ASU OKs changes to Mexico accord
A new agreement between Arkansas State University in Jonesboro and its new Mexico campus will reset the length of the partnership to a decade and give the Arkansas school a chance to earn more from it.
The Jonesboro university first signed agreements with Mexican entities in 2012 and another in 2014 with a different group of investors, said Arkansas State University System President Chuck Welch. But, both of those documents were created at a time when Arkansas State University Campus Queretaro was still an idea.
“There hadn’t been a shovel of dirt turned. There
hadn’t been any investments made in the project. It was still something that we were talking about,” Welch said.
“Now, we are looking at an August or early September start date of classes later this year, and so we’ve moved from a conceptual stage to an active-campus stage, and with that came the necessity of a revised agreement that really addressed a whole litany of other issues that weren’t necessary when it was a concept but are now necessary when it’s an active campus,” he said.
“You know, someone described to me: We went from an idea on paper to now an investment by our partners in Mexico of $100 million or 2 billion — with ab — pesos.”
Inve s tors with the ASU-Campus Queretaro private foundation, led by Ricardo Gonzalez, are paying for the project. ASU has said no state money has gone toward the Mexican campus.
With the project, ASU will be the first university in the state — if not the nation — to undertake a public-private partnership to build a campus abroad, said Brad Rawlins, vice rector of academics at Campus Queretaro. The University of Arkansas has a Rome Center for study-abroad and exchange students, but it is not a full-fledged campus.
Campus Queretaro sits on 370 acres and includes 800,000 square feet of academic and residential buildings — for students and faculty members. Other developments will surround it.
The campus is to open either Aug. 28 or Sept. 4 this year, Welch said. Campus Queretaro has started taking applications and has even started accepting some students, Rawlins said.
At the start, the Mexico campus will offer its inaugural students general education and introductory courses. The classes taught in English are part of the ASU curriculum. Upperclassmen in Jonesboro are unlikely to get a chance to experience the campus, though all of the Jonesboro campus’s 14,085 students may be able to take advantage of a study-abroad program there, which is still in the works, Rawlins said.
As the campus grows and more classes are added, Arkansas students and faculty members could then take part in exchange programs, he said.
The new agreement lays out specifics on the financial arrangement, term extensions, termination clauses and dispute resolutions. It spells out that the Mexican partners are in charge of all operating costs, while ASU leads academics.
It was unanimously approved Friday at an ASU System board of trustees meeting in Mountain Home, with Trustee Stacy Crawford absent. The vote came after a draft was presented to board
members the night before, giving them an opportunity to ask questions on the matter.
Under the new contract, the partnership between the two campuses resets to 10 years at the start of the school year. Had the schools maintained the 2014 agreement, they already would be three years in, Welch said.
The Mexico campus also would have paid ASU based on enrollment figures for just 10 years, under the old agreement. Now, the financial agreement is more commission-based — based on the amount of money collected from enrollment — and adds into account inflationary factors and can last longer than a decade.
If enrollment goes as planned, ASU could stand to earn $140.6 million over 20 years from the partnership, according to the contract. The Jonesboro school could earn even more as those calculations included flat enrollment for the final 10 years.
The contract also calls for two automatic five-year extensions should the Mexico campus meet the enrollment — and subsequently, the financial — figures.
“With automatic extensions, does this become a 20-year initial term?” Trustee Niel Crowson of Jonesboro asked Thursday.
If the campus met the financial targets, it would, said Brad Phelps, the system’s general counsel.
Board members then asked what would happen to the extensions if the campus did not meet the financial targets cumulatively or if it fell short one year but could repay the next.
The campus would need to meet the financial targets through the fourth year — no money in year one, $149,828 in the second year, $617,291 in its third year and $1,390,834 in the fourth year — to trigger the first, five-year automatic extension, said Fernando Cano-Lasa, a hired external attorney with the law firm Squire Patton Boggs.
The campus would then need to meet the financial targets in the fifth and sixth years — $2,483,102 and $3,920,709, respectively — to automatically trigger the second extension, he said.
