Counties seek to participate in lease-back plan

12/1/2011

COLUMBUS -- Counties urged lawmakers Wednesday to give them the same ability employed by universities and regional transit authorities to more cost-effectively upgrade outdated government buildings.

The County Commissioners Association of Ohio has embraced a concept pushed by Lucas County that would allow it to sell its buildings to a private developer, then lease the space while the developer renovates and modernizes the building to county-set standards. The county then would have the option of buying back the improved building at the end of the lease, which could last no longer than 40 years.

"At a time when county financial resources are limited, the sale and lease-back option would not require any county to upfront the cost of renovations, but rather would permit the purchaser of the building to pay for such renovations and then recover the cost of the renovations over the life of the lease," said Brad Cole, managing director of research for the association.

The Senate Finance Committee is considering Senate Bill 197, sponsored by Sen. Mark Wagoner (R., Ottawa Hills), to extend the sale and lease-back option to counties. Lucas County is specifically looking at entering into such arrangements for 3210 Monroe St., Toledo, which houses Job and Family Services, and 701-711 Adams St., Toledo, home to children's services, mental health recovery, and child support enforcement, as well as a private company.

A 2008 engineering study of the Job and Family Services building estimated that it would cost between $6 million and $10 million to renovate the structure.

Sen. Eric Kearney (D., Cincinnati), a committee member, said he has a problem with such agreements. "It seems to me that these large, huge real estate firms can come in, bid on these buildings, offer these great deals, and preclude smaller and medium-sized, Ohio-based companied from getting a piece of this action," he said.

Mr. Cole said counties would rather deal with local businesses. "Generally speaking, that is not allowed under Ohio law," he said. "But the commissioners are very sensitive to that issue."

A fiscal analysis of the bill conducted by the Ohio Legislative Service Commission was unclear as to whether a sale and lease-back arrangement transferring a county-owned building to a private owner would put the building back on the property tax rolls. It noted that there have been cases where it was determined that a privately owned building is taxable even if government is the building's tenant.

The Senate had added language giving counties sale and lease-back authority to the $55.8 billion, two-year budget, but it was removed at the last moment by a joint House-Senate conference committee before the budget took effect on July 1.

Mr. Wagoner said the contents of Senate Bill 197 may be amended into another bill that is further along in the legislative process.

At one point, he had held out the historic Seneca County Courthouse in Tiffin as a potential beneficiary of such an arrangement. But county commissioners there have entered into a contract with B&B Wrecking and Excavating of Cleveland to raze the 1884 courthouse.

Contact Jim Provance at: jprovance@theblade.com or 614-221-0496.