Haslam administration outsourcing experiment hits snag in Chattanooga

NASHVILLE - Back in April 2014, hundreds of state government employees in Chattanooga began moving out of two state-owned buildings into privately leased space as the administration of Gov. Bill Haslam embarked on a controversial outsourcing experiment billed as a cost-cutting move.

But today, up to 80 or so of the state employees still remain in one of the buildings, the now otherwise-vacant, seven-story, 172,000-square-foot Chattanooga State Office Building on McCallie Avenue.

The bulk of these employees - 56 - work for the Tennessee Department of Correction.

It was almost exactly a year ago - Sept. 17, 2014 - that a state General Services official told the Times Free Press by email that the department "expected in about six weeks" to issue a request for proposals to find office space for the local Correction Department staff.

Ten days ago, on Sept. 4, a request for proposals finally was issued. The very same day, General Services issued a separate request soliciting local office-building owners to submit proposals to house employees with three other state agencies still in the Chattanooga State Office Building.

Those are the Tennessee Attorney General's Chattanooga office, the state Alcoholic Beverage Commission and the Human Rights Commission.

Asked about the delays, General Services Commissioner Bob Oglesby last week acknowledged "we're still trying to find an adequate location [for] those people. I believe [the issue] is the Department of Correction tenant, so to speak. And they're not suitable for all locations."

For the Correction Department, that's due at least in part to one simple fact: Among department employees are parole officers whose job is dealing with released felons, including sex offenders.

And because sex offenders face restrictions on where they can go in public, they aren't allowed to be close to facilities where there are children.

"Since some of the offenders we serve are sex offenders, our location must meet strict requirements including not being in close proximity to schools, day cares, and playgrounds," Correction spokeswoman Neysa Taylor said last week in an email. "We also must be on a bus line so that offenders have no obstacles due to transportation when reporting."

The Chattanooga State Office Building and the nearby James R. Mapp State Office Building were among six state-owned buildings across the state that were to be closed. Haslam administration officials cited huge costs for necessary repairs and energy inefficiencies.

Closures were based on recommendations made by Jones Lang LaSalle, a Chicago-based real estate services company. The company won a bid consulting contract to see how the state could save money on office space. That bid was expanded through amendments approved by the building commission, and the firm later won a second bid for a lucrative contract that allowed Jones Lang LaSalle to manage dozens of state office buildings and strike real-estate leasing deals.

In its initial study of state buildings, Jones Lang estimated it would cost $8.75 million to address repair issues at the Chattanooga State Office Building, with the bulk of the cost going for heating and air conditioning system replacement. Jones Lang actually recommended the state construct a new building. But the Haslam administration opted instead to find private leased space.

Jones Lang, now in charge of finding landlords for many departments, gets a 4 percent commission on each lease.

Meanwhile, Haslam is looking at outsourcing of real estate, energy management and building operations for almost all state-owned buildings including state parks, prisons and Tennessee's public colleges and universities. Campus workers and Democratic lawmakers are in an uproar over that.

House Minority Leader Craig Fitzhugh, D-Ripley, said Sunday the experience at the Chattanooga State Office Building with the Department of Correction doesn't speak well of the administration's attempt at further outsourcing.

Having "the old building operating at the same level, it's not productive," Fitzhugh said. "It's obvious they've not thought this through. I think they have to realize that some things that government has to do are just different from the private sector and you can't expect to let the private sector make money off it. And I think that's been proved time and time again."

John M. Hull, General Services' deputy commissioner and head of the State of Tennessee Real Estate Asset Management, attributed delays to the department "trying to find the unique needs of every agency within the Chattanooga area. There were so many agencies within that building, we just did it in chunks essentially."

Asked about the cost-effectiveness of heating and cooling a mostly vacant building, Hull said, "we've actually relocated those agencies to a unique floor in the building. And [the University of Tennessee at Chattanooga] is going to take over the other floors of the building over time."

As to whether taxpayer dollars are being wasted, Hull said, "it's part of our process to move them out in phases, out of the building and we're almost there. And that will happen in the early part of next year."

"I don't know that much about it," House Majority Leader Gerald McCormick, R-Chattanooga, said last week of the situation.

McCormick said his wife, a top Chattanooga State official, recently told him the community college had "wanted to do something in the building educationally and they couldn't because they still had the parole people there. And that kept them from doing it."

Senate Speaker Pro Tem Bo Watson, R-Hixson, said it "does sound like it's taking them a while to get them out."

But, he noted, "the reason they're getting out of that building is the maintenance and upkeep of that building is so expensive" and part of the state's strategy is to cut costs. "The bottom line is, I think, that building is not economically viable for the state."

Chuck Cantrell, UTC's associate vice chancellor for communication and marketing, said in an email that the university now has "full possession of the Mapp building and [is] moving forward with renovations."

He said the "Corrections folks are paying their part of the expenses to operate" the Chattanooga State Office Building.

Meanwhile, in the two requests for proposals, state officials say their hope is to relocate all four agencies to the new office space as of June 1, 2016.

Haslam last week re-emphasized it would be up to the University of Tennessee and Tennessee Board of Regents' systems whether to participate in extending outsourcing of management and energy operations.

Contact Andy Sher at 615-255-0550 or asher@timesfreepress.com.