Jim Modig, university architect for Kansas University, outlines KU's development plans to a legislative committee in Topeka. Lawmakers raised concerns about KU's plan to use public-private

Some Kansas lawmakers are raising objections to Kansas University’s plans to finance its $325 million Central District Development Plan, but they stopped short of putting the entire project on hold Tuesday.

Instead, the Joint Committee on State Building Construction gave tentative approval to the plan, but told KU officials to be ready to answer more questions after the full Legislature convenes its 2016 session in January.

“I just think some of these projects that are wrapped up into this package are circumventing the normal appropriations process,” said Rep. Mark Hutton, R-Wichita. “I have serious concerns about the amount of dollars being spent here with no legislative oversight, and then eventually, at the end of the rainbow, the state is on the hook for that debt.”

Hutton raised those concerns after KU officials outlined their plans for financing several projects in the district.

Jim Modig, university architect at KU, said projects in the district include an integrated science building to replace the aging Mallott Hall; revamping the Burge Union; construction of a central utility plant and improvements to the existing plant; new parking facilities; new apartment buildings; a residence hall and dining facility; and other infrastructure improvements.

To finance those, KU plans to use what it calls “public-private partnerships,” or “P-3” in legislative parlance. That involves setting up independent nonprofit corporations that would issue the bonds to pay for construction. KU, then, would lease the buildings back from the corporation, and those lease payments would be used to make the bond payments.

Hutton, who works in the construction industry as a general contractor, said similar financing plans have been used in the past on revenue-generating buildings such as residence halls, but never before for classroom space or basic infrastructure such as a power plant.

Theresa Gordzica, KU’s chief business and financial planning officer, said that structure would shield the university and the state from any liability for the bonds.

“The bonds will be an obligation of that not-for-profit corporation using the revenue of the lease to pay that back,” she said. “Those bonds will state clearly in there that it’s not an obligation of the state of Kansas and that the bondholders can’t come after the state of Kansas if there’s any problem with the repayment of those bonds.”

But Hutton and others on the committee were reluctant to accept that at face value. First, they argued that the source of the money to repay the bonds would be student tuition and fees — revenues that Hutton said he considers “state funds” that should be subject to legislative oversight through the appropriations process.

In addition, though, Hutton said that in the event of a default, he considered it highly unlikely that KU would allow buildings in financial default to remain on its campus and that, eventually, either students would be asked to pay higher tuition and fees to pay off the debt, or the state would be asked to bail out the projects.

Committee Chairman Rep. Steve Brunk, R-Wichita, said he shared those concerns, as did Sen. Forrest Knox, R-Altoona.

“Certainly the state of Kansas would be on the hook,” Knox said. “In all practicality, seeing what I’ve seen in the last 10 years, we would not let catastrophe to happen. We would step in, and we would finance this.”

At first, Hutton offered a motion directing KU to put its Central District Development Plan on hold until other legislative committees have a chance to review the projects and ask questions about the financing.

But Sen. Laura Kelly, D-Topeka, offered a substitute motion, essentially approving KU’s plans for the time being, with the understanding that KU will be expected to answer additional questions before House and Senate budget committees after the 2016 session convenes.

Kelly’s substitute motion passed on a voice vote.