University of Iowa Public-Private Utility Partnership (P3) lift THE UNIVERSIW OF IOWA UI has fallen in rankings – Not keeping up with peer institutions U.S. News & World Report Rankings (Public Institutions) 40 35 #34 30 16 25 #24 7 20 15 10 5 0 2008 2009 2010 2011 2012 2013 University of Iowa 2014 2015 2016 Avg of UI Peer Set 2017 2018 2019 2020 UI Ranking and Reputation School UCLA Michigan U.S. News Ranking – Public/Private U.S. News Ranking – Public 4 Year Retention Rate Grad Rate AAU #1 #3 #20 #25 97% 97% 74% 75% Yes Yes UNC - Chapel Hill #5 #29 97% 82% Yes Wisconsin Madison #13 #46 95% 57% Yes Illinois Champaign Urbana Texas - Austin Ohio State #14 #14 #17 #48 #48 #54 93% 95% 94% 71% 52% 59% Yes Yes Yes Minnesota - Twin Cities #27 Indiana #31 #70 #79 93% 91% 59% 60% Yes Yes Iowa Arizona #34 #53 #84 #117 86% 81% 51% 43% Yes Yes Average 18 54 93% 63% UI vs Average (2020) 16 30 -7% -12% UI vs Average (2019) 20 34 -7% -12% Generational Investment University of Iowa Strategic Plan Improving Outcomes for Students and Iowans Students Increase retention rate Increase graduation rate Increase experiential opportunities Faculty Increase peer-reviewed research Increase citations Increase awards and National Academy Membership Iowans Increase access to quality health care Stimulate Iowa’s economic growth by: Commercializing university technology Increasing the workforce through increased graduation rates The Why? = Meeting Strategic Needs University of Iowa Strategic Plan - Funding Improving Outcomes for Students and Iowans Full implementation of the University of Iowa’s Strategic Plan will require additional resources Total resources needed each year = $33M/year Shared responsibility between the university, state, and students/families UI will generate through realignment, savings, and other activities $11M per year UI projects a portion of the strategic plan will be funded by resident and nonresident undergraduate, graduate, and professional students or an increase in appropriations above FY20 support ~ $7M (% increases vary) UI will explore maximizing utilization of existing resources through a P3 relationship ~ $15M per year through P3 Utility Endowment University of Iowa – Current Utility System Structure UI plant produces steam for heating and cooling and 25% of the electricity needed for campus (UIHC/Residence Halls/Athletics/Main Campus) and UI water treatment plant produces potable water for campus needs Delivers 75% of the UI’s electricity needs University of Iowa – Current Utility System Structure Each Campus Unit Pays for its Share of Utility Consumption Each segment of the UI pays for its consumption of steam, cooling, water, and electricity Total Budget ~ $98 million ~ $41 million Fuel/Electricity/ Purchased Services ~ $23 million Operation & Maintenance ~ $34 million Debt/Capital Expenditures University of Iowa – Utilities P3 Solid Line = Ownership Dotted Line = Lease/Service agreement New Relationship Company 1 Operator/Investor Reliable utility system focused on a sustainable future Company 2 Investor University of Iowa – Utilities P3 Value Proposition University of Iowa New Relationship Value Proposition Operator/Investor Steady long-term payment to Operator/Investor for 50 years (duration of the lease) Federal tax benefits Upfront resources to further investment in the quality of education and research for Iowans Company 1 Operator/Investor Reliable utility system focused on a sustainable future Company 2 Investor University of Iowa – Utilities P3 Company 1 Operator/Investor Company 2 Investor Company 1 Holdings, LLC Company 2 Holdings, LLC 50% Collaborative Holdings, LLC Collaborative (Concessionaire) 50% University of Iowa – Utilities P3 This partnership…. is not a sale of university assets is not a strategy to eliminate jobs is not forgoing the UI’s environmental responsibility is not forgoing the UI’s research opportunities on alternative fuels is not a replacement for state appropriations University of Iowa – Utilities P3 The Agreement Lump sum payment UI pays annual (50 years) fixed fee. Fixed fee set at $35 million in years 1-5 and increases by 1.5% each year thereafter. Company 1 Operator/Investor UI pays for O&M (employees) and Capital Capital Pays for fuel Operating agreement for 50 years Company 2 Investor Operating Agreement will contain special provisions for: Key Performance Indicators and a commitment to becoming coal-free University of Iowa – Utilities P3 Next Steps Step 1 Company 1 Operator/Investor Company 2 Investor Lump sum payment Step 2 UI pays off existing utility bonds ~ $153M Bond Holders UI pays off consulting fees ~ $13M Consultants Step 3 Establish 501c3 and invest the net proceeds Goal is to provide the UI $15M annually to support strategic plan implementation and to subsidize utility expenses to keep within historical trends. 