Home » Campus » Area » Ohio State is considering privatizing its utilities

Ohio State is considering privatizing its utilities

Click to enlarge.

Click to enlarge.

In its quest to cut costs and reduce its carbon footprint, Ohio State is looking to privatize the management of its utilities, including water, electricity and gas. And while it’s not the first time OSU has privatized an asset, officials said this also might not be the last.

The effort, dubbed the Comprehensive Energy Management Initiative, would involve entering into a long-term lease with an outside company that would manage the university’s utilities.

That company could then profit by helping OSU cut energy costs and make it more energy efficient — something Provost and Executive Vice President Joseph Steinmetz said OSU can’t easily do on its own.

“Through these kinds of opportunities, we might be able to generate revenue that we can then just plug into the sustainability efforts that we want,” Steinmetz said in a Wednesday interview with The Lantern. “The asset-generated revenue also could be plugged into student support and faculty help as well.”

OSU currently spends $100 million annually on energy, said Geoff Chatas, senior vice president and chief financial officer. It also has about $250 million to $300 million worth of energy improvements that could be made, but haven’t because of a lack of funding.

OSU would spend the early part of 2015 assessing which companies might be fit for the job, Chatas said. Bidding could then start as early as next fall. The duration of the lease and the amount OSU might save depends on what the companies propose. 

Still, Steinmetz said it’s unclear if the initiative — which was announced to the University Senate Fiscal Committee Tuesday — could result in people losing their jobs. 

“Changes in either plus or minus on positions could happen,” Steinmetz said. “It depends on what the final proposal actually looks like.” 

Although Steinmetz said it’s too early to consider employee reductions, Chatas said the money OSU might gain from the deal could create jobs.

But this isn’t the first, and perhaps not the last, time OSU has sought to gain capital from privatization. 

The university agreed to a 50-year lease on its parking assets for the upfront price of $483 million. QIC Global Infrastructure, an Australian investment firm, placed the bid and created CampusParc to operate the parking facilities. The deal was finalized and approved by the Board of Trustees in June 2012. That deal was criticized by people — including faculty — at the time and has been criticized since for the annual price increases it permits.

  • OSU also holds private contracts with other companies:
  • Coca-Cola: a $32 million contract spanning 10 years that makes Coca-Cola the exclusive beverage vendor at OSU
  • Nike: $46 million over 11 years that makes Nike the exclusive supplier of any athletic equipment used by OSU varsity athletes and gives the company licensing rights on OSU retail apparel
  • Huntington: 15-year, $25 million contract that makes Huntington the official consumer bank of OSU
  • Hat World Inc., doing business as Lids Sports Group: 10-year contract worth $12.05 million that gives the company, with J. America, the right to exclusively produce and sell university apparel
  • J. America: 10-year, $85 million contract that gives the company, with Lids, the right to exclusively produce and sell university apparel

Steinmetz said he has no qualms about privatizing other things going forward.

“From my perspective, I don’t think anything should ever be off the table,” he said. “If there’s a way we can do it more efficiently, if there’s a way we can transfer the money that we’re overspending on something to support students in our academic mission, then that’s the academic officer in me coming out.”

Still, Steinmetz said there’s been little talk of privatizing anything else at the moment, and that current efforts, like privatizing utilities, are the university’s main focus right now.  

“We’ll look at all things that are possible that may be out there — we haven’t looked at any of these in specific, like dining I’ve heard come up a couple of times — and that’s not something at this point that we’ve said, ‘Yeah, let’s go look at it,’” he said.

And while the latest privatization is still at least a year away, Steinmetz said from his perspective, faculty have so far been on board.

“I’m sensing a bit of excitement about this,” he said. “I think everyone understands the enormous issue and problem it is with a campus this large — this many working parts, the buildings, the age that they are — of accomplishing something significant of the sustainability side and I think what the faculty realize — and students, by the way, too  — is this, in a lot of ways,is a long-term investment as well.

“We’re trying to do things right now so that 30 and 40 years from now we are still reaping the benefits of having reduced our footprint and having reduced our cost as it comes to energy.”

At least one faculty member said he thinks privatizing utilities might prove helpful for the university.

“There is a potential benefit here that really has everyone involved,” said Richard Dietrich, a professor at OSU’s Fisher College of Business and chair of University Senate’s Fiscal Committee. “We can improve the energy efficiency of our buildings and we can potentially reduce the cost of energy that we use on this campus by reducing the amount of energy we use on this campus.”

Dietrich — who said he’s known about the initiative for about a year — said he didn’t have any outstanding reservations when he was first informed of the plan. 

“I think that the process is very well thought out, including making people aware at an early stage what we’re doing,” he said.

12 comments

  1. I can hardly wait till OSU “privatizes” its Leadership/Management & Faculty!!! These efforts to privatize are not all bad, however, most are often attempts by the “Administration & Faculty” to insulate themselves at the expense of everyone else. A better alternative is often to simply hold the Administration & Faculty accountable to run a University efficiently. They are after all, already Highly overpaid,and supposedly to do just what they claim “only for profit private companies are able to do.”

