A review of a Pellissippi State Community College building purchase has concluded that there were some missteps and misinformation along the way, but it was reasonable for the state to pay $10 million, twice its previous purchase price, for a long-vacant office building in need of extensive repairs.
Further from The Tennessean: In a nine-page report recently forwarded to John Morgan, chancellor of the Tennessee Board of Regents, the director of audits in the state comptroller’s office concluded that “the price of the property was negotiated and the acquisition price appeared reasonable.”
The report, however, found several irregularities, including two back-to-back six-month leases for that same Knox County building, which were not properly approved. The leases preceded the purchase and were signed by then-Pellissippi State Community College president Allen Edwards, the prime mover behind the purchase.
The report also found that there was a $2 million discrepancy in the reported purchase and repair estimates sent from the state Board of Regents to the state building commission before a key vote. The figure was later corrected.
In a Jan. 24 presentation, college officials pegged the estimated purchase price at $8 million, with an additional $2 million needed for repairs. In fact, the state already had offered $10 million for the property and $2 million more was needed for immediate repairs. “Although the $8 million offering price was presented as an estimate, it was known or should have been known that the offer price was $10 million at the time of the presentation,” the report states.
Minutes show that state Comptroller Justin Wilson, whose office prepared the audit report, was present at that Jan. 24 meeting, in which the purchase was approved without opposition. Wilson is a member of the state building commission and its executive subcommittee.
State building officials also were told at that meeting, according to the report, that the proposed expansion of Pellissippi State was included in a college master plan.
In fact it was Wilson, according to the minutes, who asked if the property “is in the master plan, and was told ‘yes.’ ”
“The (2007) master plan did not include a proposed new campus for eastern Knox County,” the audit report states.
As The Tennessean reported late last year, the building was purchased for $10 million on March 9, 2012, from a group of politically connected investors who bought it in 2007 for $5 million.
The investment group was headed by Samuel J. Furrow, a Knoxville auctioneer and developer. At the time of the purchase, Furrow’s wife had a $1 million mortgage on a Nantucket Island vacation home from James A. Haslam II, Gov. Bill Haslam’s father.
The State Building Commission on Thursday gave the green light to more than a half-billion dollars worth of construction and upgrades for dozens of projects, including a $30 million, 512-bed expansion of the Bledsoe Correctional Facility in Pikeville, reports the Chattanooga TFP. The expansion will handle medium-security prisoners. The project also will provide minor modifications to house female inmates in separate security facilities within the complex.
Commission members also approved some $21 million to beef up security at state prisons, including $4.4 million for a specialty security contractor to replace what a Building Commission document described as “aging and failing locking systems” in facilities statewide.
Many of the projects were included in the new state budget that went into effect July 1 but required commission approval to proceed.
— ETSU Football
Lt. Governor Ron Ramsey (R-Blountville) today announced the Tennessee State Building Commission’s approval of a project to build a new football stadium for East Tennessee State University.
From the Kingsport Times-News:
After a decade-long hiatus, ETSU has recently rebooted its football program under the supervision of former University of Tennessee head coach Phillip Fulmer. Last month, ETSU hired former University of North Carolina coach Carl Torbush as the university’s new head coach for the program.
“I’m so proud to have football coming back to the East Tennessee State University. College is first and foremost about academics but a full and complete college experience is crucial to attracting top top-quality students to the university,” said Lt. Governor Ramsey.
“The return of football to the ETSU campus will enrich university life in so many ways. But the first step to building a great football program is building a high-quality facility. I’m excited that the commission has approved this outstanding project.”
— Privatized Housing at U of M
The long-delayed Highland Row project near the University of Memphis may finally start construction this fall, as a result of a new affiliation agreement U of M is proposing with a private nonprofit developer for the residential space in the upper floors of the multiuse center, reports the Commercial Appeal. The university asked the State Building Commission Thursday to fast-track approval of an agreement with Alabama-based Collegiate Housing Foundation that will help arrange financing. Under the agreement, rental of the apartments will be limited to U of M students, faculty and staff and the University of Memphis name will be affixed to the privately owned and managed facility.
…Memphis-based Poag & McEwen Lifestyle Centers announced the $65 million Highland Row in 2008 but was unable to obtain financing when the recession deepened. It will have retail space on its ground floor, anchored by a 40,000-square-foot full-service Barnes & Noble bookstore that will serve as the university’s official bookstore.
Apartments were always planned for the upper three floors but the affiliation agreement is new, putting the U of M brand on it as “affiliated housing” and limiting occupancy to about 550 students and employees.
