BLOG: Senate obligates taxpayers to pay millions to rent $90 Million senate office building

State of MN
State of MN

The hot topic of the new Minnesota Senate office building is back. On Monday, during a Senate floor session, amendments were introduced and defeated to address the cost of the project. The building and parking lot have been estimated to cost taxpayers $90 million.  What many Minnesotans don’t know is the unusual way the project was funded which obligates taxpayers to rent the space back from the state government.

There was a DFL-majority in state government back in 2013-2014 when the building to house 67 state senators was initially approved.  At the time, the Democrats passed the funding as a part of their larger omnibus tax bill, which circumvented the committee process and ensured the project had no public hearing in the Senate.   Democrats chose to fund the building via issuance of “certificates of participation” (COP’s) and a 25-year lease-to-purchase agreement which stipulated that the legislature must make payments to the Department of Administrations in order to rent the space.  The state issued COP’s for the project last August, which are at a higher interest rate than general obligation bonds typically used for state building projects.

During the 2014 legislative session, in response to Republican concern about the high cost of the project, an informal inquiry into the option of the state government renting existing St Paul office space was made by the then-Chair of the House Rules and Legislative Administration committee, Rep Erin Murphy, D-St. Paul.  Staff from the Department of Administration responded at a February 27th, 2014 committee meeting that cost estimates for that idea ran between $2.4-$2.9 million annually and said their would be significant upfront renovation costs to any existing building which led Democrats to conclude that construction of the new $90 million facility was the most “cost effective” solution.

Here’s the breakdown of the project’s funding so far:

  • $3 Million in design fees appropriated in 2013
  • $12.9 million appropriation passed through the Senate this week to cover lease payments and operation costs for 2016 & 2017
  • $16.5 million appropriation passed through the Senate this week to cover lease payments and operation costs for 2018 & 2019

Costs beyond the 2018-2019 biennium to operate the facility and cover the remainder of the 25-year lease are unclear and will have to be allocated by future legislatures.

In order to address the extremely unusual financing mechanism of the taxpayer-funded project, Sen Roger Chamberlain, R-Lino Lakes, offered an amendment during Monday’s floor session that would have erased the appropriations for the lease payments from the larger state government funding bill. The amendment was defeated 28-36.

Sen Julianne Ortman, R-Chanhassen offered another amendment to redirect the $13 Million in 2016-2017 lease payments and operating expenses to fund veterans homes throughout the state.  Senator Ortman urged her peers to vote in favor of the amendment, and elaborated on the many difficulties faced by veterans of war in Minnesota.  This amendment was also defeated on a closer 31-33 vote.

Senate file 888, the bill to fund state government, including the lease payments on the new senate office building, was passed on a party line vote of 36-27.  It should be noted while the Senate has already allocated over $32 Million on an office for themselves, they approved $1 million for “repair and betterment” to veteran’s homes for the upcoming biennium in the bill that passed on Monday.

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