EXCLUSIVE | THE HUNLEY: Government by Stealth | Day 2 of 3

Clemson signed on to shaky project

University wanted in despite financial issues

By JOHN MONK

jmonk@thestate.com

Clemson University surprised many last fall when it announced it would take over the long-term preservation of the Hunley submarine and build a $35 million Hunley-centered campus in North Charleston.

The takeover would bring thousands of jobs, Clemson press releases said at the time.

But Clemson internal documents, obtained through S.C. Freedom of Information requests, reveal a financially shaky Hunley project and show just how strong — and open-ended — Clemson’s financial commitment would be.

The documents show Clemson moving forward with the takeover even though it knew it was bringing cash to a financially uncertain venture. The school agreed, for example, to pay off $265,000 in Hunley debt.

And they show that state Sen. Glenn McConnell, a key Hunley booster, and the Hunley oversight commission he chairs would retain much control over the project. That’s despite the fact that Clemson is a public, academic institution.

Hunley spending is projected to hit at least $97 million on various projects in the next few years. But the viability of the Hunley’s funding sources has been less obviously clear.

That’s why Clemson’s recent open-book examination of the Hunley records — the first ever by an independent outsider — is important.

Clemson has not made its review public.

But other Clemson documents that reference it provide windows into a cash-strapped Hunley projec and an Upstate school pleased about having a large, Charleston-area campus.

Specifically:

• Clemson’s takeover amounts to a bailout of a cash-strapped Hunley project, according to Clemson’s own assessment. Although no one has publicly said so, the Hunley preservation project — once fat with state and federal grants — now has debts, Clemson records show. And they show that Clemson proceeded even though its assessment was that the sub’s money sources were dwindling.

Clemson, as part of the takeover deal, would receive scientific assets worth at least several million dollars. But it also would pay off more than $265,000 in Hunley debt, according to a contract between Clemson and the Hunley’s foundation.

• Clemson officials raved about the chance to get the Hunley and its “showpiece (conservation) laboratory” where it is housed in North Charleston. “It (the Hunley project) is probably the only thing happening at Clemson right now that can get us an hourlong special on National Geographic or Discovery Channel,” Joe Kolis, Clemson’s director of special projects, wrote to other top university officials in an Aug. 25 e-mail.

Once Clemson has the Hunley lab, Kolis added, it can start to preserve famous underwater artifacts from the American Revolution. “If that sort of project does not get us the national reputation points to move to (the) top 20, then there is no other project at Clemson that will.”

• The deal commits Clemson to spend millions on the Hunley for an unknown period of time. If the takeover gets the green light from state officials (possibly as early as this week), Clemson will begin to pay an estimated $800,000 a year to preserve the Hunley. Clemson also will pay $3 million to fix up the Hunley’s deteriorating lab, called the Warren Lasch Conservation Center. Clemson could pay for years, since no one knows for certain how long preservation of the Confederate sub will take.

• Clemson officials hoped to curry favor with McConnell, the powerful president pro tem of the state Senate and a master of Legislative rules. They believe he can do them favors in return for the university’s Hunley takeover, according to e-mails.

It’s good for Clemson to help McConnell, wrote Kolis. “If we deliver the goods in this we will make a valuable ally in Senator McConnell and capture a lot of support in Charleston,” Kolis wrote to other top school officials.

• McConnell worked behind the scenes for more than a year to aid the Clemson takeover. The Republican senator from Charleston has worked for years to help steer millions toward the Hunley. But his work to help Clemson agree to spend $35 million on a Hunley-centered campus — and millions more to preserve the sub — represents the sub’s greatest source of government money yet.

Clemson’s internal e-mails and other documents show McConnell played a central role in the university’s move, negotiating with both Clemson and the city of North Charleston. Until now, McConnell’s role in Clemson’s deal has not been widely known.

• Under a contract recently signed by Clemson, McConnell retains tight control of the Hunley project. Clemson professors will have to get McConnell’s permission before they can talk to reporters or to scholars at other universities, according to the contract. The document says any public statement by Clemson about the Hunley must be approved by the Hunley Commission, a politician-heavy, nine-member panel that McConnell has chaired for 10 years.

• McConnell and the Hunley Commission also can refuse to allow Clemson professors to publish scholarly papers about their academic work on the Hunley, according to the agreement.

McConnell declined comment for this article.

ACADEMIC FREEDOM

Academic freedom experts were shocked Clemson will let politicians censor professors.

