Kansas officials OK merger of Bioscience Authority with Department of Commerce
photo by: Peter Hancock
Topeka — Gov. Sam Brownback and legislative leaders on Wednesday authorized the Kansas Bioscience Authority to merge with the Department of Commerce, setting up a planned sale of KBA’s assets and portfolio.
Such a sale would bring to an end the state’s 12-year experiment in operating a quasi-public venture capital operation that many people credit with helping the state land the National Agro and Bio Defense Facility, and helping the University of Kansas Hospital earn the status as a National Cancer Institute.
“I think it’s been tremendously important,” said House Democratic Leader Tom Burroughs, of Kansas City. “Not only that, the reputation it’s brought to the Kansas City corridor, in reference to the relationships with the universities, the NCI designation for KU Hospital, the Research Triangle that was developed in Fairway that involved KU.”
The governor and legislative leaders met as the State Finance Council, a group authorized to make certain financial decisions on behalf of the state when the Legislature is not in session. Brownback participated by telephone because he is attending the Republican National Convention in Cleveland.
photo by: Peter Hancock
In addition to investing in companies that focused primarily on human, animal and plant health, KBA also makes a number of research grants each year, mainly through state universities.
Kansas lawmakers authorized selling off KBA’s assets and investment portfolio during the recent legislative session, in part to generate an estimated $25 million to help balance this year’s budget.
Anything received above that amount, up to an additional $13 million, is earmarked to fund the school finance equity bill that lawmakers passed during the special legislative session in June. But if the sale falls short of $25 million, the school finance money will have to come from other designated sources.
According to KBA’s most recent audited financial statement, that portfolio, along with other securities investments, were valued at just over $25 million at the end of Fiscal Year 2015. Its total assets, including the land and building it owns in Olathe, were valued at $82.8 million.
But Commerce Secretary Antonio Soave said an outside investment banking firm is conducting another review before the state puts the assets and portfolio on the auction block.
“What we would like to do is sit down with the investment banker, and in light of the new information that we obtain Thursday and Friday hopefully all of it will sustain a certain perceived value,” Soave said.
That new appraisal of KBA’s net value will be shared with prospective buyers, he said, but the actual market value of the assets and portfolio won’t be known until the sale closes, which officials hope will happen before the end of the calendar year.
Budget Director Shawn Sullivan said merging KBA with the Department of Commerce was necessary because KBA itself is not authorized to sell off its assets and portfolio.
With the merger, all of the assets and liabilities of KBA will be transferred to the Department of Commerce. That includes commitments for about $3 million in grants to be distributed in Fiscal Years 2018 and 2019.
Burroughs said he was disappointed that the state was selling off the Bioscience Authority in what some have called a “fire sale” that was made necessary by the state’s poor fiscal condition.
“I’m very concerned about devaluing the portfolio because of our reputation of not being able to financially meet the obligations we put forward with the KBA,” Burroughs said. “I hope that we find that the portfolio, along with two future grants in 2018 and 2019 will provide us a better insight of the true value. I know that we have spent $200-$300 million in the Bioscience Authority already, and to get pennies on the dollar is not what I would call a good equity position.”
But House Majority Leader Rep. Jene Vickrey, R-Louisburg, said there was more to the decision to sell off KBA than simply raising cash for the state budget.
“I don’t believe we’re holding a fire sale,” he said. “The way this was constructed didn’t work as well as we needed it to, and we need a new structure.”