Property leases costing millions

The City is paying landlords nearly $40 million annually in rent for parking, office space and other government uses while it faces a $338 million budget deficit.

City departments — such as the Municipal Transportation Authority, which oversees Muni, police, Department of Public Health and the Sheriff’s Department — are paying landlords a combined $3 million per month to house such things as health clinics, training areas and storage units, according to Office of Real Estate records of active leases with private landlords. The list does not include interdepartment leases.

There are eight leases for parking, including a lease in which the library spends $900 per month for two parking stalls, according to city records. The library also spends $1,302 per month on 170 square feet to store rare books.

The MTA spends thousands per month on parking lots — for such items as the parking-control vehicles — and also has one of the quirkiest leases. The agency continues to pay a property owner $200 per month, after blocking the driveway to his garage when building the Eureka Portal, in the 4000 block of 17th Street. The lease has been in place for decades and renegotiated at least once.

The Department of Human Services spends $211,472 a month for about 118,000 square feet of office space at 1235 Mission St.</p>

“It’s just the cost of doing business. We need to have space to house employees and to house programs and to have a place to provide services,” said Amy Brown, The City’s Director of Real Estate.

One lease is particularly concerning: The City is spending $57,300 each month in the notoriously pricey Financial District at 1 Market St. for 20,677 square feet to house The City’s servers and mainframe.

When this lease expires in June, Brown said that the rent is expected to increase, perhaps by thousands of dollars. The City would need to rent it for at least another year even if a different location was found, she said. The City is exploring options.

“You can’t own everything,” Brown said, adding that owning buildings is not always going to save The City money. However, Brown said it makes the most financial sense to purchase a building if it’s for a long-standing city service or need.

Brown said that she has had discussions with the Police Department about finding a city-owned building for the Narcotics Unit, which currently occupies the 16,000 square feet at the 600 block of Potrero Avenue, costing the department $18,500 per month.

When The City purchased 1 S. Van Ness and 1650 Mission St. in December 2006, it was estimated it would save $9 million during 10 years, and nearly $407 million by 2040.

City departments that lease space say it’s a necessary expense. The District Attorney’s Office, for example, spends $20,000 per month to rent out 16,000 square feet on Brannan Street, for 60 employees, according to district attorney spokeswoman Erica Derryck. She said that the office space is needed “because the Hall of Justice cannot accommodate all the attorneys.”

Mayor Gavin Newsom’s spokesman Nathan Ballard said, “because of the big budget deficit, the mayor has asked department heads to look for savings across the board, including taking a hard look at all leases to make sure they are the most economical way to go in each situation.”

jsabatini@examiner.com

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