Agency officials defended the State Data Center before skeptical lawmakers Tuesday, saying the controversial building could be profitable for the state in the long term.
The hearing of the House Committee on General Government Appropriations and Oversight centered on a business strategy, written by Excipio Consulting and paid for by the state, that legislators requested last year. The report says the data center complex is much bigger than the Information Services Department will need and outlines a plan for dealing with the excess space and limiting costs from moving in and paying rent in the new building.
Given the state’s budget crisis, lawmakers have expressed concern about the project, which would have a net cost of about $27 million in the upcoming biennium. But the center’s supporters said the long-term benefits outweigh the costs now.
“I’m painfully aware that 2011 is a bad year to open a new building,” said Stan Marshburn, deputy director of the Office of Financial Management.
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The $305 million project, which was funded through bonds and is scheduled to be ready for move-in in July, included the construction of about 395,000 square feet of new space including a utility building, offices and four data center areas to house state information technology services. Critics of the project have said that the center is expensive and much bigger than the Department of Information Services can use.
Lawmakers at the hearing asked agency officials about their plans for mitigating the costs of the new center and handling the excess space. Rep. J.T. Wilcox, R-Yelm, asked whether the agencies would do things differently if they were to plan the project again.
In response, Marshburn said he thought the state would be able to turn the data center into an asset and use it to create better information technology services, though the recession had made up-front investments for long-term returns a less palatable way to do business.
Rep. Reuven Carlyle, who requested the business plan and has been critical of the project since 2009, said the hearing was a step in the right direction. He said he was more interested in perfecting the existing business plan than in investigating what happened in the building’s design.
“Their business plan is a good first, working draft,” said Carlyle, a Seattle Democrat.
The business plan estimated that the infrastructure the Information Services Department planned to move into the new data center could fit into about 6,400 square feet of space, though the center includes four 12,500-square-foot data center areas.
When the department initially got funding for the project in the 2007-09 capital budget, Todd said, officials had planned to overbuild to have space to expand into. Now, she said, budget cuts and changes in technology mean any expansions probably will not happen for a while.
The new buildings also include office space that will cost the state about $44 per square foot through a lease-to-own agreement. The cost is well above the average for office space in Thurston County, which is about $25 per square foot, but it is a fixed rate that will not go up over the 30-year lease arrangement.
Todd said the rent costs were high because the building had to meet Capitol Campus requirements, including having a stone exterior, achieving the LEED Gold environmental standard and built to last 50 to 75 years.
“Most buildings in the area you really can’t compare to it,” Todd said. “It’s kind of an apples-and-oranges kind of comparison.”
Overall, according to the report, the center will lead to an office-space cost increase of about $30 million for the 2011-17 period and a data center cost increase of about $97.8 million. But these could be offset by about $101 million that the report estimated the state could bring in by renting excess space in the building and cutting other information services costs.
By fiscal year 2016, savings from the new center could begin to outweigh costs.
“The punch line about this is that there’s a sticker shock that comes with moving into a new building,” Marshburn said. “The bottom line for us in the business plan is that by the year 2015, the data center will be costing us less than our current state, that it will return savings to the taxpayers – that requires significant up-front investment.”
Rep. Zack Hudgins, a Tukwila Democrat and committee chairman, said the hearing left him with some concerns about the project given its size and the state’s budget shortfall.
Marshburn said the Legislature could decide not to fund the move into the building, but the state already has a financial commitment to pay off the bonds that financed the project.
Katie Schmidt: 360-786-1826 firstname.lastname@example.org