Education

In 'final stages' of one public-private partnership, University of Iowa hints at more

'We're looking at doing something similar' to utilities project, Bruce Harreld says

University of Iowa President Bruce Harreld speaks during the Sept. 5 dedication of the university’s College of Nursing Building. Harreld on Thursday updated the UI’s pursuit of a public-private partnership with a company that would run the campus’ utilities systems for steam, electricity, chilled water and water treatment.(Jim Slosiarek/The Gazette)
University of Iowa President Bruce Harreld speaks during the Sept. 5 dedication of the university’s College of Nursing Building. Harreld on Thursday updated the UI’s pursuit of a public-private partnership with a company that would run the campus’ utilities systems for steam, electricity, chilled water and water treatment.(Jim Slosiarek/The Gazette)

IOWA CITY — The University of Iowa is in the “final stages of negotiating” with a “handful” of potential partners to operate its $1 billion utilities system — after administrators earlier this year announced they were exploring whether such a public-private collaboration could generate new revenue.

And UI President Bruce Harreld on Thursday — citing the state’s disinvestment from public higher education — told the Iowa City Noon Rotary Club his campus’ utility system is not the only prospect for private collaboration.

“If the state starts to deappropriate us as they have over the past 20 years, ... then we’ll have to scramble even harder,” he said. “In anticipation of that, we’re looking at doing something similar to this in a number of other areas.

“So this won’t be our only P3.”

Harreld declined to answer follow-up questions after his talk, and UI officials did not elaborate on what other services or systems might be considered for a public-private collaboration.

The university in April issued a public request for qualifications from companies interested in operating its utilities system in hopes of casting a wide net, with plans to whittle that larger pool using a follow-up public request for proposals.

Although the university has not issued any public requests for proposals, Harreld said Thursday his administration started with inquiries from more than 100 firms, narrowed that total to 67, and then took 16 bids over the summer.

“We’re in the final stages of negotiating with them,” Harreld told the crowd in the downtown Iowa City Hilton Garden Inn.

An initial timeline of the process has the UI signing an agreement late in this fall semester.

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Harreld on Thursday stressed any public-private partnership would not amount to the sale or lease of Iowa’s massive utilities operation, which includes the production and distribution of steam, electricity and chilled water, along with water treatment activities.

Rather, an outside company would operate the UI utility system for at least 50 years, ensuring for itself a predictable cash flow. In exchange for the “low-risk, stable” partner, the utility would pay the UI a hefty lump sum on the front end that the university could place in an endowment.

That amount — which topped $1 billion at Ohio State University, which also pursued the public-private utilities partnership but is much bigger than the UI — would be invested in the university’s strategic plan, including scholarship and research.

Harreld on Thursday said annual proceeds from that endowment would be awarded in three-year grants, which campus groups would apply for.

“What this is really all about quite frankly is unlocking the value that’s on our campus and has been there for a long, long time,” Harreld said.

UI officials previously stressed the campus was just exploring the idea of a private partnership and would move forward only if they found it made fiscal sense.

Early in its investigation of the public-private partnership, the UI hired a trio of consultants without soliciting public bids. Officials defended their hire of a law firm, engineer and Wells Fargo without taking bids by citing the “unique and unusual” nature of the endeavor.

Wells Fargo then, in launching the university’s initial request for qualifications, 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.

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UI officials also previously declined to share how many vendors responded to its initial call for qualifications.

But Harreld in August told the Board of Regents his administration had identified several firms that will meet their requirements, including a commitment to maintaining and improving UI sustainability goals; ensuring employees can either work for the new utility operator or stay with the university; and showing they have the expertise to effectively manage the operation.

He told those attending Thursday’s Rotary lunch that he’s met with all 122 employees who work within UI utilities eight times and told them, “If you don’t want to go to work for that organization, fine, you can stay working for the university.”

Some of the workers who are closer to retirement might do that, Harreld said, for benefit-related reasons. Others might “really want to work for the partner because they have different career paths.”

“We only have one of these facilities, and these other companies have multiple,” Harreld said. “So there actually could be a whole new career path open up for some of these employees.”

Harreld stressed the collaboration will not avert the campus’ goal of being coal-free by 2025.

“We said you have to make sure we at a minimum continue to do that work,” he said. “And they are in lockstep with that.”

UI students recently have made public appeals — via protests and an open letter to Harreld — for the university to ramp up its sustainability goals.

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“We need the University of Iowa to unite with our town and revamp its outdated sustainability practices and goals, especially in regards to the nearly century-old, coal-burning and natural gas-burning power plant,” according to the student letter, which called on the UI to end coal burning immediately and commit to using 100 percent renewable energy sources by 2030.

Harreld has not publicly responded to those demands, and he didn’t do so Thursday.

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

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