What about the other nonprofit leases?

Now that the situation with the Center Serving Persons with Mental Retardation has been essentially settled, the question becomes what about other nonprofits with similar leases?

What the nonprofits have in common is their lease agreement with the city of Houston. All pay $1 a year. And their leases, like those of dozens of other nonprofits and commercial businesses paying sub-market rent on city property, are now under scrutiny.

"We are looking at all of them, whether they were $1 a year or $100," said Bob Christy, the city's director of real estate. "Whatever the case may be, we are trying to go back through them and determine whether those are warranted or not."

This strikes me as perfectly reasonable. Recall from the KHOU story that was apparently the genesis of all this that the City didn't have any kind of decent management of its leases. While you clearly want to review all the deals with commercial establishments, you also should look at the ones with nonprofits as well, if for nothing else than to make sure that they're all still going concerns that provide a real service to the general population. Given the state of the city's management of its leases as described by KHOU, it wouldn't be a shock to find out that some of them aren't what they once might have been. You can't know if you don't check.

Mayor Bill White, who participated in the announcement at the West Dallas site, wants a more businesslike approach in dealing with city leases, including those with nonprofits.

White thinks token rent agreements are justified only in rare circumstances in which the service provided in exchange is considered a core function of the city.

"The policy is to try to avoid what's called off-the-books financing arrangements, where there is an annual subsidy but the annual subsidy isn't accounted for anywhere in the budget," White said.

Again, seems plenty reasonable to me. Without any scrutiny, how do we know there's not some kind of sweetheart deal being hidden in this accounting? The fact that the city's handling of the Center's lease was less than optimal doesn't change the fact that this is a worthwhile thing to look at.

The city has long had different types of lease agreements with some nonprofits.

Earlier leases, like those signed by the mental retardation center and center for the deaf, allowed the nonprofits to provide a certain dollar amount of social services in lieu of rent. Although earlier reports said the facilities paid $1 a year, even that token payment was waived for services rendered.

For example, although the lease agreement with the Center for Hearing and Speech set $31,065 in annual rent, the amount has been waived every year because the nonprofit provides at least that much in services for hearing-impaired children. Executive Director Renee Davis said the services there are now valued at more than $1 million annually.

[...]

Although city officials say they are bound to honor the terms of the leases now in force, they already have started replacing some of the $1-a-year leases with agreements that bring in more revenue.

The University of Houston-Downtown had a 30-year contract to lease a nearby partial acre where the city's first sewer lift station was. The city is selling the land to the university for an expected $1.4 million.

Selling the land instead of leasing it makes a lot of sense on both ends in most cases, and provides for City Council to give it a once-over before it happens. Maybe if the city makes enough of these sales, it might be able to shrink or even eventually eliminate the department within Public Works that manages leases. You never know.

Posted by Charles Kuffner on April 22, 2007 to Elsewhere in Houston