Update of the



State Building Commission's Function Should Be Limited or Terminated

Property Management Has Improved

Issue Area 1: The State Building Commission Should Either be Limited in Its Function or Terminated, but Selected Legislative Oversight is Needed for Public Property Transactions.

There is a need for overseeing property transactions given the large monetary consequences. The current oversight structure of the SBC is impaired and exhibits a high risk of costly and improper transactions occurring. A lack of accountability exists and will continue unless a better defined oversight authority is established. Therefore, the Legislative Auditor recommends that the Legislature consider providing direct oversight over property sales and purchases, and leases-purchases of certain monetary value. This was recommended in a 1995 special report on the Morris Street building. Furthermore, the Legislature has a similar legislative oversight committee in statute (31-20-26) over the Regional Jail Authority. This legislative oversight committee is charged to "regularly investigate all matters relating to integrity, probity and foresight in funding, operating and planning the correctional system..." A similar mechanism is needed for state property transactions.

Recommendation 1

The Legislature should consider the following options concerning the State Building Commission:

Level of Compliance: Requires Legislation

The Commission agrees with parts "a" and "b" of Recommendation 1. The Commission recommends the following rewording of part "c":

c) Delegate the authority to buy, own or lease (either as lessee or lessor) real property to the Department of Administration.

As the Legislative Auditor is of the opinion there is a continued need for oversight of property transactions, the Legislative Auditor does not agree that the authority to buy, own or lease should be given to the Department of Administration without Legislative oversight.

Recommendation 2
The Legislature should consider amending state law to require direct legislative approval of all long-term and large sum lease-purchase agreements, and sales and purchases of real property. The amount and terms of an agreement which would require legislative approval should be clearly stated if the Legislature chooses to amend state law.

Level of Compliance: Requires Legislation

The Commission feels that direct legislative approval of all long-term and large sum lease-purchase agreements, and sales and purchases of real property should only be called for if the lease purchase repayments require additional appropriations. The Commission does not agree with the recommendation that the Legislature approve amounts and terms of real property agreements. The Legislative Auditor reiterates its stance that due to the high risk of costly and improper transactions occurring, the Legislature should oversee certain property transactions.

Engrossed SB 78 would have required that any property to be purchased, leased or lease-purchased by the Commission or the Secretary of the Department of Administration, valued at 2 million or more, would have legislative oversight. The bill passed the Senate but died in the House.

Recommendations 3-8 are applicable depending on the Legislative response to Recommendations 1 and 2. The third and fourth recommendation would require legislation if the Commission is continued, while recommendations 5-8 would need to be addressed by the Commission if not terminated. The intent of these recommendations are to strengthen the structure of the Commission if it is continued.
Recommendation 3

The Legislature should consider amending the Commission's statute, to explicitly state what types of property transactions need Commission approval, and that all property transactions must be approved by the Commission before they are completed.

Recommendation 4

The Legislature should consider amending West Virginia Code 5A-3, sections 38 through 42 to specify that leases or lease-purchases involving the SBC property must be reviewed and approved by the Commission.

Recommendation 5

The Commission should create a second series of procedural rules to establish proper procedure for Commission staff to follow at various stages of property transactions.

Recommendation 6

The Commission should consider reversing the resolution giving blanket authority to the Commission Chair to approve all leases without a Commission vote.

Recommendation 7

The Commission's staff should provide a regular report to inform members between meetings on the status of projects and on current plans.

Recommendation 8

The Commission should consider amending its procedural rules to require more than a minimum of one meeting each year.

Issue Area 2: Management Decisions Are Arbitrary and Inconsistent.

Recommendation 9

Implementation of a uniform and consistent policy concerning determination of rent is advisable.

Level of Compliance: In Compliance

In response to recommendation 9, SBC put in place an annual review of cost and revenue information by building. As the leases expire, now on an annual basis, rent will be determined by reviewing building costs and other data. This annual review should result in uniform rates within the same Commission property.

Recommendation 10
There needs to be greater diligence in monitoring the requirements of lease-agreements and available space. Rent escalations should be implemented to keep buildings properly maintained. Usable vacant space needs to be determined and a higher priority needs to be given to finding tenants to occupy vacant office space.

Level of Compliance: In Compliance

Rent escalations should be implemented, when necessary, through the annual review of building costs and other data as addressed in recommendation 9. The agency informed the Legislative Auditor that renovations in Fairmont and Parkersburg will increase the available square feet.

Recommendation 11

The Commission should consider raising rent where appropriate to make utility payments consistent with a determined standard percentage of rent.

Level of Compliance: In Dispute

The agency felt that the establishment of a standard percentage of rent for utilities would be possible only if all buildings were built alike and performed the same functions. The Commission feels that using a standard percentage of rent for utilities is contrary to matching rent with the cost of the building.

Utilities are a cost of the building as are maintenance and capitol improvements. The recommendation was made in order for the situation where state agencies paying higher rent and thereby subsidizing the costs associated with maintaining other buildings would be addressed. For example, utilities are 43% of the rent in Building 4 on the Capitol Complex. The remaining funds leave little for janitorial and capitol improvement expenses. The most serious consequence of inadequate rent being collected is that funds are not being made available for maintenance and capitol improvements in the current period. The impact of this is to allow building improvements to be put off into the future. This will result in improvement costs accumulating over time to the extent that future Legislatures may find it difficult to make funds available to make necessary building improvements. An example of this is the Motor Vehicles building on the Capitol Complex which needs about $23 million in improvements. The conditions in the building are described as "deplorable."