Chapter III

DPW Leasing Process

The leasing process begins after the planning and budgetary approval processes have been completed. Each state agency must receive authorization through the Statewide Facility and Capitol Plan (FACCAP) or emergency certification from OPM prior to submitting a space request to the DPW leasing unit. The following narrative, also outlined in Figure III-1, provides a general description of the DPW leasing process.

Identification and assessment of potential space. Upon approval from OPM, DPW leasing staff, assigned by agency, initiates the search process. If the space request is less than 2,500 square feet, the leasing agent may begin his/her search for suitable space. However, state law requires the placement of a newspaper advertisement if the space request is in excess of 2,500 square feet. The ad, which is drafted by the leasing agent, must be placed at least once in a newspaper having substantial circulation in the area where the space is sought. By law, DPW must also send a notice to the regional chapter of the Connecticut Association of Realtors.

DPW gives proponents between 14 and 30 calendar days to respond to advertisements. All responses must be received and logged by DPW's Bidding unit before being sent to the leasing office. State law does not require DPW to only lease space from persons responding to the ads.

As part of its site search, the leasing unit may consult its internal leasing inventory to determine whether space is available in other state leased facilities. In addition, the leasing agent may review proposals made to previous ads, general real estate offerings sent to DPW, as well as sites advertised in the newspapers and other professional publications.

The leasing agent assesses all proposals and potential sites then selects the locations which meet the general requirements of the request including total amount of square feet, parking, geographical location, and any special needs. An initial site inspection is conducted by the agent and a representative of the requesting agency of all selected locations.

The requesting agency must complete a signed evaluation form indicating a preference for a particular site and whether or not the location appears to be acceptable or unacceptable. Among the evaluation items are: accessibility to employees, clients, handicapped, and public transportation; date of availability; suitability of layout for agency operations; and the extent of needed renovations.

The leasing agent reviews all agency comments and discusses proposed sites with the leasing supervisor. The leasing staff, in conjunction with the requesting agency, determine which sites are to be given further consideration.

Negotiations. Negotiations are conducted by the leasing agent and the owner or authorized agents of the sites found to be acceptable. The leasing agent will keep the client agency updated on any progress made in negotiations, however, negotiations between the client agency and proponents is illegal (C.G.S. § 4b-27). The leasing agent negotiates the terms, conditions, as well as any needed renovations with the proponents. If complex renovations are needed, the leasing agent may consult other DPW units for architectural, engineering, energy, or

Figure III- 1. DPW Leasing Process

Agency submits OPM approved request for space

.

code assistance. Negotiations continue until agreement is reached. If necessary, the leasing supervisor will assist the leasing agent with negotiations or determine whether alternative site options must be pursued.

Lease proposal outlines. Once agreement between the parties is reached, the leasing agent will draft a lease proposal outline (LPO). All agreements are to be committed to writing. Verbal agreements or consent are not allowed. The LPO summarizes the principal terms of the agreement including rental rate, length of lease, square footage, purchase or renewal options, items included in facilities such as utilities or janitorial services, and the nature of any renovations.

The LPO is sent to the proponent, the client agency, and the DPW commissioner for approval and signature. If the cost or size exceeds pre-authorized levels, the LPO must be reviewed and approved by OPM before proceeding. Once all necessary approvals are obtained, the leasing agent prepares a lease proposal summary package. The package includes the LPO, all supporting documents such as the space analysis, the evaluation forms, the advertisement, plans and specifications, code compliance review, other facilities considered, rent comparables, and any other relevant information. The package is submitted to each member of the State Properties Review Board for approval.

State Properties Review Board. All transactions under the jurisdiction of the SPRB are handled in a similar way. The board's staff records each proposed submittal and assigns it a file number. Using the board's information checklist, each package is scanned to determine if all required materials are included. Once all materials are submitted, the board's staff will review the items for the board's consideration.

As part of its review of lease proposals, one or all members of the board may conduct a site visit. In addition, the board may examine the former lease, dates and costs of all the state's leases on the premises, a list of all other properties leased by the state from the proponent, whether the proposal was included in the FACCAP, what other facilities were available, the cost and extent of needed renovations, and whether the negotiated rate is fair and favorable in light of market conditions. The board uses a variety sources to determine favorable terms including local real estate indices such as Cushman and Wakefield or CB Richard Ellis. The board's staff also conducts field visits to various regions of the state to find comparable rents. If more information is needed or questions or concerns arise relative to the proposal, the board may request additional documentation or ask DPW staff to meet with the board. On occasion, staff from the client agency may attend a SPRB meeting to answer questions.

