Moldy state of Michigan office building cost taxpayers $1-million-plus

[Guest guest]

Moldy state of Michigan office building cost taxpayers $1-million-plus since

problem first spotted

By Ron Fonger | Flint Journal

May 02, 2010, 1:00PM

http://www.mlive.com/news/flint/index.ssf/2010/05/moldy_state_of_michigan_office\

..html

FLINT — Three years after state workers began noticing mold growing in their

rented office on West Pierson Road, the Department of Human Services has finally

moved out.

But not before taxpayers were charged more than $1 million since 2007 for what

are now being called " horrendous " accommodations.

Department of Human Services Director Ismael Ahmed ordered offices — built

inside a former Arlan's department store — closed after seeing the building

firsthand Monday.

State officials and the pastor of Abundant Life Ministries, which owns the

building, said taxpayers got a fair deal, leasing the 40,000 square feet for

$30,540 monthly, not including utility, janitorial and other costs.

But others who visited the building recently said the lease price was far too

much, paid for too long, for substandard offices.

A state-commissioned environmental report issued in March said the building " has

reported to have been leaking for years from various roof leaks. Staff reported

mushrooms growing on the carpet on the east wall. The staff also has complaints

of allergy symptoms while they are in the building. "

The state's indoor air quality investigation also reported the Pierson Road

office was riddled with musty odors, wet carpet, water stains and mold.

" This is a bad building, " said Vera Rison, a member of the DHS' local advisory

board. " We really should have been " out of it before now.

The state has stopped paying its rent on the building, and a state official said

it will not make any more payments before the lease expires at the end of

September.

In the 20 years that the state has rented the Pierson Road building, the state

never opened the bidding process to other property owners.

The state's lease on the property dates to 1990 after having been renewed three

times — each time for an additional five-year term, said Kurt Weiss, a spokesman

for the state Department of Technology, Management and Budget.

Abundant Life bought the property in 2004 and renewed the lease with the DHS a

year later, Weiss said.

The Pierson Road lease for the DHS, the state's welfare agency, is one of about

600 worked out by the state DTMB, and those leases are typically renewed unless

the agency using the office complains about conditions, he said.

At Pierson Road, the state negotiated reductions in rent before exercising

options to renew the lease three times and also looked at the market to be sure

taxpayers received good value for what it received, according to the state.

Staying put generally results in " significant savings, " Weiss said, eliminating

the cost of moving and re-installing computer and other systems in a new office.

The Rev. Larry Holley of Abundant Life said the state got value for the more

than $1 million it paid in rent over the past three years.

Holley said DHS employees tired of their surroundings and expected like-new

offices in recent years, prompting their sudden move.

" After 20 years, you get thoughts of moving, " said Holley, who added he was

working with contractors to fix roof and mold problems before Monday's decision

by the DHS to leave the building.

" It's not like we haven't done nothing, " said Holley, who said he was in the

process of selling the building before the state walked out. " If it's so bad,

why would people want to buy it?

" It wasn't that bad — in my opinion, " he said. " They said we need to get

something done. We were all in agreement something needed to be done.

" It's not like we sat back and said, `Let the mushrooms grow.' `'

Bruce Siegel, who specializes in commercial real estate sales, said it's

difficult to say whether the state overpaid for the office space without seeing

details of the leases from Abundant Life, including who paid for insurance,

repairs, maintenance and other costs.

The Flint Journal has requested copies of those leases from the state through

the Freedom of Information Act.

" Rates in (that part of Flint) are substantially lower than most other parts of

the metropolitan area, " Siegel said. " Probably I wouldn't think (the rent) was

excessively high or low. I don't think there is a lot of good office space

available " in that area.

State Rep. Woodrow Stanley, D-Flint, and others said they want the new DHS

office to remain close to the Pierson Road facility to serve poor clients who

receive financial, food or medical assistance on Flint's north side.

" I can't think of any nice office space there, " Siegel said of the one-time

thriving commercial area of Clio and Pierson roads that was once home to giant

retailers such as Arlan's, the Fair and Yankee department stores.

Siegel said landlords everywhere in the area are having to accept substantially

less in rent for their buildings because of the area's poor economy in recent

years.

Weiss said the most recent five-year contract between the state and Abundant

Life saved taxpayers more than $50,000 total from 2005 until 2010 compared with

the previous five years.

Siegel said some real estate categories have seen lease rates drop much further

— up to 50 percent of what they were just a few years ago.

" Nobody likes to move, " Siegel said of the state's decision to continue to renew

its lease with Abundant Life. " You just get in the habit of renewing your

lease. "

Although several clients who showed up and found the Pierson Road office closed

Friday said they hadn't noticed obvious problems with the building, others who

saw it in recent months said taxpayers weren't getting a fair return on the

rent.

" It's not a place that was inviting, " said Genesee County Commissioner

Sims, D-Flint. " I wasn't pleased. ... The atmosphere has an effect on staff

morale and on clients, " Sims said. An office in poor condition means " you're

treating them like they don't matter. "

State records show problems at the office date to December 2006, when a notice

to fix mold was sent to Abundant Life.

" The landlord did not perform the work, " Weiss said. " The agency (did the work)

and withheld the expense from rent. "

In January 2009, the state received a notice of default on the mortgage for the

property, directing the state to make future payments to the bank instead of

Abundant Life. A final notice about mold problems was sent to Abundant Life in

March, Weiss and Holley said.

State Rep. Lee , D-Flint Twp., said the state may have waited too long

to get out of an old building and an unfavorable lease.

" I think he (Ahmed) saw it, " said , who visited the building less than

two months ago. " You could tell there was some functional obsolescence. "

The DHS said officials and clients who normally receive services from Pierson

Road will be able to get assistance at two other Flint locations: 125 E. Union

St. or the McCree District Office, 630 S. Saginaw St.

Plans call for the agency to move on a short-term basis to a former Kmart

building on Pierson Road in Mt. Township, county DHS Director Sheryl

said.

The state is expected to construct an office building in the city of Flint by

June 2011, she said.

Holley said he doesn't blame the state for leaving months in advance of his

lease expiring and has no plans to sue for any unpaid rent. He said he plans to

renovate the building for use by the community.

" I don't feel they did me wrong, " he said. " Sometimes a relationship can end in

a good way. Sometimes it ends a little rocky. "