Iowa clamps down on new lease-purchase deals

But did lawmakers overreact to Linn County bypassing bidding?

Rep. Jake Highfill, R-Johnston
Rep. Jake Highfill, R-Johnston
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Acting in response to Linn County’s use of a lease-purchase agreement — rather than traditional bidding — to construct a new public health and youth development services building, lawmakers have established rules on the future use of such agreements by local governments and state agencies.

However, while some lawmakers say the new measure eliminates officials’ ability to sidestep competitive bidding, others, including Master Builders of Iowa, fear the law will do more harm than good.

“In some respects, I think a disservice has been done here. Are we limiting economic development opportunities? Are we limiting those opportunities where a public entity and a private entity can work together to see a project come to fruition? I think we’ve hammered that,” said Chad Kleppe, Master Builders of Iowa president and chief executive.

House File 2253, which was signed into law earlier this month by Gov. Kim Reynolds, requires public bodies — cities, counties and state government, including the Board of Regents — to go through a competitive bidding process before awarding contracts for public projects including lease-purchase deals.

Proponents, including Rep. Jake Highfill, R-Johnston, who pushed the legislation, have said the goal is to enhance transparency in public projects — specifically following Linn County’s decision to enter into a lease-purchase agreement for the county’s future public health and youth development services building. The county sought proposals from only a few local contractors, and did not solicit other bids.

“That’s our goal here — to make it open and transparent. To make sure this sort of thing doesn’t happen again. This has been happening across the state so we’re going to fix it,” Highfill earlier told The Gazette. “If you are not allowing the public to see where their tax dollars are going and open up a fair bidding process, then we have a problem.”

Officials have said the bill is intended to prevent elected officials from rewarding friends and campaign donors.


However, Kleppe said his biggest concern is that the new model adds a financing component to the competitive bidding structure for lease-purchase projects. Essentially, a company with deeper pockets and the ability to self-finance could have a leg up over smaller organizations that would have to turn to a bank for a loan.

“Now I think you’ve actually made it less competitive and you really in some respects make it more difficult for local contractors to participate because they will have to find outside financing,” Kleppe said.

Just months ago, the Linn County Board of Supervisors approved the county’s first ever lease-purchase agreement — for constructing the Dr. Percy and Lileah Harris Public Health and Youth Development Services building. County officials said the process allowed them to guarantee the project to a local contractor, but others raised concern of a lack of transparency or the potential for favoritism.

While Kleppe said he disagreed with how Linn County pursued the lease-purchase agreement, he worries the new law was too reactionary.

“Who knows what’s going to happen, we’re not going to predict the future, but I think throughout this whole process we’ve seen this cascading event where one bad decision has kind of created a whole new dynamic in how these projects are going to be delivered,” Kleppe said.

In addition, Highfill this session also pushed a bill to change the Board of Regents’ process by expanding advertising requirements, requiring an engineer or architect to prepare plans and cost estimates, and “identify a specific reason” for rejecting bids if the board determines none are acceptable.

That separate bill did not make it past a legislative deadline.

l Comments: (319) 398-8309; mitchell.schmidt@thegazette.com

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