Ken Hare In Depth: Cost of state leases up 33 percent in six years

MONTGOMERY, AL (WSFA) - Alabama taxpayers should know that a large chunk of the tax dollars they send to Montgomery for state government goes for leases from private individuals and companies for buildings and other facilities. Last year, Alabama state agencies spent $37.61 million to lease everything from office space to boat ramps .

According to a report released recently by State Examiners of Public Accounts, the cost of such leases for state agencies edged up only slightly during fiscal year 2011-12, which ended Oct. 1, 2012. During the prior year -- fiscal 2011-12 -- state agencies spent $37.51 million on "real property leases" from private entities.

Still, the cost of leases is up by more than 33 percent since fiscal 2005-06,  when the state spent $28.24 million on such leases.

[ON THE WEB: Alabama Lease Information]

Meanwhile, the square footage of those leases has increased by only about 12 percent since 2005-06. The average cost per square foot has gone from $9.22 in fiscal 2005-06 to $11.87 per square foot last year.

Those are just a few of the facts that can be gleaned from an annual report by state examiners on "Real Property Leased from Private Entities."

In past decades, leases by state agencies of privately owned property were sometimes a way for key political officials to pass along favors to political supporters. But in recent years there have not been as many revelations in the news media about such politically motivated, sweetheart deals. I'll leave it up to readers to decide whether that is the result of more transparency in such spending, more honest politicians in office, or less hard-nosed reporting by the news media.

Here are some other factoids to be gleaned from the examiner's report:

-- The state Alcoholic Beverage Control Board had by far the most individual leases of any agency, with 184 leases costing more than $9.7 million. Of those leases, 168 were for ABC Store space, accounting for $8.42 million of the total spent by the agency on leases.

Mac Gipson, administrator of the ABC Board, points out that the cost of leases for that agency are covered by the markup on sales. "ABC leases are for prime retail space so that our customers have a safe clean place to shop," he said.

-- The Department of Rehabilitation Services had the second highest spending, with $4.75 million spent on leases from private entities. That included eight office leases for an average of $9.93 per square foot and 11 "office-storage" leases at an average of $10.72 per square foot.

-- The Alabama Department of Education spent $2.44 million on leases, but one lease accounted for $2.41 million of that total. It was for the Office of Disability Determination Service  in Birmingham, for an average cost per square foot of $21.15. The owner is listed in the report simply as "Woodscape, Ltd." and a notation says "owner did not respond to owner notification."

A spokesman for the Department of Education said the lease is funded with federal dollars. Whether the tax dollars for the lease comes from federal taxpayers or state taxpayers, that still appears to be a high cost per square foot, even for Birmingham.

-- The Department of Industrial Relations spent $2.3 million on leases, with the bulk of that going for 29 leases of office space for a total of 247,625 square feet. The average cost per square foot was $9.09.

-- By far the state agency paying the highest cost per square foot for office space was the Board of Examiners of Assisted Living Administrators, which paid the Assisted Living Association of Alabama a whopping $68.23 per square foot for office space on Carmichael Road in Montgomery. A notation in the examiner's report, however, says the lease also includes "746 square feet of shared space." But even when that "shared space" is included, the cost per square foot would be about $9. That means the public board appears to be absorbing the lion's share of the cost for the association.

Since the public Board of Examiners of Assisted Living Administrators is supposed to "license and regulate assisted living administrators in the state of Alabama," sharing office space with the private Assisted Living Association of Alabama seems like a very cozy relationship for what is supposed to be a regulatory agency.

-- Another large individual lease involves office-storage space leased by the Department of Human Resources for $1.2 million a year from LFH, Inc. While the annual cost is among the highest for a single lease, the annual cost per square foot is $4.13.

-- The cost per square foot for the 168 leases for ABC Store space around the state ranged from a low of $2 per square foot to a high of $23 per square foot. The ABC Store with the highest cost per square foot is located on South Memorial Parkway in Huntsville and is owned by Redstone Ridge LLC.

-- Alabama taxpayers get a heck of a deal from various entities when it leases 27 boat ramps around the state for a cost that ranges from $1 per year to nothing. The total annual cost for the boat ramps is a whopping $6 per year.

Taxpayers who want to take a closer look at the report can access it here:

The report breaks down leases by agency, by county where the property is located, and by the lease holder -- although the latter is often just a limited partnership or corporation that tells the taxpayer little about the actual individuals who benefit from the leases.

A caveat for readers who dive into the report on their own. Keep in mind that square-footage costs for office and storage space vary greatly depending upon location. For instance, a lease paying $12 per square foot in Homewood or Vestavia or Huntsville may very well be a better deal for taxpayers than one paying $6 per square foot in a small town in a rural part of the state.

The report by the State Examiners of Public Accounts is an important tool for governmental transparency. But it would be far more useful to the public if it contained more detail on the owners of leased property.


Ken Hare was a longtime Alabama newspaper editorial writer and editorial page editor who now writes a regular column for WSFA's web site. Email him at

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