Austin to increase oversight over lease agreements after critical audit

Investigations

AUSTIN (KXAN) — The city of Austin is making changes in how it tracks city-owned and leased buildings.

This follows a critical audit that said the city’s Office of Real Estate lacks oversight over city property.

For one, the audit said that the city lacked a complete and accurate list of buildings it owns and leases, as well as space needs for other city departments.

Other city departments, like Parks and Recreation, have the authority to enter into lease agreements, but Interim Real Estate Officer Alex Gale said there were some deals where the Real Estate Office was not involved at all.

“What we have to do is reach out to all the departments and find out what other agreements are out there that we may not be aware of,” said Gale.

The city created a Strategic Facilities Governance Team (SFGT) back in 2013 to guide the city’s building use and leasing decisions.

Specifically, the group handles building requests from other city departments.

KXAN investigators obtained a spreadsheet showing building requests, but it appears the document hasn’t been updated since 2013.

Despite that, Gale said the group had been meeting regularly.

Taxpayer advocate Bill Oakey said he’s appalled at how removed the Real Estate Office has been during the leasing process.

“If I owned a business, and I didn’t keep track of my inventory, I’d probably be out the door as CEO,” he said.

City didn’t always collect utility, rent payments

Oversight issues continued when the city acted as a landlord. It didn’t always collect rent or utility payments.

The audit said the city didn’t collect utilities from businesses like Texas Reds and Whites and Cookbook Cafe at the Austin Library.

Texas Reds and Whites told KXAN it was a misunderstanding having to do with its lease.

Officials at the Austin Library referred KXAN back to the Real Estate Office.

Gale says the city has since collected the money and is working to be more involved.

“I think it’s just making sure we communicate better with those tenants when rent is coming due,” said Gale.

Auditors also found the city didn’t collect rent from two nonprofits: Planned Parenthood and the Capital City African-American Chamber of Commerce.

It’s worth noting that nonprofits like these usually pay a nominal fee for rent, sometimes no more than a dollar for rent in exchange for providing a community benefit.

Yet, auditors found the city didn’t often track or even have performance measures for these nonprofits.

The audit says this may result in leases to nonprofits that do not align with city goals

“We will work with that steward department to ensure that we come up with the cost-benefit analysis to show what the nonprofit does provide, and then hold that nonprofit accountable,” said Gale.

Auditors: leases not always coordinated effectively

Auditors found that the city of Austin did not always execute leases effectively or do so to get the best benefit for the city.

In one case, auditors say the city did not effectively coordinate negotiations to ensure leased space was suitable for a data rack center, prior to entering into the lease agreement.

Auditors wrote that this resulted in waste of more than $700,000, because the city was not able to occupy the building for its intended purposes by the time the audit was released in May.

KXAN asked the City Manager’s Office about this. A spokesperson tells KXAN that the city began partially using the space in July 2018, which would be within a month the lease was signed.

The city says it now fully uses the building.

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