Panel: State Should Rent From Itself Senator Says Taxpayers Would Save Money In The Long Run

State Sen. Hal Bunderson, R-Boise, uses the state liquor dispensary as an example of how Idaho taxpayers could save hundreds of millions of dollars by using bonding for state buildings instead of renting from private owners.

Since 1971, the state liquor agency has been renting a building owned by former legislator Fred Bagley and by the end of this year will have paid a total of $2.2 million.

Bunderson said Thursday that if the state had used the Idaho State Building Authority to issue bonds, construct the facility and lease it back to the state, the cost would have been $1.2 million less - and the state would own a warehouse now valued at $1.7 million.

The lease runs out this year. A new warehouse and distribution facility is under construction on the outskirts of Boise under a lease-purchase arrangement.

A task force has been looking at state facilities, and plans to recommend to the next Legislature that the state get much more aggressive in using bonding-finance buildings instead of renting from private owners.

“It makes the taxpayer king rather than a small group of individuals,” Bunderson said.

The task force, convened by Gov. Phil Batt early this year, will suggest to the next Legislature creation of a statewide facilities management program. It would coordinate and evaluate the need for building space and the most efficient use of it.

The Department of Administration keeps track of leases signed by state agencies but has no authority over how they are structured.

The task force also will ask for legislation requiring all state agencies to compare their building leases with “other viable leasing alternatives,” including leasing from the Idaho Building Authority. Agencies would be required to take the least costly option. They would have to justify renting decisions to the administration, Legislature and public.

Considering only major leases involving at least 10,000 square feet, the state currently rents 1,187,342 square feet at a cost of $9.5 million per year.

Using that amount, the Idaho Building Authority could issue $152 million in bonds to provide the same amount of office space.

For annual payments starting at $8.4 million, the bonds would be paid off in 20 years, Bunderson said.

After 40 years, leasing the property would cost the state a total of $716 million, but using the bonding process would cost $281.8 million.

Besides the $434 million cash savings, the state also would own facilities with an estimated $460 million market value, for a total savings of $894 million, Bunderson said. “The savings are so enormous,” he said.