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SC could spend $496M to move state employees in deal that benefits major donor

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SC could spend $496M to move state employees in deal that benefits major donor

Nov 15, 2023 | 11:05 am ET
By Jessica Holdman
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SC could spend $496M to move state employees in deal that benefits major donor
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The S.C. Department of Health and Environmental Control (right) and the Department of Social Services (left) on Bull Street in Columbia are two of the agencies legislators want to move to newer buildings, though a $496 million proposal approved Tuesday, Nov. 14, 2023, doesn't include DSS. (Jessica Holdman / SC Daily Gazette)

COLUMBIA — Legislators gave key approval Tuesday to moving thousands of state agency employees to newer offices outside of downtown Columbia at the cost of hundreds of millions of taxpayer dollars that could benefit a major Republican donor.

Under the proposal, four agencies along Bull Street in Columbia would move to two office campuses miles away at a total estimated cost of $496 million over the next 20 years, according to a report by the state Cabinet agency that serves as a clearinghouse for all state property.

That’s $335 million more than it would cost in operations and maintenance over 20 years to simply keep the agencies where they are, according to the state Department of Administration.

The Legislature’s fiscal oversight board unanimously approved the idea.

Almost 60% of the total price tag is slated to go to the real estate firm of Bill Stern as rental payments, according to the report. The Columbia developer is a mega-donor, giving mostly to the state’s ruling Republicans but also to Democratic incumbents. He led the committee that organized Gov. Henry McMaster’s inaugural ceremonies in January. He is also chairman of the state Ports Authority’s governing board.

Stern did not respond to messages since Tuesday from the SC Daily Gazette.

McMaster supports the relocations, saying it makes sense to consolidate the agencies in “accessible and user-friendly facilities.” His relationship with Stern or any other commercial developer is irrelevant because the governor played no role in selecting the sites, said his spokesman, Brandon Charochak.

Stern, the owner of Stern Development, confirmed in June that he signed a contract to buy the 100-acre property that — if the rental proposal goes through — would be the new home for most of the agencies.

That confirmation came after legislators inserted a clause in the state budget directing the Department of Administration to gather bids on relocating the Bull Street agencies.  The budget received final approval later in June.

According to online Lexington County tax records, the property is still owned by Dominion Energy, which inherited the former SCANA Corp. headquarters in its 2019 buyout. A spokeswoman for the utility also did not respond to messages.

Who’s moving where?

Specifically, the utility campus in Cayce — across the river from Columbia in Lexington County — would house the state agencies that provide services for people with disabilities, mental health issues, and alcohol and drug addictions. It would also be the new home to the public health side of the Department of Health and Environmental Control.

Under a state law passed in May, that massive agency will split in two next summer, with separate agencies for public health and environmental regulations.

That split is what led legislators to seek new office space, said House Ways and Means Chairman Bruce Bannister, who’s also vice-chairman of the Joint Bond Review Committee.

DHEC
Employees arrive to work at the state Department of Health and Environmental Control on Wednesday, Nov. 15, 2023. (Jessica Holdman/ SC Daily Gazette)

Not all of the employees would fit on the utility campus. So, the rental proposal calls for the stand-alone environmental agency to be separately housed at the Columbia-area headquarters of the Colonial Life insurance company, which can hold almost 1,000 workers.

The entire deal depends on the Legislature funding it in the state budget that starts July 1, 2024 — a date that coincides with DHEC’s split.

Tuesday’s unanimous vote suggests that won’t be a problem, since the legislative panel’s chairman and vice-chairman are the chief budget writers of the Senate and House.

Rep. Gilda Cobb-Hunter, the longest-serving member of the House, was the panel’s only member to question the deal.

“I’m having some concerns about what it doesn’t appear the state is getting out of this,” said the Orangeburg Democrat.

“I am concerned about taxpayer dollars and the amount that we are putting out initially,” she said. “So, I’m trying to figure out how it’s an advantage for the state to go from being an owner of property to becoming a renter.”

Bannister said it’s about getting employees out of decrepit buildings.

“They are in terrible shape,” said the Greenville Republican, adding that anyone who doubts the need to move employees should tour the existing buildings.

The leases are the best and fastest option, he said. He called the utility and insurance campuses “very good and appropriate places for us to go.”

This is not the first time Stern has made money off state leases.

Last year, the state awarded Stern a $133 million contract to build two office facilities at the State Farmers Market in rural Lexington County and lease them to two other state agencies for 20 years. Those will be the new home of the state Education and Natural Resources agencies.

In both deals, state taxpayers must also cover most costs to maintain and update the buildings. Stern’s firm would pay only for projects that exceed $100,000, such as a new roof or air conditioning system, said Marcia Adams, director of the state Department of Administration.

The state’s deal with Colonial Life doesn’t include that piece.

Despite the added maintenance costs, Bannister said, leasing is better than buying.

“Twenty years from now, when those buildings look like what we have at Bull Street, we don’t have to deal with it,” Bannister said.

When Cobb-Hunter questioned the arrangement, Adams said the budget clause directing her office to seek proposals for moving the Bull Street agencies had very specific instructions on what to prioritize. She described them as “different” from most state bid requests.

They included easy access to the interstate, large group meeting space, and “amenities and conditions conducive to employee health and recruitment,” reads the directive.

The utility property met them and had space for 2,100 employees, she said.

As for providing “amenities,” both the Dominion and Colonial Life properties have cafeterias and gyms for employees to use, she said.

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Neither has room for the Department of Social Services. The state would need a third lease agreement somewhere else for its headquarters to also move from the Bull Street corridor.

Six other property owners submitted bids to become state agency landlords. But four were ruled out because they lacked parking and accessibility for people with disabilities. The other two could accommodate just 300 or fewer workers, Adams said.

The state plans to have the Bull Street buildings appraised before deciding whether to sell them. The land is valuable because it’s next to the multi-million dollar BullStreet District still under development. It includes a minor league baseball stadium, apartments, offices restaurants and the future home of the University of South Carolina’s medical school.

McMaster supports selling the state properties after the agencies move, his spokesman said.