Lawmakers on Friday praised a plan to have a contractor build new state office buildings then lease-purchase them.
Public Works Manager Dan O'Brien presented plans for two matching buildings to be constructed to the north of the Nevada Department of Transportation on south Stewart Street, saying they would become the new homes for Conservation and Natural Resources and the majority of Human Resources.
Traditionally, the state either rents office space or builds its own, either with cash or bond money. But needs have been growing faster than the money available to pay off bonds.
O'Brien and Treasurer Brian Krolicki told members of the Senate Finance and Assembly Ways and Means committees Friday the alterntive is a lease-purchase plan ruled constitutional two years ago by the Nevada Supreme Court.
The idea is to have a contractor build the structures to state specifications, funded through a nonprofit corporation -- the Nevada Real Property Corp. -- controlled by the state. The corporation would sell "certificates of participation" to raise money to pay for the construction.
The state would lease the buildings and, instead of paying rent each month to a private developer, in effect pay mortgage payments for the next 25 to 30 years until the state owns the buildings.
O'Brien advised the subcommittee the state will have to put in $13.7 million in bond money to jump-start the two projects.
Krolicki said the state now spends $22.6 million a year statewide on rental space. The lease-purchase plan would take those rental payments into debt service payments on the buildings.
"Over the next 30 years, we can convert that rent money that would just be gone into over a quarter-billion dollars of state-owned property," Krolicki said.
He said the advantage to people buying certificates of participation would be a higher interest rate than they get from public bonds, while their earnings would remain tax free, as bonds are.
He said the two buildings are the pilot program to test the system. In the future, he said, it could be especially valuable in Southern Nevada where growth is driving much greater needs for expanded state agencies.
"I think it's a very creative means of financing for the state," said committee member Assemblyman David Goldwater, D-Las Vegas.
Senate Majority Leader Bill Raggio, R-Reno, echoed those remarks: "I think this is a great concept."
O'Brien said requests for proposals are to go out later this month and a design-build team selected by the end of June. He said construction could start in August with one builder doing both structures at the same time to save money.
When completed, each building will provide about 120,000 square feet of space. They will be mirror images of each other, both six stories tall, costing about $20 million apiece.
Conservation and Natural Resources Director Mike Turnipseed said the new building will enable him to consolidate most of his divisions.
"Right now we have nine addresses and we're looking for 3,400 square feet more at a 10th address," he said.
Only the Wildlife Division in Reno will remain separate, as will Forestry, which will remain with other emergency services. He said that will be more efficient for his department's operations, as well as save money on computer service lines, phone systems and other infrastructure now duplicated in every office.
Human Resources Director Mike Willden said the same applies to his eight divisions, which would move into one office except for the Welfare branch. Human Resources is the state's largest agency with more than 3,500 employees.
The committee is expected to back the proposal.
