AUGUSTA — State officials say a plan to borrow about $112 million to build office space and renovate existing offices in Augusta doesn’t necessarily mean that leased space in some of the city’s most prominent buildings will be left vacant.

Department of Administrative and Financial Services Commissioner Richard Rosen said in a Friday interview that a state analysis that indicates the switch could save $46.5 million over 35 years over the cost of leasing is an accurate assessment of the true, “all-in” costs. City officials and a local commercial building owner previously called the state’s analysis flawed and not an apples-to-apples comparison of the costs of owning versus leasing the space.

It’s a serious issue for city leaders, who worry about the potential that prominent buildings, such Key Plaza downtown, could lose a major tenant, which would also cost the city money in tax revenue.

“It’s an informed analysis,” Rosen said. “The analysis is all-inclusive, and valid, though that doesn’t necessarily mean there aren’t certain circumstances where it’s preferable for the state to lease. The overall approach in the Augusta area will always have a blend of state-owned and state-leased space.”

City officials said recently they believe the state’s analysis doesn’t include all the true costs of owning versus leasing space, such as the cost of major capital repairs, depreciation and other factors. They believe the state analysis overstates the potential savings from moving state workers in buildings including Key Plaza and the sprawling Central Maine Commerce Center to space to be either renovated or built new, probably on the state’s east side campus, on the grounds of the former Augusta Mental Health Institute.

Local officials and business owners said state offices moving out of Key Plaza or the Central Maine Commerce Center, or both, would be devastating to Augusta.

For starters, City Manager William Bridgeo said, the state’s plan could cost the city more than $1 million a year in lost property tax revenue, because if commercial buildings are vacant, their taxable value will be less. Bridgeo and others said the effect would go beyond tax revenue, however.

Colleen Tyler, owner of Vickery Cafe on Water Street in downtown Augusta, said roughly 90 percent of her business at the cafe and sandwich shop is from state workers employed in the Key Plaza building. State officials said 227 DHHS employees work in the building.

“If the state was to pull out of there, I would absolutely not be in business anymore here on Water Street,” she said. “And it’s not just myself, but also other downtown businesses. We’d really be a hurting unit. It’s a scary thought, as a business owner. I’m hoping it does not pass and they stay down here.”


The city is having its own analysis done by a consultant, Lock Kiermaier, and hopes that it will show that the cost of leasing is less than the cost of owning. The city then would share that analysis with state legislators who will decide the fate of the proposal as part of their consideration of the state budget proposed by Gov. Paul LePage.

Bridgeo said a previous study done some five years ago showed, when all costs are taken into consideration, it was cheaper for the state to lease space in private buildings than to build new space the state would own.

“That’s the premise we’re operating under, and hopefully this (new) analysis will reinforce that argument,” Bridgeo said. “We told (the consultant) we want the straight facts. If what comes out at the far end of that analysis is our belief that it makes sense to lease is validated, great. If it doesn’t, then it is what it is.”

Rosen, a former Republican state senator from Bucksport, indicated the state is looking to vacate the following buildings when leases expire: Key Plaza, at 286 Water St.; the Central Maine Commerce Center, off Civic Center Drive; and multiple properties occupied by the state Department of Health and Human Services on Anthony Avenue in the Augusta Business Park.

Kevin Mattson, a partner in Central Maine Commerce Center, where, he said, about 70 percent of the space is occupied by state offices, said leasing commercial space from a private building owner is always cheaper than the state owning space, because private enterprise is in a competitive marketplace. He said the state’s projected savings estimates don’t include the true costs involved in building ownership. He said the best way to determine which is more cost-effective would be to have the state Office of Program Evaluation and Government Accountability, or OPEGA, review it.

“Leased space saves the state millions annually, but the only way to truly review that is to have OPEGA perform an open and thorough review,” said Mattson, who has developed multiple offices and other commercial properties in the area and state. “I already know what the results will be, but the public has a right to an open process.”