The owner of the downtown L&C Tower filed a claim with the state earlier this week in response to the state’s plans to sever its lease and move out of offices it has occupied in the tower since 2004, reports The Tennessean. 401 Church St., which owns the building, names the Department of General Services, the Department of Environment and Conservation and the Department of Finance and Administration as defendants in its complaint with the state Division of Claims Administration. The complaint seeks $4.15 million in potential lost rent and between $250,000 and $2 million in additional damages.
Because of the state’s new plan to condense and modernize its office space, General Services told the tower’s owners they were severing the lease agreement. But the L&C owners argue that the state needed to receive approval from the owner’s lender, CIBC, before it severed the lease agreement. No such approval was ever sought, according to the complaint.
In 2005, the state received a break on its rent in exchange for eliminating the lease provision that allowed the state to break the lease for essentially no reason. Under the most recent version of the lease, which went into effect in 2004, the state can sever the agreement provided it gives one of eight agreed-upon reasons.
A Democratic legislative leader said Tuesday he will ask legislative committees to review a five-year $330 million contract with the Chicago-based multinational consulting firm Jones Lang LaSalle , reports the Commercial Appeal.
Gov. Bill Haslam disclosed an investment in the company while running for governor in 2010, but not the amount of that investment. He now has most of his investments — except for Pilot Flying J — in a blind trust. Jones Lang LaSalle is the firm that last year recommended the state move out of its 43-year-old Donnelley J. Hill State Office Building in Downtown Memphis and five other state-owned buildings in Nashville and Chattanooga because it said they are “functionally obsolete.” JLL is helping the state find 100,000 square feet of leased office space Downtown where employees of 12 agencies and departments currently working in the Hill Building would move.
The state’s involvement with JLL has come under increasing scrutiny since its initial $1 million contract has grown to $4.5 million to $7.6 million and it won a new contact that pays Jones Lang LaSalle about $38 million over five years for management and labor for managing state buildings. It has a maximum liability to the state of $330 million, which includes costs that JLL will pay on a pass-through basis from the state, such as electrical, ventilating, janitorial, security and landscaping vendors with no markup in costs, the Department of General Servicers said.
JLL is essentially assuming responsibility for an ambitious Haslam administration plan to consolidate as much state office space as possible called “Project T3” for “Transforming Tennessee for Tomorrow,” which state officials believe will save taxpayers over $135 million during the next 10 years.
— Note: See also the Chattanooga Times-Free Press. Excerpt: (Gubernatorial spokesman) David Smith said Tuesday the governor himself is unaware whether he still has any investment and wouldn’t be swayed even if he did.
“That’s the whole point of a blind trust,” Smith said, adding, “This is a project that is slated to save the state millions of dollars and it’s good government.”
The University of Tennessee received state approval Friday to move forward with its plan to drill oil and gas wells for hydraulic fracturing — or fracking — on university land in Morgan and Scott counties, reports The News Sentinel. The four-member executive subcommittee of the State Building Commission voted unanimously after three hours of testimony from UT officials, environmental activists and industry personnel.
The move cleared the way for documents, called a request for proposals, or RFP, that allow UT to begin soliciting bids from oil and gas companies interested in leasing land in the more than 8,000 acres UT owns in its Cumberland Research Forest.
UT intends to use revenue from the natural gas and oil produced to then conduct research on the environmental impacts and best management practices of fracking.
Any contract UT enters into with a company would have to come back before the State Building Commission for approval.
That step is likely several months away, said Larry Arrington, chancellor of the UT Institute of Agriculture.
The subcommittee heard from two dozen members of the public, most of whom were activists concerned about environmental impacts and transparency.
Because research funding would be tied to the productivity of the well and its revenues, the research could not be considered objective, Gwen Parker, an attorney with the Southern Environmental Law Center, told the committee.
“I felt the conflict of interest point was not fully understood,” she said after the meeting. “So I think our next step would be to follow up and make sure it’s communicated better.”
State Comptroller Justin Wilson asked questions throughout the testimony about both the potential for research bias and accusations that UT had tailored the RFP to a specific company. He ultimately voted in favor of the proposal.
A plan to demolish the Cordell Hull Building faced questions Tuesday from legislators lawmakers concerned about the historical value of the building and future plans for the site next to the Capitol, reports The Tennessean. Members of the House Finance Committee sought assurances at a budget meeting that Department of General Services officials would consider other ways to dispose of the 60-year-old building on 5th Avenue North and would not sell the land beneath it to private developers.
