While trying to reduce the cost of its controversial $16.7 million central office in downtown Frederick, the school system should also look into leasing out part of the building to another agency, according to county Commissioner Billy Shreve (R).
During a joint meeting Tuesday between the Frederick County Board of Commissioners and Board of Education, Shreve suggested that school officials attempt to lease 12,000 square feet of undeveloped office space currently available within the 90,000-square-foot central administrative building at 191 S. East St.
Although the school system cannot lease the building to a commercial or a nonprofit entity because of terms of its own lease, Shreve — who is a real estate agent — said he believes there are many government agencies that could be interested in the space.
“They could lease it to the city or the county,” Shreve said in an interview Tuesday. “We lease space to the board of elections and the liquor board.”
Sharing their building with a tenant could result in significant savings for the school system, which currently pays $1.1 million a year toward the 25-year lease of the central office building, with the money coming from its operating budget.
School officials could charge from $10 to $25 per square foot, which could generate anywhere from $120,000 to $300,000 a year if all of the available space is rented, according to Shreve, who also serves as the commissioners’ liaison on the school board. The most realistic cost to lease the space would be somewhere between $20 and $25 per square foot, he said.
“It would be foolish not to (do this),” he said. “That is a lot of money.”
The school board Tuesday did not commit to exploring the idea, but some members expressed interest. Board President Angie Fish said the seven-member board can vote on the question at their next meeting.
“We can certainly bring that to the full board,” Fish said.
The central office building, which was completed in 2010, was supposed to consolidate 245 school administrators from four Frederick County locations into a modern building in downtown Frederick.
But school officials ended up moving more employees into the building, and today it accommodates 260 to 270 staff members, school system Facilities Director Ray Barnes said.
Since the building opened, the school system has lost at least 11 administrators as the result of a central office reorganization by Schools Superintendent Theresa Alban.
The project has been a target of criticism and public scrutiny. Critics — who often refer to the project as the “Taj Mahal” — have argued the school system should not have spent money on an administrative building while aging schools await renovations.
But when the school board approved the project in 2007, officials argued that the consolidation would save them money and cost less than it would to update their aging administrative buildings.
When the project was approved, school officials wanted to have room for expansion, which is why the building’s layout includes 12,000 square feet of undeveloped office space, Barnes said.
“We didn’t have a specific lineup of positions that would be occupying this space,” Barnes said.
However, that unfinished space is distributed throughout the entire building. To rent out space, the school system might have to consider consolidating its offices to free up a full floor within the five-story building, officials said.
Officials would also have to figure out other issues such as the cost of outfitting the space and providing a tennant with an alternative access to the building.
“It is a long conversation,” said school board member Kathryn “Katie” Groth, who noted that the board had no way of knowing in 2007 that the school system would be cutting budgets instead of adding positions.
School board member Brad Young said Tuesday he would not mind investigating the possibility of leasing out the space as a way to generate revenue.
The school system is currently in the process of refinancing its 25-year agreement with the Sun Trust Financial Corp., from an annual interest rate of 4.62 percent to 3.1 percent, in hopes of saving at least $1.8 million on the cost of the central office.
The school board had hoped in 2007 to reduce the cost of that project by $8.5 million from the sale of four other administrative buildings around the county. But those buildings still are on the market, and their value has decreased dramatically since the plan was put in motion because of the poor economy.
School officials now expect to lose close to 50 percent of the value of the properties, so they are considering refinancing their loan to recoup some of their projected losses. School officials believe the refinancing could allow them to save at least $1.8 million on the project.