Insurance commissioner's new building more costly than originally portrayed | Arkansas Blog

Thursday, May 12, 2016

Insurance commissioner's new building more costly than originally portrayed

Posted By on Thu, May 12, 2016 at 10:21 AM

click to enlarge CURRENT HOME: Insurance Department currently housed here. Its boss wants new building.
  • CURRENT HOME: Insurance Department currently housed here. Its boss wants new building.

The budget session of the legislature passed without action on Insurance Commissioner Allen Kerr's idea to build a new building for his agency, big enough to house him and perhaps the state banking and securities divisions, both now housed in leased private space. Kerr's own office space at 1200 West Markham is leased from the Arkansas Teacher Retirement System.

Sen. Bart Hester, a fiscal hawk, raised questions about an  appropriation for the building during the fiscal session. According to a Democrat-Gazette account at the time, the Insurance Department was seeking $2.8 million to buy three properties directly across Markham from the Capitol — two privately owned small office buildings and the vacant Esso service station. 

Sen. Larry Teague was quoted as saying he'd been told the project could produce $2 million annually in rent savings. The Hutchinson administration indicated  that it lacked firm numbers and wouldn't move forward without assurance of savings. Kerr never responded to the governor's requests for a full fiscal impact statement.

The numbers are a bit different than what was initially reported. In several memos, Kerr spoke of a $20 million cost to acquire the land, raze existing buildings and build a new one. The Department said this move would produce many "efficiencies" and it would be beneficial to the agency to be four blocks closer to the Capitol.

But a project budget drawn up by Nabholz Construction, first reported by Arkansas Business, put the cost at $39.3 million.  I obtained a copy under the Freedom of Information Act.

It includes $4.6 million for furniture, $500,000 for fixtures and equipment and $250,00 for art work and decorations. I don't see a specific line item for moving costs.

Some extensive documents provided under FOI are interesting, particularly in the avidness with which Kerr, a former Republican legislator, has pursued this project, in part because of dissatisfaction with his current building. In response to a question about what the state retirement system would do to fill the space vacated, the Insurance Department suggested moving other state agencies (one suggestion was the attorney general, now in the Tower Building). Good enough for lesser mortals, if not for Kerr.

A memo setting out talking points on the project mentions a $20 million cost and projects rent savings from state ownership of  — not $2 million — but $850,000 to $925,000 a year, after allowing for continuing costs of operating the state's own building against $1.7 million in rent for three agencies that would be moved there. There's also some cost in moving and new space for the Assessment Coordination Division, currently using one of the buildings that would be razed.

At savings of $900,000 a year, a $40 million project would take more than four decades to pay off. Kerr has proposed using Insurance Department trust funds, which accrue from fees paid by insurance companies under law.

PROPOSED ACQUISITIONS: Insurance Commissioner Allen Kerr would raze these to build new building for his agency across from Capitol.
  • PROPOSED ACQUISITIONS: Insurance Commissioner Allen Kerr would raze these to build new building for his agency across from Capitol.

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