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There’s a bit of Ponzi in the way government does business

I know a restaurant owner whose place has received good reviews and developed a loyal clientele, but in this tough economy its profits were tanking.

The owner didn’t want to put himself and his staff on the street, nor did he desire to run a not-for-profit restaurant. He cut where he could but eventually was faced with a dilemma.

What did he do?

He approached his landlord and renegotiated his lease.

At first the landlord balked, at one point even threatened litigation, but in the end the small businessman carved out a new lease for about half what he’d been paying. His restaurant will stay open, and the landlord will still make a profit and won’t have to worry about finding a new tenant in a recession.

That sounds like good business to me.

We’ve all heard the private-sector cliché, “Government should run more like a business.” Most people understand that government can’t actually do that, but these days I think local and state governments should take a lesson from that small restaurant owner. Namely: Renegotiate some of their dozens of building leases. With commercial building vacancy rates near an all-time high, it only makes good business sense to aggressively renegotiate those leases.

Then again, I could be wrong.

“We haven’t attempted to renegotiate current leases,” state Buildings and Grounds Administrator Cindy Edwards said Tuesday. “As leases have come up, we’ve been able to procure new leases for space at a real reasonable rate.”

That’s nice, but not exactly assertive. With the state scuffling to fill enormous budget gaps, you’d think the policy would change. But you’d be wrong.

For an illustration of just how much government does not run like a business, look no further than the Child Care Assistance Program building at 2500 W. Washington Ave., which issues subsidies to help poor working parents afford day care. It’s located in the heart of an area of need, but the building is set to close as part of a restructuring within the Nevada Division of Welfare and Supportive Services.

The 18,000-square-foot building is leased monthly for $2.20 per square foot, including utilities. When he heard the state was considering closing the building, property manager Michael Mahban offered to slash the rent to $1.35 per square foot. That’s a savings of $15,300 per month, or $183,600 per year.

Apparently, that wasn’t good enough. The building is scheduled to close.

“The state has been playing a game with us for months now,” Mahban said. “They’re just not acting in good faith, I believe. I know this is a welfare children’s program. The building is very suitable for them. It’s not in some shopping center or dilapidated building. We’re doing everything we can to keep the state happy and keep a tenant.”

State Division of Welfare and Supportive Services Administrator Romaine Gilliland said closing the building isn’t being done as a cost-saving measure, but to “improve access” and “better distribute services throughout the local area.” A secondary benefit, he said, is to better use available space in other buildings.

Gilliland added, “Every facility that we’re in that’s a lease facility, when each lease comes up for renewal, we’re emphasizing the renegotiation of rates.”

Added Debbie Ohl of the state Department of Buildings and Grounds, “We do renegotiate the lease. We also work with the tenant to be sure the office space is in a proper environment. We do want to be working to the best benefit of both.”

Something tells me no one from Ohl’s office asked the staffers on West Washington if they thought moving would improve access and provide better distribution of services. Frankly, the impending closure stinks of petty politics and begs for legislative scrutiny.

It’s a good thing Gilliland said the closure wasn’t a cost-savings measure because it won’t save much. Edwards said the new lease calls for $1.02 monthly rent per square foot.

While that’s cheaper than the $1.35 Mahban offered, Edwards said the employees from West Washington will fill the space left vacant at a building that currently is home to state parole and probation workers.

The P&P employees are headed to, you guessed it, a new building that Edwards said is scheduled to open in 2010.

Come to think of it, government may run like a business, after all:

A business run by Ponzi.

John L. Smith’s column appears Sunday, Tuesday, Wednesday and Friday. E-mail him at Smith@reviewjournal.com or call (702) 383-0295. He also blogs at lvrj.com/blogs/smith/.

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