A planned $50 million UI Art Museum is one of the highest-profile projects impacted by the university’s decision to impose a five-month moratorium on building and maintenance projects. RENDERING BNIM
By Katherine Carlon
katherine@corridorbusiness.com
A five-month halt on maintenance and building projects by one of the region’s most powerful growth engines is worrying economic development leaders and putting the Corridor’s construction sector on edge.
The University of Iowa announced April 12 it will freeze more than 100 projects in various stages of development, from a $120 million UI Health Care clinic extension at Iowa River Landing and a $50 million art museum to dozens of smaller renovation and maintenance jobs.
In all, UI officials put a temporary hold on three new buildings including the museum, a $10.8 million clubhouse at Finkbine Golf Course and a $30 million entrepreneurial center for the Tippie College of Business. It is also deferring work on the IRL clinic and $308 million in other planned renovations across campus and the UI Health Care system.
The moratorium follows the state’s decision to make about $5.5 million in midyear cuts to the UI’s budget with fewer than 90 days left in the fiscal year, and will last through Sept. 12 – and possibly beyond, university officials said.
“It’s certainly something that will ripple through our economy,” said Mark Nolte, president of the Iowa City Area Development Group, who added he is already hearing alarm in the building and development community. “They rely on a lot of work from the public sector to keep their pipelines full and their projects in order … It’s creating some interesting political bedfellows as people understand the importance of the university to the entire state, let alone our region.”
Calls to a number of construction, design and engineering firms that have contracted on large university projects in the past suggest the worry is widespread, although few were willing to be quoted by name, citing the sensitivity of their relationship with the UI. Dustin Nordell, operations manager for City Construction of Iowa City, which won the low bid for nearly $9.5 million in work at the university in 2018 alone, said the lack of certainty has been unnerving for those in the industry.
“There were $10 million in projects that were going to get bid out in the next two weeks that are just not there anymore,” Mr. Nordell said, referring to the UI Facilities Management bid webpage, which currently lists only one project – an estimated $725,000 remodel of a production area on the ground floor of the Pharmacy Building – instead of the two dozen or so that are usually posted.
“Typically, construction is pretty busy through the summer months, but we’re usually looking to pick stuff up for later in August, so this could be a little bit of a worry for us,” he said. “If [the moratorium] stays at five months, it’s probably not going to do too much harm. Much beyond that, though, it’s worrisome.”
University officials did not respond to multiple interview requests before the CBJ’s deadline, but in a joint statement, UI President Bruce Harreld and Rod Lehnertz, senior vice president of finance and operations, were vague on the question of whether planned projects would go forward in the fall.
The university “will evaluate levels of state support to determine if the moratorium must continue,” the leaders said, warning that the construction and maintenance freeze could result in higher construction and repair costs as well as dilapidating buildings in the future. The statement further cautioned that while the action addresses the shortage of funds in 2018, “it does not address the shortfall created in FY19.”
“If this goes on for a year or five years, we could see some pain,” said Steve Nienhaus, business representative for Carpenters Local 1260. “The university has really insulated this area from economic downturns, so if this isn’t just five months, I can see it being quite an issue.”
In the short term, Mr. Nienhaus said a temporary slowdown – as long as it remains temporary – could actually help the industry catch up with a large backlog of work at a time when it’s nearly impossible to find enough workers.
“Right now, there’s so much work going on that a five-month moratorium may actually help,” he said, citing a number of large projects in the works this summer, including the Iowa Arena, more than $190 million in construction and repairs associated with last year’s successful school bond referendum, Coralville’s wastewater plant, a new school in Tiffin and a number of projects in downtown Iowa City, including a streetscape redesign and work on the Chauncey and Hieronymus Square buildings.
The university will also go forward with projects that have already been awarded bids or are currently under construction, and exempted projects addressing public safety, code enforcement or emergency issues.
“There’s such a shortage of manpower – we’re short 50 to 100 guys a month, and who knows about non-union,” Mr. Nienhaus said. “Right now there’s a lot of work even without the university, so a little slowdown won’t hurt.”
But if the moratorium lingers on that could change, he said, adding the university typically bids out about $10 million of work each month.
“It could be a bluff,” Mr. Nienhaus said. “If [UI] Facilities Management starts physically laying people off, then we’ll know this is for real.”
Cost calculations
David Swenson, an associate scientist in economics at Iowa State University and a lecturer in UI’s School of Urban and Regional Planning, said he believed the Corridor’s construction and development industry was “large, robust and diversified” enough to withstand a short-term pause in new UI building projects.
“The bigger issue is the cumulative loss in funding to the university that gets spent in the community,” he said. “The salary impacts are very, very concerning.”
Mr. Swenson, who published a 2015 paper studying the regional “economic value” of UI, found that university and student spending combined accounted for more than $3 billion in regional industrial output in 2012 – including $1.7 billion in labor income to 29,127 workers directly or indirectly employed by the university.
Today, he said, that number is closer to $1.85 billion.
“Funding for the university has gone down significantly over the years and a huge fraction of that goes to salaries,” he said. “Since we know people who live in a community spend the bulk of their dollars in the community, that lack of support [from the state] is going to have an effect on the regional economy that is substantial. It’s growth that doesn’t happen. It’s new businesses that never open.”
Plans in the Iowa legislature to cut tax revenues could spell more bad news for the UI and the state’s other public universities, Mr. Swenson added. House Republicans have said they want to cut $1.3 billion in tax revenue over five years while the Senate version calls for chopping $2 billion.
“We already know the template and it’s that higher education will be hit hard,” Mr. Swenson said. “If that happens, it’s going to leave a mark [on the Corridor economy].”
At an Iowa Board of Regents meeting earlier this month, UI officials pointed out that over a 10-year period in which the Consumer Price Index grew 53 percent, the state’s commitment to the university actually dropped.
“Since 1998, the state budget has grown by nearly $3 billion,” Mr. Harreld said at the time. “UI enrollment has grown by more than 5,000. But state funding for the UI has decreased by $7 million.”
“It feels like a constant attack on our institutions of higher learning,” Mr. Nolte said. “We need to be asking, as a community, how do we weather this storm?”
