States Own More Property Than They Know
Many states struggle to know how much property they have and how best to use it. Some, though, are fixing the problem -- and it's saving them money.
In 2007, we wrote a column for Governing in which we described the strange nature of Rhode Island’s capital facilities management. The state didn’t have a complete inventory of property under its control, a plan for the use of state facilities or “any coherent effort” to ensure that it used the property efficiently. We also noted that the state was “paying rent for space, even when state-owned properties were underutilized or vacant.” One of the most important goals for states and cities is to keep their vacancy rates as low as possible. An empty office or suite of offices still cost money in insurance and lease or bond payments.
It looked like the state was starting to fix these problems, by creating an inventory of all assets and centralizing all the state's facilities managers under one authority. But Rhode Island didn’t actually get around to making those improvements over the last eight years. To some extent, the reform effort -- part of a larger efficiency drive by Gov. Donald Carcieri -- ended when a new administration came in with its own priorities in 2011. The loss of momentum could also be attributed to the resistance of agencies, which weren't eager to give up information and control to a central office.
Now, in the first year of Gov. Gina Raimondo’s term, the state created a new organization, the division of Capital Asset Management and Maintenance, and hired Carole Cornelison to run it. It's responsible for overcoming resistance and bringing data together in one place.
Cornelison believes the work she's doing consolidating data will translate into cost savings because the state will pay less when it can share services from one vendor, make bulk purchases of materials and equipment and use the space it already has. In past years, the state has acquired new building space instead of using vacant offices that managers didn't even know they had.
Will Rhode Island succeed this time around? It’s hard to tell. But the issues of facilities management it confronts are not unique and other states have been able to address the problem successfully.
“This is a major issue for many states,” says Doug Nelson, current president of the National Association of State Chief Administrators (NASCA). “We just had our conference last week, and [facility management] was a hot and important issue.” One of the major factors is the continuing concern over money. This makes it important for states to have a precise accounting of the facilities they need, and an updated list of the buildings they own or lease, as well as concrete plans for maintenance and repair and a plan for future needs.
Coming up with such plans are particularly difficult. According to John Turcotte, the director of the program evaluation division for the North Carolina General Assembly, his state owns “thousands of pieces of property, including buildings and land and the value of those assets is often unknown ... We don’t know enough about state buildings or how they’re utilized.”
As in Rhode Island, North Carolina’s central facilities management office relies on agencies to provide information about the buildings they use. Turcotte says that agencies often aren’t interested in keeping track of properties that have been acquired. “It’s not something that agency heads know that much about."
But centralized government offices can be just as uninformed as agencies about their own buildings. According to a West Virginia audit, the state's Department of Administration (DOA) indicated that it follows no written documentation to guide the acquisition of properties and the auditor found that master plans, capital improvement plans and facility assessments were “incomplete, unfulfilled and contradictory.” In addition, the DOA has continued to spend money on new buildings without sufficient funds to maintain the properties. In some buildings, whole floors cannot be occupied because they are in disrepair. According to the legislative auditor, “the main reason the DOA cannot adequately maintain its properties is that it has purchased buildings with little regard for the financial implications of the acquisitions.”
States and cities that emphasize strong facilities management can see financial benefits. Missouri, for example, takes pride in its system for keeping careful track of the use of its physical assets. It uses an electronic asset management system that tracks the vacancy rate and physical condition of state buildings.
This wasn’t always the case.
In the early years of this century, Missouri had problems with facility management, partly because of unreliable information from state agencies. The state introduced a new asset management system during the end of the administration of Gov. Matt Blunt. In 2010, during the Jay Nixon administration, the state did a thorough study of the space it owned and leased and has focused since then on reducing leases and increasing preventive maintenance so as to avoid more expensive repairs. It has a six-year plan, compiled annually, that outlines maintenance needs.
Missouri recently purchased a former six-story General Electric building for state use. The state made a careful fiscal analysis of the purchase as opposed to retaining leased buildings. Included in this analysis was making certain that the agencies that would use the building could co-exist. It’s clearly not a great idea to have an office that is visited by drug abusers share common space with one that services troubled youth.
The purchase was made for $1.75 million and allows the state to eliminate eight leases in the near future, with more to come; within a few years the state anticipates that the entire building will be at full capacity. In general, staying on top of facility needs has paid off. Since 2009, Missouri has reduced leased space by 486,285 square feet (or about 15 percent) and routine maintenance means the state has to do fewer repairs. Total savings over the last six years has been about $6.3 million.
“What we do in Missouri is we work very hard at maximizing our state-owned space,” says Nelson. "A lot of states don’t do that. They don’t do that type of business analysis as often as they should.”