State pays more than $10M to private landlords in metro Jackson

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Thirty three state agencies. 

Nearly 90 leases.

One million square feet of office space.

More than $10 million paid to private landlords.

Those are the findings of a new state investigative report that shows how much money Mississippi taxpayers could save if some agencies moved into vacant or under-used state-owned property instead of renting from private landlords in Hinds, Madison and Rankin counties.

The Joint Legislative Committee on Performance Evaluation and Expenditure Review, commonly called PEER, published the report June 13. Authors of the report note that state regulatory boards and commissions, which have small staffs, would be prime candidates to take advantage of state office space.

“The benefits from these savings would actually inure to these agencies as they would be called upon to spend less on rent, thereby making funds available for service delivery or savings. Implementing a shared services model could also reveal additional areas in which agencies that are co-located might realize further reductions in expenses,” authors of the report wrote in the recommendations.

The new PEER report crystallizes other surveys conducted in recent years that reached similar conclusions.

In 2013, the Else School of Management at Millsaps College found that Mississippi taxpayers paid $15.5 million a year in office leases. During his tenure, Gov. Haley Barbour’s administration commissioned a study that concluded it would be cheaper to buy the Landmark Building, in downtown Jackson, to house the Department of Revenue than continue with an existing lease.

Gil Ford Photography

Sen. David Blount, D-Jackson

Sen. David Blount, a Democrat whose district includes downtown Jackson, called PEER’s findings overdue.

“Hopefully this report moves us closer to getting it done,” Blount said.

Blount, who chairs the Senate Public Property Committee, has sponsored several bills in recent years that he says could save the cash-strapped state some money. These have included efforts to purchase the Landmark Building, to complete renovations on the Robert Clark Building — a five-story building on Lamar Street in downtown Jackson that is only half occupied — and to consolidate state agencies into office space closer to the Capitol whenever possible.

A Mississippi Today analysis of state leases in the Jackson metro area finds that the Department of Revenue tops the list of private lease payments. Formerly known as the state tax commission, the revenue department is located at South Pointe, the former headquarters of telecommunications giant Worldcom in Clinton, at a cost of $2.8 million per year in rent.

State Agency Leases, Jackson Metro by R.L. Nave on Scribd

Renewing the revenue department’s lease, which expired in 2013, prompted a showdown between Speaker Philip Gunn, a Republican from Clinton, who made no secrets about wanting to the keep the agency and its 500 employees in his district, and bean counters in the Legislature who thought there were cheaper options available.

In the end, the Department of Finance and Administration, which must OK private leases approved a 20-year lease at South Point; it expires in 2034.

Gunn, speaking through a statement from a spokeswoman, said he does not support a blanket rule requiring ever state agency to move to downtown Jackson.

Kate Royals, Mississippi Today

Speaker of the House Philip Gunn in his office at the State Capitol

“Our priority is to be the most cost-effective we can be in the housing of state agencies. We are also not interested in the state being a real-estate holding company. We are looking at ways of divesting ourselves of property that doesn’t make sense in the long run for the state,” Gunn said.

Gunn’s counterpart, Lt. Gov. Tate Reeves, said it’s a “no-brainer” to move agencies into taxpayer-owned offices.

“I have supported and the Senate has passed measures to do just that to save tax dollars. Unfortunately, the legislation stalled in the House. It is a good government policy that I hope more people can support in the 2018 session,” Reeves said.

After the Department of Revenue, the agencies that spend the most on rental agreements are the Department of Human Services, whose lease is $1.9 million per year for its building on North State Street, followed by the departments of Employment Security and Corrections, which pay about $500,000 each, to landlords in Canton and Jackson, respectively.

Grace Fisher, a spokeswoman for the corrections department, said the agency “has been involved in discussions about seeking an alternative to leasing, including moving into state-owned office space.”

The state Department of Health holds the most leases, documents show, at 18. That department announced in May that it planned to close six district offices across Mississippi to deal with its $12 million budget cut.

Six of nine public health district offices are closing

Liz Sharlot, a spokeswoman for the Health Department, said those moves alone will shave $1.5 million from the health department’s bottom line.

She added: “We have been and continue to look at consolidating office space and certainly using space where the cost is minimal – for example, in some cases, not paying rent but just paying the utility bill.”

Sharlot added that MSDH is also relocating some of its services back to the MSDH campus, in Jackson near Veterans Memorial Stadium, when there is available space. Next year, the agency will ask the Legislature for money to repurpose an old public-health lab into office space.

One agency, the Mississippi Department of Archives and History, uses a microfilm storage facility in Hutchinson, Kan., where the state pays $6,600 per year for 720 square feet of office space until June 2021, when the lease is up.

The agency stores approximately 20,000 rolls of microfilm consisting mainly of Mississippi newspapers, manuscript collections, and government records at Underground Vaults and Storage.

“The salt mine facility provides environmental control, off-site redundancy at a distant geographic location, and underground protection from disaster. They also assist us in filling orders for copies of microfilm rolls,” said agency spokesman, Chris Goodwin.

Google Street View

A building located at 906 N. Halstead in Hutchinson, Kan., where the state spends $6,600 to store microfilm.

 

The survey includes a list of agencies with high square-footage-to-employee costs, including the Auctioneer Commission which has one employee and rents 750 square feet of space at a cost of $7,200 per year.

The PEER report notes that there is 13,309 square feet of office space available in the Robert E. Lee State Office Building, which could accommodate several agencies.

Rick Snowden, a deputy director at the Department of Finance and Administration, which maintains state buildings and reviews state agency requests to enter into private leases, said his agency cannot require an agency to move into state building but can “encourage and facilitate” such a move.

“We mention the state spaces and see if there’s a fit there and basically present that as an option to them,” Snowden said.

In 2016, the Legislature passed a law prohibiting state agencies from charging or paying rent to one another. Before that legislation took effect, the state charged agencies $12 per square foot to rent office space in state owned buildings.

Snowden said DFA is also stepping up efforts to better market its own products. The Robert E. Lee Building, located just north of the Clark building, has good meeting spaces available but few agency heads realize it’s there, Snowden said.

When it comes to wooing state agencies away from private landlords, he adds: “We have to compete — and that’s not bad.”

Contributing: Kayleigh Skinner

  • James Patterson

    Am I missing the part of the story that tells us who we are leasing from?