DC decision to pay double the rent and move into new offices angers local government counterparts who stay put and stand up for taxpayers
McIntosh, MN—If you wonder how the federal government runs up trillion dollar budget deficits, folks in McIntosh say the glut of red ink starts with the way Washington does business on a daily basis in places like this rural town of 635 residents.
“Everybody who hears about it is saying ‘is that really how our government is being run?’ It’s wide open here, why don’t they see it?” Mayor Bruce Haaven said.
It began when the Farm Service Agency and Natural Resources Conservation Service announced plans to move out of a city-owned office building in December, despite the structure’s new windows, roof, siding, fiber-optic cable and other improvements.
The city did suggest a one dollar per square foot increase in the federal agencies’ rent, but any second thoughts over the potential adverse impact of a rate hike didn’t last long.
Disappointment turned to astonishment and outrage when word got out that the General Services Administration (GSA) agreed to pay more than twice as much as the city’s bid and move into a new building under construction down the street.
Instead of paying $10 a square foot under the city’s proposal, the feds opted to pay $22.14 a square foot for rent—$37,269 more in rent per year than the cost of being in the city-owned building and almost $375,000 over the life of the ten year lease.
“How can our government justify paying more than twice the rent?” asked Al Bauer, a county conservation official whose board voted unanimously to stay put in the city’s building. “It’s a slap in the taxpayers’ face. If it’s happening in a little deal like this here, what’s happening in the big picture? What’s happening in the big buildings where there’s real money involved?”
In a rejection letter, agriculture officials said the city failed to meet unspecified requirements of the solicitation, referring the city to a federal government leasing specialist for details.
As a last resort, McIntosh officials turned to Washington for help. They contacted Congressman Collin Peterson (D-MN), Chairman of the House Agriculture Committee, who represents them.
“Collin Peterson puts on conferences in the area on economic development and keeping things local,” said Jim Stordahl of the University of Minnesota extension service, another government tenant who’s remaining in the city-owned building. “Collin has considerable clout. I was really disappointed he wasn’t able to do more about it.”
By the time the influential committee chairman weighed in, it was apparently too late, according to Peterson’s staff.
“It wasn’t that the congressman didn’t try, but it was beyond the point of no return in doing the contract,” said Wally Sparby, an aide to Peterson. “Certainly, it’s not the best economics, that’s for sure.”
Potential concerns over accessibility issues may have been a factor, according to Ronald Carlsen, the developer awarded the new lease. The city, however, says it had already made renovations to its building to comply with the Americans with Disabilities Act and had agreed to make further improvements.
“I think one of the reasons is, if there were ever a lawsuit, it would cost the government many times whatever the rent is going to be,” said Carlsen, a Mantorville, Minnesota developer. “For taxpayers, it’s like getting insurance. Do you try to avoid something before it happens?”
The feds' move out of the McIntosh-owned building will cost the city nearly $30,000 in lost revenue, which amounts to almost ten percent of the city’s annual budget. Mayor Haaven submitted a complaint to a federal watchdog agency in September, but has not received a response to date. Meanwhile, Haaven put his federal tenants on notice that they can expect to pay the city double the going rate—the same amount as under their new lease—until they leave in December.
“We’re a little angry. We said if you’re moving out and you’re going to pay him that $22.14 then that’s what you’re going to pay us, until you move out,” Mayor Haaven said.
The city has yet to see the rate hike reflected in rent checks from the feds. For his part, developer Carlsen thinks the city is demanding too much.
“I think they should get a little bit more, but that’s a little too much,” Carlsen said. “But you can always try, you can always ask for something. I agree with that philosophy 100 percent.”
A call to the General Services Administration official in Washington, D.C. who’s familiar with this issue was not returned.
Tips or feedback? Contact Tom Steward, FFM Investigative Director. 952-451-3684.
Posted on Fri, December 3, 2010