- Associated Press - Tuesday, November 1, 2016

AMES, Iowa (AP) - A business group has cancelled plans to borrow $175,000 from Iowa State University to pay for its share of a new terminal at the municipal airport in Ames, citing potential public concerns about the arrangement.

In a memo to board members obtained by The Associated Press, Ames Economic Development Commission president and CEO Dan Culhane said securing a private bank loan instead of a cash advance from the university makes more sense given “the recent scrutiny of the Ames airport.”

Iowa State’s role in pushing and financing major renovations at the city-owned airport has faced questions amid a scandal into the use of university planes by its president, Steven Leath. The university stores its two airplanes at the airport, where Iowa Board of Regents President Bruce Rastetter’s business plane is also based.

Iowa State has worked with the city and the commission to make the airport - which doesn’t offer general commercial flights - more appealing to executives and others who use private airplanes. Donations paid for a $1.1 million hangar that was built earlier this year to allow for more plane storage. The next part of the plan involves building a $3.3 million terminal that would include a lounge and other amenities for pilots and passengers.

Some city councilors have criticized the terminal’s rising price tag. The university and the commission both agreed to pay $250,000 upfront to help pay for it. The university has also agreed to cover shortfalls in the airport budget through 2035 - which puts it on the hook for up to $1.3 million in additional payments.

The commission, an affiliate of the Chamber of Commerce, tried to raise private money for its $250,000 obligation but came up short. Before the plane scandal broke in September, its board discussed plans to borrow $175,000 from Iowa State and pay that back over a four-year period, Culhane’s memo said. The group last week scrapped that plan and opted to borrow the money from Bankers Trust.

Susan Battani, who retired in 2013 as director of the financial audit division in the state auditor’s office, said the Iowa State loan and the school’s other airport spending would raise “a red flag.”

“Governments aren’t financial institutions. They’re not in business to loan funds,” he said. “They are educational institutions that should be using funds for educational purposes, not municipal airport purposes.”

Iowa State spokeswoman Megan Landolt said the “final terms” of the loan weren’t established and therefore the plan wasn’t submitted to the Board of Regents.

The board has ordered an audit of every flight taken on university planes since Leath became president in 2012. State Auditor Mary Mosiman’s office is also reviewing the situation but hasn’t explained the scope of its work.

Leath, a pilot, has acknowledged damaging one plane in a hard landing while returning from vacation in North Carolina and using it on three other trips that had personal components. Rastetter has said he’s “extremely disappointed” in Leath’s questionable use of the planes, but has praised the university’s role in the airport project.


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