SENATE BILL REPORT

ESB 6073

BYSenators Fleming, Sellar, Bottiger and Hayner

Revising the authority of the state to lease buildings.

Senate Staff:Eugene Green (786-7405); Barbara Howard (786-7410)

                  April 21, 1987

AS PASSED SENATE, APRIL 26, 1987

BACKGROUND:

Under current law (Chapter 43.82 RCW), the Department of General Administration has the power to acquire, construct and provide office or other needed space for state agencies, unless the Department delegates that power to the agencies themselves, or unless the agency has the power directly, as in the case of an institution of higher education.  It has been suggested that the leasing and acquisition provisions be made more specific, including allowance for lease-back transactions.  Similar powers are granted to cities and towns under Chapter 35.42 RCW.

SUMMARY:

The state is empowered to lease a building for its use for a term not exceeding 50 years.  (Similar to RCW 35.42.020 and - .030.)  "Building" is specifically defined as one approved by the State Capitol Committee, to be constructed on the northeast corner of the Capitol Campus on a site bounded on the north by 11th Avenue, on the east by Jefferson Street, on the south by 12th Avenue, and on the west by Washington Street, including the site, necessary facilities and parking.  Leases may include either options to renew or options to purchase.  No lease may be construed to provide that the state is under any obligation to purchase the leased building.  However, the lease may include as part of the rental payment:  taxes and assessments on the building, insurance for the benefit of the lessor and repair, replacement, alterations and improvements during the term of the lease.  (Similar to RCW 35.42.040 and -.050.)

In anticipation of acquiring a site and construction of a building, the state may enter a lease prior to actual site acquisition or construction, but the lease may not require payment of rent until the building is ready for occupancy.  The lessor must furnish a satisfactory bond conditioned on delivery of possession of the completed building.  The lease must provide that no part of the cost of construction of the building shall ever become an obligation of the state.  (Similar to RCW 35.42.060.)

If the state desires to have a building erected on land owned or to be acquired by it, the state may lease the land for a reasonable rental for a term not exceeding 50 years if the state leases back all or part of the building for the same term.  The following conditions must be among the terms of the lease:  (a) no part of the cost of construction may ever become an obligation of the state; (b) the state has a prior right to occupy any or all of the building upon payment of an agreed rental amount, which shall not exceed prevailing rates for comparable space; (c) the lessee is allowed to rent any unneeded portion of the building to suitable tenants approved by the state, during any time that the building is not required for state occupancy; and (4) all buildings and improvements of the land become property of the state upon expiration of the lease.  (The language is virtually identical to that for cities and towns in RCW 35.42.070.)

The lease and lease-back agreements must be based upon a competitive procedure providing an equal and open opportunity to qualified parties on terms most advantageous to the state.  The selection process is similar in several respects to the requirements for constructing other state buildings, and includes (a) consideration of qualifications and past performance data of the proposed lessees; (b) responsiveness to solicitation requirements; and (c) compliance with statutes and rules concerning public contracts.  The state must discuss the project with at least two proposed lessees and select the most highly qualified firm, and negotiate a contract at a fair and reasonable price, with the approval of the Legislature or State Capitol Committee.  If the state is unable to negotiate a satisfactory contract, negotiations with the first firm shall be terminated and the process is repeated with other firms until an agreement is reached.

All leases under these provisions are exempt from:  the excise tax on real estate sales, the business and occupation tax, and the retail sales tax (same as RCW 35.42.090).

This act is codified as a new chapter in Chapter 43.82 RCW, "State Agency Housing."

Fiscal Note:      none requested

Effective Date:The bill declares an emergency and takes effect immediately.