Archive for Monday, January 8, 2001

Building binge raising eyebrows

Audit finds sketchy paper trail in wake of costly projects

January 8, 2001


— During the past five years, Gov. Bill Graves' administration has quietly been on an office construction and buying spree in the downtown area.

But questions have arisen about whether the Graves team did the necessary homework before committing the state to deals that ultimately will cost it about $100 million.

A report by state auditors says the reasons for construction of two buildings and purchase of the Security Benefit Group buildings is kind of a mystery.

"During this audit, we expected to find written documentation showing what criteria the selection committee had used in evaluating these bid proposals, the results of the analyses performed, and the rationale for deciding which proposals to take to the Legislature.

"However, we found no documentation related to any cost-benefit calculations that had been performed on the proposals, nor did we find documentation of why certain proposals were rejected."

Secretary of Administration Dan Stanley, who has headed Graves' effort to consolidate state agencies into fewer locations downtown, defended the process used to select the projects.

Three projects

He said there should have been a better paper trail of records, but added that all projects were selected for the betterment of the state.

The audit focused on three projects that will give the state about 565,000 square feet of office space.

They are:

A $46.4 million, five-story, 255,000-square-foot state office building with a parking garage. It is called the Signature Building and will house the Kansas Department of Health and Environment.

An $11.4 million, three-story, 85,000-square-foot office building for the Department of Social and Rehabilitation Services.

Purchase of the existing Security Benefit Life Insurance Co. buildings, which includes a four-story building, a 14-story building and parking lot. Total cost will be $21.6 million, plus almost $16 million to refurbish the property. The buildings have more than 225,000 square feet of office space. The Kansas Department of Transportation plans to move in and build a $3.6 million tunnel from the building to the Capitol.

At the end of 1999, a total of 54 state agencies were leasing office space from private landlords at 84 different locations within Shawnee County.

No records

Graves sought to consolidate some of these agencies, and in 1997, 24 developers submitted proposals for leasing, build-to-suit and remodeling projects in the downtown area.

A committee that included representatives from the state's Department of Administration, Division of Facilities Management, KDHE, KDOT, SRS and Department of Agriculture, evaluated the proposals.

But no records of their evaluations remain, according to the state audit.

"Maintaining documentation of what the selection committee did to evaluate the proposals would provide both a record of the state's decisions and justifications for why decisions were made, and could be extremely useful in evaluating future proposals," the audit stated.

Stanley concedes better records should have been maintained.

But he said that the projects were analyzed.

"Agency records and a phone survey of recollections of participants involved indicate that the agencies did a drive-by tour of all submitted proposals," Stanley wrote in response to the audit.

"Agencies came to the meeting with their own 'short list' of favored locations. Only those projects that were considered suitable to at least one agency based on size, location and cost were invited to proceed," he wrote.

Closed sessions

Stanley said in an interview that good records were kept of the proposals from developers.

He said some of what auditors wanted was probably done in closed session when officials were "taking the pulses" of developers.

Those closed-door deliberations were allowed, he said, under a provision of the state open meetings law that allows officials to discuss real estate purchases in secret.

But the purchase of the Security Benefit building has caused heartburn for some lawmakers.

State Sen. Jim Barone, D-Frontenac, a member of the Joint Committee on State Building Construction, said the cost of the Security Benefit project seems to be increasing.

The buildings will cost $18.5 million, plus $3.1 million to finance through the issuance of bonds by the Kansas Development Finance Authority.

In addition, preliminary estimates have pegged the cost of remodeling the facility at $15.9 million. That includes the construction of a $3.6 million tunnel from the 14-story building to the Capitol.

Overpayment concern

"As time goes on, we see more and more expenses," Barone said. "We need to get the whole story all at once."

Barone said he also thinks the state has not been a good negotiator.

For example, he said, the state is considering purchase of the New England Building, which currently is leased to the Kansas Department on Aging.

State officials have said the current asking price is about $6.4 million, but Barone said it is on the tax rolls for about half that amount.

"That just doesn't gee and haw with me," Barone said.

Stanley said negotiations are ongoing with the owners of the New England Building and no decision has been made yet.

The current owner of the New England Building is Dick Pratt of Topeka. A minority owner of the building is Jack Brier, a friend of Graves recently appointed by the governor to head the Kansas Development Finance Authority.

The KDFA issuance of bonds for the purchase of the Security Benefit buildings was done before Brier went to work there.

Brier did work as a consultant for Security Benefit in making its presentation on the purchase to state officials.

Brier said his role as a real estate development consultant was minimal.

Stanley said Brier's involvement with Security Benefit had no affect on the decision to go ahead with the purchase of the building.

"You can't swing a dead cat without hitting someone connected to the governor. We do not reward nor do we discriminate against people because of their associations," Stanley said.

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