How would UI’s public/private partnership work?: A rundown before Iowa regents consider the deal

The proposed public/private partnership that would operate the UI’s utility system is up for approval by the state Board of Regents at a meeting in Urbandale this morning.


David Harmantas

Steam swirls around the University of Iowa Power Plant on the evening of Monday, Jan. 14, 2019.

Kayli Reese, Managing News Editor

After months of discussion, the state Board of Regents will consider approving the University of Iowa’s proposed public/private partnership at a meeting at the regents’ office in Urbandale, Iowa, at 10 a.m. today.

The partnership, should the regents sign off on it, would contract a private firm — which has yet to be announced — to operate and maintain the university’s utility system for the next 50 years.

Q: What does the UI Utility System encompass?

A: The UI Utility System makes and distributes water and energy across campus, as well as to its auxiliary units, including University Housing and Dining, UI Hospitals and Clinics, and Athletics.

Q: How would UI employees be affected by this partnership?

A: UI officials have previously said they anticipate the firm will offer jobs to the approximately 120 UI Utility System employees within their company. Those not offered a job or who choose not to work with the new firm would retain a university job.

Q: What would the private partner pay?

A: The firm would pay an upfront lump sum to the UI, which the university would place in a newly created endowment that could help fund its strategic plan, UI President Bruce Harreld has said — particularly programs that would aim to boost university retention and graduation rates.

Harreld has previously said the UI will need $33 million annually to fund the strategic plan and plans to take $15 million annually from the new endowment to help fund strategic initiatives. In an informal webinar Dec. 3, Harreld told the regents that the endowment could also help reverse the UI’s fall in national rankings.

Q: How much money would the UI place into the endowment?

A: The amount of the upfront sum has yet to be disclosed. With the upfront sum the partner pays, minus the $166 million the UI would pay for consulting fees and outstanding utility-system bond debt, administrators expect the endowment to amount grow to about $3 billion over the partnership’s 50-year duration.

Q: What would the UI pay the private partner?

A: The UI would pay an annual fixed fee of $35 million — which increases 1.5 percent annually after the first five years — to the firm to operate the utility system. The UI would still pay for fuel, employee wages, and capital expenditures.

RELATED: UI hopes to earn $3 billion over 50 years from utilities public/private partnership

Q: What are the next steps if the regents proceed with the proposal?

A: A financier and operator will invest money from the partner to create a concessionaire, which would be a new entity the UI will partner with. A nonprofit board will also be created to hire a firm, invest net proceeds, and determine allocations to campus from the “P3 utility endowment.”

Q: Who would manage the money from that endowment?

A: A nonprofit board composed of one regent, one Faculty Senate appointee, and the UI senior vice president for Finance and Operations would meet quarterly to review the fund’s operation, hire investment advisers and managers, and determine the yearly allocations to campus.

Shared-governance leaders and a budget review board would work together to determine how to share the proceeds from the deal using one- to five-year grants.

Q: When would the selected partner take over the utility system?

A: Following a commercial close Tuesday and financial close within roughly the following 90 days, the partner should begin its work at the university in January 2020. The firm would then begin work 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,” UI Senior Vice President for Finance and Operations Rod Lehnertz told The Daily Iowan in October.

RELATED: UI hopes to earn $3 billion over 50 years from utilities public/private partnership

Q: What goals must the firm meet?

A: The firm must hit certain performance indicators while in operation, including complying with the UI’s commitment to being coal-free by 2025 and meeting the UI’s sustainability goals. Failure to meet these measures could result in fines.