Education

University of Iowa faculty members have questions about utilities partnership

Governor's office, lawmakers, welcome idea, UI executive says

Work continues Feb. 8 on new boilers at the University of Iowa Power Plant in Iowa City. The university is exploring a possible public-private partnership for operation of the massive utility complex. (Liz Martin/The Gazette)
Work continues Feb. 8 on new boilers at the University of Iowa Power Plant in Iowa City. The university is exploring a possible public-private partnership for operation of the massive utility complex. (Liz Martin/The Gazette)
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IOWA CITY — Some University of Iowa faculty members Tuesday voiced skepticism about an idea administrators aired last week to partner with a company for the operation of the massive campus utilities operation.

“I don’t know much about these (public-private partnership) arrangements, but what I do know is catastrophically bad,” UI law professor Caroline Sheerin said during a UI Faculty Senate meeting Tuesday.

“In Chicago, you now have to take out a second mortgage to park your car on the street, and they call the Indiana toll road the ‘highway to hell,’ ” Sheerin said, referencing the city of Chicago’s parking meter privatization and Indiana’s privatized toll road. “These have gone terribly wrong.”

The public-private partnership UI administrators are considering would echo ones other universities — like Ohio State University — have either investigated or entertained, giving a utilities company a 50-year contract to operate the university’s power.

Although the universities maintain ownership of their power systems, they pay the independent operators for their services — giving those private firms decades of guaranteed, stable income.

The partnerships benefit universities in that they require the private companies to make a hefty upfront payments. In Iowa’s case, administrators would place the lump sum into an endowment, which would produce proceeds annually to be invested back into its core missions of teaching, research and scholarship.

“They sound really good up front, but they’ve just been a disaster for the citizens,” Sheerin cautioned. “I just wonder, are we going to end up not being able to turn on the lights after 5 p.m.? Are the students going to not be allowed to use their computers? I have to make sure we are learning the lessons from (public-private partnerships) that have gone so bad.”

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UI Chief Financial Officer and Treasurer Terry Johnson, who presented the prospect to the Faculty Senate, agreed. Acknowledging that 50 years is a long time, Johnson said administrators — in their early exploration of this concept — have heard of some good experiences.

“But I’ve heard the same horror stories,” he said. “That is exactly what we have to avoid.”

The university several months ago began looking into the possibility of a public-private partnership for its utilities operation, in part by hiring three outside consultants, Johnson told faculty on Tuesday. Those firms are Jones Day, based in Chicago; Wells Fargo Securities; and Jacobs Engineering, out of New York.

“Why we hired them is they’ve done this for many other higher ed universities across the country,” Johnson said. “Both firms were involved in the (Ohio State University) energy-utilities system transaction.”

The consultants are helping Iowa explore potential tax implications for both the university and the private company and work toward a solid agreement that would compel any partner to maintain efficiency efforts, take good care of the facilities and run a smooth operation.

“We will be highly selective about whatever firm we will even entertain,” Johnson promised faculty members.

Compelling UI administrators to consider the non-traditional arrangement is a trend in state disinvestment in public higher education, Johnson said.

A letter from the governor’s office last summer, he said, encouraged the UI — along with Iowa State University and the University of Northern Iowa — to explore creative funding alternatives.

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Since unveiling their examination of public-private energy partnership last week, Johnson said administrators have heard from the governor’s office.

“They said, ‘Thanks for doing this,’ ” Johnson said. “Similar conversations have occurred with the House and Senate leadership.”

Faculty members questioned whether lawmakers would still be on board in 20, 30, or 40 years — or whether this decision would taint the university’s efforts to align with state leadership and their ideals.

“At the end of the day, this will not be bulletproof,” Johnson said, acknowledging the Legislature could look much different decades down the road.

In response to faculty concerns the move would swap long-term losses for short-term gains — or equate to selling its utilities and any decision-making power over them — Johnson argued the university is being cautious, taking its time, and planning a monthslong inquiry into whether this is a reasonable option.

“We have done all the right things to date and will do more in the future,” he said. “But there is no certainty.”

l Comments: (319) 339-3158; vanessa.miller@thegazette.com

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