I suppose we should give the state credit for trying to economize by consolidating its computer systems in one place, but the new Department of Information Services building at the state capitol is raising a lot of questions.
When the contractor was selected in November 2007, the economy was flying high. True, the state’s unemployment rate was ticking up, but it was comfortably low at 4.7 percent. The plan called for a state-of-the-art, $260 million, 456,000-square-foot office complex and data center to house most of the state’s computer technology currently scattered throughout multiple state and private buildings. In addition, it would provide hundreds of thousands of square feet of office space for other state agencies.
Later, the building was downsized because it was over budget. The size of the building dropped 14 percent while the cost dropped 2 percent.
By the time DIS broke ground for the building in August 2009, the state’s unemployment rate had skyrocketed to 9.1 percent and the national unemployment rate stood at 9.7 percent, a 26-year high.
At this point, a private employer would have reconsidered. The economy was obviously in a downward spiral and with a recession looming, big expenditures must be reassessed.
Not so with the state. Despite the warning signs, DIS forged ahead with what some critics are calling the agency’s “Taj Mahal.”
DIS project manager Sally Alhadeff says the building is expected to become one of the few in the country to earn a platinum rating for “green” construction of both core elements and tenant improvements. It will also have an underground parking garage, a $6 million roundabout for traffic and a nearby park.
Scheduled to open next September, the building is coming under fresh scrutiny for the rental rates taxpayers will pay. According to The Olympian newspaper, the state has a 30-year lease-to-own agreement with a Seattle developer at a rate of $44 per square foot. The highest local Class A private-sector office space rents for $28, according to Olympia property manager Pat Rants.
“Those were the rates when the project was finalized,” Rants said. “Current high-end rates for private buildings are about $25 a square foot.” A DIS spokesperson maintains the building is a sound investment because the rate will stay the same throughout the lease, at which time the state will own the building.
Is that a good deal? It might be, but no one can predict that far into the future. Remember, the economy changed drastically in the two years between the selection of the builder and the groundbreaking.
With such uncertainty, why sign such a long-term lease?
Ideally, a long-term lease provides some degree of certainty about costs, although it’s not known what rents the state will charge state agencies when they move into the DIS building. If it’s more than they pay now, those agencies will have to go back to the Legislature for more tax money.
Critics say another reason could be that a lease-to-own arrangement allows the state to do a fiscal sleight of hand because the $255 million construction cost doesn’t count against the state’s capital debt limit.
The bottom line here is….the bottom line. In times of financial crisis and economic uncertainty, the private sector reassesses, changes course and cuts back. In this case, the state did not.
In these tough economic times, the new DIS building, touted with words like “platinum” and “green,” could become a symbol of why people are frustrated with those we send to Olympia to allocate our hard-earned taxes.
Don Brunell is the president of the Association of Washington Business.