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Education

University of Iowa moving ahead with utilities-partnership inquiry

Harreld: 'We are ready to take the next step'

Steam rises from the University of Iowa Power Plant in Iowa City on Friday, Feb. 8, 2019. (Liz Martin/The Gazette)
Steam rises from the University of Iowa Power Plant in Iowa City on Friday, Feb. 8, 2019. (Liz Martin/The Gazette)

IOWA CITY — The University of Iowa is powering ahead with its exploration of a public-private partnership to operate its utility system after “a rigorous” initial call for potential partners — with plans to issue a more formal request for proposals later this summer.

UI administrators didn’t share a specific date they plan to publish the request of potential vendors who responded to the university’s initial call for qualifications.

And the university declined to share how many vendors submitted qualifications, or the names of those vendors — although administrators previously said they’ve received plenty of interest and expected as many as 100 to 150 firms from across the region, nation and world to respond.

“We are ready to take the next step in our exploration,” UI President Bruce Harreld said in a statement. “The potential partners in this next round have illustrated a commitment to our employees, ensuring the UI is coal free by 2025 and the additional responsibilities we outlined toward a sustainable future.”

Here’s how the partnership would work: an outside company would operate the university’s utility system for at least 50 years, ensuring for itself a predictable cash-flow stream via a “low-risk, stable” enterprise. The UI, which would retain ownership of its utility system, would receive a hefty lump sum up front from the partner that it could place in an endowment.

That amount — which topped $1 billion for Ohio State University in a similar but likely larger transaction — would be invested in Iowa’s core missions, namely teaching, research, and scholarship, as well as strategies outlined in its strategic plan, according to the UI Office of Strategic Communications.

“As stated from the start, the UI is exploring a P3 involving its utility system through a deliberate and measured process — and no final decision has been made,” UI spokeswoman Anne Bassett said Thursday. “The UI won’t know the value of the utility system P3 until the RFP process is completed and a concessionaire agreement is signed.”

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Board of Regents President Mike Richards has praised the university’s exploration of a new revenue stream — as the state over time has decreased its contribution to the public institutions, while some students and families oppose the idea of stepped annual tuition increases.

others exploring

In addition to Ohio State, other institutions nationally are investigating the potential financing power of public-private partnerships, with the Chronicle of Higher Education reporting “P3s are taking hold across college campuses and showing no signs of slowing.”

The journal in late May produced an issue brief on “The Outsourced University: How Public-Private Partnerships Can Benefit Your Campus.” The brief is billed as an “essential resource” offering advice and context for universities weighing a public-private partnership.

A recent survey, it reported, showed 83 percent of university administrators reported partnership deals were increasing at their institution, with more than half “most interested in partnering on the development of campus facilities and infrastructure.”

Early on in its investigation of a utilities-operation partnership, the UI hired a trio of consultants — a law firm, engineer and Wells Fargo — without soliciting public bids for the work. Campus administrators, in defending that move, cited the project’s “unique and unusual” nature.

Wells Fargo, in launching the initial request for qualifications process, shared a confidential letter and information memorandum with a select group of companies it believed “might be interested” — before posting the request on the public UI bid site.

UI officials declined to say how many companies got that head start, but Bassett said the outreach was part of Wells Fargo’s “typical process for a project of this kind.”

As part of the request for qualifications process, applicants had to sign a nondisclosure agreement to view detailed information about the proposal from Wells Fargo — which a UI spokeswoman said also is typical of their process “to protect their own proprietary information.”

In its call for qualifications, UI asked potential partners to confirm a commitment to move the university toward being coal-free by Jan. 1, 2025; continue exploring new sources of renewable fuels in hopes of securing sustainable and lower-cost options; and maintain all facilities in a similar or better condition.

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The university also expects a new operator will offer jobs within their company to UI utility system employees affected by the transaction, according to the UI communication office. Employees not offered a position could stay with the university.

“We value our employees and, as we’ve stressed throughout this exploration process, the intent of the P3 is not to reduce staff,” Rod Lehnertz, UI senior vice president for finance and operations, said in a statement.

To date, the university has spent $227,568 on the inquiry — paid to the Jones Day law firm. It hasn’t yet paid Jacobs Engineering or Wells Fargo, which is contracted to receive a cut of the value of any monetization transaction — meaning it could make millions.

After the request for proposals goes out, the university is planning a pair of “information sessions” in September on both sides of campus. Officials reported the next stages “will provide significant opportunity for campus feedback.”

An updated timeline shows the university choosing a vendor in the fall and signing an agreement toward the end of the fall semester.

First resources from the endowment enabled by the deal would be allocated in the 2021 budget year, according to UI officials.

Information sessions:

Sept. 10: 9 to 10 a.m. in the Urmila Sahai Auditorium, Medical Education Research Facility, room 2117, on the west side of campus;

Sept. 11: 1 to 2 p.m. in the Big Ten Theater, Iowa Memorial Union, room 348, on the east side of campus

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

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