AUGUSTA — State officials have decided not to pick any of the three proposals from developers hoping to provide 225,000 square feet of state agency office space within one mile of the State House.

Instead of selecting any of the three competitive bids submitted, state officials plan to regroup and reconsider how they will address the need for office space in Augusta before deciding how to proceed, according to David Heidrich Jr., director of communications for the state Department of Administrative and Financial Services.

State officials rejected the bids, the details of which have not been disclosed, because they would not have saved the state money.

“The proposals received were not to the economic advantage of the state, which prevented the Department of Administrative and Financial Services from issuing an award,” Heidrich said in an email.

State officials said that prior to the bids being submitted, they reserved the right to reject all of them if they would not be of financial benefit to the state.

The proposal seeking a massive office building, required by bid specifications to be within one mile of the State House, is thus shelved.

Where the state locates office workers in the future could have a big impact on Augusta, where the state both owns multiple buildings filled with workers and leases several others from private developers. The state doesn’t pay property taxes on the buildings it owns, but the owners of buildings leased to the state do pay property taxes to the city of Augusta on those properties.

Three groups submitted bids to provide the 225,000 feet of leased office space to the state, which was required to accommodate 1,400 employees and have at least 1,300 parking spaces.

The bidders were KNG Holdings LLC, of Gardiner, which is owned by members of the family that also owns Pine State Trading in Augusta, Hallowell and Gardiner; Opechee Construction Corp., a New Hampshire-based firm that has built at least one other building leased to the state in Augusta previously and developer Peter Anastos; and Eastern Impact, LLC, of Portland.

The proposal from Opechee and Anastos, owner of Maine Course Hospitality Group, was to build a new office complex at the vacant site at 109 Capitol St., the former Maine Department of Transportation maintenance garage and associated buildings which Anastos had an option to purchase.

Reached Friday by email, Anastos said he no longer has an option to purchase the transportation department property.

“We were not able to provide the 225,000 (square feet) of building the state was looking to consolidate in one place,” Anastos said. “Although I’m disappointed we were unable to do so, I was impressed with how hard the administration, the Department, and (Bureau of) General Services and the Maine Department of Transportation are all working together in the best interests of the residents of the state.”

Anastos, who was appointed by Gov. Paul LePage to the Maine State Housing Authority board, had secured in April of last year an option on the transportation property, which is well within the one-mile radius of the State House required for the office proposal, after Auburn developer George Schott let his option to purchase it expire.

Nick Alberding, a partner in KNG Holdings with cousins Keith and Gena Canning and managing partner of Pine State Trading, said he feels they put forward a strong proposal and a property that would have been ideal for such a proposal, but said he was not surprised the state rejected all the bids.

He said the requirement for 1,300 parking spaces drove up the cost of meeting the bid specifications.

“That parking requirement was really significant,” Alberding said. “That many spaces required a parking garage, which really drove up the cost quite a bit. My sense is the math didn’t work out.”

KNG’s proposal would have put the new office building on the site where Pine State now has warehouses on both sides of the Augusta-Hallowell border.

Alberding said that warehouse will continue to be used by the company, which is currently celebrating its 75th year of operation, though he said someday the best use for that property may be something similar to what they had proposed to construct to lease to the state.

“I think we had a really beautiful piece of property for what they wanted to do,” he said. “But the math has to work for the state of Maine. We were hopeful, but not surprised. Maybe something else down the road will work out. We totally understand, and obviously we have a use for the property in the meantime.”

State Sen. Roger Katz, R-Augusta, said it was surprising to him the state rejected the three bids to provide leased space. He declined additional comment until he was able to learn details of the move.

Mayor David Rollins said the city is looking forward to the sale of the former DOT site, which was vacated when the state moved its operations to a new location at 66 Industrial Drive. Once it’s in private hands, it will be taxable property. He said the city wishes the state would allow it to provide input into the use of the property.

“We’re just patiently waiting to see what opportunity pops up there,” Rollins said when told Friday Anastos no longer had an option to buy the property. “Obviously the state is in control of the site. We’d welcome an opportunity to have input into that.”

State officials have not said what agencies were, and potentially still are, looking to consolidate at a single location. Heidrich has said, before the bids to provide leased space were rejected, a number of state agencies now in leased space and state-owned space could occupy the proposed consolidated offices. He said determining who the occupants would be would depend on the lease agreements the department negotiates with the owners of properties where those agencies are located now.

The state’s lease for 58,000 square feet of space in Key Plaza in downtown Augusta for the Department of Health and Human Services expires in June 2018. That is one of several locations in Augusta where the state leases office space. That includes Central Maine Commerce Center, where the state occupies roughly 70 percent of the sprawling former computer plant in north Augusta, with leases for a combined 84,000 square feet of space for the Department of Public Safety, the Department of Defense, Veterans and Emergency Management, the state Gambling Commission and the Office of Information Technology. Those leases are due to expire in 2019 or 2020.

Heidrich said the state’s intent in limiting the location of the proposed leased office space to within a mile of the State House was to gain efficiencies of having offices consolidated together close to other state functions.

Leasing space was not the state’s first preference. The original plan was to build a state-owned office building in Augusta, but state legislators did not include Gov. Paul LePage’s proposal to borrow $112 million to renovate state-owned properties and build a building to consolidate state agencies in the 2015 state budget. Instead legislators reduced that amount to $23 million, so the administration put out the request for proposals for leased space.

Keith Edwards — 621-5647

[email protected]

Twitter: @kedwardskj

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