RI Spends $10M on Private Leases While Leaving State Buildings Vacant

Thursday, February 19, 2015

Stephen Beale, GoLocalProv News Contributor

The state government is spending $10.7 million a year leasing space from private owners while leaving more than 60 buildings vacant or underutilized, including the 186,000 square-foot Cranston Street Armory, according to documents provided in response to a public records request.

The amount the state spends on the annual leases remains close to where it was a little over four years ago, when then-gubernatorial candidate Lincoln Chafee proposed cutting down on expensive leases by moving state agencies into unused state buildings.

At the time, in July 2010, the state was spending $11.3 million on 33 leases. Today’s annual rent costs are just $600,000 less and 27 leases are still on the books. (See below slides for the list.)

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Then-candidate Chafee had also sought to renovate the sprawling Cranston Street Armory in Providence and relocate at least three state agencies that were holding “high-rent leases.” The renovation, at least on the scope envisioned by the campaign, never happened and, instead of moving state agencies into the facility, the one agency that was using it, the state Fire Marshal’s office, moved out last year because the building was deemed to be unsafe, according to state Sen. Paul Jabour, a Providence Democrat whose district includes the armory.

The state doesn’t yet even have a plan for how to use the space.

“The ball was dropped there,” Jabour told GoLocalProv.

In November last year, state authorities hired a private consultant, the Peregrine Group, to come up with a redevelopment plan for the building. That plan is expected to be completed this spring.

Nearly 60 state buildings listed as vacant

The Cranston Street Armory is not the only underutilized state-owned property. An official Department of Administration list of all state buildings provided to GoLocalProv identified 56 as vacant. An additional four buildings are either unoccupied or used for storage, according to the list.  

A request for comment to Governor Gina Raimondo’s office was forwarded to Allison Rogers, the director of policy at the Department of Administration. Rogers said that “most” of the properties listed as vacant were either uninhabitable or had actually been demolished.

“It is misleading to look at the vacant properties … as options for office space. As discussed, most of those properties are either demolished or uninhabitable. The state’s only open office space available for any significant contingent of employees is located in the Cranston Street Armory—and there is only a minimal amount of viable office space currently available in that building,” Rogers said in a statement.

The state has moved some agencies out of leased space into state-owned buildings. A document Rogers provided showed that the state has moved various agency offices out of 11 lease arrangements into state-owned buildings, saving an estimated $3.5 million a year in rent. But 8 out of those 11 moves are dated from 2008 to 2010, before Chafee actually took office.

“[S]taff within the Department of Administration review all leases when they come up for renewal. It is a priority for the department to increase efficiency and maximize cost-savings, while also providing suitable office space. As you saw in the spreadsheet shared with you, the department previously conducted a comprehensive review of all state leases in order to reduce costs and increase efficiency. These efforts resulted in approximately $3.5 million in annual savings. The department will continue to look for opportunities for cost-savings moving forward,” Rogers said.

While 11 leases were ended during the Chafee years, another 19 leases were either renewed or began sometime between 2011 and 2014, accounting for most of the 27 that are currently on the books, state records show.

GoLocalProv was unsuccessful in multiple efforts to reach out to former Governor Lincoln Chafee for comment through several former spokespersons.

When the Chafee campaign first rolled out its proposal to curtail lease expenses, it claimed that the state had 400,000 square feet of unused office space, according to a July 27, 2010 news release. That figure that was calculated and confirmed with assistance of Robert Brunelle, a former associate director at the Department of Administration, according to two former Chafee campaign officials. (Brunelle did not respond to a request for comment.)

“It’s obvious that the state should make efficient use of its office space,” said state Sen. James Sheehan, a North Kingstown Democrat who chairs the Government Oversight Committee. “I’m confident the new administration will address this when it comes to light or when the Governor is made aware of it.”

Three most expensive leases cost a combined total of $61.4 million 

Despite efforts to move the state out of expense lease arrangements, the state remains committed to a number of them.

