This presentation slide shows an aerial view of redevelopment planned for Kansas University's Central District near Allen Fieldhouse.

Topeka ? Kansas lawmakers reacted sharply this week to a pair of recent real estate deals, including Kansas University’s $350 million Central District development project, in which they say state agencies circumvented regular procedures to obtain outside financing for building projects that the Legislature itself never authorized.

In addition to the KU project, lawmakers are also questioning the Brownback administration’s recent action on a $16.6 million “municipal lease” with Bank of America, using a state office building as collateral, to finance construction of a new power center for the Capitol area complex in Topeka, replacing an existing one in the soon-to-be-demolished Docking State Office Building.

Both deals involve different kinds of lease-purchase arrangements in which an outside third party is putting up funding for the project. The agency, in turn, leases back the facility over a period of years until the financing is paid off, at which point the agency takes possession of the facility.

KU and the Kansas Department of Administration both insist they had all the legal authority they needed to execute the financing agreements, but some lawmakers are now calling for legislation to prevent such deals in the future unless they receive legislative approval.

Secretary of Administration Sarah Shipman answers questions from Rep. John Alcala, D-Topeka, about financing of a construction project near the Statehouse that lawmakers did not approve. Lawmakers are also questioning Kansas University's decision to issue bonds through a Wisconsin agency for its Central District development project.

“I have a bill draft that addresses the future of Regents universities and other state agencies being able to do build-lease-purchase financing on buildings without legislative approval,” said Rep. Mark Hutton, R-Wichita, who serves on the Joint Committee on State Building Construction, which has limited oversight authority over state-funded projects.

Docking power station

That committee met Tuesday to review the Department of Administration’s plan for building the new power center, a facility that delivers heating and air-conditioning to all the buildings in the Capitol area complex in Topeka.

During that meeting, Rep. John Alcala, D-Topeka, questioned whether the Brownback administration acted illegally by using private financing for a construction project the Legislature hadn’t approved, and by putting up another state-owned office building as collateral to secure the deal.

“I hate to get into the finger-pointing mode because this should be about resolutions, but let me tell you. This is very bad,” Alcala said. “Has anyone checked to see the legalities of this, if this was a process that was done legally?”

But Secretary of Administration Sarah Shipman said state laws allow her department to enter into lease agreements. She also said her agency has been advising and consulting with the joint committee since 2013.

Agency spokesman John Milburn said the lease will be repaid through the regular administrative fees that the Department of Administration charges other state agencies for providing administrative support services, and that it will not require additional state appropriations.

KU’s Central District

KU’s Central District project involves a collection of new science buildings, a student union facility, residence halls, apartments and a parking facility in an area of campus just south of Daisy Hill.

KU Vice Chancellor for Public Affairs Tim Caboni said that to finance the project, KU formed an outside, nonprofit corporation called the KU Campus Development Corporation, or KUCDC, to act as the developer. That entity, which is controlled by KU, recently borrowed $327 million through the Wisconsin Public Finance Authority, which issued bonds on KUCDC’s behalf.

Once built, KU will lease the buildings back from KUCDC, using revenue from the fees they generate, from cost savings and from tuition that KU expects to result from increased enrollment from nonresident and international students that the facilities are meant to attract.

“Because we bundled together all these different projects, we’re able to operate both at the pace of business to increase the economies of scale,” Caboni said. “There are tens of millions of dollars in cost savings because we’re operating through a public-private partnership.”

Caboni pointed to a specific statute that gives public universities authority to enter such agreements, as long as the repayments do not involve the use of “state money,” which is money directly appropriated by the Legislature.

He said it’s the same statute being used by Wichita State University to build a new residence hall and aeronautical engineering building, although those projects have received far less scrutiny by the Legislature.

But some lawmakers say they’re concerned that if anything goes wrong with the KU projects, ultimately it’s the taxpayers who will be on the hook.

“You know, it is over a third of a billion dollars,” said Rep. Marvin Kleeb, R-Overland Park. “I know the state is not technically on the hook for it, but let’s say something went wrong. Do we really think the state’s not going to back those bonds in the end?”

Lawmakers have been raising questions about the KU projects for months, first at the State Building Construction Committee in October, and later at an interim Legislative Budget Committee hearing in November.

At both hearings, the committees took no action to block the projects, but they advised KU officials that there would be more questions when the full Legislature reconvened in January.

What angers some lawmakers now is the fact that KU went ahead and issued the bonds Jan. 7, just days before the Legislature convened, and it did so through a Wisconsin state agency rather than the Kansas Development Finance Authority, which typically handles bond issues for state entities.

“The reason they went to Wisconsin was because KDFA declined to issue the bonds because they said you need legislative approval to do this,” Hutton said. “So instead of listening to that, they went to Wisconsin and paid substantially more.”

Caboni denied that KU is paying more through the Wisconsin agency. And he said KDFA could not handle the bond issue because state law does not allow it to issue bonds for research facilities.

KDFA’s general counsel Rebecca Floyd confirmed that KDFA cannot issue bonds for research facilities without legislative approval.

The Brownback administration has temporarily put its power station project on hold while lawmakers continue to seek more information. And some lawmakers said Monday they want to investigate the possibility of cancelling the project by leaving at least part of the Docking building, including the current power station, intact.

But KU officials say they’re moving ahead with the Central District projects, which Caboni said are expected to be completed within three years.