Downtown boosters were stunned last Tuesday after the House Public Properties Committee declined to act on legislation to move the Mississippi Department Revenue to downtown’s Landmark Center, thus preventing a House vote on the measure already approved by the Senate.
The potential move of the DOR headquarters from Raymond into 200,000 square feet of the Landmark Center at 175 East Capitol Street was seen as a huge boost to the Central Business District’s anemic office market. Further, downtown businesses had looked forward to the arrival of 500 or so employees that would come to work at the Landmark Center each day.
The nearly 354,000 square-foot Landmark Center won top ranking last fall in a Cushman & Wakefield study of possible new homes for the DOR, an agency exiled 15 years ago from the Woolfolk Building to a massive warehouse in Raymond. Based on a purchase price of $14.1 million, the analysis determined that the state would save about $17 million over the cost of building from the ground up on property already owned by the state. The international commercial real estate firm based its cost analysis on a 40-year time frame.
Support for adopting the Landmark recommendation came from former Gov. Haley Barbour, who commissioned the Cushman & Wakefield examination, and Department of Finance & Administration executive director Kevin Upchurch. Cost savings to tax payers played prominently in their support, they say.
For Barbour, an urgent need to inject new vitality into downtown’s office market had an influence as well. “Recent statistics show that Jackson’s vacancy rate is approximately 27 percent — a figure too large to ignore,” he wrote in a letter to legislative leaders last fall.
The purchase price of the Landmark building “was just a great price,” said Upchurch, whose agency oversees state facilities, in an interview last Wednesday.
Buying the building would cost the state about $40 a square foot compared to $250 to $300 a square foot for constructing a new facility, according to the Cushman & Wakefield analysis.
Upchurch indicated surprise at the sudden demise of the Landmark proposal. “I wasn’t prepared for where we are right now,” he said.
Upchurch said he is unsure what led the House panel to balk at allowing a floor vote on the legislation authored by state Sen. David Blount, a Democrat whose Hinds County district stretches from Jackson south to Terry and west to Clinton.
“I’m still trying to figure out what the message is, not having heard anyone say anything negative about the Landmark Center, ” Upchurch said.
He said House members may have wanted extra time to study the facilities issue or needed clarification on the availability of parking. The proposed sale of the building included provisions for leasing about 600 garage parking spaces at One Jackson Place across Capitol Street from the Landmark. Ownership of One Jackson is scheduled to change from Parkway Properties to the California-based Hertz Group later this month. Concerns could have arisen over whether the parking would still be available under One Jackson’s new owners, Upchurch said.
Not so, said John Barton, a senior executive with Parkway Properties, which represents Landmark owner Capitol Street Associates. Hertz had been looking forward to leasing the spaces to the state, Barton said.
“Hertz wants to make money on the garage, and the DOR leasing spaces in the garage makes Hertz money.”
Barton said the DOR had completed its due diligence on the building and the agency’s top management was eager to move ahead with buying the building and beginning the three-year process to ready it for the department’s use.
No explanation for the quashing of the Landmark deal was forthcoming from state Rep. Tom Weathersby, a Florence Republican and chair of the Public Properties Committee. In an interview Wednesday. Weathersby would say only that “the committee did not see fit” to advance the measure.
The chairman also declined to say whether he and other committee members prefer a different site. “I’m not going to get into the better home business,” he said.
He reacted with irritation to critics’ claims that he refused to move the bill at the insistence of House Speaker Phillip Gunn, a Clinton Republican. “He doesn’t tell me what to do,” Weathersby said.
Gunn did not return a phone call that sought to find whether he had issued a no-go order.
Keeping the state headquarters currently based in Raymond out of downtown ups the odds it will end up in Clinton or possibly somewhere in Rankin County, said Ben Allen, president of Downtown Jackson Partners, a public private agency created to promote downtown.
“I think this was politics – pure and simple,” Allen said last Wednesday.
“We couldn’t believe it; we were stunned.”
Allen blamed Gunn and theorized he is pulling strings to put the DOR headquarters in Clinton.
Allen said reports that Gunn had ordered the bill’s pocketing began circulating in recent days. “The Speaker wouldn’t even meet with us about it,” Allen said, referring to himself and Commissioner of Revenue Ed Morgan.
Barton, senior VP and asset manager for Parkway, said he’s been told by people who are “as dialed in as you they come” that Gunn put the kabash on the deal.
“In this, it is more about the Speaker not wanting to take those jobs from Clinton,” Barton said of the city situated next to Raymond.
Barton said he is perplexed that the committee members failed to consider the significant savings the purchase represented for taxpayers and the suitability of the building to the DOR’s needs. Beyond that, he said it is difficult to understand why the lawmakers would ignore the consequences of their action on downtown.
Once AT&T vacates the Landmark Center in November and the building owner shutters it, downtown’s office vacancy will climb to 38 percent, putting it among the highest urban vacancies in the nation, he said.
“This will probably be the highest vacancy of a CBD in the country. This is a huge deal for downtown. It’s a game changer” in a bad way, Barton added, and predicted the business district’s office vacancy will rival Detroit’s.
Meanwhile, another year will have to pass before a decision can be made on where to move the DOR, leaving the department’s several hundred workers in a “metal barn” that has a leaking roof and snake sightings inside it, Barton said.
The DOR’s lease on the former Mississippi Power Co. equipment storage building expires in 2014.
By then, the Landmark Center could be off the market, said Barton — the owner will soon be marketing the building nationally.
State Sen. John Horhn, a Jackson Democrat, said last Wednesday he may try to revive the Landmark deal, but declined to say how. “ We have several mechanisms we can use to resurrect a piece of legislation.”
Which mechanism he might employ he declined to say. “I don’t want to give away my thunder,” he said.