20-year lease for Maryland’s Environment Department raises concerns over unnecessary costs
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Diverging Reports Breakdown
20-year lease for Maryland’s Environment Department raises concerns over unnecessary costs
The state recently locked into a two-decade long lease, costing $167 million dollars. A $10 million renovation agreement with the building’s owner helped seal the deal. With this lease, rent rises by 3.45% annually, starting at $5.9 million this year to $11.3 million by the final year. Taxpayer advocate David Williams: “This deal doesn’t make sense. You don’t remodel a space that you are leasing because you don’t own that space.”
The state recently locked into a two-decade long lease, costing $167 million dollars. Helping seal the deal, a $10 million renovation agreement with the building’s owner.
A lengthy commitment state auditors are now calling shortsighted. In a new report, auditors questioned if the renovations were necessary and the costs reasonable. Additionally, “The structure of this lease may have circumvented State budget law,” the report said.
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With this lease, rent rises by 3.45% annually. Starting at $5.9 million this year to $11.3 million by the final year. Over 20 years, that means the landlord will pocket an additional $12.6 million compared to the prior lease. And compared to other state leases, auditors found most only last 10 years, and all had less than 3% rate hikes.
“This is going to cost the state, which means taxpayers, a lot of money,” said Taxpayer advocate David Williams, “This deal doesn’t make sense. You don’t remodel a space that you are leasing because you don’t own that space.”
Defending the lease, the state’s Department of General Services argues the renovations are overdue and helped avoid costly relocation and parking expenses. But Williams questions the timing.
“Right now, the state needs flexibility,” he said.
Facing significant budget challenges, the state has entered a year-long hiring freeze and is currently offering voluntary buyouts to state employees.
“A lot can happen over 20 years. People can leave this agency. The agency can get smaller, but they’re going to have this space for 20 years regardless,” said Williams.
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It also comes at a time the state is asking you to pay more. This session lawmakers passed $1.6 billion in new taxes and fees.
“It’s amazing because state officials always ask taxpayers and consumers to sacrifice first and the state second. And the fact of the matter is, the state never sacrifices,” said Williams, “Governor Moore needs to take the deficit more seriously”
In this lease, the state also waived their right to terminate for convenience. Making it nearly impossible to break for a better deal later on.