Entity To Own Campus Formed

Vogel and Kastner appointed to board that will own $500 million campus, support facilities

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Plans for a college campus in Payson moved one step closer to reality last week as the town council took a key step in setting up the Separate Legal Entity (SLE) that will actually own the campus and related facilities.

The council also appointed former town councilor Mike Vogel and former marketing executive Mary Kastner to fill two of the six seats on the board of the newly formed Rim Country Educational Alliance. Star Valley will also appoint two board members. The four board members will then recommend two more people to sit on the SLE board.

Payson Mayor Kenny Evans said the town decided that appointing council members to the educational alliance governing board would create too many potential conflicts of interest and problems with the state’s open meeting law.

“We had considerable discussion about including elected officials,” said Payson Mayor Kenny Evans. “It was felt that there was too much potential for conflict of interest.”

Vogel, a retired firefighter and union representative, lost his bid for re-election to the council a year ago and now serves as the town’s part-time economic development coordinator. Kastner previously ran the marketing department for a $46 billion corporation, supervising a budget of $230 million, before retiring to Payson.

The unelected educational alliance board members will actually negotiate and sign the agreements with Arizona State University, the builders of a 500-room convention hotel, the builders of solar generating facilities, businesses that lease space in the proposed research park, the private companies that will build the dormitories and other spin-off businesses.

The agreement gives representatives of the group providing up to $400 million in financing the right to approve the list of candidates for the educational alliance board.

The Star Valley and Payson councils retain the power to appoint and remove members of the SLE board, but can only remove a board member “for cause.” The educational alliance board otherwise remains separate — which protects both towns from liability if something goes wrong.

“The whole idea of this structure is to limit the liability of the council — and the town,” said Evans.

The agreement requires a two-thirds vote of the educational alliance board for major financial decisions, including issuing bonds or debt in excess of $1 million, approving contracts worth more than $500,000 and adopting the development master plan.

The board will have to abide by the same state laws as a town council, including the open meeting law and submitting to annual audits. The board members will receive no pay, but can be reimbursed for their expenses.

The struggle to establish a separate district to own the facilities and contract with the various businesses without cost to Payson taxpayers has accounted for much of the two-year struggle to finalize plans for the campus.

“When this whole thing started, we were told ‘you have to do it without spending any of Payson’s money and without any liability, but we want all the benefits,’” said Evans.

The Payson Town Council also plans to establish a special educational zone to encompass the roughly 370 acres planned for the campus. That special zoning category means the SLE board will have to receive the Payson council’s approval for its master plan. Without such a zone, the university would be essentially exempt from the town’s zoning ordinances.

“Without that zoning, ASU could build pretty much anything it wanted,” said Evans.

Evans said ASU and negotiators for the town, financiers and other participants have finalized plans for the first phase of construction. They now have to decide whether to build the first phase of a 67-acre parcel north of Highway 260 next door to Gila Community College.

Backers would rather start on a 300-acre parcel on the south side of the highway, but the Forest Service still can’t provide a firm date on when it can finalize the sale of that land, although Congress authorized its sale more than five years ago.

Evans said he expects the Arizona Board of Regents in August will approve an intergovernmental agreement committing to operating the undergraduate campus here.

Evans said ASU and Payson have also negotiated most of the details in a crucial lease agreement, which will spell out exactly what facilities, dorms and classrooms the SLE will provide and how much ASU will pay to lease those facilities.

Evans said lawmakers have indicated that the state won’t provide the traditional extra funding for new facilities.

However, he said lawmakers have raised no objections to the normal, per-student funding formulas. Three years ago when negotiators started working on the campus, the state provided a subsidy of about $7,500 per full-time university student annually. Due to budget cuts in the past three years, that subsidy has declined to about $3,000 per student annually.

The plan for the Payson campus calls for a focus on relatively low-cost, undergraduate degrees and a public-private partnership that will greatly reduce the cost of construction. Moreover, the various spinoff businesses will generate revenue that will reduce the cost to ASU.

As a result, backers hope to keep the tuition at perhaps half the $9,000-per-year cost at ASU’s Tempe campus. Tuition at the state’s three universities has skyrocketed in the past three years, rising from the bottom third for public universities nationwide to near the top of the scale. However, the Payson campus could charge half as much as the Tempe campus now charges — and still have higher tuition rates than students at the Tempe campus paid three years ago.

Gov. Jan Brewer complicated the calculations when she vetoed a hard-won bill that would have allowed ASU to become a partner in forming the SLE. The veto cost backers ultra low-interest financing, which will add some $200 million in interest costs to the project — necessitating a higher tuition.

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