One member, state Rep. Matthew Hill, R-Jonesborough, also questioned the decision to tear down the building and five others across Tennessee at a time when thousands of state employees work in leased office space.
“Do we not want to make sure those leases are concluded before we go tearing down buildings?” he asked. The Haslam administration has proposed tearing down the Cordell Hull Building, arguing that the Truman-era building has grown obsolete and would cost $24 million to rehabilitate, far more than its actual value.
The Haslam administration has proposed tearing down the Cordell Hull Building, arguing that the Truman-era building has grown obsolete and would cost $24 million to rehabilitate, far more than its actual value.
General Services Commissioner Steve Cates told lawmakers that one of the building’s main flaws is a leaky foundation that, because of its massive size, would be difficult to repair.
The University of Tennessee on Thursday asked a state panel to delay taking up the school’s fracking research proposal for 30 days to allow more time to meet with concerned residents and environmental groups, reports the News-Sentinel. A caravan of at least half-dozen university officials made the trip to Nashville, but decided before the meeting to request a deferral from a subcommittee of the State Building Commission, UT Agriculture Chancellor Larry Arrington said.
“I’d have rather gotten it done (Thursday), and I believe we could have done it. But it feels right to wait 30 days and let people have their say,” Arrington said. “But we were here and we felt like we needed to be in that room in case somebody wanted to say something.”
The standing room only meeting of the executive subcommittee was to approve documents that would allow UT to start the bidding process with companies interested in drilling wells on university land on the Cumberland Plateau.
Once UT enters talks with the winning bidder, the lease would have to come back before the full State Building Commission for approval.
UT is seeking approval to conduct research on the environmental effects of hydraulic fracturing, a newly popular and controversial natural gas extraction method.
A coalition of a about a dozen environmentalists, including staff from the Southern Environmental Law Center and members of the newly formed Frack-Free Tennessee group, a newly formed group, also attended Thursday’s meeting.
“I think our presence here may have made a small difference,” said Eric Lewis, who formed the Frack-Free Tennessee group last fall. “I don’t think UT would have deferred unless they thought they were going to lose.”
KNOXVILLE, Tenn. (AP) — Environmental groups are asking a committee of the State Building Commission to prevent use of a gas drilling technique at a forested tract owned by the University of Tennessee.
According to the Knoxville News Sentinel (http://bit.ly/VW0TqC ), the Southern Environmental Law Center asked, on behalf of a half-dozen environmental groups, that fracture drilling, or fracking, not be allowed in the Cumberland Research Forest.
A letter to the commission’s executive subcommittee states UT is dragging its feet on public records requests and asks the panel to defer action on drilling until the public is better informed of university intentions.
“Now UT has started behaving like an oil and gas company, and saying, ‘We’re just going to do what we want,'” said Renee Hoyos, director of the Tennessee Clean Water Network, one of the groups represented in SELC’s letter sent to subcommittee members. “I don’t think UT is doing its due diligence by acting this way. It’s a university and it needs to hold itself to a higher standard.”
UT is asking to solicit bids to lease part of the 8,000-acre tract in Morgan and Scott counties. The university said it would use revenue from leases to fund studies into the environmental impact of fracking.
The drilling technique is used to extract oil and gas from shale. A well is drilled vertically and then horizontally, and water and chemicals can then be pumped into the well to fracture the rock and free the minerals. Because the shale lies at shallower depths in Tennessee than elsewhere, drillers often use nitrogen rather than water to extract the gas.
The committee meets Thursday, and UT has requested a waiver of appraisals to assess the value of the land and its mineral deposits.
In a prepared statement, UT officials said they delivered the requested public records last week but that it took seven weeks to prepare them. Officials noted the scope of the request, inclement weather and holiday university closings.
A group of politically connected businessmen earlier this year sold a long-vacant Knoxville office building in need of millions of dollars in repairs and upgrades to the state for $10 million, twice the price they paid for it five years earlier, reports The Tennessean. The building, for Pellissippi State Community College, will cost an additional $16.6 million to make it suitable for a community college, according to a report commissioned by the college to assess the property before the purchase.
A series of emails obtained by The Tennessean under open records laws shows that the top aide to Gov. Bill Haslam stepped in late last year to try to make the purchase a priority after being contacted by an intermediary for the Knoxville developer selling the 220,000-square-foot building.
