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IOWA CITY - A financial adviser guiding the University of Iowa's inquiry into possibly monetizing its utilities system has shared a confidential request for qualifications with a select group of companies that 'might be interested” in the partnership - before posting the project publicly on the UI bid site.
A confidential letter from Wells Fargo Securities dated April 18 - shared with the select companies and a group of UI facilities stakeholders - spelled out the 'request for qualifications” process and outlined response requirements. It also indicated a 'confidential information memorandum” previously had been shared with that group - although it's unclear when.
The university didn't respond to The Gazette's question about how many companies got the RFQ head start. But UI spokeswoman Anne Bassett said this is part of Wells Fargo's 'typical process for a project of this kind.”
On Wednesday afternoon Bassett said the RFQ will be posted on the UI bid website Thursday.
The university has competitive purchasing policies requiring it put out for public bid projects and professional service agreements meeting a certain cost threshold - or receive documented approval for an exception.
It's hired three consultants to help facilitate its inquiry into the utilities partnership - a law office, engineering firm, and Wells Fargo - without soliciting public bids, citing this project's 'unique and unusual” nature.
Last week's confidential letter outlining the RFQ process - which the university provided to The Gazette - gives potential partners until 3 p.m. June 14 to respond. Depending on the responses, UI could choose a smaller group of five to eight companies to submit more detailed proposals about how they would operate the UI utility system to the benefit of both the campus and their private enterprise.
The RFQ letter indicates a 'final, binding offer” could come by September 2019.
A previously-released timeline had the university issuing the RFQ on April 1, followed by a request for more detailed proposals in early June. It had UI choosing a vendor by early fall - although any additional resources generated by the deal wouldn't become available until the 2021 budget year.
New UI resources are paramount to any potential public-private partnership, which would task an outside company with operating the university's power system for 50 years - securing for that private entity decades of reliable revenue, along with tax benefits.
In exchange, the company would pay a large upfront sum that UI could put into an endowment and pull from annually to support its core missions of academics and research.
The university would retain ownership of its power system - even as the partner would be responsible for operating and maintaining its electrical systems, steam, water, sanitary and storm sewer, utility network, energy control center, and related distribution systems on the main UI and Oakdale campuses, according to RFQ letter.
The company also would be responsible for procuring fuel, optimizing plant operations, and ensuring reliability. As part of the initial RFQ process, interested companies must confirm they can meet the UI goal of operating its utility system coal-free by Jan. 1, 2025.
But the key question Iowa is looking to answer with its initial call for qualifications is how much prospective partners might be willing to pay upfront, according to UI Chief Financial Officer and Treasurer Terry Johnson.
The much larger Ohio State University, which two years ago entered into a public-private utilities partnership like the one UI is considering, achieved an initial payment topping $1 billion, plus a $150 million commitment toward academics.
'We have thoughts about that at some level,” Johnson said, referencing the amount Iowa should get. 'But we're not going to really know until we receive a response to the RFQ. It could be a range of values instead of one finite value. But that will give us a strong indication that we'll use to determine whether to move forward.”
'If that value's not high enough, we won't go to the RFP stage,” Johnson said.
But he reports plenty of interest and expects as many as 100 to 150 firms from around the region, nation, and world could respond to the call - based on initial inquiries UI received after announcing in February it was considering the utilities collaboration.
The Wells Fargo RFQ letter indicates applicants should detail in their responses expected sources of funding for the upfront payment, along with plans to finance capital expenditures over the term of the deal.
It also requires applicants outline future plans to present a competitive employment package that will attract current UI utilities employees to stay on the job - even though they'll no longer be working for the university. Those details should include salary, insurance and retirement benefits, vacation and sick leave, and perks like parking, athletics ticket discounts, and recreation memberships.
If the university does find sufficient value in moving forward - and Johnson said 'that's a big if” - it will bring to town a handful of finalists for one to two days.
'They will actually visually inspect our facilities, our campus, meet with leadership, President (Bruce) Harreld … just to get to know us,” Johnson said. 'There are going to be firms from all over the country, coasts, Canada, overseas perhaps. We are in the middle of the United States … so they have to get to know us better.”
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