TRANSPARENCY TUESDAY: “Corporatizing” university functions raises new public-disclosure obstacles for journalists

With shrinking subsidies from state legislatures and tuition maxed out to affordability and beyond, colleges understandably are looking at everything but selling the provost’s plasma as a means of generating money. This is both good news and bad news for the journalists whose job is to hold colleges accountable.

The bad news is that entire chunks of formerly state-owned operations are being handed over to private corporations that are exempt from the open-meetings and open-records requirements of state “sunshine” laws.

One of the most aggressive recent examples comes from the Pensacola News-Journal, which reports that the hometown University of West Florida has created a nonprofit affiliate, Business Enterprises Inc., to find ways to squeeze earnings out of the university’s assets. Among the ambitious plans on BEI’s drawing board, the News-Journal reports, are a football stadium, a retirement village, and upscale campus housing and dining options — all intended to maximize the revenue from the university’s underutilized Pensacola land.

Arrangements of this type raise questions aplenty to which inquiring journalists should demand answers, including: When control over valuable university assets is given over to an outside party, what contractual guarantees exist to make sure that the university shares in any profits that are earned? And in the event of a financial bust, what safeguards prevent the corporate contractor and its managers from skipping away while the university absorbs the losses?

Although a non-governmental entity such as BEI need not entirely open its books and records for journalistic scrutiny, any documents that are shared with a public university’s administrators or trustees are (with limited exceptions) obtainable through state open-records laws. So when such public-private ventures are launched, journalists should regularly be asking the college for audit reports, contracts and correspondence pertaining to the corporate partner.

And this part is the journalistic good news. When government agencies make business deals with private industry, they often screw up colossally and leave a trail of disastrously bad (if not outright dishonest) financial decisions that can be easily found and scrutinized.

Just last year, the Texas Tech University student newspaper reported that TTU and its alumni association got stuck in a money-sucking lease for spaces in a parking garage that students don’t want to use and can’t afford. The garage was built by well-connected investors who capitalized on connections within Tech alumni circles to negotiate an advantageous deal that puts the alumni association on the hook to help cover any shortfall if the garage generates less parking revenue than expected.

The headline on The Daily Toreador‘s award-winning story — “Million Dollar Bust” — should be a flashing red “Caution” sign for the folks at Ohio State University, who recently announced they are leasing out university parking facilities to a private vendor.

The immediate payoff — $483 million to let a private vendor operate OSU’s 36,000 parking spots and keep the revenue — sounds enticing. But as an administrator at Texas A&M University explained to the Columbus Dispatch, OSU may be selling itself short. A savvy management company could make $5 billion selling parking spaces over the 50-year lease term — and since nobody expects Ohio State to go away (or college students to stop driving) anytime soon, that is a incredibly profitable deal for extremely little risk.

This is less like selling the provost’s plasma and more like selling the provost’s kidneys. Once the asset is gone, so is any possibility of future Ohio State stakeholders sharing in any of that profit.

Journalists covering deals of this nature should be asking whether the contract was competitively bid, should be looking into the ownership and insider connections of the lucky contractor, and should be requesting any studies or projections that were considered by university trustees before voting to undertake such a contract.

Not every agreement, of course, will be tainted by insider dealing. But even if there are no discernible conflicts-of-interest, journalists should not take for granted that trustees are smart businesspeople who negotiated the most advantageous terms. If your university is mortgaging its future to shore up its present, basic questions of management judgment not only are fair game, but are essential to ask.