“This is a financial commitment, so the financial commitment is an obligation of agreement whether it is extended or not,” Cano-Lasa said. “That means that if they don’t reach those levels, they are in breach of the agreement, and we can terminate the agreement or we can enforce the agreement or we can make them pay for what they committed to pay.”
Welch said ASU’s partners have been approached by other U.S. universities who have said they could run the Mexico campus with a lesser monetary charge than Jonesboro.
“If it’s working well, then it gives us a much longer term of being there than what we would have had previously,” Welch said. “You’ve got to
look at it at a couple of different sides.”
Welch also went over the different reasons either party could end the agreement, which included failure to make timely payments to ASU, any governmental ruling that could affect campus operations or the payments to ASU and any criminal acts.
If an officer or partner committed a crime, ASU could terminate the contract automatically, but if an employee had done so, the Jonesboro school would give its partners an opportunity to remedy the situation, Welch said.
Trustee Price Gardner of Roland wanted clarification on the organizational structure in Mexico.
“Who owns it? Is it solely Ricardo? What happens if he were to pass away? What happens if there were a change of control?” Gardner asked. “We have gotten comfortable with these people as our partners, but if these people are not our partners and none of these events trigger, have you all had discussions with them about that?”
Phelps and Cano-Lasa had discussed the matter privately, but not with the partners.
“I have the same concern because we’re many. He’s one,” Crowson, the trustee, said. “When you look at it like that, if something were to happen in his world — maybe he exits prematurely — what happens if this is one of his many entities? While it’s a lot of money to us, it may not be a lot of money to him. If something were to happen to him, is there any endowment, life insurance, or whatever to perpetuate this? I have those concerns.”
Attorneys added in a clause in the contract late Thursday that requires Welch to provide written consent of any change of control at the Mexico campus.
Welch added Thursday that the university is not liable for any debts incurred by the private foundation.
The contract also states that disputes will be handled through a mediator under International Chamber of Commerce rules in Houston. The arbitration would be in both English and Spanish.
The new agreement comes on the heels of a trip that system officials, Crawford and Gardner took to Queretaro to tour the campus. They saw some 300 cameras on the campus, controlled access into buildings and other technologies such as voice recognition and fingerprinting being used.
“You can read about it. You can look at video and really get a feel for it,” Gardner said at Friday’s meeting. “But really the opportunity to go down there and spend two days has been of tremendous value to me.”
He said he had a greater appreciation for all the work undertaken.
“So not only was I allowed the opportunity to see the physical plant but also all of the data and the study behind it, not only about the need but then learning more about the industries there and what this is going to do not only within our country but the benefits to our university,” he said.
On Friday, Gonzalez, the primary investor, and Edmundo Ortiz, the campus’s executive director, spoke before the trustees, thanking them for the opportunity.
“It’s not an agreement,” Ortiz said in a later interview. “It’s a marriage. You have to share the same vision and build it together, and that’s the best way to do it with — with love, with trust, with commitment.”
Gonzalez, who became emotional talking to the board about the project, later said he wanted to be part of something that would help generations of people when he’s no longer around.
Campus Queretaro has received inquiries and applications from about 4,228 people, Welch said. Of those, most are from Mexico, but about 10 percent are students from the United States, including Texas, California and Arkansas, said Rawlins, the campus vice rector.
Queretaro also is home to about 4,000 industries, more than a fourth of which are multinational, ASU officials have said. Those companies could open the door for more internships for ASU students in Mexico and Jonesboro.
For Ortiz, the partnership was more than economic: it is something that he said could bring hope and a different vision of the future for Mexicans.
For Gonzalez, the most important goal is to expand educational opportunities in Mexico.
“The most important is just to step up the game for education in Mexico and show to Mexico that we can have an education that’s in the U.S. and definitely this will bring a lot of learning and hopefully supply to other universities or other projects that are made in Mexico or even worldwide,” he said.