Lawmakers continue questioning KU’s financing of Central District, Innovation Way

? A second group of Kansas lawmakers asked more pointed questions Monday about Kansas University’s plans for financing $350 million in new science and engineering facilities, known as the Central District and Innovation Way projects.

Members of the Legislative Budget Committee expressed continuing concern that KU’s plans to hire a private developer and use of a “public-private partnership” to build the facilities could put the state of Kansas on the hook for repaying the bonds that would be issued for the projects.

“At the end of the day, the whole state would probably get a black eye if there was a default, so I’m sure the state would have to come in and back all this up,” said Rep. Marvin Kleeb, R-Overland Park, who during the regular session chairs the House Taxation Committee.

The Legislative Budget Committee is the second panel to grill KU officials over the plans. In October, the Joint committee on State Building Construction asked similar pointed questions. And while that panel chose not to try to block the plans, it told KU officials to be prepared to answer more questions before additional committees after the 2016 legislative session gets underway.

Theresa Gordzica, KU’s chief financial officer, assured the panel that the financing plan, known as a “public-private partnership,” or P-3 model, is sound and the state will not be on the hook for the bond payments, or for maintenance costs for the facilities after the bonds are paid off.

Theresa Gordzica, Kansas University's chief financial officer, takes questions from legislators about the university's plans to finance 50 million in new facilities.

“There is an urgent need for this project,” she said. “The project will transform the way we educate and do research in the STEM (science, technology engineering and math) fields. The project will have a tremendous economic benefit for the state, and from the business perspective, this is a great deal, thanks to the P-3 model.”

That model involves forming a nonprofit corporation that will lease the land from the university. It, in turn, will issue the estimated $350 million in bonds to finance the project, and the university would sublease the facilities back from the nonprofit group, using fees and tuition charged to international and out-of-state students, as well as revenue generated by some of the facilities, including a new Student Union annex to replace the Burge Union, a new residence hall and new apartments.

She also insisted that KU would not hike tuition for in-state tuition beyond the normal tuition increases in order to pay for the projects.

Most of those projects will be in a 40-acre area near 19th and Iowa streets. The plan calls for a new science and engineering facility to replace Malott Hall, which Gordzica said is woefully outdated.

“Our science facilities were built before we put a man on the moon,” she said. “At best they’re outdated. At worst, they’re obsolete and unsafe. There are high schools that have better science teaching facilities than the University of Kansas has.”

Gordzica said the financing plan is similar to those used on other projects at KU, and at other universities in Kansas, and they are specifically authorized under Kansas statutes.

She said KU plans to finance the Central District and Innovation Way projects over 40 years, with annual payments estimated at about $21.5 million.

But Rep. Ron Ryckman, R-Overland Park, who chairs the House Appropriations Committee, said the P-3 financing has never been used on a project this large, and he said in the past universities have sought legislative approval before embarking on such a massive development plan.

“I believe you’ve found a way to make this be viable,” he said. “But the process making this viable is outside of what we typically see. And we all know who’s ultimately responsible when something goes wrong, and so we’d like a chance to review this.”

The budget panel took no action Monday, but indicated that lawmakers would continue to monitor KU’s plans.