BATON ROUGE, La. (AP) — Louisiana state agencies are paying above-market rates to rent office space from New Orleans Saints owner Tom Benson, and the state is paying $625,000 for space it isn't using, according to an audit released Monday.
Legislative Auditor Daryl Purpera's office reviewed the lease, which was negotiated by Gov. Bobby Jindal's administration in 2009 as part of a package of incentives that replaced a previous state deal with the NFL team.
The deal keeps the Saints in New Orleans through 2025 and scrapped direct cash incentive payments the state had been making to Benson, in exchange for improvements to the New Orleans Superdome and the office lease arrangement.
The Jindal administration has said the deal saves the state millions it would have paid under the old deal, while also keeping an economic driver for the state.
Louisiana entered into a long-term lease to rent about 323,000 square feet of office space in downtown New Orleans from Benson's company Zelia LLC, consolidating state agency leases from around the city into one building, now called Benson Tower.
Agencies moved into the building in February 2011, and the lease runs through December 2025. The audit says the state pays annual rent of about $7.5 million and another $625,000 for vacant space, up from about $4.6 million in 2010 before the rental deal with Benson.
"Lease costs, including amounts paid for vacant space, have nearly doubled since 2010 and exceed current market rates for comparable properties in the New Orleans area," auditors wrote.
Before moving agencies into Benson Tower, the state paid an average of $17.66 per square foot of office space.
If agencies had stayed in their previous locations, they would now be paying an average of $19 per square foot, the audit says.
To Benson, the state this year is paying $25.12 per square foot, and the rate can increase yearly with an inflationary adjustment, according to the audit.
Mark Moses, director of the Jindal administration's Office of Facility Planning and Control, defended the office lease arrangement.
He said the reworked deal with the Saints saved Louisiana more than $280 million that it would have otherwise paid in cash subsidies, while also getting Benson to invest in vacant property and generating millions in economic activity for the region.
"The New Orleans Saints are an important part of Louisiana's culture as well as an economic driver for New Orleans and the rest of the state," Moses wrote.
Moses said his office has been trying to sublease the vacant space the state is renting and is working on a list of possible tenants outside of state government.
Purpera's office warns that the state could run into trouble using federal dollars to pay for the above-market rate rental price and could be forced to repay the money.
"State agencies have expressed concern with the Division of Administration that annual rental rates charged to federal programs may not meet the definition of reasonable and cost-effective under federal program guidelines," auditors wrote.
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Posted on Tue, September 9, 2014
by Melinda Deslatte, Associated Press