DFCM urges better agency reporting as it builds lease‑rate model and outlines capital‑improvements priorities

The Division of Facilities Construction and Management told the Transportation Infrastructure Appropriation Subcommittee on Feb. 4 that it is working to implement House Bill 349 (2019) by developing lease rates that reflect the full cost of occupying state buildings rather than relying on operations-and-maintenance (O&M) charges alone. Andy Maher, DFCM division director, said the agency combines self‑reported O&M data with factors for capital replacement and a capital‑improvement factor DFCM currently models at about 1.3 percent.

Maher and Scott Whitney, DFCM facilities program manager, said the approach is meant to produce a private‑sector‑style lease rate that adds a pro rata amount for capital renewal and improvements to the O&M base. "We can develop a good idea of what our space would be if we were to lease it similar to a private sector model," Maher said. DFCM uses agency self‑reported costs where available and regional adjustment factors where reporting is missing.

DFCM emphasized a major limitation: incomplete agency reporting. Whitney showed the lease‑rate spreadsheet with many cells missing data, forcing DFCM to estimate values and apply adjustment factors. The agency proposed potential rulemaking authority or statutory direction to require consistent reporting in a standardized format so lease rates can be calculated reliably.

Committee members raised questions about valuation choices and whether the internal service fund model adequately captures long‑term replacement costs. Senator McKay asked whether DFCM "marks to market" and whether tax or other market factors are included; Maher said DFCM models a private‑sector equivalent but generally does not add tax amounts the state would not pay. The discussion also touched on whether the state should prefer owning versus leasing; DFCM said ownership can be more cost‑effective over the long term but acknowledged vacancies and uncertain occupancy complicate long‑term investment decisions.

DFCM proposed a preliminary capital‑renewal placeholder of $1.50 per square foot and asked the committee to clarify the legislature's intent for any collected funds (whether held for each building or pooled for statewide projects). The division recommended working with risk management to validate current replacement values (CRV) used in allocating capital‑improvement funding and said CRV commonly omits some infrastructure costs.

The presentation closed with DFCM asking the committee to consider interim work on improving reporting compliance, clarifying capital‑improvement intent, and validating CRV data before finalizing lease‑rate estimates for the voting packet and next session.