On December 22, 2010, then-Governor Jim Doyle’s Department of Administration renewed a rental lease for the State Department of Corrections offices in Madison that State Treasurer Matt Adamczyk says cost the state millions more than the cost of building a new office building would have. Adamczyk says just two weeks before Republican Scott Walker would succeed him, the Doyle administration extended the lease by five years. Adamczyk argues that leasing office space versus building might result in the state wasting as much as $45,000,000.
Adamczyk said in a news release that back in 2000, DOC and the Department of Revenue each were in need of just more than 200,000 square feet of office space. For the DOR, the state chose to build a new building with a $30.1 million price tag and bonded for a total estimated cost of about $45 million. The building will be paid off and fully owned by the state in about three years.
The DOC chose to rent instead of owning space. Adamczyk says those rent payments will cost taxpayers $90 million by the end of the lease on June 30, 2021. So, the state will pay twice as much for the DOR office space as it did for the DOC office space and will have nothing to show for it. The state, around the same time, will own the DOR building clear of debt; a structure built to last at least 50 years. And as of 2021, the state will not own the DOC building and will need to either continue renting or build a new facility. As for the last minute Doyle Administration extension, Adamczyk says:
What is…curious about the timing of that extension in 2010 was that the state was already leased until June 30, 2016. So when they signed that extension, the state still was under lease for 5.5 years (all of 2011, 2012, 2013, 2014, 2015 and half of 2016). His DOA secretary exercised the second lease renewal from July 1, 2016 until June 30, 2021.
With that one signature, he gave just under $30 million to the owner of the building for those years of rental. I have seen the entire lease and the next administration (Gov. Walker) could have waited to exercise that second renewal up until June 30, 2015, one year before the end of the current lease at that time. The state had no incentive to extend the lease in 2010.
Walker’s Administration could have negotiated a much better lease if Doyle’s appointee had not signed the extension so early.
Despite the odd timing, Adamczyk says if the Doyle administration had an ulterior motive for the extension he doesn’t know what it would be.
Adamczyk told Media Trackers that this is just one example of state waste that he has uncovered related to the rental of state office space. He’ll be revealing other examples one at a time, but he says he’s certain the waste will run well into the hundreds of millions of dollars:
These are headquarters for state agencies. To compare that with another agency; on the capitol square, the state courts has been renting in an old building for 45 years. Who rents for 45 years? We’re paying $5.3 million in rent per year (for DOC). That building is probably worth about that. Who would pay the building’s rent per year, what it’s worth? I can make the argument it’s hundreds of millions of dollars over 20, 40, 50 years, because it really adds up. This is a hundred million over twenty years, if we extend that out over another 20 years. That’s another $150 million dollars, for just one agency. You extrapolate that out to other agencies and, I don’t know, you could approach a billion dollars.
So we asked Adamczyk, now that you’ve discovered the waste, how to you combat it?
I serve on the board of Commissioners of Public Land. It’s basically a trust fund, right? And that board has $1 billion of assets. At any given time we have about $200 million cash. What I’m proposing is: why wouldn’t we utilize what we have when the state needs a new facility. Let me given you an example. The state’s going to be building a crime lab possibly, in the Milwaukee area, which is projected to cost $75 million. If we buy that building and it gets built, it’s not going to cost $75 million because we have to pay some $30 million in bonding. My point is utilize the funds we have and pay for it in cash and have that agency pay us rent. The Board of Commissioners of Public Lands, all we do is give the money right back to the taxpayers, because all K-12 schools get the money from us, so it would be cyclical, right back to the taxpayers.”
Meanwhile, Adamczyk says he’s working with legislators, the building commission and the DOC to address the office building issue before the lease ends in 2021. Adamczyk wouldn’t say he’s facing resistance, but it’s clear that government agencies are always comfortable with the status quo. “It’s not easy to change anything in government, that’s what I’m noticing the most. What they have been doing is what they like to do. But the more you talk to Republican legislators, they’re going at it.” Adamczyk says that for starters, lawmakers can make sure they review these types of leases before they are signed.
Adamczyk ran for Treasurer on the pledge of eliminating the office. He said he continues to work on that goal as he looks for ways to reduce state government waste.