It is the board's responsibility to ensure the proposals contain terms and conditions favorable to the state, make prudent business sense, and conform to state laws. If, upon review, the board still has concerns it may return the package to DPW leasing without approval. The board, at its discretion, may make recommended changes to the proposal. The DPW staff assess the nature of the board's concerns and comments and take the appropriate steps to address the concerns before resubmitting for final approval.

Review by Attorney General's Office. Once the board has approved a proposal, the terms or conditions cannot be changed or modified without its consent. Final decisions of the SPRB are signed by the chairman and returned to DPW for final lease execution. The leasing agent who prepared the proposal also drafts the final lease for the assistant attorney general assigned to review DPW leases. The attorney general's office is responsible for determining the legal sufficiency as to form and substance of all state contracts and leases. After the assistant attorney general has provided a preliminary review, a final lease document is prepared and sent to the property owner and the agency commissioner for signature. The attorney general then provides final legal review and approval.

Final leases. Final leases are recorded by the clerk of the town where the leased space is located. Copies are sent to the client agency, SPRB, and the State Comptroller's Office. Any required renovation work may begin at this time. If no renovation work is required, or if renovations have been completed and inspected by DPW, the leasing agent prepares a rent control card which is sent to the occupying agency's business office. The rent control card begins rent payments.

LPO submittals. Table III-1 presents the approval rates for 354 DPW leases submitted to the SPRB from FYs 94-00. As the table shows, the total number of leases provided to the board for consideration have gradually decreased over the period. In FY00, DPW put forth 37 lease proposals to the board compared to the 59 leases submitted in FY94.

The vast majority of lease proposals are approved each year. Of the 354 leases submitted during FY 94-00 time period, 89 percent have been approved on their first submittal, 15 leases or four percent were approved after being resubmitted. Fourteen leases or four percent were withdrawn, and 9 leases representing three percent rejected.

The analysis found the number of resubmitted leases jumped in FY00. Prior to FY00, the number of leases approved on resubmittal represented five percent or less of the total submitted each year. In FY00, the number of leases resubmitted for approval grew to 16 percent of the total.

Analysis of DPW's leasing inventory

As part of its study, the committee examined DPW's leasing inventory as of June 29, 2001. The inventory contains various pieces of lease information including amount of space leased, annual cost, location, occupying agency, and lessors. The following summary provides the analysis of this information.

Table III-2 shows the distribution of leases statewide as of June 29, 2001. As the table shows, the DPW inventory contained 206 active leases with an annual cost of approximately $35 million. The leases are grouped into three major categories of space: office, parking, and a variety of other types such as courtrooms, classrooms, and storage. The majority of leases are for office space with a total annual cost of nearly $31 million. Almost equally represented in number are leases for parking and other various types of space. However, the total annual cost for the miscellaneous leases, $3.2 million, is significantly higher than the total cost for parking leases at $754,077.

Office leases. Table III-3 provides a breakdown of the office leases by categories of cost. More than 50 percent of the leases have a total annual cost of less than $100,000. Forty-seven percent of all leases annually cost the state $100,000 or more. Eleven leases have a yearly cost of more than $500,000. The single most expensive lease is held by the Department of Information Technology at an annual cost of $4,027,700.

At the same time, more than 60 percent of the office leases are for less than 10,000 square feet, as shown by Table III-4. Thirty-seven percent of the leases are for 10,000 square feet or more. Seven leases are for more than 50,000 square feet. The individual largest office lease by square footage is located at 55 Elm Street in Hartford occupied by the state's constitutional officers.

The cost per square foot for office space is presented in Table III-5. Seventy-five percent of the office leases cost less than $16 a square foot while 25 percent cost more. Seven of the leases are $22 a square foot or more. The single most expensive office lease per square foot belongs to the judicial department for $26.80 in Torrington. (This office space is adjacent to the court for courthouse operations.) Further analysis of the DPW lease inventory is provided in Appendices B, C, D, and E.

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