Asu Deal Now About The Money

Alliance now scrambling for another tenant to close multi- million-dollar gap

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In the end, it’s all about the money.

Now that Arizona State University has offered its latest draft Intergovernmental Agree-ment (IGA) to build a four-year university in Payson, the Rim Country Educational Alliance has to find the additional money required to make the arrangement feasible.

The IGA submitted by ASU would require the Alliance to not only provide free office and classroom space for the first, 1,000-student phase, but to subsidize the housing component of the university campus.

ASU has agreed pay for all furniture and equipment, building operation and maintenance, planning and capital costs for all future educational program expansion for subsequent phases for the additional 5,000 students anticipated at build out. The bottom-line quest for millions in additional revenue has prompted the Alliance to seek another anchor tenant for a complex that has grown to some 400 acres.

The Alliance has opened negotiations with a private, specialized academy that could contribute the extra revenue needed to close the deal with ASU.

Several meetings involving top officials from all of the parties have gone well — but working out key details will require time, said Payson Mayor Kenny Evans, who remains a driving force behind the complex project. The president of the corporation is expected here in about two weeks.

If it works out, the academy would likely go on some 100 acres north of Highway 260 between Tyler Parkway and the Gila Community College campus. That specialized school might also make use of several other large parcels.

That would shift the ultimately 5,000-student public university to a 300-acre Forest Service parcel directly south. The university would occupy about one-third of the parcel. The rest would go to a 500-room hotel, a research center and an incubator center to turn faculty research into commercial products.

Those spin-off businesses could in theory help generate the lease payments needed to keep costs as low as possible for the university. ASU wants to keep tuition on the Payson campus low enough to ensure the small campus in a rural town fills up quickly. Originally, backers wanted tuition linked to the federal maximum for Pell Grants, which is about half as much as ASU Tempe’s more than $9,000 annually. Now, backers concede tuition will come in several thousand dollars above the Pell Grant maximum.

The effort to make the project pencil out has proven a frustrating, moving target for backers of the Payson campus.

Backers two years ago were counting on the extremely low interest rates offered by the investors.

However, when Gov. Jan Brewer last year vetoed a law that would have allowed ASU to join in setting up the Rim Country Educational Alliance Separate Legal Entity) SLE, the delay forced project backers to swallow an extra $10 million annually in financing costs, said Evans.

The long delay has centered on finding a way to cover those additional costs.

Even if it doesn’t have to pay to lease facilities for the first 1,000 students, ASU would wind up spending at least $2 million annually, more than it could get from the state or tuition.

The Legislature has made major cuts in university budgets in the past three years, prompting a 50 percent rise in tuition and forcing the universities to try to make any new programs virtually self-supporting.

Evans said he’s convinced that ASU’s plan represents a best effort proposal on their part, based on the severe financial constraints under which the universities are operating today.

However, he said he’s reluctant to advise the Educational Alliance to accept the offer without first knowing whether it can get enough lease payments to make everything add up.

“We could take a chance and sign the deal and then go find the money, but I’d much rather know that the additional money is there,” he said.

The proposed academy could provide the perfect addition to the project, complementing ASU’s offerings rather than competing for the same students, said Evans.

However, several major questions remain in blending the two campuses into a single educational zone, he said. With luck, negotiators can work through those issues in the next few weeks, he said.

Working out a deal with ASU remains the goal, but backers are optimistic that one of the other interested universities could work out an alternative quickly if the Alliance can’t make the arrangement with ASU pencil out.

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