New state buildings on hold as cost climbs

By Adam Wilson | The Olympian • Published May 23, 2008

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Murphy has criticized the method used to pay for the project. Under the scheme, the developer will create a nonprofit corporation to hold the title to the property. The state will lease the buildings from that entity for about 25 years, after which the state will own the property again.

Sen. Karen Fraser, a Thurston County Democrat, defended the lease-purchase system. She leads a committee that writes the construction budget and says legislators support the method.

"If you look at it from a total-project point of view, it's cheaper for the taxpayers in the long run. You go with a guaranteed price, and that's it," she said.

Under the lease-purchase method, the state commits to a certain lease payment. It includes higher interest rates than in traditional construction bonds, Fraser said. But if construction or maintenance costs go beyond what that payment will cover, the developer pays the difference because it owns the building, she said.

Murphy, Fraser and other leaders took part in a study of the method in 2006. Although governments like the system as a way of transferring risks to the private builder, there's little evidence to support the claim that it's cheaper over the long haul, according the report, which Murphy's office issued.

The Legislature ordered the Department of Information Services to use a leasing method to pay for the buildings in 2007.

The project is poised to fall off its tight timeline before its budget package is approved, however.

Residents of the nearby South Capitol neighborhood appealed the state's plan to lessen environmental effects of the projects, saying the state is underestimating how much traffic that 1,350 employees set to work at the buildings will generate.

The appeal kept the agency from submitting its budget package to the State Finance Committee on Thursday. Murphy said at the meeting, which included Gov. Chris Gregoire, that he was not willing to approve the package.

"I don't think we have sufficient, accurate information to be making this kind of financial commitment — particularly in these uncertain times," he said in a prepared statement later.

With no budget approval and a pending appeal of the environmental plan, the agency cannot move forward on the project, not even to tear down the buildings on the site, Robinson told a separate panel of legislators and architects Thursday.

Heavy construction work was set to begin in June so the buildings could be completed in February 2010. That timeline is critical to provide a new home for the state patrol. The patrol must vacate the General Administration Building on the north side of Capitol Campus then, because the GA Building is scheduled for demolition by April 2010.

Razing the building is necessary to make room for another massive project, a Heritage Center and executive office building due in 2012.

Greg Klein, president of the South Capitol Neighborhood Association, said linking the two projects puts pressure on the Department of Information Services.

"Maybe this is moving too fast," he said.

Fraser said she was concerned that the Legislature had seized an opportunity to complete several important moves — such as moving its big computer systems out of antiquated space and building a new home for the State Library — at once.

"Every so often, a lot of things happen. I don't think this will be a permanent state of affairs," she said.