“We’ve learned through long experience that the need for prior review and approval to what professors write and speak is inevitably corrosive to the spirit of academic freedom,” said Jonathan Knight, director of programs of academic freedom and tenure for the 45,000-member American Association of University Professors.

“Even if the hoped-for effect is benign, no faculty member should have to be concerned that he or she might have to trim their academic sails to gain the approval of this external body.”

Although the agreement is between Clemson and the Hunley Commission, commission members defer to McConnell, according to a commission lawyer.

“As long as the Senator understands (the Clemson deal), the rest will follow his leadership,” wrote Hunley Commission lawyer Ric Tapp in an Aug. 8 e-mail to a Clemson official as talks between Clemson and the commission reached their final stages.

In an interview last week, Clemson president James Barker disputed the academic freedom issue, spoke hopefully of the new campus, and said he did not expect favors from McConnell for taking over the Hunley.

In many agreements with industry and corporations, the university clears what it might publish. “You might be doing some things that are proprietary in nature,” Barker said. “In working with the Hunley Commission, we felt like this idea of clearing with them publications that we would do makes sense to us. It was not restrictive in terms of academic freedom. We don’t see it that way.”

If Clemson follows up on work already begun by the Hunley scientists, it would make sense to clear that work, Barker said. “It seemed to me that good partners ought to have that kind of understanding.”

As far as Clemson clearing comments to the media with the Hunley Commission, Barker said, “That’s not something that gives us concern. We think that is the way partners ought to be working with each other.”

the need for money

The Clemson internal documents shine a light on the unseen side of the Hunley takeover.

And they shine a light on the two main actors, one a man and the other an institution.

McConnell is arguably the state’s most powerful politician.

Clemson is among the state’s largest and wealthiest public universities. It has long wanted to make the U.S. News & World Report list of the nation’s top 20 public universities.

Since even before the Hunley was raised in 2000, McConnell helped get millions in state and federal funds for preserving and promoting it.

But that government money is dwindling, as is public interest that might result in donations, according to Clemson.

The number of fee-paying visitors to the Hunley lab is down, according to Hunley records. Half of the lab’s 276,000 or so visitors went through by 2002, the first year it offered consistent tours. The 48,000 visitors in 2002 slid down to 37,000 in 2005.

And Hunley officials confirm that government funds, once streaming into the Hunley project in the millions a year, reached only $250,000 in 2005.

The money is kept by the Friends of the Hunley foundation, whose governing board McConnell appoints.

The vast majority of spending shows up on foundation audits, although sometimes only in general terms. But some information is found only on IRS documents.

Because of fragmented funding sources, few people — not even some people close to the project — can say how the combined Hunley projects are performing financially.

Foundation spokeswoman Raegan Quinn said the organization is healthy. “Our books are balanced. There are no outstanding loans,” she said.

But several commission board members, for example, told The State they didn’t know the total cost of the various projects.

And the state has never specifically audited the foundation’s spending, according to state auditor Tom Wagner Jr.

Last year, however, Clemson’s Kolis inspected the foundation’s financial records and concluded the Hunley is on financial thin ice.

“æThe main source of problems for the Friends of the Hunley is that tour, membership and gift shop income is dropping rapidly,” wrote Kolis in an Aug. 25 e-mail to top Clemson officials.

In a recent interview, Kolis confirmed his inspection of Hunley records and estimated that Clemson’s yearly commitment to preserve the Hunley could be upwards of $800,000 a year.

(Under the deal, the foundation will continue operating the Hunley gift shop at the lab and keep raising money for Hunley preservation and promotion.)

Before the deal was signed, Kolis told Clemson officials if the Hunley project proves too expensive, the powerful McConnell can help.

“I would rather take my chances that we get the Senator to put some below the line funding in place for us for a year or two,” Kolis wrote in an e-mail last August.

Under the Clemson-Hunley Commission contract, Clemson is supposed to have the Hunley museum ready by February 2009.

But the core work on the Hunley’s long-term preservation hasn’t begun. Similar projects of long-underwater ships in other states — the Monitor in Virginia and La Belle in Texas — are taking 10 years or more to preserve.

behind the scenes

Some state lawmakers were astonished that Clemson, North Charleston and McConnell, acting in secret for nine months, had created a $35 million campus.

