VALPARAISO — A newly discovered lease for the Porter County Prosecutor’s Office’s child support division has some officials shaking their fists and others shaking their heads.
“This is a complete boondoggle to the taxpayers. It just is,” Councilman Dan Whitten, D-at large, said Wednesday.
County commissioners hope to move the child support division, along with other county offices, into the old Porter County Jail at 157 S. Franklin. Proponents of that move contend the county could stop paying rent and get money from the federal government, which pays two-thirds of the cost for the current child support space.
County attorney Scott McClure said it wasn’t until last week that he became aware of a 10-year lease, signed in 2014, for the child support office at 15 N. Franklin. McClure had been prepared to give the landlord notice at the end of this month that the lease wouldn’t be renewed, he said.
“When we found this new lease, I can guarantee you we were all feeling sick,” Board of Commissioners President Jeff Good, R-Center, said.
The new terms
The new lease was brought before the commissioners on Jan. 21, 2014. Commissioners John Evans and Nancy Adams were present; the other commissioner, Laura Blaney, had the stomach flu, and did attend or vote on the matter.
Evans and Adams are no longer commissioners.
Attorney Patrick Lyp, representi,ng building owner Chuck Williams, offered the proposed lease. Lyp said then — and Williams, Evans and Prosecutor Brian Gensel said Wednesday — that the child support division wanted to eliminate a file room because the records had been digitized and put additional offices there. The office got new carpet and new furnishings, too.
“And I paid for that remodel; the county did not pay for that,” Williams said.
In exchange, the contract was extended to 2024. This was in the middle of an existing 10-year contract.
“This happens all the time for leasehold improvements,” Williams said.
Before the lease was renewed, the original called for a 2 percent rent increase each year. Under the new lease, the rent was locked in at $87,757.32 per year until 2019, Gensel said.
Williams said this is a gross lease, meaning the landlord pays utilities and other operating costs, like janitorial service and snow removal.
Beginning in 2019, the annual increases of 2 percent a year are set to resume.
McClure said he found out about the newly discovered lease when the landlord sent the county a notice that the rent next year would increase to $89,512.47 per year.*
Williams sold the property several months after the existing lease was renewed in 2014 but still manages the property for the new owners, he said.
Commissioner Jim Biggs, R-North, was on the County Council in 2014 when the lease was approved. He didn’t know about it until last week, he said.
“How can a commissioner or commissioners obligate a county on a 10-year lease like this, that is basically a $10 million obligation, without passing it first before the council?” he asked.
Under state statute, Whitten said, contracts are supposed to be presented to the fiscal body.
“That’s a huge, huge red flag to me,” he said.
“You put it on the agenda, you give people notice of how you’re spending their money,” Whitten said.
Good, Biggs and Blaney agreed.
“There wouldn’t be any confusion and questions four years later if this issue had been on the agenda, and that’s exactly why we’ve worked so hard to have clear policies and procedures and to follow them,” Blaney said.
Evans said Wednesday that even though the new lease wasn’t specifically listed on the agenda, agendas typically include “any other business.”
Whitten said he's asked for more research into the matter.
“I’ve asked the county for any rent analysis they’ve done back then, and there is none,” Whitten said. “If I want to take risks and enter into contracts without doing due diligence, it’s my risk, it’s my money,” he said.
But when it’s taxpayer money, that’s different, he said.
The minutes of the Jan. 21, 2014, commissioners meeting spell out the discussion on the contract.
McClure said it took him a day or two to find those minutes to verify what happened.
“It’s not the act of signing that makes it official,” he said, but the vote to enter into the contract.
The previous commissioners delegated the job of signing contracts to the board president, McClure said, so Evans is the only commissioner who signed it.
Under current policy, all three commissioners sign each contract to make it clear to everyone in the future that all three commissioners know about it, he said.
Biggs said the commercial real estate market was down in 2014, so the county should have received a lower rent.
“It was like we were negotiating against ourselves if you read the contract,” he said.
Evans said his contribution to the negotiations was to lock in the rent through 2018.
Williams said although the market was recovering in 2014, he said, landlords prefer to keep tenants than face uncertainty over how long a space will remain vacant and not producing income.
There still has been no decision about whether to move the child support division to the old jail, a few blocks south of the existing location.
Evans said he understood that if the county owns the space the child support office is in, the federal government won’t pay its two-thirds of the rent.
That’s technically true, McClure said, but it’s more complicated than that.
Because the space in the old jail would be custom-designed, the construction costs as well as operating costs -- and the going rate for office space in Valparaiso -- would all factor into the complicated federal formula for determining how much to pay the county.
And that’s assuming the division is included.
Whitten said that federal payment was a big factor in his vote to purchase the old jail.
But now the county appears locked into a lease that previously was unknown to several county officials, he said.
“I think what happened there was absolutely unethical, but it wasn’t illegal,” Biggs said.
*This has been changed from the original.