GovGuam lease cost doubled in 10 years

January 24, 2017

 

 

From 2004 to 2015, the government of Guam doubled its annual cost for leasing commercial space going from $6.8 million to $12.5 million, according to the Office of Public Accountability's report released Tuesday.

 

The burgeoning lease cost has prompted the OPA to revisit its recommendation to GovGuam made more than 10 years ago.

 

“Since 2005, the Office of Public Accountability urged the Legislature to begin evaluating whether or not it is feasible to initiate long-term planning to acquire or build facilities to house government entities for the future,” OPA said. “In the audit report, OPA stated that the amount of money spent on leases could be used to purchase or build office space to house government entities.”

 

In more than a decade, OPA said, the average cost per sq. ft. more than doubled from $1.15 per sq. ft. in 2004 to $2.11 in 2015.

 

A majority of GovGuam’s commercial leases were for office space at $11.8 million, while other commercial lease space was $692,000 in fiscal 2015.

 

The Top 10 entities with the highest lease costs for office space accounted for 80 percent, or $9.4 million of the total annual lease costs for GovGuam in 2015.

 

The Guam Customs and Quarantine Agency had the highest annual lease cost for office space at $2.8 million, nearly 82 percent more than the second highest agency. This cost is comprised of three separate leases, which averaged a cost of $4.27 per sq. ft. The most significant of these leases is for a 29,347 sq. ft. office/inspection area with an annual lease cost of $2M.

 

 In 2004, CQA was paying $3.93 per sq. ft. for this space. This particular lease increased by 45 percent to $5.70 per sq. ft. in 2015 resulting in paying the highest average cost per sq. ft. of any GovGuam agency.

 

The Office of the Attorney General had the second highest annual lease cost for office space at $1.5 million. OAG paid $392,000 in fiscal 2004 for a variance of $1.1 million.

 

While OAG more than doubled its space, the cost per sq. ft. still increased, as it is paying $0.55 more per square foot. In July 2013, OAG had to be relocated because of safety issues in the building that housed its office in Hagåtña.

 

The Department of Revenue & Taxation also had to relocate its office as the land in Tiyan, where its building was located on was returned to the original land owners. DRT had the fourth highest annual cost for office space at $978,000.

 

DRT is currently leasing the second largest space among the government agencies with 50,094 sq. ft., however its average cost per sq. ft. is the second lowest among the Top 10 agencies. DRT did not lease office space in FY 2004, thereby contributing to the third highest increase in comparison to its costs in FY 2015.

 

OAG, Department of Land Management, and Department of Administration all leased office space at the ITC Building in Tamuning.  However, OPA found that all three agencies pay different rates. The highest is OAG at $3 per sq. ft. followed by DLM at $2.35, and lastly DOA at $1.95 all-inclusive of utilities.

 

OPA noted that there are some agencies that had managed to reduce their office space costs by constructing or renovating their own buildings to accommodate their spatial needs such as the Guam Power Authority  and the Guam Housing and Urban Renewal Authority.

 

The most significant decrease in lease costs was realized by the Guam Power Authority, which paid $54,000 in fiscal 2015 compared to $300,000 in FY 2004. GHURA also reduced its lease costs by renovating its building in Sinajana in fiscal 2014 to meet their spatial needs saving $63,000 annually.

 

“Until GovGuam has the means to follow through on plans for a new government building, we still recommend as we did in 2005, that an agency monitor and annually report all GovGuam leases, review and apply practicable standard guidelines for office space leases, and establish minimum specifications

for basic rent and common area maintenance fees for GovGuam office space,” OPA said.

 

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