Original FFM investigative research was featured in a KSTP report on how much the state spends on office space this year. Could the state have saved taxpayers’ money by leasing more reasonably priced office space? Watch the video online at KSTP.com or read below.
MN to spend $62M on prime office space in ’10
A 5 EYEWITNESS NEWS investigation found the State of Minnesota will spend millions this year to lease prime office space, despite the availability of less expensive options.
Some of the poshest office space includes buildings with views of Lake Superior in Duluth, Hazeltine National in Chaska and St. Paul’s Mears Park.
In Duluth, the state will pay $2.3 million over the next few years to rent offices in Canal Park for the Pollution Control Agency and the Department of Labor.
Veteran Duluth realtor Beth Wentzlaff said the state could have spent up to a third less had it leased offices elsewhere in town.
Of Canal Park she said, “It is unlike any other place in the country actually, so it is a highly sought after space of any kind.”
Workers with a view of Hazeltine work for the Department of Employment and Economic Development. Taxpayers spend around $59,000 a year for the space. 5 EYEWITNESS NEWS found similar office space in Chaska for about 25 percent less.
The state’s Housing Finance Agency will spend $1 million this year to rent offices overlooking Mears Park.
Tom Steward from the government watchdog group Freedom Foundation of Minnesota–which shot video of state office supplies being stored in prime office space–said he finds irony in the Mears Park location because the main purpose of the Housing Finance Agency is to get Minnesotans into affordable homes.
Steward said, “They are the ones familiar with the market and with properties and how to manage them, I would think, more efficiently than any other agency simply because of what they do.”
5 EYEWITNESS NEWS looked at all 800 leases that the state holds for private office space and found the state spent $62 million in rent this year.
The Department of Public Safety is spending $32 million for high-rise offices.
The Health Department is spending $2.6 million for space in the Golden Rule Building in St. Paul, even though the agency has its own new building down the street.
This year, 14 agencies will spend more than $1 million each to rent office space.
5 EYEWITNESS NEWS also found the state is paying more in rent each year, despite the weak real estate market.
Herb Tousley, the director of the University of St. Thomas real estate program said the time is right to renegotiate for savings.
Tousley said, “It is an opportunity as a tenant to look at lease rates we have not seen in a long time.”
He said tenants could negotiate savings of 10 percent or more–possibly as much as 15 percent.
5 EYEWITNESS NEWS learned that just two of the states 800 leases have been renegotiated.
The State of Iowa is using this tactic. It is reworking all state leases. The move has saved taxpayers $16 million so far.
Jim Schwartz from the Minnesota Department of Administration said, “Could we do better? Could we do more? You can always do better and you can always do more. But, you do the best you can.”
As for the reason behind the prime locations that cost more, he said, “That is certainly is an issue we need to look at and we can look at and we do look at.”
5 EYEWITNESS NEWS did not get many specific answers from officials.
Assistant Commissioner Nicky Giancola who handles leases for the Department of Administration refused an on-camera interview.
Department of Administration officials did say they would find out more about empty office space in buildings owned by the state and get back to 5 EYEWITNESS NEWS.