IOWA CITY — Barring another devastating flood, the University of Iowa expects to spend over the next five years half what it did between 2012 and 2018 to restore and upgrade its utilities, according to a “confidential information memorandum” made public as part of a UI effort to privatize its utilities.
Utility system capital investments are projected at $93.6 million between the 2019 and 2024 budget years, according to the memo — with major projects including expansion of the main UI power plant and $19 million in repairs to deficient Old Capitol and Currier Residence Hall steam tunnel systems.
By comparison, the UI spent $188 million on utility system capital investments between 2012 and 2018, including $35 million on flood recovery and mitigation. The 2008 flood forced the university to replace 42 miles of wiring, 24 large electric motors and six large air compressors, among other things.
The UI pitched those recent upgrades among the reasons a private operator would want to partner with it to run its “highly reliable utility system,” the memo said.
The university in its appeal for potential partners notes any private operator would see tax benefits from “any additional investment made to the utility system.”
That, according to the memo, is based in part “on its ability to depreciate utility system assets, including improvement on its federal and state income tax returns” — benefits not afforded the university itself as a public institution.
The UI announced earlier this year it was looking into the idea of paying a private company to run its utilities system in exchange for a hefty upfront payment.
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That lump sum — which topped $1 billion for Ohio State University in a similar but larger transaction — would go into an endowment the university could pull from annually in support of its core mission.
Benefits to the partner include “long-term, predictable cash flow stream” over the life of a 50-year deal.
“Few opportunities in the market rival the low-risk, stable return profile of this (public-private partnership) opportunity,” the memo said.
In the earliest stages of its investigation into a potential utilities partnership, the university hired three consultants — a law firm, engineer, and Wells Fargo — without soliciting public bids. Administrators cited the project’s “unique and unusual” nature as justification for a departure from the typical process.
When Wells Fargo last month shared the request for proposals and confidential memo with a select group of companies that might be interested — before the UI posted the appeal on its public bid site — officials explained it as part of Wells Fargo’s “typical process for a project of this kind.”
Even though the appeal and memo now are posted on the public website, prospective applicants must sign a nondisclosure agreement to view a process letter from Wells Fargo. That also is not a typical part of the university bid process, but UI spokeswoman Jeneane Beck cited the “unique nature of the public-private partnership” and said Ohio State used the same process.
“In order to protect their own proprietary information, Wells Fargo requires all qualified vendors to sign a nondisclosure agreement in order to continue the process,” Beck said. “The University of Iowa is fully compliant with its competitive bidding process.”
Bidders have until 2 p.m. June 14 to submit their proposals — which UI officials have said must spell out how much they’re willing to pay the university up front for the 50-year contract.