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EMU moving forward with plan to outsource management of campus utilities

EMU vice president of communications Walter Kraft
Jacob Korrey
Eastern Michigan University
EMU vice president of communications Walter Kraft


David Fair: And I'm David Fair, and this is your community NPR station, 89-1 WEMU. We're going to take some time today and discuss some concerns that have been raised in the campus community at Eastern Michigan University. Back in April, EMU officials announced the administration was working on a deal to contract out management of utilities. That's heating and cooling, as well as electricity and water. It calls for the company CenTrio Energy to pay EMU $115 million upfront in exchange for operating the utilities for a period of 50 years. Of course, there's a lot more to the deal, and much of it has raised concern and objection. Last night, representatives of the EMU Faculty Council and various unions on campus participated in an online forum to express those concerns about the rapid nature in which the deal was put together, what it considers to be a lack of transparency, and the potential adverse impacts on wallets of students, staff and faculty. You can find a report on that forum from our own Cathy Shafran on our website at WEMU dot org. Joining me today to discuss the EMU administration position on the outsourcing of utilities management is Walter Kraft. He serves as vice president of communications at EMU. And, Walter, thank you so much for being here.

Walter Kraft: David, it's a pleasure always, and I'm happy to be here.

David Fair: Well, as late as last fall, the discussion on campus was to invest in more energy generation that could be sold off and create a revenue stream for the university. And that was going to be done in-house. Where did that go?

Walter Kraft: Well, when our teams investigated that, David, our teams took a deep dive, looked into that, spent a lot of time to evaluate what opportunities would be. And we frankly found that we don't produce enough energy that would be useful externally. So, and this is important, during this process we actually discovered that there was a different opportunity, which is the opportunity we have now: to bring in a third party to manage our energy and utility systems here, save the university literally millions, $2 million a year, in energy costs, reduced energy usage, and, at the same time, bring in a funding source that is something that the university couldn't achieve otherwise. You mentioned right at the beginning $115 million payment to the university. Those are funds that the university would not be able to access anywhere else. And those funds will go directly to supporting our students, faculty and staff, and the infrastructure of the university.

David Fair: Well, let's talk a moment about the broader perspective, and most call it privatization of Eastern Michigan University. I've heard you refer to it as a public/private partnership. That's a different maybe semantic, maybe realistically. Nonetheless, at last night's online forum, former EMU-AAUP president Judy Kullberg called EMU a vanishing public university because of the expanding nature in which you are outsourcing management services. Why do you believe that is not the case?

Walter Kraft: Well, David, we've been around for 174 years as you know. And Eastern Michigan University will be around another 174 years. We are not vanishing. What we are doing is bringing in expertise into non-core academic areas. So, if you think about it, this is utilities, it is infrastructure. We have a great team in place on campus that has managed those in the past. Six employees are directly affected by this. By the way, they will retain their jobs. Nobody is losing any jobs by this, but we're bringing in a nationally recognized expertise in energy management and utility management that, frankly, we don't have on campus. And why not tap into the expertise of a nationally-known entity that can manage our energy services into the future in ways that we can't and save the university a lot of money by conserving and reducing energy usage, David?.

David Fair: Well, I do want to bring up that after you catch that $115 million check at Eastern Michigan University, the school will be on the line to pay CenTrio about $5.3 million a year through the life of the contract. That's 50 years. That comes to $265 million. Their profit margin is built in. And if we look at some of the other services that have been outsourced on campus, dining, parking, costs have gone up to students. And while the university may have benefited, there is the ongoing lawsuit with the parking management company because they're not making enough profit. What is to say that this contract, a 50-year contract, is not going to result in adverse impacts that you may not see at the moment? What have we learned from the parking situation?

Walter Kraft: David, we've continue to learn a lot, but the important thing is we put contract language in place that protects the university. And I think what may be getting lost here, in addition to the $115 million that we get upfront, the partners will invest $20 to 25 million in utility infrastructure enhancements and another $26 million of their own funds into direct energy conservation measures. Those two additional funding sources will reduce the use the university's energy usage by roughly $2 million a year. So, we are saving annually, during the 50 years of this contract and beyond, roughly $2 million a year or so. All told, once we settle out our payment to the to the new provider, we will be generating an additional $2 to $3 million a year to the university, in addition to the $115 million that we're getting upfront.