“If a university wants to come up with a multimillion dollar campus, it should be done in an open process,” said Rep. Herb Kirsh, D-York. “It ought to come before the General Assembly. Let us take a look. We’re the ones that are going to pay the bills.”

Gov. Mark Sanford was equally surprised — and disturbed that Clemson was announcing a tuition increase at almost the same time.

“We have to define our higher-ed system as something other than a vision that grows by ‘I can get some money out of this pot, some land out of this municipality, and therefore, I’m doing another campus over here,’” he said last week.

“That approach is a very costly approach.”

Having open discussions before decisions are made is the best approach, Sanford said, but was reluctant to criticize the way the Clemson deal happened.

Crafting the deal took more than a year of secret talks.

In an Aug. 27, 2004, letter, Barker told McConnell there “are many ways in which the Hunley Commission and Clemson University can benefit by a long-term relationship.”

The discussions bore fruit.

In early 2005, a lawyer for McConnell’s Hunley Commission described the commission’s position in an e-mail to Clemson.

“The Hunley Commission is anxious for Clemson to assume ownership of the facility (the Hunley lab), but they naturally are also looking for Clemson to commit to maintain the restoration of the submarine through its completion, which is approximately 3 more years,” wrote Neil Robinson, a lawyer at the Nexsen Pruet law firm of Hunley Commission attorney Tapp, on Jan. 25, 2005.

In fact, no one knows how long preservation will take. Kolis confirmed that uncertainty in an interview last week, much to the surprise of Barker, who was not completely aware the preservation could take more than a few years.

For its part, Clemson has had a long interest in the Hunley.

After the sub was raised in 2000, a Clemson chemistry professor began working with Hunley scientists.

By early 2005, records show, Clemson had McConnell’s blessing to take over the project.

By then, Clemson’s vision had outgrown the Hunley. Its officials had decided to create a major campus around the Hunley lab. They would call this the “Restoration Institute.”

The Restoration Institute, Barker said, will address “restoration” broadly, with major programs in historic preservation of buildings, materials preservation and restoring environments damaged by pollutants or hazardous wastes, commonly known as “brownfields.”

The institute also will study — at the Hunley lab — how to get salts out of underwater artifacts.

Clemson’s historic role has always included outreach around South Carolina, so locating the Restoration Institute in North Charleston fits in with university tradition, Barker said. “We are taking Clemson to the state.”

Barker said the campus will pay dividends: There are trillions of dollars worth of economic opportunity worldwide in restoration these days, he said.

He acknowledged his comments didn’t apply to the Hunley, saying economic opportunities related to underwater archaeology are limited.

GETTING THE LAND

Fortunately for Clemson, land around the Hunley lab, which is on a former U.S. Navy base, is owned by the city of North Charleston. The city has hundreds of acres and can sell or donate them as it pleases.

As Clemson began talking land with North Charleston, McConnell helped ease the way, according to Clemson documents.

In June 2005, McConnell met with North Charleston Mayor Keith Summey to discuss a land transfer to Clemson.

“They (Summey and McConnell) agreed to move forward with a donation (to Clemson) of about 40 acres across from the Lasch Lab,” wrote Clemson’s Barry Nocks, associate dean of outreach and special projects, in a June 27 e-mail.

Eventually, Clemson would want — and get — 82 acres.

During those talks, McConnell served as a liaison between the city and university, documents show. He helped relay conditions from one party to the other, and pledged a Department of Public Safety officer who guards the Hunley would stay after Clemson took over.

On Sept. 8, North Charleston City Council met in a secret session with McConnell and Clemson officials. McConnell briefed them on the project.

For many council members, it was their first inkling that North Charleston and Clemson had been discussing a land deal.

The council then voted in public, giving tentative approval to Clemson’s takeover of 82 acres of prime former Navy base land, including the Hunley lab.

Phoebe Miller, North Charleston’s mayor pro tem, said she didn’t know about the impending Clemson land deal until the closed-door session with McConnell.

“Secret negotiations like that go on all the time,” she said. Sometimes she is upset at the secrecy, but because the Clemson deal seems so wonderful, she wasn’t bothered in this case. “We’re just thrilled,” she said.

Summey said he sees nothing unusual in the nonpublic talks between Clemson and his city. He operates under a strong mayor form of government, so he can negotiate without council’s consent.

“There are all kinds of deals out here that we work on that we just aren’t willing to make public until there’s a something that we need to make public,” Summey said.

“I’m not going to take it to council until I’m sold on it.”

