DFCM outlines lease-rate method, flags agency data gaps and capital-improvement priorities
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Summary
DFCM told the Transportation Infrastructure Subcommittee it has created lease-rate estimates under House Bill 349 (2019) to capture capital-replacement and capital-improvement costs, but staff warned that incomplete agency reporting forces estimations; DFCM urged clearer reporting rules and discussion of how collected capital-replacement funds would be used.
The Division of Facilities Construction and Management (DFCM) told the Transportation Infrastructure Appropriation Subcommittee on Feb. 4 that it has developed a lease-rate methodology to supplement operations-and-maintenance funding and better account for capital replacement and capital improvements.
“We use the 1.3% as a midpoint between 1.1 and 1.5%,” DFCM division director Andy Maher said while explaining how the lease-rate work implements House Bill 349 from 2019. He said the purpose is to produce a private‑sector‑style lease rate that more accurately reflects capital renewal and improvement costs than the current O&M-only rates.
DFCM said it began by asking state agencies to self-report detailed cost data (elevator contracts, insurance, utilities, personnel and maintenance categories). The agency then applies a capital‑replacement factor, a capital‑improvement factor and regional adjustment factors when data are missing. Maher warned that many spreadsheet cells were flagged in red or yellow—indicating missing or non‑variable data—and that the absence of consistent reporting forces DFCM to rely on baseline estimations and regional factors.
The agency estimated a current replacement value for state facilities of roughly $18.7 billion and noted statutory guidance that new capital-development projects must meet at least 1.1% in capital‑improvement funding before the legislature will approve new buildings. At current funding levels DFCM showed how many projects could be funded at 1.1%, 1.3% and 1.5% (roughly 362–484 projects, depending on the rate).
DFCM raised two policy questions for the Legislature: whether the agency should have rulemaking authority or statutory reporting requirements to compel standardized data submissions from state agencies, and what the legislature’s intent should be for the capital‑replacement dollars collected through lease rates—whether those dollars would be retained for the owning agency, held centrally, or used for a statewide pool of projects. DFCM said it currently assigns $1.50 per square foot for capital renewal in its model but suggested that figure may need upward adjustment for escalation and fuller definition of intent.
DFCM also described the agency’s work to identify vacant or underutilized space and the revenue shortfall that vacant space creates for the internal-service fund model used to recover facility costs. The presentation cited consolidation successes, such as moving CCNE into the North Capitol Building to reduce underused floors at the Tax Commission building.
What happens next: DFCM asked the committee to consider interim discussions on possible rulemaking, clearer reporting deadlines and guidance on the use of capital‑replacement funds. Staff said they will reconcile numbers with the Board of Higher Education and DFCM before the committee’s final meeting.
