IOWA CITY, Iowa — The University of Iowa must comply with a subpoena from the state auditor that seeks the names of investors in a multibillion-dollar utilities privatization agreement it completed last year, the Iowa Supreme Court ruled Friday.
State Auditor Rob Sand acted legally when he subpoenaed details about the 50-year plan granting the right to operate campus utilities to a consortium of French companies in exchange for a $1.165 billion payment, justices agreed.
Given that it was one of the largest transactions in Iowa history, it was appropriate for Sand to seek to audit the deal even before it closed to ensure the school followed bidding processes and had no conflicts of interest with investors, the court found.
“The taxpayers of Iowa, who bear the ultimate financial risk for this transaction, are entitled to know if the agency got the best deal available and if anyone had a conflict of interest,” Justice Edward Mansfield wrote in a concurring opinion.
Under the deal, investors that include financial services companies lent $1.65 billion to the utilities companies, ENGIE and Meridiam, which paid it to the university. The university invested its upfront payment in an endowment that will pay out $15 million annually to fund campus education and research priorities.
In exchange, the university is required to pay the companies $35 million annually to operate plants and infrastructure that distribute electricity, water, steam and compressed air to campus buildings. That sum will rise over time and total payments could exceed $6.8 billion over the 50-year period, with the investors earning steady returns.
The deal will only make financial sense for the university long-term if the endowment earns billions in the market and isn’t depleted too quickly through campus spending. Taxpayers could be on the hook for the payments to the companies if the deal goes south.
In promoting the proposal as a win for the state, University of Iowa President Bruce Harreld noted that 21.5% of the money for the transaction would come from Iowa-based investors. Democratic lawmakers questioned whether the investors had ties to university officials or were supporters of Republican Gov. Kim Reynolds, who backed the deal.
But the school denied open records requests for the investors’ identities, saying their names were marked as “proprietary” and “trade secrets” by the bidders and therefore could not be disclosed.
Sand, a Democrat serving his first term, requested details of the four bids from companies that competed for the transaction and the list of investors, after university officials briefed him on the deal in 2019.
Sand filed a subpoena for several categories of documents related to the transaction in January 2020, after university officials declined his requests for information. A judge ordered the university to comply with the subpoena, but put the ruling on hold as the university appealed.
University officials were concerned that releasing the information to Sand would jeopardize the transaction, which had not yet closed. They argued that he did not have the power to issue a subpoena since he wasn’t conducting an audit of the deal.
All seven Supreme Court justices rejected the university’s position and agreed that the subpoena was valid and should be enforced.
“This is a massive win for taxpayers,” Sand said. “It protects their ability to know what state government is doing with their money.”
The school recently shifted its rationale for shielding the identity of the investors after The Associated Press renewed its open records request for them.
“The university was not involved in choosing, nor does it know, which of the potential lenders ended up engaging with ENGIE-Meridiam to complete the financial transaction,” university spokeswoman Ann Goff said in February.
