The 81st Texas Legislature
UTB/TSC: TSC seeks $10.8M payment
By LAURA TILLMAN, The Brownsville Herald
2009-07-18 21:07:29
Texas Southmost College is attempting to recoup more than $10.8 million from the University of Texas System, after the Texas Legislature failed to fully make payments on a lease agreement with the college for several years.
The lease agreement has allowed the University of Texas at Brownsville to lease space from TSC’s historic properties, like Gorgas Hall, Tandy Hall, the Cavalry Barracks and dozens of other buildings.
Although the state was the entity that failed to adequately pay the lease, the Legislature ended its 2009 session by ordering the University of Texas System to resolve or arbitrate the debt with TSC, according to TSC Board of Trustees Chair David Oliveira.
Though the situation is complex, the bottom line is that TSC is owed $10.8 million dollars, nearly as much as its total annual revenue, and the UT System is being asked to find a way to pay it.
UT System officials have said they’re working in good faith to resolve the issue.
The recent financial complication comes in the midst of a generally fruitful partnership between what was once an independent community college and one of the state’s most prestigious public university systems.
TIGHT BUDGET
At the beginning of the legislative session, UTB-TSC was determined to realize its long-held goal of joining the Permanent University Fund, a multibillion-dollar source of funding for the state’s public universities.
But when UTB-TSC officials realized the timing was off because of the UT System’s budget constraints this year, they instead suggested to local legislators to pursue the lease debt.
"UT was looking at a nightmare situation in Galveston," said Oliveira, referring to the impact of Hurricane Ike on the University of Texas Medical Branch at Galveston. "We felt the timing wasn’t right to go ahead with the Permanent University Fund."
When Rep. Rene Oliveira, D-Brownsville, learned of the debt, he sought the support of University of Texas System officials in recouping the losses.
"The UT System, through its chancellor and public affairs representatives, made a commitment to pay the money which was owed and obtain the funding through the appropriations process," Rep. Oliveira said. "They agreed we would have further discussions in the future about joining the PUF fund."
MILLIONS OWED
The $10.8 million said to be owed to TSC is the result of a longstanding lease agreement made between the college and the UT System. When the University of Texas at Brownsville and Texas Southmost College formed a partnership in 1991, the UT System agreed that TSC buildings would be leased for UTB classes and activities.
Many of the school’s most essential buildings, like the library, the Central Plant, Tandy Hall, and the North and South Classroom buildings, are listed in the agreement, along with dozens of other buildings.
A new lease contract was signed in 2000. By that time UTB had built some of its own buildings. Under the new agreement, UTB calculates how much space it should have each year based on its enrollment.
Whatever is the resulting deficit in the amount of space, it is then leased from TSC. The money currently in question comes from this lease agreement.
The lease is to be paid for with appropriations from the state budget. For example, if UTB had 500,000 square feet of space and needed 600,000 square feet, the Legislature would pay TSC for the remaining 100,000 square feet.
The partnership agreement allows UTB and TSC to use each other's buildings interchangeably, regardless of what square footage is technically leased from TSC.
"The Legislature didn’t fund it — and if the Legislature doesn’t fund it then it doesn’t get paid," said TSC general counsel Daniel Rentfro, who said the Legislature had underpaid the lease for several years. "They did fund some of it, but there was a shortfall. There are routinely shortfalls in all kinds of higher education funding."
Since 2006, these shortfalls have been in the millions of dollars, Rentfro said.
The $10.8 million that TSC claims is no small amount for the school: TSC's entire district operations revenues for fiscal year 2010 amounted to $12.6 million.
Rep. Oliveira initially sought the money via the state budget, where he said the UT Board of Regents pledged to support his efforts.
"Two important things came out of the agreement we made mid-session," Oliveira said. "An acknowledgement that the debt existed and a pledge that they (the UT Regents) would give their full support to try to get the money appropriated. It wasn't until the end of the session that I was told by key House and Senate leaders that there wasn't enough money for it. They left me with the impression that UT hadn't made it the priority that they said they would."
Initially, Rep. Oliveira drafted an appropriations rider to require the UT System to pay the debt over two years.
"The System countered with separate riders calling for a study of the lease agreement for the development of the 2012-2013 appropriations cycle, omitting any obligation or time frame to pay back the lease funds," Rep. Oliveira wrote to Dr. Juliet Garcia, the president of UTB-TSC on May 26. "Their riders were unacceptable to me or David Oliveira."
ARBITRATION REQUIRED
Rep. Oliveira said he felt duty bound to find a way to collect the debt.
"The lack of specificity regarding payment of the lease debt resulted in my adding the final rider ... requiring the payment of any award or judgment by an arbiter and not some study over the next two years," Rep. Oliveira told Garcia.
Garcia declined to comment for this story.
The legislation, which now requires the parties to arbitrate the debt, passed in the final days of the legislative session recently ended.
"Frankly there were several of us who were frustrated and I think that’s why it resulted in a mandate to arbitrate these differences and settle them," Rep. Oliveira said. "At that point, my job was done in terms of the legal process."
The two parties have until March 2010 to come to a final agreement, according to the legislation. Rep. Oliveira said he has not asked to take part in the resolution process, nor has he been invited.
Rentfro says the TSC representatives and UT System representatives have met twice regarding the debt since the legislative session ended.
"It is important to preserve this educational partnership that has brought educational opportunities to thousands of Valley residents," said Sen. Eddie Lucio Jr., D-Brownsville.
"We’ve got a committee and TSC has put together a group," said UT System Vice Chancellor Barry Burgdorf. "We have turned this into an opportunity to look at the partnership agreement between UTB and TSC and take the partnership to the next level. Everything is on the table. We are thinking broadly about what is in the best interest of the students."
Burgdorf and other UT System representatives said they are confident the issue could be resolved without resorting to arbitration.
David Oliveira, the TSC chair, also said he would rather resolve the issue through a non-dispute resolution process than go to court.
"It would be expensive to go to court and there’s no guarantee that we would win," David Oliveira said. "There’s just too much to chance. Both sides agree that we’re better served if we just try to work it out."
David Oliveira has said that the UT System could donate other resources or help UTB-TSC to expand programs instead of paying the debt in dollars, but Rep. Oliveira is wary of what that could mean.
"There was a veiled threat made that the UT System would not provide services that they’re already providing if they have to pay this money," Rep. Oliveira said. "I said (to UT System officials), 'I think that's up to you to decide. If even though you acknowledge the money is owed, you're going to retaliate seems to me in poor taste.'"
Rep. Oliveira said the public should be aware of the ongoing negotiations under way to resolve the $10.8 million issue, since in his view it involves their local tax dollars.
"If this $11 million had been paid, perhaps we wouldn't have had to have that level of taxation over that time period," Rep. Oliveira said. "Perhaps we could have been doing much more for the community served by the university."
Unlike much of the money the university receives, this money would not be earmarked for a particular purpose. So university needs that are often difficult to fill could be met.
"That's why I'm so excited that there should be something good forthcoming," Rep. Oliveira said.
Source: The Brownsville Herald
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