IOWA CITY — In looking to monetize its utilities operation and create a new revenue stream, the University of Iowa has agreed to pay three consultants to, among other things, evaluate its assets, identify potential partners and map out a transaction plan.
The UI is looking into whether a company wanting to take over the operation supplying power to the university would pay an upfront fee that the UI could use to create an endowment supporting academics.
One month ago, the UI signed a contract with Jacobs Engineering Group to pay it a lump sum of $185,000 to “develop an inventory report along with high-level assessment and future requirements of its central steam, chilled water, electrical, and water treatment systems.”
That sum doesn’t include travel expenses for consultants or potential upcharges for services outside the initial scope. Hourly rates range from $95 to $355.
The UI also signed an engagement letter with the Jones Day law firm related to its inquiry into whether it makes financial sense to partner with a company to operate its utilities system. Rates for Jones Day attorneys likely to work on the project, according to the letter, range from $800 to $1,050 an hour for partners or $450 to $800 an hour for associates.
The university’s earliest consultant on the venture is investment adviser Wells Fargo Securities, with which it signed a contract Nov. 28, 2018. Payment for its work will follow the “successful conclusion of a monetization transaction” and will be based on the value of the deal.
UI officials did not immediately report Monday how much the institution has paid these consultants so far — having just 10 days ago publicly unveiled plans to explore a public-private partnership to operate the campus utilities.
Administrators held faculty and staff meetings last week, which will be followed by a UI Student Government discussion Tuesday and public informational sessions in early March.
The university is planning to issue a request for qualifications from prospective partners in April and then a request for proposals in early June. Based on a draft timeline, the university hopes to choose a partner around the start of the fall semester, and then sign an agreement before the semester’s end.
If all goes as planned, a new utilities partnership would let the UI maintain ownership of its system while entering a 50-year agreement with a firm to operate it.
The deal would benefit the company by allowing it to control energy used across campus and collect UI payments.
The university benefit hinges on a required upfront payment. UI officials are leaving open the prospective value of that sum but say it would go into an endowment that annually would support the university’s “core missions” of teaching, research and scholarship.
Ohio State University similarly privatized its utilities and secured an upfront payment of $1.015 billion. But officials caution that Ohio State is twice UI’s size.
At a UI Faculty Senate meeting last week, professors voiced concern about the risk of entering a 50-year agreement and whether the deal would mean swapping short-term payoffs for long-term losses.
Based on the preliminary timeline, UI officials say the institution wouldn’t start allocating resources from a utilities endowment until the 2021 budget year.
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Contracts the UI provided to The Gazette indicate Wells Fargo would continue working on the project through June 30, 2020, and Jacobs Engineering would continue through Jan. 14, 2020. Jones Day’s letter does not give a time frame.