Nebraska Public Power District bought land for $5 million — from NPPD executives

Early this year, the Nebraska Public Power District paid $5 million for a piece of rural Lancaster County land.

The price tag — around five times the land’s assessed value — is eyebrow raising on its own.

Even more surprising is who sold the land to NPPD: two NPPD executives.

The land, 202 acres of mostly irrigated farmland, had been previously owned by married couple Ronald and Donna Starzec.

Ronald is NPPD’s land management manager, responsible for the department that manages land purchases like this one.

Donna’s title: chief audit and ethics officer.

An ethics officer engaging in a transaction with a public entity is practically unheard of, said Richard Painter, a University of Minnesota law professor who served as an ethics lawyer to the George W. Bush administration.

“The chief ethics officer is one of the people selling the land to the company? That’s a laugh,” Painter said. “I haven’t seen that before.”

Neither of the married NPPD executives filed a conflict-of-interest statement with the state, either before or after the sale, said David Hunter, executive director of the Nebraska Accountability and Disclosure Commission. That’s despite a state statute that requires any employee of a political subdivision to identify potential conflicts if their salary and benefits exceed $150,000.

Donna Starzec’s pay in 2024, as reported to the Flatwater Free Press, was more than $250,000.

In interviews, both NPPD General Counsel John McClure and CEO Tom Kent defended the purchase, saying the specific piece of land was crucial to meeting Nebraska’s future energy needs. NPPD leaders kept the transaction transparent and objective, they said.

A law firm managed negotiations with the Starzecs on behalf of NPPD to avoid pressure on employees who have worked directly with the couple, McClure said.

He said that, based on his reading of state law, the couple weren’t required to divulge the sale to the state because the conflict didn’t arise “in the course of their employment.”

“We took them out of being required to do anything in the course of their employment.”

NPPD’s board was notified of the situation, discussed it in executive session and voted on it, Kent said.

“As I look back at this particular transaction and how it was approached, I think we did all things right,” Kent said.

Why this land?

The newly acquired land sits just north of the existing Sheldon Station NPPD power plant. There, the public utility plans to build a new power plant called Princeton Road Station, using the existing transmission lines and railroad.

“From a geography standpoint, it’s right where we needed to be,” Kent said. “It fits our expansion plans as we build additional … infrastructure to serve the growing state.”

NPPD is expanding its power-generation capabilities to meet growing interest from businesses in rural areas of the state, Kent said in a press release announcing Princeton Road Station.

“It’s becoming sort of an energy center, if you will,” McClure said about the station. “There’s a solar project that’s been developed privately in close proximity.”

Donna Starzec is from the Hallam area and had purchased the land about three years before she started working for NPPD in 1991, McClure said.

“I’m sure she never thought about it,” McClure said. “She just happened to be in that area, from that area, and purchased that property.”

The Starzecs did not respond to multiple emailed requests for comment, and NPPD leaders declined to make them available for an interview.

A private energy developer made an offer to the Starzecs in June or July of 2024 to buy 40 acres of the tract, at $30,000 per acre, to build a battery storage facility.

Ronald Starzec knew that NPPD was interested in acquiring their entire 202-acre tract, according to NPPD purchase documents, and told NPPD leaders that they had received an offer.

“That information was shared internally, and it was recognized that, wow, we may have an interest in that property … and we need to think about making a counteroffer here,” McClure said.

Donna Starzec submitted an internal ethics document indicating her ownership of the property, McClure said. Both Starzecs signed a statement declaring that they represent their individual interests and would not make decisions on behalf of NPPD.

Most of the discussion around the purchase happened in executive session with the board, closed to the public, McClure said, because staff were providing legal advice and engaging in negotiations.

At the August 2024 public board meeting, the board unanimously adopted a resolution, without any public discussion, to option the property and authorize the purchase.

The agenda posted before the meeting identified the Starzecs as employees, and Kent acknowledged their employment during the meeting.

The text of the resolution passed by the board does not mention that the Starzecs are NPPD employees.

Market Value

After the district closed on the property on Feb. 28, the amount paid to the Starzecs and closing costs totaled just over $5 million, around five times the assessed value of the land.

Farmland is regularly assessed lower than the market value for tax purposes, said Anthony Schutz, a University of Nebraska College of Law professor specializing in agricultural law. It is not unusual for sale prices to exceed the assessed value, he said.

But this particular sale price does appear to be an outlier, according to a Flatwater Free Press analysis.

In previous Lancaster County land purchases, NPPD has paid an average of 150% more than the assessed value of the land, according to that analysis of assessor records.

“I would say that real estate transactions between state employees and any state-owned entity should only be at the tax-assessed value,” said Painter, the government ethics law professor. “Anything else — no go.”

The board agreed on a final sale price of about $25,000 per acre, McClure said, determined by the private developer’s higher offer and an appraisal conducted by NPPD that estimated the land could be worth $20,700 per acre for a high-end investment.

But that appraisal also priced the fair market value of the whole tract at just under $2.3 million, or about $11,000 per acre, less than half the sale price.

“You do an inside transaction with your own officers and exceed the appraised value,” Painter said. “That’s what’s most shocking, because appraisals tend to be fairly generous.”

Other states place legal limits on the extent that a government body can exceed fair market value while acquiring land, Schutz said, but those limits don’t exist in Nebraska.

The only real check on a transaction of this sort in Nebraska is political, Schutz said — generally, public agencies and elected officials want to appear as good stewards of public dollars.

The 11 members of NPPD’s board of directors are elected to serve six-year terms.

“I tend to think that the best course of action in a situation like this is recusal, and it’s a lot of disclosure, and it’s making sure that everybody knows exactly why you’re purchasing this property from these people at this price,” Schutz said.

Transactions like this one can also set an informal precedent, Schutz said, where sellers hold off because they know NPPD may be willing to pay far above market value for property under the right circumstances.

Setting the floor for future transactions was a concern for NPPD, too, McClure said, because appraisals rely on comparable sales. If the private buyer had paid $30,000 per acre, that would have become the market value for future sales in the area, McClure said.

Schutz noted that NPPD had another potential tool to acquire the land: eminent domain.

The desirability of land near Sheldon Station, he said, “doesn’t necessarily justify spending 50% more when you also have the condemnation authority that would keep your public costs at fair market value, plus whatever transaction costs are associated.”

Eminent domain, an authority that NPPD has to condemn land that it needs for development, may have kept the price at the appraised market value — potentially saving around $2.7 million.

But it also might have ended with higher costs if the private sale went through and reset the market value before the eminent domain process was complete, Kent said.

“We work to negotiate first,” McClure said. “That really never came across our thinking that we’re going to go condemn this, try to acquire this through eminent domain.”

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This story was originally published by Flatwater Free Press and distributed through a partnership with The Associated Press.