WICHITA — Kansas University’s $350 million Central District redevelopment plan and its novel funding mechanism won approval from the Kansas Board of Regents Wednesday, though with some hesitation.

KU is setting up a public-private partnership, or P-3 for short, which university leaders say will help them move more quickly and complete a larger-than-usual project with less financial risk to the university and the state.

“It is, as we’ve said before, a bold project,” KU Chancellor Bernadette Gray-Little told the Regents. “It is a large project. We have really dug deep … to see how we can go forward in spite of this being a difficult time, financially.”

The Regents approved the project with the stipulation that once details of the development agreement are finalized, the Regents Fiscal Affairs and Audit Committee will be able to review them before KU moves forward.

Regent Ann Brandau-Murguia said the board tries not to micromanage universities’ projects but that in this case, since P-3s are not routine, they “don’t want any surprises.”

“This is a huge project, this is a lot of money,” she said. “The public needs to be comfortable that we’re looking at those details on occasion and having a checks and balances situation.”

Regent Dave Murfin, while discussing the project in the Fiscal Affairs and Audit meeting earlier in the day, also pushed for a final review once details were set.

“That’s kind of a promise that we have to give to the Legislature, that we’re looking at it very carefully,” Murfin said.

The project is in the design phase now, said Theresa Gordzica, KU’s chief business and financial planning officer. She said KU expects to close on bonds by the end of the year and must finalize contracts prior to issuing the bonds.

While some numbers within those contracts remain unknown — which is why Regents want a final look — the overall project cost is firm.

“It will not go over $350 million,” Gordzica said.

The Central District redevelopment will start with a new 500-bed residence and dining hall going up near Oliver Hall, to be constructed by fall 2017, Gordzica said.

Additional projects include a 700-bed student apartment building at 19th and Iowa streets, the new Burge Union, a parking garage, a utility plant and — the most important, KU officials say — a 280,000-square-foot integrated science building.

P-3s have been used by independent universities in the past but only recently are being tapped by more public universities, according to an article from the Association of Governing Boards of Universities and Colleges magazine. “Public institutions have never been under more pressure to find alternative sources of revenue to help close the resources gap resulting from lower state appropriations.”

Here’s how KU’s P-3 will work, according to the Regents project summary.

• KU creates a new KU-affiliated nonprofit corporation named the KU Campus Development Corporation, which Gordzica said would be composed of KU administrators and staff.

• KU enters a lease (up to 40 years) with the corporation for the land under the buildings. The corporation obtains bonds to finance the project, with the sublease serving as the bond guarantee. Bond proceeds will fund construction.

• When construction is complete, the corporation will sublease the facilities back to KU. KU will pay the annual sublease payment of about $21.5 million plus operating costs to the corporation, with those payments being funded by nonstate appropriations.

• An outside company called Edgemoor will be the project developer.

Gordzica said the P-3 takes financial liability away from KU and the state.

“We believe that gives us a buffer between the bond holders and the university and really prevents the state from any liability whatsoever,” she said.

KU’s P-3 setup is the first of its kind in Kansas, Gordzica said, though Wichita State University used a similar model to construct at least one of its new residence halls.

Greg Hoffman, director of facilities for the Regents, said KU has done due diligence on the project, which is part of the university’s master plan and capital improvement plan.

He said the P-3 financing was exciting because it could become a tool for all state universities.

“It provides a funding model that we haven’t used before that is really a solution to some of the challenges that we’re facing,” Hoffman said.

In other business, the Board of Regents:

• Approved razing the Burge Union to make way for its replacement.

• Accepted proposals for residential and dining plan rate increases at all six state universities. The board is scheduled to vote on them next month.

KU Central District construction projects

Integrated Science Building — $117 million

Residence Hall & Dining Facility — $49 million

Apartment-Style Housing — $58 million

Student Union — $13 million

Parking Facility/Transit Infrastructure — $20 million

Central Utility Plant — $15 million

Site development, utilities, soft costs, fees — $78 million

Total (approximate) — $350 million

Source: Kansas Board of Regents