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Bill would provide more oversight on costly state leases

By   /   March 10, 2017  /   News  /   No Comments

UPDATED: 3.13 to correct previous leasing information. The state Department of Administration property previously listed was purchased by the state, according to a DOA spokesman. Incorrect information was provided to Wisconsin Watchdog.

MADISON, Wis. — A last-minute deal — some say a “sweetheart deal” — between then-Gov. Jim Doyle’s administration and a Madison real estate will cost taxpayers more than $50 million over the extended life of the lease on the sprawling state Department of Corrections building in Madison.

MIG Commercial Real Estate, formerly known as Mortenson Investment Group, brokered the five-year extension Dec. 22, 2010, just days before Democrat Doyle’s second term ended and his successor, Republican Gov. Scott Walker, took office.

AP file photo

TAXPAYER PROTECTION:  A bill moving through the Legislature aims to provide more oversight on state agency leases. Taxpayers are paying tens of millions of dollars each year on state government department accommodations, including $2,631,116.28 this year for the Wisconsin Department of Administration headquarters.

That deal, and others like it, is precisely why such leases need more oversight, according to the sponsors of a bill that would lay out guidelines for the state Department of Administration to follow each time it enters into or renews a lease.

“This bill will add appropriate accountability each time the state enters into a leasing contract,” state Rep. Rob Hutton, R-Brookfield, said in a statement.

The legislation, co-authored by Hutton and state Sen. Chris Kapenga, R-Delafield, would require DOA to conduct a cost-benefit analysis before signing a lease, “ensuring Wisconsin is being a good steward of its citizens’ tax dollars,” Hutton said.

And the bill requires the secretary of the Department of Administration to sign the contract. All leases totaling more than $500,000 must be submitted for a 14-day “passive review” by the Joint Committee on Finance.

As Wisconsin Watchdog first reported in December 2015, the lease on the DOC headquarters at 3099 East Washington Ave. will cost taxpayers more than $51 million over a decade, between fiscal 2012 and fiscal 2021, according to a copy of the lease.

That’s more than three times the $14.38 million assessed value (2015) of the 14-acre property.

The state will pay nearly $1.1 million more in escalating lease payments over the period, with annual payments rising from $4.6 million in fiscal 2012 to $5.697 million in fiscal year 2021.

The deal was signed by then-state Department of Administration Secretary Daniel Schooff, a former Democratic state representative and longtime Doyle loyalist. Schooff managed Doyle’s 2006 re-election campaign.

The Doyle administration previously extended the lease five years — through June 30, 2016 — on Sept. 14, 2005.

Bradley L. Hutter, president of MIG, told Wisconsin Watchdog in 2015 the agreement took months to negotiate, and he denied suggestions that his thousands of dollars in donations to the Doyle campaign had anything to do with the lease extensions.

Hutter agreed the extended lease was a sweetheart deal — for taxpayers.

The deal did provide the state with hundreds of thousands of dollars in allowances, including carpet and lighting upgrades.

But the bigger savings came from the ability of a far-flung Department of Corrections to consolidate and put all of its administrative operations under one roof, the developer said.

“I’m really proud of the building and the transaction we put together with Gov. (Tommy) Thompson in the (late) 1990s,” Hutter said. “I am proud of saving the state a lot of dough by corrections being able to consolidate its offices around the state. …  In the electronic age it allowed them to centralize all of their electronic needs. And it is an incredibly secure building.”

Cullen Werwie, DOA spokesman in December 2015, told Wisconsin Watchdog the renewal “is not a good deal for taxpayers.”

“The previous administration’s approach to meeting the space needs for State operations has been the complete opposite of what is taking place under Governor Walker,” said Werwie, a longtime member of the Walker administration.

Photo by DOC

DEAL OR NO DEAL: Critics say taxpayers got burned on a “sweetheart deal” with the owner of the state Department of Corrections building on Madison’s East Washington Avenue.

At the time, Werwie said, the department was in the process of formulating “comprehensive space usage” policies and plans focused on saving taxpayer resources, reducing the state’s overall office space footprint and consolidating agencies to fully utilize shared spaces.

DOA spokesman Steven Michels said Walker’s Department of Administration is “consistently looking to make our processes more efficient while delivering more value through government that is accountable to the taxpayers.”

“DOA looks forward to working with the legislature to find efficiencies and savings,” he said in an email. “Specific to leases, based on the needs of the agencies, we seek low rates through competitive request for information and request for proposal processes.”

Taxpayers will spend nearly $13 million this year on the nine most expensive state leases, according to a list provided by Hutton’s office. The list includes the Director of State Courts operations, housed in a 52,000-square-foot space in a mixed-use building near the Capitol. Taxpayers will spend $1.53 million this year for the accommodations, or $29.42 per square foot.

Then there’s the University of Wisconsin System Administration property, at an annual lease payment of $1,074,797. The mixed-use property comes with 46,340 square feet, priced at about $23.19 per square foot.

 

 

The cheapest lease on the list is the Public Service Commission property, with a lease payment of $703,186.44, or $16.87 per square foot. The PSC property contract is for 23 years.

State Treasurer Matt Adamczyk has been a crusader for state lease reform. The Republican has spent a good portion of his first — and last — term in office reviewing state leases as part of his campaign pledge to “find government waste and eliminate it.”

He said he appreciates the lease oversight legislation and what it aims to do.

“This bill, for example, if it had passed in 2010, what Gov. Doyle did (with the Department of Corrections lease extension) he wouldn’t have been able to do,” Adamczyk said.

“The bill tries to get at some of these bad leases and hopefully stop the state from entering into them,” he added.

Kapenga said the review proposal is a common sense approach used in the private sector.

“This bill provides a tool for legislators and the public to better understand the state’s physical footprint costs … ensuring a more efficient and effective government,” Kapenga said in a statement.

M.D. Kittle is bureau chief for Wisconsin Watchdog and First Amendment reporter for Watchdog.org. Contact him at [email protected]

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M.D. Kittle is bureau chief of Wisconsin Watchdog and First Amendment Reporter for Watchdog.org. Kittle is a 25-year veteran of print, broadcast and online media. He is the recipient of several awards for journalism excellence from The Associated Press, Inland Press, the Wisconsin Broadcasters Association, and others. He is also a member of Investigative Reporters & Editors. Kittle's extensive series on Wisconsin's unconstitutional John Doe investigations was the basis of a 2014 documentary on Glenn Beck's TheBlaze. His work has been featured in Town Hall, Fox News, NewsMax, and other national publications, and his reporting has been cited by news outlets nationwide. Kittle is a fill-in talk show host on the Jay Weber Show and the Vicki McKenna Show in Milwaukee and Madison.