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Kansas Lawmakers, KU Tangle Over Construction Bonds

Stephen Koranda

The University of Kansas is embarking on a major construction project on the Lawrence campus. The Central District plan includes educational facilities, housing and a new student union. KU says it’s a needed update, but lawmakers are raising concerns about the project and have taken steps that could punish KU.

In the heart of the KU campus in Lawrence, excavators are digging through piles of concrete and twisted metal. This rubble used to be old student apartment housing, but a new science facility is planned for this spot.

Chancellor Bernadette Gray-Little told lawmakers this week that new housing and science facilities are badly needed.

Credit Stephen Koranda / KMUW
KU Chancellor Bernadette Gray-Little speaks to lawmakers about the school's need for new student housing and buildings.

“Our science faculties, which were built before we put a man on the moon, are out of date at best, and at worst they are obsolete. The truth is that many high schools have better basic science facilities than we have at the University of Kansas,” Gray-Little says.

To do this, KU formed a public-private partnership that issued more than $300 million in bonds for construction. KU will pay to lease the buildings with revenue generated from the facilities, efficiencies and enrollment growth.

Gray-Little says this model allows them to take on the project with no state tax dollars.

“By bundling the various project components and by using the public-private partnership model, we have saved millions of dollars for KU students and families,” Gray Little says.

But KU didn’t get the approval of lawmakers for the plan, and some legislators say they actively dodged oversight. Republican Rep. J. R. Claeys referenced Star Trek when spelling out his concerns.

“KU is flying the Starship Enterprise through our statues trying to avoid a transparent process that’s accountable to taxpayers and students both," Claeys says.

Republican Sen. Michael O’Donnell blasted KU over the financing system, where bonds were issued through the state of Wisconsin. But he was quick to point out his criticism isn’t because of a grudge against the school. He took out his wallet during a committee meeting.

“I would like to pull out my Intrust Bank debit card, which is a Jayhawk. I use it every day. I love KU, but this is just flagrant,” O’Donnell says.

KU responded by saying they met with a state committee multiple times and the Kansas Board of Regents also had oversight.

Jeff Gans, an attorney for KU, says they wanted to issue the bonds through Kansas, but couldn’t because of certain facilities in the project. He says issuing the bonds through Wisconsin helped them keep the project on track and beat a possible rate increase.

“We believed and we were advised that the longer we went on, the more likely higher and higher interest rates would be required. When the interest rates go up, the project becomes more expensive,” Gans says.

Gans tried to calm some lawmaker’s concerns. He says the bonds are set up to insulate the state from any liability. That wasn’t enough to satisfy Republican Rep. Marc Rhoades.

“Whether you want to call it lease payments or whatever, it’s on state property, it’s going to be ultimately the state responsible," Rhoades says. "However they want to try to frame it, it still comes back to the taxpayer."

Both chambers are now considering sanctions on KU. The Senate plan would block KU from making the lease payments they owe.

Democratic Rep. Barbara Ballard, who also works at KU’s Dole Institute, says lawmakers are coming down too hard on KU. They’ve urged universities to find ways to build facilities without tax dollars, but now KU might be punished for that.

“If you want to teach them a lesson, then I think we have to be very careful going out and saying get creative, find your own funding, because the state doesn’t have the money that they’re going to give you,” Ballard says.

After hearing from KU officials, Republican Sen.Tom Arpke was not swayed. He still supports his proposal that would block KU from making payments for the project.

“I’m tickled pink that we’re going to have some nice new things on the KU campus. I’m just concerned about where the dollars are going to come from and that the process I don’t think was followed correctly,” Arpke says.

Arpke’s provision is in the Senate’s version of the budget. The full chamber will debate that bill Thursday.

House members voted Wednesday to exempt KU Med from their proposal, but the rest of KU would still face spending restrictions under the House budget.