New financing for buildings proposed

Monday, April 28, 2003 | 9:05 a.m.

CARSON CITY -- The state spends more than $22.6 million a year in leasing private office space for its agencies scattered throughout Nevada.

Gov. Kenny Guinn and state Treasurer Brian Krolicki have developed a plan to turn some of the rent into financing for construction of state-owned buildings.

"We will be converting rent money into a quarter of a billion dollars of development over the next 30 years," Krolicki told a Senate-Assembly budget subcommittee Friday, whose members applauded the plan.

A nonprofit agency would be created to lease the land from the state, Krolicki said. The nonprofit, the Nevada Real Property Corp., would then issue certificates of participation to sell to investors to raise construction money.

The Nevada Supreme Court has ruled that this kind of arrangement is legal.

When construction is completed, the state agencies would move in and pay rent, which would go to pay off the investors. At the end of the payments, the state would own the buildings.

"We're converting money for debt into equity," the treasurer said. "This is the most profound legacy we will ever have, but most people will not understand it."

The state traditionally has financed construction of office buildings through cash or by selling general obligation bonds that are paid off over an extended period. But the state can issue only so much debt through bonds. The state Constitution prohibits the state's debt from being more than 2 percent of the assessed valuation. The debt is paid off by the state taking 15 cents of the property tax rate.

The unused bonding capacity as of June 30 last year was $383.6 million. Guinn is recommending $132.1 million in new bonds that would require an additional one penny on the tax rate.

The bonding capacity being used by Guinn is the traditional method of financing and is not tied to the new plan.

This Guinn-Krolicki plan would not count against the state's debt rate.

The state currently leases 1.5 million square feet of private office space, more than 310,000 square feet of it in Clark County, Cindy Edwards, property manager for the state Buildings and Grounds Division, said.

That does not include the University and Community College System or the state Transportation Department.

In Southern Nevada the rents range from $1.80 a square foot to a little more than $2 a square foot. Those are the most expensive in the state, Edwards said.

The first two lease-purchase projects will be a human resources building and a natural resources headquarters, both to cost $16.5 million and be located on state-owned land in the capital complex in Carson City.

Mike Turnipseed, director of the state Department of Natural Resources, said he has nine departments and two programs spread over eight locations. Putting his agency in a single site would save communications and other costs, he said.

Mike Willden, director of human resources, echoed that testimony. But he said he wouldn't be able to get all of his agencies into the proposed 120,000- square-foot building.

The subcommittee reviewed a number of other construction projects but took no action on them.