State Senator: REAC Building Loan May Be Illegal

The interim Government Finance Committee is addressing the controversial REAC building sale from the now-defunct UND Research Foundation to the University of North Dakota. North Dakota University System Chancellor threw himself under the bus on the sale, apologizing to the State Board of Higher Education for handling it inappropriately. Legislators are upset that the deal to sell the building from the “private” foundation to the taxpayers wasn’t an arm’s length transaction since the foundation was pretty much run by UND officials.

The legislature had specifically tapped the State Board of Higher Education to negotiate the transaction, but the board wasn’t involved in negotiations at all and Chancellor Skogen simply rubber stamped the deal reached between the foundation and the university.

Now, in addition to that problem, Senator Ray Holmberg, R-Grand Forks, says that the loan itself may be illegal:

The REAC — or Research Enterprise and Commericalization — building was built by the Foundation, using a Centers of Excellence Grant, federal grant monies and loans. But the building g hasn’t lived up to its promise – and UND agreed to buy it from the Foundation for $9.8 million. The University is financing the purchase through a loan from Bremer Banks. But state Sen. Ray Holmberg (R-Grand Forks) says there is a potential conflict over how that loan should be repaid. He told the Legislature’s interim Government Finance Committee state law does not allow UND to use state appropriated funds to help pay off the loan – but in the “request for proposal” that went to Bremer and other banks, state appropriations were included.

“And the basic question is, does the fact that the RFP appears to be in conflict with the law — does that make the contract void, or voidable?” said Holmberg.

Holmberg has asked Legislative Council legal staff to look into that question.

That’s an interesting development. At the last SBHE meeting, the one where Skogen apologized, members discussed what could be done with the deal now that it has been finalized (video here). “The issue is that the transaction has been completed,” board member Grant Shaft said. “I’d like to know what we do with this now.”

Possibly, if Senator Holmberg is right, the deal can be undone because the loan was issued on a repayment plan based on appropriated dollars that weren’t appropriated for any such purpose.

You have to wonder, at what point is someone going to be held accountable for putting the taxpayers on the hook for such a shoddy deal to begin with? It’s all well and good that Skogen apologized, but what about the university officials who negotiated the deal?

When will we get a mea culpa, at the very least, from UND President Bob Kelly?