Report to the 2008 General Assembly

Legislative Report 4

Title: Fee for Space Implementation and Budget

FACILITIES OPERATIONS REVOLVING FUND
(Fee for Space)
January 15, 2008
CONDITION OF THE FUND

After two years of positive balances, the Fee for Space program suffered an operating loss of $1,044,299.  The programmed vacancy and turnover savings of $695,000 proved unachievable.  The resulting loss was $400,000.  Electricity costs exceeded budget by $300,000 even after budget adjustment.  There was an unanticipated information technology billing of $100,000.  Contracts for repair and maintenance services increased by $200,000.  Snow removal expense, grounds maintenance services and custodial service contracts increased by $200,000 with the St. Valentines day storm playing a large part in the increase.  Overtime, temporary employees and all other categories made up the remaining $200,000 of overrun.  Cash flow on the Bennington project was actually under spent by $400,000 on June 30th, though it is over spent on the two year projection and will be addressed in the FY-08 Budget Adjustment.  The fund has an unaudited deficit of $1,706,107 as of June 30, 2007.
 
Following final audit, Net Assets in this fund stood at ($661,808) on an accrual basis at the beginning of FY-2007.  Operating losses totaled $1,044,299 leaving the unaudited condition of the fund at ($1,706,107) on June 30, 2007.

            A copy of the unaudited FY-2007 Balance Sheet is attached.

FISCAL YEAR 2008 BUDGET ADJUSTMENT

BGS and the Department of Finance and Management consulted on projections for the fund for this current fiscal year.  Upward pressures were considered and the operation of the fund was fully examined.  It was determined that a budget adjustment of  $1,869,899 will be sought in FY-2008.

This budget adjustment is comprised of the following components:
Vacancy Savings adjustment of $412,203
Bennington relocation costs of $488,981
Essex Storage Facility issue of $53,000
Supplies $291,194
Property Management Services $216, 863
Building Repairs $184,844
Information Services Overhead Allocation $73,643
Utilities $149,172
Additionally, internal billing adjustments will be made to reallocate costs statewide where revenue was lost due to moves and errors in space calculations ($493,048).
           
FY-2009 Budget Development

The FY-2009 budget continues the spending level established in the FY-2008 Budget Adjustment.  Salary and benefit increases are provided for.  The total budget and billing request is $24,120,426.  A copy of the billing schedule is attached.

One new position has been included.  With the expansion of card reader systems to the Waterbury Complex and other areas statewide and additional Security Systems Specialist is needed to install and maintain the systems as well as maintaining the data base of identification cards.
 
Additionally, due to the concern over indoor air quality and cleanliness of buildings in general, BGS has created a quality assurance team to inspect buildings statewide without seeking additional resources. 

CREATION OF THE RENTAL RATE

The rate varies by cost center.  For FY-2009, BGS is continuing a district cost center approach, which more closely matches the organization of the BGS facilities effort.  This allows district wide expenses to be equitably shared between towns in a district.  The result is a much more closely aligned rental rate between districts. 

The rate is determined by dividing the budgeted expense of the cost center by the net rentable square feet in the cost center.  Net rentable square feet is defined as "the square footage including circulation area such as corridors and stairwells, storage areas, office closets, rest rooms and lobbies.  The square footage of common area (i.e. conference rooms, rest rooms, lobbies, corridors, stairwells) has been divided equally with those departments sharing the particular facilities."  This rental rate is then applied to the net rentable square footage assigned to each agency in the cost center to determine that agency's billing.

Some space is left out of the calculation because it can be considered overhead.  The space occupied by BGS Facilities Division, temporarily vacant space, and cafeteria space shared by all agencies in the cost center are examples of space that is considered overhead.  As such, the costs associated with them are included in the numerator but the square footage of these areas is not in the denominator.  The space occupied by other BGS units such as Administration, Engineering, and all internal service funds are billed to BGS in the same manner as all other agencies.

Space that receives less than full service such as Libraries, Corrections, and Liquor Control, where only building maintenance services are provided, pay for only the service provided.

Vacant space that can be expected to remain so for more than two years (such as the former Brandon Training School) is charged to BGS.

Space that is leased to other than State entities such as the Vermont State Colleges or private entities are charged to BGS at the Fee for Space rate and sublet in accordance with BGS policy number 0001 (rental rates).

Heated storage space is charged at 75% of the going office area space while unheated storage space is charged at 25%.

In another policy change, space (large blocks that are rentable to other entities) that is vacated during the year will not be charged to the agency vacating but rather addressed as a budget adjustment item or paid for by the entity moving in.

            A copy of the proposed FY-2009 rental rate structure is attached