The three most expensive leases carry an annual cost of about $2 million each. They are also all for terms of ten years. In at least one case, the state paid out millions more in rent over the lifetime of the lease than the actual assessed value of the building. The three leases, all in Providence, are for the following:

■ About $1.8 million a year for 76,000 square feet at 206 Elmwood Avenue. The Department of Human Services currently occupies the building and is nearing the end of a 10-year lease that began on January 1, 1998. Over the lifetime of the lease the state will pay out $18 million for the use of the building.

■ About $2 million a year for 99,500 square feet of space at 101 Friendship Street. The Department of Children Youth and Families has rented the space for ten years. The lease is set to expire on November 30 of this year. Total cost over 10 years: $21.7 million, using the current annual rate.

■ About $2.1 million a year for 126,184 square feet at 235 Promenade Street for the Department of Environmental Management. When the lease ends in July 2016 the state will have spent a total of $21.7 million renting the space since the agreement began in July 2006, using the current annual rate. For that amount, the state could have actually purchased the building, with millions left over for other expenses: current city records show the building has an assessed value of $13.7 million.

All told, the three leases have a total combined cost of $61.4 million over their ten-year lifetimes.

Questions remain over vacant buildings

Rogers was asked if the state has studied the cost of renovating its vacant buildings that are still standing, comparing that expense to the ongoing expense of more than $10 million a year in leases. Her office was not able to provide evidence of any such study in time for publication. Jabour said he was not aware of any efforts to study the matter either.

Gary Sasse, the former administration director under Gov. Don Carcieri, said he was not personally involved in any such studies during his tenure, nor did he remember any of his staff conducting such studies. But he said the state had made decisions that moving into its own office space would be more effective and beneficial to the public and employees than leasing. He offered the DMV, which used to rent space in Pawtucket and now occupies a building at 600 New London Avenue in Cranston, as one example.

“The first priority is always to get the best bang for the buck,” Sasse said.

He said state authorities should always maintain a comprehensive list of all leases, as well as an inventory of its unused spaces.

Jabour says the state should review its vacant buildings, to identify possible uses for them. He said the state should examine whether the state buildings are feasible for rehabilitation, identify the best use for those locations, and pinpoint the state agencies that might be the best fit for those spaces.

“Somebody’s got to sit down … map it out, and come up with a figure,” Jabour said.

Jabour pointed to creative ways the state could revitalize its vacant buildings. One approach, he proposed, is using public private partnerships to redevelop them. Perhaps businesses that want to move to the state but cannot afford to build their own offices from the ground up, could be offered vacant state space in exchange for spending money to spruce it, Jabour suggested.

“This is something our new Commerce Department should be looking into,” Jabour said.

Cranston Street Armory renovation estimated to cost millions

For now, state officials seem most concerned with what to do about the Cranston Street Armory, which has 82,000 square feet of office space, plus approximately 52,000 square feet currently used for storage, according to Rogers.

It will cost a total of $9.2 million to do the many needed repairs to make the Cranston Street Armory ready for occupancy again, according to a May 17, 2013 estimate provided by Durkee, Brown, Viveiros & Werenfels Architects to state officials. But at least some of that appears to have already been done: an estimated $3 million was budgeted in the current fiscal year to do the most basic and urgent repairs, according to Jabour.

By this January, the space was safe enough for new Providence Mayor Jorge Elorza to use it for his inaugural celebration. And, even though the office has moved out, the state Fire Marshall, still holds various training exercises at the armory, according to Rogers. The state Film Office also lists the armory as an available location for shooting a film.

Jabour said he envisions the armory becoming a multi-use space with a community educational center and business resource agency sharing space with various state departments.

One state agency that might be a good fit would be the Department of Labor and Training, according to Jabour. That location, he said, might also better serve the public than its present address, at 1511 Pontiac Avenue in Cranston.

“I think people would find that more palatable,” Jabour said. 

Tips can be sent to [email protected]. Follow Stephen Beale on Twitter @bealenews

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Related Slideshow: Current RI State Leases

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