IOWA CITY — Responding to new, often harsh higher education revenue realities and a call from the governor to think outside the funding box, the University of Iowa is exploring a public-private partnership for its utility system that could prop up its budget for years and propel its strategic plan.
UI administrators revealed Friday they’re in the early stages of investigating whether a partnership — such as the one at Ohio State University, which sold its energy to the highest bidder in 2017 — makes sense here.
“The UI is committed to delivering on our mission of education and research excellence,” university President Bruce Harreld said in a statement. “Investigating this opportunity over the next nine to 10 months in order to determine if a (public-private partnership) is right for our campus is a prudent and measured step.”
In theory, a new utilities partnership would allow the UI to keep ownership of its system while entering a 50-year deal with a company to operate it.
The agreement would benefit the company in that the utility would control the energy used across campus and collect UI payments for it.
It would benefit the UI in that the contract would require a hefty upfront payment. Although officials are leaving open the prospective value of that, they say the lump sum would be placed into an endowment, with annual proceeds invested into the “core missions” of the UI — teaching, research and scholarship.
Although the UI is less than half the size of Ohio State, that university’s innovative deal with ENGIE — a French global energy producer and operator — came with an upfront payment worth $1.015 billion.
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The UI would pay the vendor to power the campus — from lighting residence halls to heating the hospitals — and for ongoing care and maintenance of the operation.
The UI now pays about $97.6 million for its utilities operation annually, officials said.
The university has 120-some utility system employees. Officials expect a company would offer most the opportunity to stay in their jobs, although they no longer would be UI employees. Officials said they expect power plant workers employed under such an arrangement would be compensated “at a market competitive salary.”
Any utilities employees not offered jobs with a new operator would keep a UI job elsewhere.
“We value our employees and the intent of the (public-private partnership) is not to reduce staff,” UI Senior Vice President for Finance and Operations Rod Lehnertz said in a statement. “It is our people in utilities and energy management that have made our system a best practice model in higher education.”
At the end of the 50-year agreement, the UI still would own the utility system and buildings, which would come back under UI control.
Any successful bidder for the contract must commit to seeing through the UI’s sustainability goals — such as its intention to operate the power plant without coal by Jan. 1, 2025. A new vendor also must promise to continue exploring new biofuel sources, officials said.
The university noted the need for funding innovation by pointing out a “meaningful gap” between available resources and those needed for its strategic plan.
As state support has waned in recent years, the Board of Regents has approved tuition hike after tuition hike — now promising in-state undergraduates at the UI and Iowa State University can expect annual increases of at least 3 percent for five years.
The UI’s monthslong exploration of the idea includes an informational session with the Faculty Senate on Tuesday; the Staff Council on Wednesday and the Student Government and Graduate and Professional Student Government later.
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Broader sessions are planned in March and the UI intends to issue a request for qualifications in April. That will be followed by a request-for-proposals in early June.
A preliminary timeline has the university hoping to choose a vendor by early fall. According to the plan, the university ideally would have a contract signed by late in the fall semester, with resources from the lump sum first available in the 2021 budget year.
Although university operating agreements don’t typically require regent approval, portions of this one may — given the size, scope and complexity of this project, according to UI spokeswoman Jeneane Beck.
Officials stressed the importance of shared governance throughout the process — indicating the UI also will involve the campus and a new budgeting model that calls for broader decision making in figuring out how to allocate resources from any utilities-fed endowment.
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