State Panel Approves $4.1 Million More for Innovista

June 7, 2010

Investigative Reports

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The NerveA state legislative committee has approved $4.1 million for more construction at a new public building on the University of South Carolina’s Innovista research campus, which has yet to attract high-tech jobs as pitched by supporters.

Although the S.C. Joint Bond Review Committee, made up of five state senators and five state representatives, quickly approved the request at its meeting last Wednesday, Rep. Annette Young, R-Dorchester, the committee vice chairwoman, voiced concerns about future costs of the project.

“It’s going to cost you guys, and it’s going to cost the kids,” said the longtime lawmaker, who is not running for re-election this year.

The $4.1 million would be used to “upfit” the first floor of the recently constructed five-story Horizon I building, located at Main and Blossom streets in downtown Columbia. Part of the project includes building a “wet-lab incubation facility” with 4,500 square feet of lab space, 1,700 square feet of office space and 1,200 square feet of conference space, according to university documents.

The second half of the first floor would include 4,300 square feet of lab space and 1,800 square feet of office space for a state endowed chairs professor specializing in coal electricity technology and his research team, documents show.

In its application for state approval for the project, USC said the “wet-lab incubation facility” would be used by “entrepreneurs/researchers to develop new technologies,” and that the renovated space will “contribute significantly to the commercialization of technology for endowed chairs and researchers.”

Two of the five floors of Horizon I are unoccupied. The other three floors are being used by researchers specializing in coal electricity technology, polymer nanocomposites and solid oxide fuel cells, according to documents provided last week to The Nerve by Thomas Quasney, USC’s associate vice president for facilities, who was present at the Joint Bond Review Committee (JBRC) hearing.

All three researchers in Horizon I – Jochen Lauterbach, Brian Benicewicz and Kenneth Reifsnider – are part of the state Centers of Economic Excellence (CoEE), or endowed chairs program, according to USC and CoEE documents. That program attracts renowned – and typically high-priced – researchers to the state’s three research universities – USC, Clemson University and the Medical University of South Carolina – with state lottery money and non-state matches.

The Horizon I renovation is scheduled to be completed by September 2011. The S.C. Budget and Control Board, which meets next week, must give final approval to the project.

Exactly how the $4.1 million project will be paid for is unclear. USC records show that $1 million of the cost will be covered with a U.S. Department of Commerce grant, with the $3.1 million balance earmarked as “facilities and administrative costs.”

When asked last week by JBRC Chairman Sen. Hugh Leatherman, R-Florence, what the university meant by “indirect administrative recovery” costs, Rick Kelly, USC’s legislative liaison and recently retired chief financial officer, described it as “dollars the federal government gives you back on top of the grant amount to help you recover some of your costs associated with administrative issues and things like that.”

Besides construction costs, the university projects more than $640,000 in building operation costs over the next three fiscal years, records show.

Since 2005, $106.5 million has been spent to build two research buildings – Horizon I and Discovery I – and two parking garages on the Innovista campus, plus upgrade an energy plant supporting those buildings, according to USC documents.

Throughout those years, USC has been increasing tuition at unprecedented levels. Since 2004-05, USC has increased its yearly tuition and fees for full-time undergraduate students at its Columbia campus 42.7 percent – from $6,416 to $9,156 this year (2009-10), according to state Commission on Higher Education data.
The original Innovista plan also included two privately funded buildings to house high-tech firms that would market products tied to the research.

“Even during these tough economic times, I am confident that Innovista will be the driving force in building a strong new economy with more jobs and an increase in our per-capita income,” Columbia Mayor Bob Coble wrote in an April column for the The State newspaper, which had endorsed the Innovista project.

But the project hit a major snag because two private developers – first Craig Davis, then Kale Roscoe – failed to attract enough tenants or obtain necessary financing for the two planned buildings. The former Innovista director, John Parks, resigned last year after the Free Times newspaper reported that Roscoe, who worked with Parks at the University of Kentucky, had served about a year in prison for federal tax evasion and was a defendant in dozens of lawsuits.

The project has other problems as well. Under state law, USC must come up with a dollar-for-dollar non-state match to the $58 million in state bonds that were used to pay for the Horizon I and Discover I buildings. To-date, however, the university is about $24 million short on the match; the matching funds so far have included about $34 million in tax dollars from the city of Columbia and Richland County for the parking garages, and a $335,000 federal grant for the Horizon I building, USC records show.

The university kicked in another $14.3 million in bonds and other funds for the buildings and one of the garages. That amount is not included in the matching funds, records show.

Under state law, the university could have included the value of the two private buildings to help meet its match requirements, said Arik Bjorn, a program manager at the state Commission on Higher Education, which provides staff support for the endowed chairs program.

Quasney told The Nerve there is “no legislated deadline” for meeting the $58 million match, though the university is “committed to completing the matching requirements.”

“We are developing plans to combine federal and other non-state funds to complete Horizon 1 and Discovery 1 upfits and meet the matching requirements, and will present a plan to the USC Board of Trustees soon,” he said.

The estimated total cost to renovate three of the five floors of the Discovery I building, located on Greene Street near the Colonial Life Arena, is $15 million, according to documents provided by Quasney. The projected cost to “upfit” two floors of the Horizon I building is $10 million.

Meanwhile, state taxpayers are responsible for covering the annual principal and interest payments on the $58 million in state bonds sold for the Innovista project, Gary Glenn, finance director of the Commission on Higher Education, told The Nerve last week.  Glenn referred questions about specifics on the bond payments to Rick Harmon, the state senior assistant treasurer, who told The Nerve in a written response that he couldn’t provide answers until the end of this week.

The  projected interest on the bonds over 30 years is about $44 million, bringing the total estimated cost of the bonds to about $102 million, according to records provided earlier by the S.C. Treasurer’s Office toThe Nerve under the state Freedom of Information Act. The bonds are classified as general obligation bonds, which, according to the S.C. Constitution, means that state taxpayers are responsible for paying them back.

So far, the university’s build-it-and-they-will-come  strategy for the research campus has not worked, Innovista’s new director, retired Roche Carolina CEO Don Herriott, acknowledged to The Statenewspaper in January. Herriott said then that he planned on shifting Innovista’s focus to attracting high-tech businesses to anyplace they could be successful, whether on or off campus.

“We need to re-examine the game plan,” Herriott said.

Quasney told The Nerve last week that Herriott is “revising the master plan to clarify the role of private development of the real estate,” though he didn’t offer specifics.

Reach Brundrett at (803) 779-5022, ext. 106, or rick@scpolicycouncil.com.