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Treasurer: ‘Glaring example of stupidity’ to cost taxpayers $90 million in rent payments

By   /   April 5, 2017  /   News  /   No Comments

MADISON, Wis. – The state official who has campaigned on eliminating his own position says he wants to provide a greater public service to taxpayers before he goes.

Photo by Wisconsin State Treasurer's office

WASTE SPOTLIGHT: State Treasurer Matt Adamczyk in the coming weeks intends to shine a light on wasteful state leases.

In the weeks ahead, State Treasurer Matt Adamczyk says he plans on issuing periodic press releases detailing  costly state property leases.

And the treasurer has a doozy to start.

Adamczyk asserts the state is on track to waste $90 million on one “bad” lease over its 20-year extended life.

“This is a glaring example of stupidity,” the treasure said of the sprawling Wisconsin Department of Corrections headquarters, currently leased at north of $5 million a year.

As Wisconsin Watchdog first reported in December 2015, the lease 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 nearly three times the $14.38 million assessed value of the 14-acre property in 2015.

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  last-minute deal — some say a “sweetheart deal” —  was orchestrated between then-Gov. Jim Doyle’s administration and a Madison real estate firm.

MIG Commercial Real Estate signed the five-year extension on Dec. 22, 2010, just days before Democrat Doyle’s second term ended and his successor, Republican Gov. Scott Walker, took office.

But Adamczyk says the suspect stewardship of taxpayer money goes back more than a decade before, to the end of Republican Gov. Tommy Thompson’s tenure.

In 2000, the DOC and the Department of Revenue were each in need of more than 200,000 square feet of office space. State leasing agents took two very different approaches to meet those needs.

The state constructed a new building for Revenue, at a cost of $30.1 million. The total bonded cost was around $45 million. That property, Adamczyk noted, was built to state specifications and constructed to last half a century. He said the state will own the building outright in the next few years.

State leasing agents opted to rent space for Corrections. Rent payments began in July 2001. Over the 20-year life of the lease, total rent payments are expected to hit $90 million.

“What does this mean for us taxpayers?  Well, it’s not good,” Adamczyk said in the press release. “Over those two decades from about 2000 until 2020 the DOC building will cost taxpayers about TWICE as much as the DOR building for similar square footage. What’s worse, at the end of the lease in 2021 the state will not own the DOC building and will need to either continue renting or build a new facility.”

Bradley L. Hutter, president of MIG, told Wisconsin Watchdog in December 2015 that the extended agreement has been a good 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.

AP file photo

PRICEY PROPERTIES: Lawmakers say the state’s Madison-centric focus on agency building sites has driven up lease costs, ultimately paid for by taxpayers.

Adamczyk said spending $90 million on rent payments for a Department of Corrections building with nothing to show for it is a “terrible deal for taxpayers.”

An official with the Department of Administration, the agency that negotiated the deal, agreed the 2010 lease extension was “not a good deal for taxpayers.”

DOA spokesman Steve Michels said that under Walker’s leadership, the Department of Administration has focused on reducing the state’s overall office footprint and consolidating agencies to state-owned buildings.

“In fact, the Madison Master Plan and construction of the New Hill Farms building reduces by 15 the number of state leases in privately owned buildings scattered throughout Madison, saving taxpayers more than $3 million a year in rent, maintenance and energy costs,” Michels said in an email to Wisconsin Watchdog.

He said the DOC lease is set to expire in June 2021. What happens next is on the table.

“As part of our long-term planning, we are gathering space needs and requirements in order to complete a request for proposal.  The competitive proposal is projected to be released in spring of 2018,” he said.

Rent control

Fiscal hawks like Adamczyk say there’s a long way to go to roll back leasing agreements that are soaking taxpayers.

Lawmakers have proposed legislation requiring more oversight of big-ticket government leases. A bill authored by state Rep. Rob Hutton, R-Brookfield, and  state Sen. Chris Kapenga, R-Delafield, would require DOA to conduct a cost-benefit analysis before signing a lease. 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.

Another bill, by state Rep. Joe Sanfelippo, R-West Allis, and Sen. David Craig, R-Town of Vernon, aims to change a Madison-centric point of view when it comes to state agency real estate.

The measure would require the DOA to identify the “most appropriate and cost efficient locations to place an agency when securing or renewing a lease.” Leasing agents would have to consider situating a state agency where it provides the most services, and identify multiple locations – at least two of which are outside Dane County.

“You see these buildings all right there around the Capitol, for the most part,” the lawmaker told Wisconsin Watchdog last month. “These landlords know (about the DOA policy) and they screw us 10 times from Sunday when it comes to these leases.”

RELATED: Bill aims to change Madison-centric state leases

Adamczyk proposes the state tap into the resources of the Board of Commissioners of Public Lands to save taxpayer money. The treasurer is one of three members of Wisconsin’s oldest state agency, serving alongside Secretary of State Doug La Follette, and Attorney General Brad Schimel. They preside over the School Trust Funds, with $1 billion in Trust Fund assets and more than 77,000 acres of School Trust Lands.

Adamczyk said the BCPL has plenty of money available, earning almost no interest in the current low short-term interest climate. The board could “easily write” checks to pay for construction of agency buildings, collecting rent on them.  Any rental income profits the BCPL receives must constitutionally flow back to all K-12 public schools yearly on a per pupil basis.

It’s a double-win, the treasurer said. Taxpayer money for rent would “flow back to the same taxpayers that paid the rent.”

“I’m a fiscal conservative. It is amazing for me to say that building these buildings is more efficient than renting them from some real estate firm,” Adamczyk said. “If we’re going to have these state employees, and I think we are, they need to be housed somewhere. Why not put them where it’s more efficient and costs less?”

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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.