published Wednesday, June 12th, 2013

Chicago firm that got state contracts had ties to Tennessee Gov. Bill Haslam

Tennessee Gov. Bill Haslam answers a question during a news conference after speaking to a joint session of the Legislature in Nashville.
Tennessee Gov. Bill Haslam answers a question during a news conference after speaking to a joint session of the Legislature in Nashville.
Photo by Associated Press /Chattanooga Times Free Press.

NASHVILLE — Gov. Bill Haslam in 2010 held a financial stake in a Chicago-based real estate services firm that since the Republican took office in 2011 has seen what began with a $1 million consulting contract mushroom into millions of dollars more in state business, records show.

But it's unclear whether Haslam still has any investment at all in Jones Lang LaSalle LLC, which in April won a competitively bid, five-year, $330 million outsourcing contract to manage and maintain state office space.

That's because Haslam, a multi-millionaire, placed many of his investments in a blind trust upon taking office.

Haslam spokesman David Smith said Tuesday the governor himself is unaware whether he still has any investment and wouldn't be swayed even if he did.

"That's the whole point of a blind trust," Smith said, adding, "This is a project that is slated to save the state millions of dollars and it's good government."

Nashville television station WTVF on Monday reported about Haslam's 2010 holdings in Jones Lang LaSalle. The investment was among dozens of entities in which then-candidate Haslam disclosed publicly that he held an interest of more than $10,000.

State lawmakers, meanwhile, are showing interest in the contract. The outsourcing contract is resulting in 126 state General Services employees losing their government jobs and the Chattanooga Times Free Press reported Monday night that the Tennessee State Employees Association and several General Services employees and workers in other departments are suing the state over their treatment.

A Nashville judge on Monday temporarily blocked the layoffs until she holds a hearing next week on whether the employees were provided job counseling and opportunities to apply elsewhere within state government as law provides.

State House Democratic Caucus Chairman Mike Turner, of Nashville, said Tuesday that if Haslam remains invested in Jones Long LaSalle it's "disturbing."

Turner said the governor "needs to disclose this stuff and if he discloses his finances, a lot of this stuff would be put to rest. I think the governor is an honest man, but I think the people would feel better about it. ... All this speculation would go away."

But Turner, who acknowledged he opposes the outsourcing of General Services building responsibilities, said he intends to ask House Speaker Beth Harwell and Senate Speaker Ron Ramsey, both Republicans, to have the chambers' Government Operations Committees scrutinize the Jones Lang LaSalle contract.

The chairman of the Legislature's Fiscal Review Committee, Senate Republican Caucus Chairman Bill Ketron, told colleagues Tuesday that he is asking General Services Commissioner Steven Cates to come before the panel in July and give an accounting on three contracts, including the Jones Long LaSalle contract.

The firm won two contracts with the state, beginning with a competitively bid $1 million comprehensive statewide capital improvement plan approved by the State Building Commission in January 2012.

The contract was amended repeatedly and grew in size and cost with approval granted by State Building Commission members or the commission's Executive Committee. It's now estimated at $7.65 million in maximum liability.

WTVF reported top Haslam officials in the thick of things both on that contract and the eventual award by General Services on the competitively bid facilities management contract.

In a May 16, 2012, email to a staffer, Comptroller Justin Wilson described how Haslam Chief of Staff Mark Cates and the governor's attorney, Herb Slatery, came to him and wanted to amend the state's first contract on real property to cover preplanning and "some evaluations of the existing state real estate. They describe it as a continuation of the existing contract that was generally within its scope."

He wrote, "I said that it sounded a little like a sole source but that they may well have good justification." The Building Commission approved it.

The first contract included Jones Lang LaSalle taking over contracting for leased office space. The company is taking a 4 percent commission fee on what companies receive for the state.

Last year, the Times Free Press reported that Jones Lang LaSalle recommended the state get rid of six state office buildings saying they were old, inefficient and cost too much to fix. Among them are the State Office Building on McCallie Avenue in Chattanooga and the nearby James R. Mapp Building.

The state agreed and officials plan to lease space for some 400 employees. General Services spokeswoman Kelly Smith previously told the Times Free Press there is no conflict in Jones Lang LaSalle recommending getting rid of the buildings and then making money off the leases it is handling.

The firm said constructing new buildings was cheaper than leasing, she said. Because the state wanted more flexibility with a changing workforce, the department decided leasing the space was the best option, Smith has said.

This year, the state put out for bid the outsourcing of all building and maintenance operations statewide. It had been part of the originally proposed contract but split off for separate handling.

Jones Lang LaSalle won the contract over a competitor.

Sitting on the three-person panel, named by General Services' Central Procurement Office, were Cate and Haslam's then-special assistant Larry Martin, who is now acting finance commissioner.

Smith defended the appointments, saying Cate has experience in real estate and facilities management issues and is Haslam's staff representative to the State Building Commission. Martin was Haslam's deputy when he was Knoxville's mayor and has "extensive" banking and public policy experience, she said.

Smith said Jones Lang LaSalle will be paid about $38 million over the life of the facilities management contract for management and labor. The maximum amount of liability for the state is $330 million, which Smith said includes all pass through costs and utilities.

The firm pays all vendor bills, including janitorial, security, landscaping and electrical and heating/air conditioning work at no mark up, Smith said.

Smith said the facilities management contract is expected to save taxpayers about $50 million over five years, plus a onetime "cost avoidance" of $25 million. On top of that is another projected $3 million in annual cost savings because the state will not have to purchase technology systems, manage training and operate its own call center.

In addition to that, selling off the six state office buildings and a consolidation/modernization of state owned space is expected to save the state $135 million over the next decade, Smith said.

Contact staff writer Andy Sher at asher@timesfreepress.com or 615-255-0550.

about Andy Sher...

Andy Sher is a Nashville-based staff writer covering Tennessee state government and politics for the Times Free Press. A Washington correspondent from 1999-2005 for the Times Free Press, Andy previously headed up state Capitol coverage for The Chattanooga Times, worked as a state Capitol reporter for The Nashville Banner and was a contributor to The Tennessee Journal, among other publications. Andy worked for 17 years at The Chattanooga Times covering police, health care, county government, ...

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