Haslam presentation to bond-rating agencies says state 'will' do outsourcing

Tennessee officials say idea remains exploratory

Governor Bill Haslam speaks Friday, October 1, 2015 at the Jewish Federation of Greater Chattanooga.

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* Tennessee officials pitch state as the 'gold standard' to New York credit-rating agencies * Tennessee officials defend building-management outsourcing * Gov. Haslam moves to outsource building management, services in higher education

photo Tennessee created a slideshow for a bond presentation in which it said that it would reduce costs in facilities management outsourcing, but Gov. Bill Haslam later walked back the verbiage, saying that it was a list of "potential things that can happen."

NASHVILLE - While Gov. Bill Haslam says he has not decided whether to outsource management of more state-owned buildings, a document used earlier this month in presentations to New York bond-rating agencies specifically cites the controversial initiative.

In their Oct. 9-10 pitch to Wall Street experts reviewing the state's financial picture in advance of Tennessee issuing new bonds, the Republican governor and top state officials relied on a 63-page PowerPoint document.

A one-page section called "Looking Ahead" cites two specific initiatives "to reduce costs and improve productivity."

One is energy management. The other is "Facilities Management Outsourcing." That's the proposal now generating a ruckus among state government and higher education workers as well as many Democratic and some Republican legislators.

Haslam spokesman David Smith said Friday the PowerPoint's mention of outsourcing is not at odds with what Haslam told reporters Wednesday as the administration continues to walk back a confidential timetable.

First reported by Nashville's WTVF-TV last month, the timetable cited a July 1 date for outsourcing facility management and operations of most state-owned property, including colleges, state parks, prisons and more.

The governor and administration officials are adamant no decision has been made.

"I don't know how we can say that any more clearly," Haslam chided reporters last week when they asked about the controversial plan. "We've said that 10 times, that it is not decided yet."

The governor also defended his action in telling administration officials to be careful what they put in emails subject to the state's Open Records Act.

"We're exploring, are we doing real estate the right way? But there have been scores of stories of what the state is going to do, when we're not there," Haslam said.

Asked about the PowerPoint page, Smith said it "is not at variance with what the governor is saying."

"At these [presentations] one of the questions you're going to get is, and I'm paraphrasing: 'You've cut expenses, are you out of ideas?'" Smith said in an email. "And these are noted as some of the things we're looking at as we continually look for ways to reduce costs and increase productivity."

House Minority Leader Craig Fitzhugh, D-Ripley, was surprised when shown the PowerPoint page.

"It's pretty clear there," Fitzhugh said in an interview. "It doesn't say investigate. It doesn't say continue to look at it. What's going on? When you look at that statement in conjunction with everything that seems to be going on I don't see any indication that it's just an investigation. It looks like all signs point to all speed ahead."

He called it an "absolute concern."

Still, Fitzhugh noted, he had made similar rounds of bond-rating firms with former Democratic Gov. Phil Bredesen.

"It's one of those where you try to put your best foot forward in talking with the bond agencies," Fitzhugh said. "I guess they thought at least for that purpose that was the thing to do."

The copy of the state's presentation provided to the Times Free Press does have a legal disclaimer. It says in part that the information "is dated as of its date and is subject to correction."

The disclaimer also specifically warns that any information "should not be relied upon by potential bond investors or current bondholders, who should instead refer to the Official Statements of the State relating to the bonds when the Official Statements are made available."

The presentation to the bond-rating agencies was assembled by the Department of Finance and Administration, staff in state Comptroller Justin Wilson and Treasurer David Lillard's offices and other agencies. The section mentioning additional outsourcing was prepared by Finance Commissioner Larry Martin's office and presented by Martin.

In 2013, the Haslam administration outsourced operations and management of about 10 percent of its real estate portfolio, largely major office buildings, to Chicago-based real estate giant Jones Lang LaSalle. As many as two-thirds of the estimated 180 workers in those buildings lost their jobs when they didn't go to work for JLL.

But the Haslam administration says the buildings are better-operated now and JLL has hired more-expert workers to enable it to reduce its use of costly outside subcontractors. Officials also say those employees are paid more.

The administration also says JLL saved the state some $12.9 million over two years. And Haslam says it's only reasonable to look at other potential savings as he seeks to run the state without a general tax hike.

Last week, the Legislature's Fiscal Review Committee heard presentations about the JLL contract and about what administration officials say is still just an exploration of additional outsourcing.

Regarding the JLL contract, General Services Commissioner Bob Oglesby told the panel, "We are trying to hire the best people to provide the service, and we are not an employment agency to hire the general public any more."

Contact Andy Sher at asher@timesfreepress.com, 615-255-0550 or via twitter at AndySher1.