Kasich adopts property upgrade proposal

Private sector would enhance or build, return to government

4/20/2012

COLUMBUS -- An idea pushed by Lucas County as a means of upgrading aging public buildings without taking on major debt has been adopted by Gov. John Kasich, and he's taking it to an all-new level.

In addition to counties, the state wants to get into the act of selling or leasing public property to a private owner who would take responsibility for making needed improvements or constructing a building to government specifications.

If the space is still needed by the state or county, it would rent part of the building while the improvements are made. At the end of the business arrangement in 30 or 40 years, the structure and all of its improvements could be back in government hands at no additional cost.

The language was inserted into one of several House bills containing pieces of Mr. Kasich's mid-budget review policy changes. Lawmakers are expected to send the measures to the governor's desk before they recess for the summer as early as late May.

House Bill 513, sponsored by Rep. Ron Maag (R., Lebanon), goes well beyond the bill originally sponsored by Sen. Mark Wagoner (R., Ottawa Hills) that focused solely on counties.

"I've been trying to work with [Commissioner Pete] Gerken and [county Administrator] Peter Ujvagi to get them what they need," he said. "The governor took a look at it and thought it would work statewide."

Counties have primarily looked at the concept of a sale-lease-buy back arrangement as a means of getting around the normal capital improvement routes of borrowing money up front to do the work.

The state has sale-leaseback authority now but has found the process to be too cumbersome and impractical compared to just selling an unused building outright. But it is embracing the new concept of "lease-leaseback'' in which the state would lease an entire property to a private developer and then rent back just the portion it needs.

This would allow the developer to rent the rest of the space to private-sector tenants.

The state would retain title to the building throughout the process without the cost of upgrades and regular building management. A lease-leaseback option would not be available to counties.

"We're in the mode with state-owned properties where we have unused space because of shrinking agency sizes," said Randall Howard, assistant director of the Ohio Department of Administrative Services.

"We've been fortunate to backfill a lot of that by moving other agencies out of leased private space," he said. "We're still pretty up there in terms of occupancy rates in state buildings, but as this shrinking footprint continues -- and we expect it to continue -- we want the flexibility to manage property in equitable fashion."

He said he doesn't expect it to become an "everyday tool," but he did point to the now mothballed former Bureau of Employment Services building next to the Ohio Judicial Center on the downtown Columbus riverfront as a building that might find new life under such an arrangement.

Rep. Matt Szollosi (D., Oregon), the No. 2 Democrat in the House, has been critical of recent moves by the Kasich administration and Republican General Assembly to undermine prevailing wage, the largely regional union-scale wages that must be paid on public projects.

But he doesn't see House Bill 513 as another attempt to get around that.

"As long as the state receives either a property or a possessory interest in a completed project, then the project is technically done by or for a public authority," he said. "Prevailing wage law will apply."

He said he's not a big fan of the proposal but said he understands why government is looking in this direction.

"I think in certain instances it will help," Mr. Szollosi said. "But it wouldn't be my first choice for overcoming some of the deficit-oriented problems that counties are facing."

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