GETTING THE CASH

By Sept. 8, Clemson had two of the three things it needed for its new campus.

It had McConnell’s blessing.

It had 82 acres of North Charleston land.

Now it needed $10.3 million from the state.

That is the amount needed to upgrade the Hunley lab, buy more equipment and build the first stage of the campus. (Clemson would add its own $3 million to the $10.3 million from the state, for a total of $13.3 million in cash.)

In general, state appropriations for universities had been on the decline in South Carolina. With McConnell at their side, Clemson officials decided to go after a separate pot of state money, created under the 2004 Life Sciences Act.

Under that act, research universities like Clemson are eligible for multimillion dollar grants to build super research programs that have the potential to create jobs. The money goes to build offices and labs, sewers, parking — infrastructure.

To win the money, a university must go before a panel and meet two conditions:

• Have cash or assets to match the grant it is getting

• Show its project will spark jobs and economic growth

The first condition — putting up matching money — was easy.

The 82 acres Clemson had been given, and the buildings on them, had a value of $18.5 million, according to a Clemson appraisal. That value more than matched the $10.3 million Clemson sought.

To meet the second condition, Clemson told panel members the campus would create up to 4,750 new jobs over more than 20 years, with an annual payroll of up to $286 million.

The panel didn’t question Clemson’s numbers. No outside group vetted the numbers.

If Clemson is counting on creating jobs from the Hunley lab, it is off track, said one of the nation’s foremost underwater archaeology experts, Donnie Hamilton of Texas A&M University.

Hamilton said his school is the nation’s main preserver of underwater artifacts. He also said there aren’t that many underwater objects around. He estimated his well-known lab makes only about several hundred thousand dollars a year treating underwater artifacts.

Barker said, “We recognize that (with) underwater archaeology kind of work, there’s probably a limited market.”

He added that the Hunley is certainly not the centerpiece of the new campus — “in terms of jobs.” But there are rapidly growing opportunities in environmental restoration and architectural historic preservation, he said.

The job projections were developed by Clemson using standard economic formula projections, he said in an interview.

Clemson put the numbers forward despite internal documents that showed officials were wary. Inflated jobs-projection numbers came out earlier for the school’s ICAR automotive research project in Greenville, and school officials were worried about looking overly optimistic.

“Do NOT under any circumstances mention anything about a number of jobs created,” Kolis wrote in a Aug. 3, 2005, e-mail to Jan Schach, Clemson’s dean of College of Architecture, Arts, and Humanities. “Ask Chris (Przirembel, a top Clemson official) about the horror stories he is still suffering from the ‘20,000’ jobs that ICAR will create.

“My strong suggestion is to completely forget about this argument. You will never get out from under it later. Also, these e-mails are going to a lot of people. E-mail is pretty insidious stuff and tends to morph and mutate in the wild. The numbers you quote will get out to the press and we’ll have trouble.”

In a recent interview, Barker pointed out that the ICAR inflated job projections were made public not by Clemson but an outside party.

At its Sept. 16 meeting — the only public discussion of the Clemson request for the money — the research infrastructure panel voted to give Clemson the $10.3 million.

DEAL NOT CLOSED

Through the fall and winter, Clemson, McConnell and the Hunley Commission wrangled over details.

In December, Clemson officials in e-mails worried McConnell wanted to retain too much control.

“For the next four years, we are obligated to pony up 6-7 hundred thou/ year,” Clemson’s Kolis wrote to top Clemson officials in a Dec. 12 e-mail. “That kind of scratch buys some leeway. If they don’t like it they can have it back. They are desperate at this point so we should let them know who is boss.”

Clemson officials worried, too, whether McConnell’s open admiration of the Confederate military would turn off donors. They also wondered what would happen if McConnell’s $42 million proposed museum for the Hunley never got built and they had to keep the preserved sub in the lab.

In the end, McConnell apparently won the battle over details, keeping the right to muzzle Clemson professors if the Hunley Commission disapproves of their work or what they might say publicly.

The takeover contract between Clemson and the Hunley Commission will take effect when the S.C. Budget and Control Board formally approves selling $10.3 million in state bonds to raise the money for the campus.

Barker, however, said issues remain to be clarified before Clemson goes before the Budget and Control Board. Approval might be delayed until those issues are worked out, he said.

“We are as anxious to get this project started as anyone.”

Reach Monk at (803) 771-8344.