He said the state already has a backlog of capital improvement projects needed at state facilities, so it shouldn’t build new space when it can’t maintain what it already has.

Bridgeo said the results of the city’s analysis would be shared with Sen. Roger Katz so he could in turn share them with the Legislature’s Appropriations and Financial Affairs Committee when it considers the proposal as part of the proposed state budget. Katz, an Augusta Republican and a former city mayor, serves on that committee.

Rosen said if that alternative analysis is made available, the state would take a look at it.


Rosen said Friday that even if the Key Plaza building’s main occupant, the Department of Health and Human Services, does move out when its lease expires in 2018, that doesn’t necessarily mean the state won’t negotiate with the Key Plaza owner to put some other state department in that building.

“If DHHS were to consolidate into one new building (and move out of Key Plaza), that should not suggest the state utilizing that space wouldn’t still be a priority,” Rosen said. “That lease is about to expire. If the state is able to successfully renegotiate a favorable lease for space there, the occupancy could continue (but by another state department).”

A representative of the New Jersey firm listed as the owner of the Key Plaza building — which is the tallest and one of the most prominent in the city’s downtown — could not be reached for comment Friday.

Rosen said the state also could remain in the commerce center building, where the Department of Public Safety, the Department of Defense, Veterans and Emergency Management, the state Gambling Commission and the Office of Information Technology occupy a combined 84,000 square feet in the 317,000-square-foot former factory, if it can negotiate a favorable lease.

Rosen said the proposal to bond $112 million to build new and renovate existing state-owned space is part of a 10-year facilities plan that is more about renovating and using state-owned space, and giving the state options, rather than about getting out of state-leased space in Augusta. He said the state has space in the Marquardt, Greenlaw, Deering and CETA buildings on the east side campus now going unused. He said the state has an obligation to maintain its buildings in Augusta, and it makes economic sense to utilize the space in them.

“A significant part of the plan is dealing with issues in state-owned space, not focusing on the leased space,” he said. “We need to be prudent caretakers of state-owned space, and there is a plan for rehabilitating that space, and a plan for funding it. It’s a responsibility the state has, as a steward, to keep its buildings up to speed.”


Rosen said if the state vacates leased space, it won’t necessarily stay vacant long. He said he’s heard the state even could be facing “significant competition” for office space in Augusta. He said the city is growing, and some of that growth is in the private sector, not government.

“If you look at the dramatic growth in commercial development in Augusta, to attempt to make the argument that, if not for the state, there would be no tenants (in commercial space), doesn’t jibe with what has occurred,” Rosen said. “The state will always be a significant tenant, when you look at the totality of leased space in Augusta; but there is also a significant amount of private for profit, private nonprofit, retail and professional (commercial activity) in Augusta. So I’m a little perplexed at that pessimistic view.”

Mayor David Rollins said he doesn’t want to be pessimistic, but he also doesn’t see the likely demand for commercial office space.

“From where?” Rollins responded when asked if other tenants would likely take leased space now occupied by the state. “I just don’t see that on the horizon, that would be difficult. Those kinds of companies aren’t just floating around, waiting to land, unfortunately.”

Last week, several city councilors described the state’s proposal as buried deep in LePage’s budget, and they said it should face a public hearing. Rosen said the proposal was discussed, as part of a public hearing on the entire budget, before the Appropriations and Financial Affairs Committee in March.

Steve Pecukonis, downtown manager and director of the Augusta Downtown Alliance, said it is hard to know what will result from the proposal, but the association and its members will lobby their local legislators and work to help show it is good business for the state to keep workers in downtown Augusta.

“Those downtown (state) employees are important to many of our downtown businesses, such as our restaurants and coffee shops,” he said. “The loss of those people downtown would be a challenge to those businesses. We’re watching it. We’re concerned.”

Keith Edwards — 621-5647

[email protected]

Twitter: @kedwardskj

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