Politics & Government

Should the state move employees out of downtown Raleigh?

The Revenue Building at 2 Salisbury Street now houses the North Carolina State Auditor. Photographed on Tuesday, May 22, 2018. A draft bill calls for an analysis of the potential sale or lease of the building.
The Revenue Building at 2 Salisbury Street now houses the North Carolina State Auditor. Photographed on Tuesday, May 22, 2018. A draft bill calls for an analysis of the potential sale or lease of the building. rwillett@newsobserver.com

State leaders could study leasing or selling aging government office buildings in downtown Raleigh, one of several proposals in draft legislation aimed at cutting costs and improving efficiency at the N.C. Department of Administration.

The recommendations were part of a report from the legislature's Program Evaluation Division, which included a draft bill that could be considered during this year's short session.

The report found that state-owned downtown buildings have nearly $100 million in deferred maintenance projects, and that many of the employees who work downtown could just as easily do their jobs in cheaper leased space outside the city center.

It says that "property in downtown Raleigh have reached unprecedented values due to the surge in residential, commercial, and retail development" and that the "current inventory of state-owned property may no longer be cost-effectively contributing to the State's goals and objectives."

There are several large-scale projects currently under construction or near completion in downtown Raleigh, with many more expected to follow suit in the coming months.

It suggests that the square footage of office space per employee could be reduced in some cases.

The draft bill approved by the Joint Legislative Program Evaluation Oversight Committee would start small, calling for a consultant to "conduct a business case analysis to reduce facility management costs and generate additional revenue through the sale or lease of the Old Revenue Building." That 1920s-era building sits at the corner of Morgan and Salisbury streets and houses several state agencies, including the state auditor and Department of Labor.

Legislators and State Auditor Beth Wood voiced frustrations about the lack of accurate data on state office buildings. There's limited information available about how many employees work in each building, and the PED report included inaccurate information that indicated many buildings hadn't been renovated since the 1970s or '80s.

"A lot of the data (PED staffers) have had to work with has been incomplete, inaccurate and unreliable," Wood said. "That is not in any way related to the current secretary we have, but is certainly related to years of inaccurate data coming out of the Department of Administration."

Secretary of Administration Machelle Sanders said her agency is already reviewing state property issues under legislation passed in 2016.

"We need to have a plan that is comprehensive and promotes smarter use of our state property," she said.

Rep. Craig Horn, a Union County Republican, said hiring an outside consultant to look at the property issue could provide "a more objective look."

"We don't have a track record of changing ourselves very well from the inside," he said.

Downtown Raleigh's state buildings were a top priority for former Gov. Pat McCrory, who proposed a "Project Phoenix" initiative to partner with the private sector to renovate buildings and add housing and retail around the government complex.

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The issue has gotten less attention since McCrory left office in 2016, but aging offices continue to have structural problems. The Office of State Budget and Management is moving out of the top floor of the Administration Building because a roof replacement project was needed.

The Program Evaluation Division report also looked at other potential cost savings at the Department of Administration. One finding was that 20 to 30 percent of state-owned parking spaces aren't fully used because many state workers have reserved spaces that are often empty. Switching to unreserved spaces, the report found, could allow the state to lease out unused space and generate revenue of $50 $85 per month, per space. The draft bill also calls on the consultant to study that possibility.

The report also addresses government contracts and suggests that the state could save money by ensuring that competitive bidding processes are used. The draft bill requires DOA to seek a 10 percent cost reduction when renewing contracts. The draft bill also requires DOA to reduce its vehicle fleet by 5 percent after the report found that using GPS tracking technology could result in more efficient use of vehicles.

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