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The Chattanooga State Office Building is located at 540 McCallie Ave.

NASHVILLE — Dozens of Tennessee government workers remaining in the former Chattanooga State Office Building will be moving into privately leased space next year following a panel's approval.

Members of the executive subcommittee of the State Building Commission OK'd the deal Monday with little comment.

John Hull, deputy commissioner of General Services, later said employees with the Department of Correction and the state attorney general's Chattanooga office, as well as local offices of Alcoholic Beverage Commission and the Human Rights Commission, likely will move into the new space sometime next summer.

"It'll probably occur by June of 2016 after we acquire the leases and fill them out according to our specifications," Hull said.

Specific figures for how many workers are affected were unavailable on Monday. In September, officials roughly estimated about 80 employees remained in the McCallie Avenue building, ownership of which was transferred to the University of Tennessee at Chattanooga.

The four agencies are the last to leave the state building.

Luken Holdings Inc. won the bid on a five-year lease to provide office space for Department of Correction employees. The new site is at 100 W. M.L. King Blvd. The state is leasing 15,984 square feet and will pay annual rent, utility and janitorial costs totalling $287,712 in its first year, or $18 per square foot.

Winning the bid for housing the three other agencies was Tallan Holdings Co. The office building is located at 3916 Volunteer Dr.

Under Tallan's 10-year contract, the state is leasing 8,255 square feet. Combined rent, janitorial and utility costs are $187,801.25 per year, or $15.30 per square foot.

Other state agencies such as the Department of Human Services moved out of the State Office Building several years ago. The moves came under Gov. Bill Haslam's ambitious statewide experiment to outsource management of many state buildings maintenance and operational functions to a private firm, Chicago-based real estate giant Jones Lang LaSalle.

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Under its initial contract, JLL examined the state-owned buildings and determined several, including the Chattanooga State Office Building, had long-deferred maintenance and repair issues totaling millions of dollars.

Citing costs for repair, JLL recommended the state abandon the McCallie Avenue building and the nearby James R. Mapp Building. But JLL also advised the state to construct a new state office building, saying long-term costs would prove cheaper.

But the Haslam administration ignored that and opted to lease private office space instead. And under provisions of its contract, JLL negotiated the leases and is paid a 4 percent commission.

The company will be paid a $57,542.40 commission on the five-year Correction Department lease with Luken and another $75,120.50 on the 10-year Tallan lease.

After an inquiry earlier this year about why several agencies remained in the State Office Building, a Department of Correction spokeswoman said the agency, which also handles parolees or probationers, has unique needs.

For example, it can't just locate anywhere because of state restrictions dealing with sex offenders. Convicted sex offenders are required by law to keep their distance from schools and other places frequented by children.

"They do have their own unique specifications," Hull said. "They can't be near schools and other things. And they didn't need to be downtown, necessarily. So we took our time to find a correct location. Again, we had several proposals and locations around Chattanooga to be able to do that. We finally settled on one."

He said it just takes time to work through the state's requirements.

Meanwhile, the state has decided not to extend its contract with JLL on negotiating private leased space and is putting the service up for bid again in separate geographic regions. But JLL remains eligible to bid to provide the service.

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

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