    When I began my thirty year stint at OSU, no one could legally be paid more than the Governor whose pay was capped at around $56,000 per year. “Public Service” was just that and there was no difficulty finding highly competent folks to run OSU. Look at what OSU’s president and other administrators are paid. The lowliest bureaucrat and assistant coach now make more than what only thirty odd years ago was the cap on pay.

    Abandon the “progressive” path and return to the “conservative” path that once dominated Ohio & Ohio State, and costs will plummet.

    OSU’s academic standards would return as well!

  2. Buckeye in the West

    “conservative path”? I guess that is what OSU is doing. Privatize. Go to where the money is. Run OSU like a for profit business and corporate greed that goes with it.

    As an alumnus, I do not directly experience the “changes”, but if privatizing utilities goes the same way as CampusParc; expect colder classrooms in the winter and warmer ones in the summer.

    As for administrator salaries, and the like, the people of Ohio haven’t noticed. As long as Ohio State’s football brand keeps winning, that’s all they care about. And considering the current politics of Ohio, people do not want to pay taxes to fund education and prefer places, like Ohio State, to makes as much money, as it can, by other means. Even if it means “leasing” itself to the highest bidder.

    The next step? Privatize staffing for all non-academic functions. That is, all non-academic staff will not be OSU employees, but will be “contractors” hired by private industry. That is the “conservative” way. When that happens, and staff football tickets go away, then people will notice. Oh yeah, the administrators will get even more higher salaries at they pat themselves on the back at the Huntington Club.

  3. buckeye in the mid west……on above comment. VERY WELL SAID someone please post it on a CAMPUS billboard..

  4. Instead of being lazy, why doesn’t the university take PRIDE in itself and tap into the talented students and faculty to make this work? Use the Engineering and Ecology folks, I’m sure they could help cut energy costs, eh?

  5. Yeah, OSU gets more money, and more OSU staff lose their jobs. Yeah, I’d say that’s a real win-win situation. And I agree with Buckeye in the West, next thing, everyone that is non-academic staff will be off the OSU payroll and become subcontractors with no benefits. You can bet I (and many others) will retire before that happens.

  6. Love how we talk about how we need to pay top dollar to get the best administrators on campus and the only thing they can come up with is to fire staff and let someone else manage what the administrators were paid to manage in the first place.

    We’re an R1 University and we can’t figure sustainable energy policies out on our own?
    Just take the easy road and give public dollars to a private company?
    What was a public good now becomes a private good.
    How often do we see that working out, in the long run?

    The administration of this University is a joke.
    They make their money, and GTFO asap.
    The taxpayers and students of this University need to wake up.

  7. Privatizing CampusParc has worked out so well . I’ve parked on campus four or five times (near the stadium to attend OSUMB related activities) and EVERY time the machine malfunctioned. The latest CampusPranc problem: My card was charged for the previous car so the license plate number on my receipt does not match my license plate. Apparently, I paid for the guy who parked right before me.

  8. The idea that privatizing the utilities will lead to a reduced carbon footprint is vague at best, and most likely a flat out falsehood. If OSU, in control of its own utilities, wants to invest in greener energy technologies, it can do so. This would also be a great way to attract students to OSU for engineering and environmental studies. OSU would lose that option if privatized, and whichever AEP/Duke Energy subsidiary that wins the contract would be far more interested in its shareholders than the people who work and study at OSU, or public environmental stewardship in general. There would be no impetus for a company to work towards more sustainable sources of energy.

    This is a terrible and short sighted idea, just as the leasing of parking lots was. When the leases expire, the university will have to pay a steep price for the private companies dereliction of maintenance.

  9. I would assume the payments for these contracts are spread out evenly over the life of the contracts, as frontloading the payments received from the private companies would be criminal to future generations. Yet the article says “The university agreed to a 50-year lease on its parking assets for the upfront price of $483 million.” I hope that just means the price is agreed to upfront, but the cash comes over the course of the 50 years.

    In any event, the first function to be outsourced should be the University Compliance and Integrity office; it is hugely expensive and disastrous in its functioning in its current status — a change can only be a win-win.

  10. TommyS – no they get the money right away, and “supposedly” use it for scholorships, etc. (so they say).

  11. CampusParc is the biggest joke going on campus. CampusParc boots wrong cars due to clerical errors, they seldom respond to calls for service, equipment malfunctions all over the place, inept, incompetent staff. The list goes on. If you are a staff member needing to park on game day in a garage, forget about it. Its bad enough you pay hundreds of dollars for parking but they take your parking area and turn it over to tailgaters. As was said above, expect colder classrooms in the winter.

  12. I’m pretty sure the next thing that’s privatized is the University itself. The Les Wexner University.

Leave a Reply

Your email address will not be published.