Federal government’s rent for office space eclipses purchase, records show |

Federal government’s rent for office space eclipses purchase, records show

The government has paid more than $45 million to occupy a building it could have bought at half the price and is scheduled to continue paying about $3.5 million a year to lease the FBI's Pittsburgh Field Office on East Carson Street, records show.

The General Services Administration agreed in 2000 to lease the South Side building that Oxford Development Co. would build. That was at least a decade after the Government Accountability Office highlighted problems with such long-term leases.

In 2003, the continued practice led the GAO to put property management on its list of programs at high risk for fraud, waste, abuse or mismanagement, where it remains.

It's a popular target for watchdog groups such as Citizens Against Government Waste because there's little government — and even less public — oversight of the program.

“There's no good auditing of the leases, so there's not a good way to tell if we're getting a good deal,” said Leslie Paige of Citizens Against Government Waste. “Nobody is taking a look at them. They're going on forever, and we might as well own the building.”

The GSA said in a statement that it agrees that owning is often more cost-effective and it has slowed the growth in the amount of space it has under lease.

“However, the agency does not have the funding available to purchase, renovate or construct every building,” the agency said.

The agency contends it has paid $32 million, not $45 million, so far on the FBI building lease.

The Tribune-Review's figure comes from records from 2002-11 and the GSA's lease inventory reports from 2012-14.

The FBI building is not the only federal lease in Western Pennsylvania. The government leases about 45 percent of the 2.4 million square feet of office space it uses in the region, according to GSA figures.

Annual rent for the 68 leased spaces: about $24.8 million. They include long-term leases for Bankruptcy Court in the U.S. Steel Building, the Citizenship and Immigration Services Office in the South Side, and the Drug Enforcement Administration Office in Kennedy.

Out-of-state owner

Oxford Development bought the site for the FBI building from the city's Urban Redevelopment Authority in 2001 for $20,000, Allegheny County records show.

It was awarded a contract to build and lease the building to the government.

Oxford later sold the property to Pittsburgh FBI GPT Business Trust, a subsidiary of Government Properties Trust Inc. of Omaha. A spokesman for the Nebraska company could not be reached.

Jeremy Kronman, who negotiated the government lease for Oxford Realty Services, said it was standard practice then — and now — for the government to lease office buildings and not buy them.

The building cost $20 million, but it costs more than that to use it, Kronman said. The lease includes costs such as utilities, cleaning and snow removal, he said.

Leasing allows the government to design a building it needs, he said, and since the property stays in private hands, the owners pay property taxes.

“I like that model,” he said.

The Nebraska company pays about $118,500 in property tax annually, according to county records.

Jeff Killeen, an attorney and retired FBI special agent who worked in Pittsburgh when the office was built, said the FBI has outgrown the building and the government won't be saddled with it if the agency moves.

The 9/11 terrorist attacks delayed the FBI's scheduled move to the building in fall 2001, and the agency's duties and personnel rapidly expanded.

“By the time we moved into the building, it was too small,” Killeen said.

Postal Service exception

The White House in 2011 estimated the government owns 14,000 buildings and other properties it does not use, and thousands more that are underused. Eliminating those could save taxpayers about $15 billion in the first three years.

The White House listed two vacant buildings in Western Pennsylvania; one since has been sold, and an agency moved into the other.

Whether a federal agency can lease space depends on what's available in government-owned buildings, said Stephen Miller, manager of the GSA's Pittsburgh Field Office: “There's an executive order that says if there's space available in a federally owned building, that's where we should look first.”

An exception is the Postal Service, an independent agency that manages its property. The agency moved from the Federal Courthouse, Downtown, in February, vacating about 30,000 square feet, said Tad Kelley, a Postal Service spokesman.

The move saves the Postal Service about $864,000 a year — the difference between $1,027,000 it paid the GSA for courthouse space and $163,000 it pays the owner of Liberty Center, Starwood Capital Group of Greenwich, Conn., for 4,465 square feet of retail space, he said.

The Postal Service used about half of the space it leased in the courthouse when mail-sorting functions and carriers transferred to other sites, Kelley said.

“We don't need as much office space as we used to,” Kelley said.

Typically the Postal Service owns its older offices but leases its newer ones, to save on building and upkeep costs, he said.

Error-filled records

GSA data show that about 78,000 square feet is available in two main buildings the government owns in Pittsburgh — the courthouse on Grant Street and the Moorhead Federal Building on Liberty Avenue. The space vacated by the Postal Service is “the really big one right now,” the GSA's Miller said.

All agencies housed in federally owned buildings pay rent to the GSA. A regional committee sets square-foot rental fees according to market rates.

Rent the GSA pays to private property owners in Western Pennsylvania varies from $5.49 per square foot in Washington to $79.21 per square foot in the Landside Terminal of Pittsburgh International Airport, according to an April inventory by the agency.

The higher number may be an error, because the inventory says the lease is one of two the GSA has with the Allegheny County Airport Authority. The other lease is for the Transportation Security Administration, said airport spokeswoman JoAnn Jenny. The authority does not have a record of the second lease, she said.

Paige, with Citizens Against Government Waste, said bad data plague the GSA, hindering its ability to manage properties effectively.

“It's very, very difficult for them to even gather into a database what's owned and leased by the government,” she said.

Indeed, the public should be skeptical about GSA data because reviews have revealed numerous errors, said Dave Wise, director of the GAO's Physical Infrastructure Team.

The office has noted in reports that it's easier for agencies to get money for lease payments than money to build an office building, he said, but the GAO has not persuaded Washington to change how it manages properties.

Though the GAO has not analyzed the Pittsburgh FBI lease, its analyses of similar leases found the government almost always could have saved money by buying, Wise said.

“What happens when the lease expires? You've put a lot of money into it, but it's not your building.”

Brian Bowling is a Total Trib Media staff writer. Contact him at 412-325-4301 at [email protected].

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