David Fair: We are talking with Walter Kraft. He is Eastern Michigan University vice president of communications. Now, CenTrio Energy is based out of Houston, and it has a commitment to building not only long-term profit, but annual profit. So, what is your understanding of how they are going to make their money and meet shareholder expansions and not put it entirely on the back of students?

Walter Kraft: Well, David, there is no student funding that comes into play here. I mean, we will actually save money at the university. This will make the university able to do things that we can't do currently in terms of investing in students, investing in our faculty, investing in our facilities, investing in energy conservation measures. We'll be able to take the energy savings under this program, David, will save the equivalent of taking 2500 vehicles off the street every year. So, Eastern will become an energy conservation sustainability leader. You may know that, last year, we were awarded a silver award by the Stars, which is the rating system for universities for sustainability. We're among the top 5% of universities in the country and sustainability efforts because of that. We believe this will move us into the gold standard, which is even a smaller population of universities take part in that. So, this is really important, not just for Eastern, it's actually important for our community in our state and in reducing energy usage, reducing fossil fuel usage and damaging the environment.

David Fair: So, Ypsilanti has set 2035 as its goal of reaching carbon neutrality--EMU, a big acreage part of the city. And, as such, it will take investment in renewable energies. And you mentioned some price figures that CenTrio is willing to do. But if profit margins on an annual margin aren't meeting expectation, where in the contract does it say you are still obligated to meet not only the campus standard but the city and overall energy goals and pollution goals for the area?

Walter Kraft: Yeah, David. We have great confidence in the contract language that exists that Eastern is 100% protected going forward, and we're not concerned that there will be any disruption or anything that will not allow CenTrio and the university to go down the path that we're going on that will provide outstanding benefits to our students, faculty and staff. I mean, we're talking about creating living, learning labs that our students will be able to engage with, watching the energy savings process as it takes place, creating an online energy use dashboard, so, every day, you and I will be able to look and see what energy usage is and how much is declined over a year before, and in internship opportunities for our students working with CenTrio. So, there's there's opportunities that go beyond, you know, some of the things that we may have read about and maybe some of our faculty even know about.

David Fair: So, one of the concerns was transparency. The deal came about very quickly and did not have a lot of input from the stakeholders in the campus community. So, what do you say to those who remain concerned that they've not had a voice in the process yet?

Walter Kraft: Yeah, David, I appreciate you asking that. We work really hard to bring in the appropriate bodies--campus bodies--and individuals into that process. On campus here, we have a University Budget Council that is the area where projects like this are taken to. And this project was discussed in advance with the University Budget Council, with our faculty members on that budget council. So, we believe we take the right steps. I understand what they're saying. And maybe there's never enough time for--

David Fair: [Yeah, they learned in March. And then, the deal is announced in April.

Walter Kraft: Well, it was beyond that. It was much earlier than that. It was into 2022 when some of these discussions started at University Budget Council. So, I wouldn't say it started in March and was approved in April.

David Fair: So many questions. Is there anything that can be done about it at this time, or is it a done deal and the contract will be signed and put into effect?

Walter Kraft: Well, we are moving forward, and it was approved by our Board of Regents to move forward at the April 20th Board of Regents meeting. And they, certainly, as does the rest of the administration and, I will say, others on campus, recognize the value of a program such as this. And so, it is definitely moving forward.

David Fair: While this is an extraordinarily complex contract, an extraordinarily complex issue, and it plays into larger issues on campus and in the community, and there's no way to cover it in our short, allotted time. I appreciate you coming in today and explaining your perspective and putting out there the benefits that are available to the university community. And we'll have to have more conversations as we move forward.

Walter Kraft: I hope we do, David.

David Fair: Thank you so much. That is Walter Kraft. He is vice president of communications at Eastern Michigan University. I'm David Fair, and this is your community NPR station. It's 89 one WEMU-FM Ypsilanti.


"Eastern Michigan University enters innovative utilities partnership to support sustainability efforts, establish new revenue stream for academic, retention, and enrollment efforts"

CenTrio Energy

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Contact David: dfair@emich.edu
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