Chesterton Tribune

 

 

After lease surprise Porter County Council to review financial obligations

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By LILY REX

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 transparent.”

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.”

Whitten revealed 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.

Council members 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.

County Council 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.

Whitten reported 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 leases.

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.”

Councilwoman Sylvia 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.

Whitten’s questions 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 added.

“This isn’t 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.”

 

Posted 6/29/2018

 
 
 
 

 

 

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