REAC Building Boondoggle Dumped On The Taxpayers By Unapologetic Higher Ed Officials

“In my 38 years in the legislature, this is one the most egregious examples of thumbing nose at a legislative directive. Period.”

That’s what state Senator Ray Holmberg, R-Grand Forks, told Prairie Public about the deal in which the UND Research Foundation, controlled by UND officials, dumped the financially-challenged REAC building onto taxpayers. I’ve written about the situation previously here and here, and yesterday higher education officials appeared before the Interim Government Finance Committee, chaired by Rep. Jeff Delzer, R-Underwood, to explain themselves.

It didn’t go well for the folks in higher education. Especially when the current President of the State Board of Higher Education Kirsten Diedrich admitted that she didn’t even know the law required the board she heads to negotiate the sale (as opposed to UND officials organizing the sale with a foundation also controlled by UND officials).

John Hageman reported for the Grand Forks Herald:

Diederich said she wasn’t aware the board was supposed to negotiate the sale until she was approached by fellow board member and past president Duaine Espegard at a higher education conference.

“(He) informed me that he would like to start negotiating on this building. And it had already been completed at that time,” Diederich said.

So how bad is this? Well, pretty bad. The REAC building cost $17.1 million to build, and used state, local, and federal tax dollars as well as a loan from Bremer Bank. It was opened in 2009, but now just five years later the building is only 55% occupied and the purchase agreement between the UND Research Foundation, the entity formed to manage the building, and the University of North Dakota proper was for just $9.8 million.

That’s quite a decline in value, and Diedrich blamed it on the economic downturn and “over-optimistic projections.” But let’s face it. It was mostly the over-optimism.

“However, because of the nationwide economic downturn and, in retrospect, over-optimistic projections, the foundation experienced cash flow challenges,” Diederich told lawmakers.

And Senator Rich Wardner, R-Dickinson, worries that, because UND officials essentially negotiated the sale with themselves, the taxpayers are getting the short end of the stick while Bremer Bank rakes in a higher-than-justified interest rate on a new loan (and the UND Research Foundation got to clear it’s books and bow out of existence).

Wardner said there are a number of things that are “getting under (legislators’) skin,” including the fact that the same bank giving the original loan to help construct the REAC facility is now giving UND a loan to buy the building, and the seemingly high interest rate on the loan.

“We concerned about the taxpayer, we’re concerned about the students having to pay this,” Wardner said.

Keep in mind, the UND Research Foundation is another of those university spin-off organizations we’re all supposed to believe is separate and private. Except, I guess, when they get into financial hot water. Then the taxpayers bail them out.

The REAC building was a disaster. It has been a colossal waste of the taxpayer dollars already invested in it, and now that it’s been dumped in the taxpayer’s lap, it will cost millions more.

In a just world, people in higher education would be losing their jobs over this. But let’s face it. This is North Dakota, and we never hold anyone in the university system accountable for anything.