Lawmakers see savings and consequences in state office consolidation
by Ted Carter
Published: February 8,2013
Sen. Will Longwitz, Jones’ Madison County colleague, is not convinced. Nor is Tim Coursey, Madison County’s chief economic developer. The Legislature must take a real close look at the potential downsides to Sen. David Blount’s proposals for a phased-in consolidation of much of the state’s metro area offices into downtown Jackson’s Capitol Complex, they say.
Consolidation of 28 offices now occupying 198,286 square feet would reduce the 323 square feet of rentable space allocated to each state worker to the federal standard of 218 rentable square feet, an analysis by Millsaps College’s Else School of Management found. Moving the 28 offices into space available for lease in the Capitol Complex would drop the current average cost per square foot for those agencies and departments from $14.51 a square foot to $13.71, for an eventual annual savings of $5 million, the Millsaps study says.
Offices that could be moved total 198,286 square feet and carry total annual rent of $2.87 million. In addition to 13 offices in Madison County totaling 144,000 square feet, the study lists nine office leases in Rankin County of a combined 55,457 square feet. The remaining offices able to be moved into the Capitol Complex are in Hinds County.
The area Millsaps designated as the “Capitol Complex” for its analysis takes in more than the downtown core. It extends from the Old Capitol north on Interstate 55 to Lakeland Drive and over to the University of Mississippi Medical Center and west across State Street to just beyond Memorial Stadium. From there the complex extends back south to Pascagoula Street, said Dr. Bill Brister, a Millsaps Else School of Management professor who led the study.
The Mississippi Department of Revenue, which occupies slightly more than 200,000 square feet in Raymond, is not included among the 28 offices. The Millsaps study took a separate look at moving the DOR into downtown Jackson’s Landmark Center. The analysis concluded the state could save an additional $3 million a year over a 20-year stretch by buying the fully vacant building for $7.6 million and moving the DOR and other state offices into it.
Reacting to the pair of state office space bills Blount has introduced, Sen. Jones said he thinks the projected savings Blount’s plan offers could prevent forced furloughs or even layoffs of state workers as the state struggles to balance spending with revenues.
“We want everybody comfortable. But… we’re trying to look at options so we won’t have layoffs. We feel that state workers will rather deal with not having as much space than not having a job,” said Jones, a Canton resident and five-year Democratic member of the Senate.
“With the information we have we think Sen. Blount is going in the right direction. I don’t want to do any furloughs; I don’t want to do any layoffs. I feel this is an acceptable tradeoff.”
The Millsaps’ study projects the state would incur a $3 a square foot relocation cost in consolidating the offices, though the moving and build-out expenses could be amortized over 10 years to ease the expense burden. Those and other costs must be carefully weighed, said Longwitz, a Madison Republican and attorney.
“I am all for saving the state money but I am also for things that are working the way they are right now,” he said last week. “I would have to look very carefully at the numbers and be very convinced it is worth uprooting state offices that are already where they need to be.”
Coursey, executive director of the Madison County Development Authority, said he thinks Blount’s bill is mostly a downtown Jackson “revitalization” effort clothed as a money-saving strategy. “If it was me I’d probably be doing the same thing,” he conceded.
What shouldn’t be lost, he said, is that “there is always a downside to centralizing government functions,” chiefly the unintended consequences that can result.
“You have to look at the economic impact to that local area” that is losing the economic benefits of having buildings filled and workers spending money on food and shopping, Coursey said.
He said a dearth of available space led to the move outside the Capitol Complex. Now that downtown has an office vacancy rate approaching 40 percent, the push is on to move the offices back into Jackson, he added. “The wheel has turned and now they are saying they need to come back.”
Ben Allen, executive director of the quasi-public downtown enhancement and advocacy organization Downtown Jackson Partners, said filling unused office space is a benefit. But it is one that should not over-shadow the proposal’s money-saving aspects, Allen said.
His hope, Allen said, is that “business acumen wins out over politics.”
He acknowledged the importance, however, of having hundreds more state employees downtown to help revive shops and restaurants that have seen declines in business over the past 18 months.
And without a change in fortunes, downtown’s office market can expect to see further increases from what Allen says is a near 50 percent vacancy rate when public offices are included.
“Downtown office rental is extremely challenged at this point in time,” he said in an email.
Allen is not taking approval of either the office consolidation or the purchase of the Landmark Center for granted, not after last year’s sudden refusal by House leaders to let a proposed lease for the Landmark building to come to a vote. That setback occurred after the state Senate voted 52-0 for the lease deal.
Allen and Blount can count on the Jackson Chamber of Commerce’s support, said Sam Begley, a Jackson attorney and chair of the Chamber’s legislative affairs committee.
Begley said he expects the Landmark lease would have passed the House in 2012 had Speaker Phillip Gunn allowed a vote. He said he expects House support is equally as strong this year.
“I believe there is a rank-and-file consensus from legislators from all over the state to locate the Department of Revenue and some other state agencies closer to the state Capitol,” he said.
Begley, a board member of Downtown Jackson Partners, said the state has a “tremendous opportunity to better centralize its operations, and there are some leasing and purchase bargains the state ought to pursue.”
Begley, who has a law office downtown, said he hopes state officials keep in mind downtown’s convenience to the metro area’s suburbs and its ease of access from the interstates.
“Downtown is also unique because we’ve got housing in place and opportunities for more housing,” he said. “We’ve got a potential for some workers to avoid having to commute so far.”
Regardless of whether legislators pass Blount’s bills, the Department of Revenue will be moving from its Raymond headquarters of more than a decade and a by spring 2014. The Landmark Center is among three finalists to become the new HQ. Others having made the cut in RFP process include South Point Business Park in Clinton (the former WorldCom HQ) and Ergon Properties’ Diversified Technologies complex in Ridgeland.
The Landmark Center, which became 100 percent vacant with AT&T’s departure late last year, received top ranking in a Cushman & Wakefield study that analyzed options for a new headquarters for the DOR.
The lease on the Raymond building expires at the end of June next year. Selection of the new HQ could come soon after an end-of-February deadline for each property representative to submit final lease offers.
Summary of Findings
of the Agency Lease Cost Analysis
State of Mississippi by Millsaps ELSEWorks
» The average lease rate for the vacant office space examined in downtown Jackson is slightly lower than the average lease rate currently being paid by state agencies outside of downtown Jackson, but within the metro area.
» Significant savings can be realized through more efficient use of office space by state agencies.
» Purchasing the Landmark Center and filling it with state agencies (which now lease office space in the metro area) affords the state significant cost savings.
To view entire PDF of the Agency Lease Cost Analysis by Millsaps College ELSEWorks go to www.msbusiness.com
Link this URL (http://msbusiness.com/wp-files/lease-cost-analysis.pdf) to direct viewers to full PDF version of the Agency Lease Cost Analyisi done by Millsaps.
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