Legislation to allow Payson to set up a special district to build a college campus passed its final legislative hurdle this week by a lopsided vote.
The Senate approved SB 1497 on a bipartisan 48-11 vote, which will allow the town to set up a Separate Legal Entity (SLE) to build and operate educational facilities. The law now needs only the governor’s already-promised signature.
Payson Mayor Kenny Evans said the vote amounts to the Legislature’s seal of approval on Payson’s plan to use donations, loans and bonds to build a four-year college campus and various support facilities, including a convention hotel, dorms and a research park.
“The fact that a little tiny town of 16,000 can go in there and get a 76 percent vote on something like this is pretty significant and should make ASU feel comfortable that we really do have the ability to deliver on the promises we make,” said Evans.
The creation of an SLE remains central to Payson’s plan to build facilities that could cost up to $500 million without using town money or exposing Payson residents to any risk of a tax increase.
SB 1497 essentially expanded the legal definition of an SLE so that it could build educational facilities and so universities could enter into agreements with these special districts.
The legislation “is critical to our ability to form the SLE, which is our preferred way of building the campus because it protects the residents of Payson,” said Evans.
He said that the strong bipartisan vote in both the Senate and the House should also reassure Arizona State University that the Legislature supports the innovative plan to build a campus for up to 6,000 undergraduates with mostly private funds and donations.
“It’s significant because we were able to get such an overwhelming vote in both the House and Senate,” said Evans.
“Both Democrats and Republicans were standing up saying ‘this is the wave of the future.’ That’s impressive.”
The vote came just as ASU completed a marketing study on the proposed campus, which would offer a limited list of undergraduate degrees and charge about half the tuition as the state’s existing universities.
That marketing study reportedly found that ASU could enroll 1,000 to 2,000 students initially, with the first classes starting in 2013, according to people who had been briefed on the results.
However, ASU has not provided copies of the study and ASU officials did not return calls seeking comment on the study this week.
Supporters of the Payson campus have already bought a 67-acre parcel next to Gila Community College for the first phase of the campus and come up with a site plan.
Private donors put up the money, part of the roughly $400 million in promised loans. Backers have also worked out agreements to build a $65 million solar cell generating array on the parking lot and the covered roof of the Payson Event Center and struck a deal with a hotel chain, all dependent on ASU finally signing on the bottom line.
The passage of SB 1497 lays the foundation for Payson’s innovative approach to its partnership with ASU, which will make it possible to build and lease all the facilities planned for a campus site that will eventual cover more than 300 acres.
Support for a college campus in Payson has often appeared overwhelming, with the exception of a core of doubters worried the construction of a campus and related businesses will cost existing taxpayers money, either for the bonds necessary to finance the facilities or extra costs for police, fire and planning.
The creation of an SLE represents the town’s answer to that concern. Essentially, the SLE will bear all the legal risks of the creation and operation of the campus.
It basically accomplishes the same purpose as the creation of a limited liability corporation in business. In the case of a business organized as an LLC, lawsuits and bankruptcies can only affect the assets of the business — not the personal property of the owners.
The town council will control the SLE, but that district will contract with the university and related businesses and will continue to own the facilities, which it will lease back to the various businesses.
The SLE can levy various taxes within the boundaries of the educational district, but not in the rest of the town. The SLE can also issue bonds and enter into partnerships with other agencies and private businesses — but the taxpayers of Payson won’t be legally responsible for those bonds or the fulfillment of those contracts.
The SLE will use lease payments, bonds, donations and loans to build the facilities and then make sure that ASU can operate the campus with minimal per-student state support while charging tuition set at about half that of ASU’s other campuses in the Valley.
Evans said the town won’t use any of its own money or bonding capacity to build the campus. In fact, construction of the campus will even include a $6 million payment the town can use to help build the Blue Ridge pipeline.
In addition, the influx of students, several hundred university employees, and workers in related businesses will likely help support town services through the sales, income and property taxes they pay.
Evans said SB 1497 got broad support from legislators, who hope Payson’s effort will provide a model for other community-supported efforts through which the state can end up with a network of lower-cost, undergraduate colleges.