501c3 University of Iowa – Utilities P3 Utility Fee Composed of Three Parts: Fixed Fee Operations and Maintenance Costs • Employee salary and benefit costs • Materials and other contracts Capital Expenditures • Principal repaid over 20 years • Interest assessed on unrecovered capital expenditures; rate repriced every 5 years University of Iowa – Utilities P3 FY22 Concessionaire Payment Fixed Fee: $35.0 million O&M Fee: $21.4 million Capital Expenditure: $ 3.8 million TOTAL $60.2 million University of Iowa – Utilities P3 FY22 University Utility System Costs* Fuel/Electricity: $33.83 million Sewer/Fire/Refuse: Energy Control Center/ Environ Compliance: Insurance/Audit Costs: $ 5.47 million TOTAL *Current University of Iowa utility costs $ 4.56 million $ 2.01 million $45.9 million University of Iowa – Utilities P3 FY22 University Summary* Campus Billing (revenue) $99.5 million (-) Concessionaire Costs $60.3 million (-) University Utility Costs $45.9 million (=) Subsidy need from Endowment $6.7 million ___________________________________________ (-) Subsidy from Endowment $6.7 million (-) Strategic Initiatives* $15.0 million (=) FY 22 Funding from Endowment $21.7 million *1st full-year expending funds for strategic initiatives University Perspective Including Utility Subsidy from P3 Endowment FY21 FY22 Amount Billed to Campus $ 97.5 $ 99.5 Less: Univ. Utility Costs $ 45.2 $ 45.9 Subtotal $ 52.3 $ 53.6 Less: Payments to Concessionaire for Operating and Capital Costs Operations & Maintenance (O&M) $ 21.1 $ 21.4 Capital Expenditure Repayment $ 0.3 $ 1.4 Capital Expenditure Interest $ 0.5 $ 2.4 FY26 $ 107.6 $ 48.5 $ 59.1 FY69 $ 252.2 $ 112.2 $ 140.1 Average $ 163.3 $ 73.1 $ 90.2 Total $ 8,166.2 $ 3,656.9 $ 4,509.4 $ 23.3 $ 5.7 $ 8.6 $ 54.5 $ 109.0 $ 18.3 $ $ $ 35.3 31.4 21.0 $ 1,764.0 $ 1,567.6 $ 1,051.9 Contribution Toward Concession Fixed Fee Less: Fixed Fee Payment Utility Subsidy From P3 Endowment Strategic Funding $ $ $ $ 30.4 35.0 (4.6) (7.5) $ 28.4 $ 35.0 $ (6.7) $ (15.0) $ $ $ $ 22.5 35.5 (13.9) (15.0) $ (41.7) $ 67.4 $ (109.1) $ (15.0) $ 2.5 $ 48.4 $ (45.9) $ (14.7) $ 125.9 $ 2,418.2 $ (2,292.3) $ (735.0) Total Distribution from P3 Endowment $ (12.1) $ (21.7) $ (28.9) $ (124.1) $ (52.6) $ (3,027.3) University of Iowa – Utilities P3 The Challenge: Maintaining Discipline Must grow P3 Endowment to fund all necessary cash flows over 50-year term of agreement The beginning value in the P3 Endowment is ~$XXX million P3 Endowment must support $3.03 billion in cash flow over 50 years University of Iowa – Utilities P3 Public-Private Partnership (P3) P3 501c3 Board: The P3 501c3 will be managed by a three-member board: Board of Regents appointee UI Faculty Senate faculty appointee UI’s Senior VP for Finance and Operations Board will: Meet quarterly to review the operation of the fund Hire investment advisors and fund managers Determine yearly allocation to the UI University of Iowa – Utilities P3 Public-Private Partnership (P3) P3 Resource Allocation: Members of campus will be able to submit a proposal for one-time grants that may last up to 1 to 5 years These grants will implement strategies in support of the UI’s Strategic Plan. For example, grants will: Increase retention and graduation rates Provide additional support for first-generation students Improve students’ time to degree (reduce student debt) Create additional undergraduate research opportunities Increase outreach and engagement across the state Invest in research facilities and grant applications P3 – Resource Allocation P3 Resource Allocation - Proposal Transparent Grant Process Ideas from campus Anyone can submit a proposal Up to 5-year grant Must impact the strategic plan Path Forward Work Groups Final Decision Making Body Budget Review Board Determines If Proposals Move to BRB Path Forward Steering Committee Group of experts Will triage first round of requests Path Forward Work Groups Path Forward Steering Committee Shared governance and administration Will determine what requests move on to budget review board for final review Budget Review Board Shared governance, academic leadership, and administration Will make final decision regarding requests Triage Proposals and Moves Forward Suggestions to PFSC Student Success Research and Discovery Engagement Ideas From Campus Diversity, Equity, and Inclusion University of Iowa – Utilities P3 What does success look like? Implementation of the UI’s strategic plan which will: Keep students in school Graduate in 4 years to decrease potential debt Increase peer-reviewed research Increase citations Increase awards and National Academy Membership Increase access to quality health care Stimulate Iowa’s economic growth by: Commercializing university technology Increasing the workforce through increased graduation rates World class utility system Protecting choices for future UI leadership Coal-free by 2025, if not earlier Seamless transition of staff and operational responsibility New student learning experiences in energy management New sustainability research opportunities 1. THE UNIVERSITY OF IOWA