The developer, Samuel J. Furrow, has been a business partner with the governor in the past and a friend of the governor’s father, who loaned Furrow’s wife $1 million while Furrow was trying to sell the building to the state.
Furrow and his investment group bought the vacant property at 7201 Strawberry Plains Pike for $5 million on June 28, 2007, from North American Philips and sold it to the state on March 9, 2012, for $10 million, according to public records.
“We stole it (from Philips) and sold it to the state,” Furrow said in a telephone interview, attributing the gain on the investment to a low purchase price.
He said the deal did not produce a full$5 million profit because of expenses such as interest and maintenance.
“We did everything right and for the right reasons,” Furrow said, calling the sale “clean as a whistle.”
The state bought the building by tapping $87 million that it had previously budgeted for TennCare, the state’s Medicaid program for the poor. But that money was able to be shifted for other uses when the federal government boosted its share of Medicaid funding for Tennessee as part of the stimulus package. In addition to $8.5 million in state funds, $1.5 million was contributed by the Pellissippi State Foundation toward the purchase.
Tennessee officials set aside an extra $2 million for immediate repairs, including a new roof. Estimates for total repair costs ranged from $3.1 million to nearly $5 million, records show. And to make the entire building suitable for use as a community college, a report dated Nov. 28, 2011, by Community Tectonics to Pellissippi State concluded it would cost $16.6 million, or $75 a square foot. Among that report’s recommendations was replacement of the heating and air conditioning system.
…The governor’s press secretary, Alexia Poe, said the governor was aware of the Knoxville building’s purchase but noted the process began before he became governor in January 2011. She said Haslam had never discussed the sale with Furrow or any of the other investors.
…Records obtained by the Tennessean under the state public records law show that a flurry of email activity began on Nov. 3, 2011, when Raja Jubran, acting as an intermediary for Furrow, contacted the governor’s chief of staff, Mark Cate….Jubran, who has been involved in business dealings with the governor in the past, urged in his email that the deal be closed by the end of the year. Though the effort ultimately failed because promised repairs had yet to be completed by Dec. 31, 2011, Jubran’s email set off a chain of emails involving high-level Haslam administration executives that outline their efforts to make the deal a priority.
A century and a half ago, the new Tennessee State Capitol was seized, fortified and transformed into Fortress Andrew Johnson by the Union Army during its Civil War occupation of Nashville.
Now, Richard Locker reports, the Capitol is becoming increasingly fortress-like again as a result of security measures already made and new ones under way. State officials are keeping the details secret, but they include heightened security checkpoints, which already require citizens to produce photo IDs to enter, high-definition cameras inside and out, license-plate scanners and others not known.
Gov. Bill Haslam said he doesn’t know details of the security plan. “That funding decision was made by the Building Commission, not by us, and that’s really important to note. That being said, I would hope that part of the reason for additional security is to make it so people can still access the building instead of just sealing it off and saying, ‘I’m sorry, there’s too many security reasons why you can’t.'”
Security officials proposed X-ray body scanners but they were reportedly nixed in favor of less intrusive metal detectors first put up in 2001.
The 153-year-old State Capitol closed last week for an eight-month, $15.3 million renovation project that mostly involves new heating, air conditioning, electrical and plumbing systems and interior refurbishing.
But the State Building Commission also approved various unspecified “interior and exterior security upgrades” in November and February, after top officials of Haslam’s administration — Safety & Homeland Security Commissioner Bill Gibbons of Memphis and General Services Commissioner Steve Cates of Nashville — recommended a package of far-reaching upgrades. The “Master Security Plan” for the Capitol complex is confidential under state law.
The Building Commission is composed of Senate Speaker Ron Ramsey, House Speaker Beth Harwell, Secretary of State Tré Hargett, State Treasurer David Lillard, Comptroller Justin Wilson and Finance Commissioner Mark Emkes. It approved the upgrades after private briefings and no public discussion.
State Architect Robert Oglesby referred questions to the General Services Department, where Assistant Commissioner Kelly Smith initially said she was unaware of any security components to the overall project. She later acknowledged them but would provide no details.
However, two sources familiar with the projects said they include upgrading the existing checkpoints and installing high-definition cameras throughout the interior of the Capitol, the Legislative Plaza Building where state legislative committee hearings are held, and the War Memorial Building, which houses legislative offices.
They also said powerful new cameras capable of recording close-up images of people will be installed outside the Capitol and atop nearby buildings for monitoring the public grounds outside the Capitol and War Memorial Plaza, a public square with fountains across from the Capitol that is the site of occasional protests.