Las Vegas Sun

October 25, 2014

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HIGHER EDUCATION:

Use of private entity raises openness issues

Beyond the Sun

The UNLV Research Foundation’s use of a private, nonprofit corporation to help develop the university’s business park is reducing public access to information about the 122-acre project in ways some public officials are criticizing.

Foundation officials say the more secretive approach will pay off by allowing business matters including negotiations with companies to remain confidential. Universities often use private corporations to develop land, and the change will help shield the foundation from lawsuits, including those that lenders and tenants might file.

The foundation’s board meetings are public. Those of the Commercial Development and Management Corp., the private nonprofit company, are not.

Foundation records, including its expenditures and most of its contracts, are public documents available upon request. The private corporation’s are not.

The Commercial Development and Management Corp., incorporated in Delaware in 2008, was created to help develop and manage the UNLV Harry Reid Research and Technology Park. UNLV is the nonprofit company’s sole beneficiary.

This month, Bud Pittinger, the corporation’s chief executive officer, declined to provide the Sun with his salary and basic budget information, even though his corporation receives almost all its funding from the research foundation, which relies on federal grants.

He noted that his compensation will be made public through a federal IRS form the nonprofit company will file in May. He also said the corporation has only two full-time employees.

His refusal to provide the information, though legal, led to harsh words from some public officials, given the intimate relationship between the foundation and corporation.

“The public has a right to know. It’s not even a close call to me,” said Steve Sisolak, a Clark County commissioner whose district includes the business park site at South Durango Drive and West Sunset Road. “Not even coming close to being a close call.”

In 2007, foundation officials gave a presentation to the higher education Board of Regents’ investment committee outlining the need for such a corporation.

Pittinger was the foundation’s executive director from May 2006 to August 2008. The foundation’s chief financial officer is doubling as acting executive director, and did not receive a raise for taking on the additional role.

The foundation and corporation split rent and other occupancy costs at an office on West Sunset Road overlooking the research park. A $497,000 contract with the foundation provides almost all of the corporation’s funding, Pittinger said.

One of the corporation’s strategies for developing the park will be to lease land from the foundation and sublease that land to developers who will build office and research facilities to rent to companies. If the corporation is successful, it will turn revenue over to the UNLV Research Foundation to support university activities.

The corporation, which has not yet leased land from the foundation, is responsible for day-to-day operations such as obtaining tenants for the park.

How transparent the corporation is to the public will depend on how much information board members and employees choose to divulge.

In denying the Sun’s request for his current salary, Pittinger said, “It’s a Delaware corporation. We are not a part of the Nevada System of Higher Education.”

Pittinger’s annual take at the research foundation, where overseeing the business park was only one of his duties, was $208,952 in the 2007-08 fiscal year.

Dan Klaich, executive vice chancellor of the higher education system, said though he believed thought were valid business reasons for creating Pittinger’s corporation, “I don’t think that we should use entities to take information that would otherwise be public information and claim that it’s not public information.”

“When we went in front of the (regents’ investment) committee, we talked about liability, we talked about indemnity, but I don’t think anyone went in front of the investment committee and said, ‘We are trying to shield certain information that would otherwise be subject to disclosure.’ ”

Gerry Bomotti, senior vice president of finance and business at UNLV and a research foundation board member, said keeping some information private has advantages in the business world.

“If company X was looking to relocate to Las Vegas they would likely work with several developers to consider their options,” Bomotti said in an e-mail. “If five of those developers were private and one was public then the private developers would all find out the ‘deal’ with the one public.”

Mark Fine, chairman of the research foundation board, offered a similar example: “If we were dealing with a company that didn’t want their name thrown around during negotiations because everything’s a public forum, (Commercial Development and Management Corp.) is a good place to negotiate those things.”

In a letter to the Sun, Fine pointed out that the foundation has taken steps to ensure the corporation works in UNLV’s best interest.

The fact that the foundation pays the corporation a fixed amount of money to perform specified duties helps prevent excessive spending.

“In fixing the consulting fee, the (foundation) conducted due diligence to ensure the amount of the fee was not excessive but that it was reasonable to cover overhead,” Fine wrote.

And although leases between the corporation and tenants would not automatically be public records, Fine wrote, “It is planned that appropriate safeguards will be in every ground lease” between the research foundation and the corporation “to ensure that the university receives fair value.”

Fine wrote that subleases between the corporation and tenants will meet strict guidelines the foundation sets.

Adding another level of oversight, the corporation’s board must include research foundation board members. And the corporation must provide the research foundation with an annual audit of financial statements, Pittinger said.

Each year, the corporation will file a federal Form 990, reporting information including compensation of the five highest-paid employees and independent contractors making more than $100,000. Nonprofit corporations must make recent forms available to anyone who asks to inspect them.

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