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Constitutional Amendment 2: Multi-Year Lease Agreements (Part 3 of 3)

In part three of the series on the Constitutional Amendments is a review of the Multi-Year Lease amendment.

The second constitutional amendment on Tuesday’s ballot has received a lot less press than the charter school amendment. This amendment, if approved, will allow the state to enter into long-term rental agreements. While this amendment is much less controversial than the charter school issue, it will have significant impact on how the state of Georgia is able to do business in the marketplace.

 

Under present Georgia law, the state may enter into a lease for more than one year however the state must pay the entire term of the lease during the current fiscal year.  The state can not create obligations for the budget in future years. This is due to the fact that each year the State must approve a balanced budget which prevents the state from obligating future years to pay for present expenditures.  Proponents of the constitutional amendment want to authorize the state to enter into multi-year lease agreements in order to take advantage of better market conditions.  However, this will create obligations for the state for future years.

 

The proponents of this amendment argue that the state is unable to compete in the open market for the lease of property due to the fact it cannot enter into long-term, multi-year rental agreements.  Tenants entering into one-year leases have a tendency to pay super-inflates rents prices in exchange for the property owner entering into such a short-term lease, which is not advantageous to the owner.  Property owners receive greater benefits and enjoy greater security for renting their property for longer periods of time.  Lenders tend to give better interest rates to commercial property owners which have longer term leases in place and longer term leases tend to increase the over-all property values.  

 

In turn, property owners who are able to lease property for longer periods of time offer better rental rates.  In fact, this is the standard in the commercial market.  Most commercial leases are for at least three to five years with opportunities for renewal at pre-negotiated lease rates.  Some leases even run longer, giving the tenant lower rental rates and more benefits.  What this means is that presently the State of Georgia is not able to compete on the open market to rent property and is paying higher rent than just about any other private sector counterpart.

 

The Georgia Chamber of Commerce and other supporters of the amendment contend that it will save the State money overall and will allow the State government to run more like a business.  The opponents contend that the state entering into multi-year lease agreements will open the state treasury to abuse.  In essence, they contend that present policy makers will be able to make deals now that future governments and generations will be obligated to pay for.  They contend that future tax dollars will end up in the hands of well-connected property owners due to current deals that might possibly be made for long-term leases.

 

The General Assembly has already enacted legislation that enables the state to engage in the leasing process.  It calls for a commission to review and approve leases for state agencies entering into multi-year leases.  The amendment provides that in the event the state budget can not afford to maintain the lease due to decreases in revenues or increases in expenses, the State can seek to terminate the lease.  This legislation will go into effect next year if Amendment Two is approved by the voters.  If you haven't already taken advantage of early voting, remember that this Tuesday,  November 6th, is Election Day.  Don't let your voice go unheard.

 

 

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Frank Jones November 06, 2012 at 02:11 PM
There are many problems with Amendment 2, such as: 1. Most striking is that the state will be able to enter into 20 year leases! If the state is going to lease a building for 20 years, the state should instead purchase the real estate. Leasing is a short-term solution. There is no reason to lease anything for 20 years. It is better to purchase and sell later. 2. The state may enter into leases for departments and agencies that are discontinued in future years, leaving the taxpayers on the hook for unused office space. 3. The state may enter into sweetheart deals with political cronies and obligate taxpayers for long-term payments. Yeah, I know OUR politicians are honest, but who knows about future administrations...LOL! Vote NO on Amendment 2.

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