Report: City paying too much rent

Posted: December 08, 2013

PHILADELPHIA Philadelphia could save millions of dollars if it had a better management system for its real estate and utility bills, the Mayor's Task Force on Facilities said Friday, citing a nearly two-year study.

The task forced issued a report that makes recommendations for shrinking the city's real estate footprint and improving energy efficiency. The report also calls for another study.

The city owns more than 9 million square feet of space and leases 1.3 million square feet from the private sector. The report states that many of those leases contain inefficiencies, including renting more space than needed and paying higher than market rates.

"Based on a review by the Task Force's leasing subcommittee, the city appears to lease far more space than it needs at rental rates that are, in some cases, above market or not optimal for city functions, particularly when there is excess space in owned facilities," the report states.

The task force's chairman, Tom Knox, the millionaire businessman who ran for mayor in 2007 and recently called off his plan to run in 2015, gave an example of a building that is leasing more space than it probably needs.

"There's one building that I'm not going to mention who it is, but they [lease] about 180,000 to 190,000 square feet. We've determined they really only need about 150,000 square feet," Knox said during a news conference at which the report was released. Furthermore, he said, the city is paying too much in rent, and if the contract were adjusted, the city could save $3 million a year.

"Why would we pay $30 square foot when you can pay $21?" he asked.

The report, which lists the usage of the 100 largest city-owned buildings and the top 30 facilities it rents, does not get into specifics other than to suggest that the city hire a design firm to conduct a space-utilization study and develop new space standards.

The report also noted that the city rents some space to the private sector, including nonprofits, and does not get full value in those contracts.

There are several companies that the city pays for rent and utilities "and no one really knew why," Knox said.

The administration paid $590,000 in utilities for noncity tenants of city facilities. The city spends about $28.8 million total per year on utilities.

The report recommends that the city establish a criteria for payment of utilities for existing tenants of city-owned facilities.

Nutter, who was also at the news conference, said he was forming a utility payment advisory board to work in this issue.

He also welcomed the rest of the recommendations, noting that some of them are being worked on, such as implementing an asset management program to manage citywide data on facilities.

"I'm confident these measures and others will have a meaningful impact on how the city manages its assets and conducts business," Nutter said.

Other recommendations include an increase of staffing within the Department of Public Properties real estate division. The cost for implementing the recommendations is $2 million to $3 million over five years.

The task force was created by executive order in 2011 and charged with reviewing city leasing, space management, building maintenance, and utility management policies and operations. It included real estate experts, Council members, and university officials.


cvargas@phillynews.com

215-854-5520 @InqCVargas

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