other areas within buildings or other facilities is delegated to the institutions. All
requests requiring Board approval shall be submitted to the Chancellor and
forwarded to the Board with the Chancellor's recommendation.

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6. Academic issues. Addressed in paragraph 3.

7. Coordination.
SBHE President Bresciani briefed the SBHE about the proposal during the
presidents comments at the November 21, 2013, meeting
Chancellors Cabinet surveyed by email
Chancellors Senior Staff March 17, 2014
Academic Affairs Council surveyed by email

8. Enclosures.
Five-year budget projection
November 8, 2013, Memorandum of Understanding
Lease agreement
Asset Transfer Agreement
Sanford Graduates Employment Statistics

9. Contact information.
NDSU General Counsel Christopher Wilson, Christopher.s.wilson@ndus.edu,
701-231-7215

10. Chancellors recommendation. Recommend approval of the proposed motion.

[Disclosure, I am a member of the Sanford Health Bismarck Board of Directors.]

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 Employed in
% at
Total Employed at % at North
other Employed % Out-
Year Number of Medcenter Sanford Dakota at
ND Out-of-State of- State
Graduates One/Sanford /MCO other
facility
facility *
2013 45 41 91% 1 2% 3 7%
2012 42 36 86% 6 14% 0 0%
2011 43 41 95% 2 5% 0 0%
44
(42 employed
2010 at 6 months 32 73% 8 18% 2 5%
after
graduation)
2009 44 35 80% 8 18% 1 2%

2013 Stanley
2012 Sanford Fargo (3), Essentia, St. Alexius, Oaks
2011 St. Alexius, Dickinson
2010 Beulah, Missouri Slope Care Center Bismarck, Minot (3), Linton, St.
Gabriels Bismarck, Triumph Mandan
2009 St. Alexius, Dickinson, Wishek, Carrington, Minot, Harvey, Linton, Missouri
Slope Care Center Bismarck