Following years of bureaucratic and legal obstruction by the University of Iowa and the Iowa Board of Regents, in mid-December the Iowa State Auditor finally concluded his review of UI’s celebrated public-private utility partnership. (Excellent reporting and context here, from the Gazette’s indefatigable Vanessa Miller.) Because that partnership was a notable administrative act perpetrated by former illegitimate UI president J. Bruce Harreld, I began writing a post reviewing and commenting on the state audit, and whenever life stops dropping hammers I intended to finish that post to put a black bow on Harreld’s legacy.
Reminding me once again that I am endlessly naive, however, it was reported last week — again by Miller, here — that the University of Iowa recently lost yet another legal appeal in its long-running, manic pursuit of legal vengeance against a former construction contractor. I don’t know why the university persists in trying to win a case it has previously lost in every conceivable way, with judicial prejudice, buy okay. Someone in the UI Office of the General Counsel — which is about to come under new administrative management — would rather subject themselves and the school to semi-annual ritualistic embarrassment and abuse instead of accepting that loss.
Now, however, less than a week later — while I was still chuckling about last week’s news — yesterday Vanessa Miller reported that the University of Iowa is being sued in federal court by its utility partners. (Additional coverage by the Iowa Capital Dispatch, and by the Chronicle of Higher Education — subscription required.)
From the lede to Miller’s report:
Just three years into the University of Iowa’s landmark 50-year deal for the private operation of its utility system as a way to raise money for education, cracks are emerging in the $1.165 billion agreement, with the operator accusing the UI of “breaching its obligations.”
In a federal lawsuit filed Thursday, the UI Energy Collaborative outlined four main ways the UI was reneging: refusing to pay money it owes; rescinding approval to repair the utility system; refusing to file casualty insurance claims; and demanding payment for “unplanned” utility outages “even though the university’s representatives participated in the very meetings and discussions planning for those events.”
I obviously don’t know if there is any basis for this lawsuit, and none of the parties are going to open their books for independent analysis. What I can say with some confidence, however — having read the 1,800 page concession agreement — is that there are a number of outs in the contract which would effectively allow either party to blow up the partnership. Whether UI is intentionally failing to perform in order to trigger one or more of those provisions, or the energy consortium is filing suit for the same reason, it is beyond dispute that the economic environment in 2023 is wildly different from the context in which the deal was initially struck. Where modest long-term returns may have looked tantalizing during an unprecedented extended period of low inflation, the current inflationary context may have radically altered that calculus for one or both parties.
— Mark Barrett