Iowa regents to consider University of Iowa public/private partnership in December

The regents will consider the proposed agreement to partner with a private firm to operate and maintain the UI Utility System in two special meetings.


Emily Wangen

UI President Bruce Harreld and UI Senior Vice President for Finance and Operations Rod Lehnertz listen during a state Board of Regents meeting at the Iowa School for the Deaf in Council Bluffs on Thursday, April 12, 2018.

Marissa Payne, Editor-in-Chief

The state Board of Regents will convene in two special meetings in December to consider the University of Iowa’s proposed public/private partnership in which a private firm would operate and maintain the institution’s utility system.

Under this 50-year agreement, the private partner would pay the UI an upfront lump sum, which the UI would place into an endowment that UI President Bruce Harreld has said the university could use to help fund the UI’s strategic plan. Meanwhile, the UI would pay the firm an annual fee to operate the utility system.

Harreld has said the UI is neither selling nor leasing the utility system, which produces and distributes energy and water to the whole campus and its auxiliary units such as University Housing & Dining, UI Hospitals and Clinics, and Athletics.

The UI will deliver an informational webinar about the proposed agreement to the regents Dec. 3 before the regents ultimately decide whether to approve the partnership Dec. 10.

RELATED: Harreld talks state funding, public/private partnership at State of the University speech

If the regents agree to move forward with the proposal, they would then consider resolutions “authorizing redemption and defeasance of outstanding University of Iowa Utility System bonds,” which regent spokesman Josh Lehman said in an email to The Daily Iowan would authorize the university to move forward with the process of paying off approximately $150 million in existing bond debt on the Utility System.

“Regarding specifics on paying the bonds, the University of Iowa will share an informational webinar with the Board a week from today on the P3, and it will be available publicly as well,” Lehman said.

UI Senior Vice President for Finance and Operations told the DI in October that, should the bids the UI receives in the request-for-proposals stage be such that the UI selects a vendor, the UI will refine the concessionaire agreement for the regents’ approval and eventually bring the private firm on as a partner after a commercial close and financial close, anticipated in January 2020.

RELATED: University of Iowa president talks importance of resources in funding strategic plan

After that point, he said, the firm would begin working with the UI Utility System staff.

“Part of that month after selection is for that selected vendor to come on campus and to get to know the employees, to talk with the employees, find out what they are thinking about their future career objectives, and then assimilating them into their culture and their company, and then they would begin working for them upon our close of this deal,” Lehnertz said.

UI Chief Financial Officer and Treasurer Terry Johnson has previously said the utilities staff will receive job offers of equal or greater pay with the concessionaire if they choose.

Since the UI first began exploring the possible agreement, UI officials have said they expect the private firm would offer many UI employees a position with its company. Those not offered a position or those who choose not to move to the new operating entity would retain a position with the UI.

RELATED: Public/private partnership would allow for more financial leeway, university says

Regarding the distribution of the funds placed into the endowment, Lehnertz said the UI will invest in nonrecurring grants with a one- to five-year time period “to allow for seed money for great initiatives that will advance student success, performance of our students success in research, and discovery to things that will make a difference to our campus.”

“We want to establish the endowment and establish the funds and not pay ahead of those dividends coming in,” he said. “So, we’re going to be as we need to be on behalf of this campus. We’re going to be judicious and conservative in our approach and make sure that risks are minimized. We’ve got the university’s long-term viability and success in mind with every step we take, and that doesn’t mean acting fast; it means doing the right thing.”