After the Porter
County Board of Commissioners, County Council, and County Attorney were
surprised to learn that an office they planned to move is locked into a
lease through 2024, the Council has ordered a review of all financial
obligations that extend past the end of 2018.
Over the past few
weeks, County Attorney Scott McClure, the Commissioners, and the County
Council have been trying to make sense of a lease that was extended by
Commissioner President at the time John Evans, R-North, at a January 21,
2014 Commissioners meeting where it was not on the agenda and one
Commissioner was absent. At the time, the lease for the child support
division of the Prosecutor’s office at 15 N Franklin Street in downtown
Valparaiso was several years from expiring, and the extension appears to
have been secured at an above market price. The owners of the property have
also been benefiting from a tax exemption since 2009.
15 N. Franklin St.
was bought by Courtney Morgan LLC in 2004, whose registered business agent
with the Indiana Secretary of State was Charles Williams at the time of the
extension. Charles Williams, also known as Chuck Williams, is a Valparaiso
businessman and the Treasurer of the Indiana Republican party. Later in
2014, Courtney Morgan LLC sold the building to its current owner, 15
Franklin LLC, whose registered business agent is William Ferngren. Williams
still manages the property.
Pam Rearick, a
Chesterton resident commented on the extension, summing up the views of
several in the room. “I feel that this was a real black eye to Porter County
government, a real black eye,” she said. “It was not right. It was not
Until receiving a
letter on May 29 that revealed that the lease was valid through 2024, and a
rent increase of 2 percent per year begins in 2019, the Commissioners were
under the impression the lease expired this year, and they could move the
child support office into the old jail building that they recently acquired
to house 911 dispatch and other County offices that are outgrowing their
spaces or being leased by the County from private companies. The
Commissioners bought the jail for $3.6 million as part of their $30 million
capital improvements plan.
Some members of the
County Council have said their vote to release the funds for the jail
purchase hinged at least partly on moving the child support office and
saving money on the lease, which has cost the County $87,757.32 annually for
the past four years.
At Tuesday’s County
Council meeting, Councilman Dan Whitten, D-At-large, began a discussion of
the matter by saying “Things haven’t gone as they were supposed to go.”
Whitten referred to the extension as being shrouded in a lack of
transparency, and, to him, saying that nothing illegal happened is setting
the bar too low. “I thought the standard was what’s best for the taxpayers.”
that his review of the past extensions for the lease, which has been renewed
several times since 1999, has brought up more questions. The 1999 lease took
effect the following year and contained an auto-renew clause that extended
the lease by default when the Commissioner’s did not cancel the lease within
180 days of the six-year mark. Whitten said once it auto-renewed, that lease
would have been up in 2012, but he found that Evans signed another extension
on October 2007 continuing it through 2018.
Mike Jessen, R-4th, Jeff Larson, R-At-large, and Council Vice-President
Jeremy Rivas, R-2nd, all questioned why a fair market rent analysis wasn’t
done at time of any of the extensions. The original lease was signed by
Commissioners Brian Gesse, Jim Biggs, and Larry Sheets in 1999. According to
McClure, no fair market rent analysis was done at that time, either.
The 2014 extension
was supposedly a response to $30,000 in upgrades made to the space child
support used, paid for by the building’s owner. Larson said he would
understand the owner wanting to reclaim build-out costs, but he wants to
know whether it’s fair or not in light of the cost of similar office space
and in light of the tax exemption the owners receive. Jessen said, “It might
be a good lease, or it might be a bad lease.” According to records from
County Assessor John Snyder, Williams first filed for an exemption in 2009
and 15 Franklin LLC continues to receive it. In 2009, Williams secured a 37
percent exemption. He secured an increase in the exemption to 42 percent
starting in 2010.
Attorney Harold Harper said he would defer to a real estate lawyer to find
out whether the price the County pays is fair or not, but he can review the
contract to see if there is an “escape hatch” out of the lease.
that he conducted an en masse review of the County Council’s obligations a
few years ago, not only was the lease that is now in question not part of
the package he got, he recalls being uncomfortable with all the auto-renew
McClure noted that
a policy against auto-renew leases has been put in place since then, as well
as a policy that all three Commissioner’s must sign contracts.
Rivas said the
situation has only gotten more convoluted: “Every question we ask has taken
a new turn.” He added, “It appears some elected officials in the past
haven’t done their job.”
Graham, D-At-large, echoed Whitten’s sentiments about a lack of
transparency. “It’s so unethical, in my opinion,” she said. “It’s not fair
to the taxpayers that this kind of business would be going on in county
government right here in Porter County.”
“I think this is
county government at its worst,” she added.
to Harper were whether or not the lease extension is enforceable, if there
is a way to terminate it, and if the lease never received approval from the
County Council carries any weight in its validity. Harper said he will look
into that and suggested that if nothing could be done to terminate the
lease, subletting the space could be an option.
McClure agreed that
subletting and renegotiating are options but added “From my preliminary
review of it, it’s a valid lease.”
The Council voted
to direct department heads to provide lists of all financial obligations,
including leases, maintenance agreements, and any contracts that extend
through the end of the year in what Whitten termed, “an Easter egg hunt.”
McClure said most of the County’s financial obligations span over years, so
this review will be a big undertaking.
Jessen said the
list is not intended to be a new annual obligation on department heads but a
way for the Council to stay aware of what’s going on right now. “We’re
elected to watch every dime we spend, so it is our responsibility,” Larson
attacking anyone who wants to do business with County government,” Rivas
clarified. “This is a breakdown form within, and we’re making sure this
doesn’t happen again.”