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How Much Has Tennessee Privatization Really Saved?

Posted at 8:26 PM, Sep 16, 2015

The first stage of a Haslam administration effort to outsource the management of state buildings to a big corporation isn't saving near as much as taxpayers were promised, NewsChannel 5 has learned.

As Tennessee Gov. Bill Haslam considers expanding that program, those "expected savings" have shrunk yet again.

"We're saving millions of dollars -- that's millions of dollars that we can put into education," Haslam recently told reporters.

The governor was defending the idea of potentially outsourcing the state's college and university buildings. It comes two years ago after the administration turned control of state office buildings over to the Chicago-based corporation Jones Lang Lasalle.

"I can show you that when we changed things we save money," he added.

JLL officials convinced the administration to outsource office buildings in 2013 after the state paid the company a million dollars to study the condition of those buildings.

A slide prepared by JLL showed the "expected results" would be savings of $18.8 million a year -- $94 million over five years.

Last year, JLL official John Padgham told NewsChannel 5 that was only a reflection of industry averages.

"That was never the intent of that study was to say here's what you can expect," Padgham insisted.

"'Expected' doesn't mean expected?" we asked, prompting the JLL official to sigh.

After the state put the facilities management contract up for bids, JLL won the job after projecting cost savings this time of $13 million a year.

A big chunk of that came from slashing security on state buildings by more than 90 percent.

"That's not realistic, is it?" NewsChannel 5 Investigates asked Padgham.

"Uh, no, it's not," he conceded. "I don't think that will happen."

Then, when the contract was announced, JLL said it would save $50 million over five years -- in other words, $10 million a year.

"I think we'll get to $50 million," Padgham said.

But in a recent memo that Padgham helped draft that $10 million a year was down to $8 million.

Part of the reason, he wrote, was "due to buildings being in worse condition than expected."

State Rep. John Ray Clemmons, D-Nashville, scoffed at that excuse.

"We're getting lower estimates on the money that we are actually going to save for which we paid $1 million to know how much we were going to save," he said.

We showed Clemmons a chart offered up by the governor's office showing those savings are now down to $5 million a year -- a long way from the $13 million that JLL promised in its bid, even further from the $18.8 million it first said could be "expected."

"So again where is the accountability when it comes to privatization?" Clemmons asked.

A JLL spokesperson first acknowledged in one email that the true savings were now $5 million a year, then he came back in a second email and said it's more like $6.5 million.

The Tennessee State Employees Association has now called for an independent audit to determine which, if any, of those numbers are real.

That JLL spokesperson said the full scope of the problems inside those office buildings did not become apparent until company officials began working inside on a daily basis.

And it turns out, the state wasn't spending as much on utilities as the company thought -- which cut down on the potential savings.

David Roberson, spokesperson for the Tennessee Department of General Services, said in an email: "It’s important to remember that, with all the figures you mention, we’re dealing with projections and estimates made at various times over a period of several years, and numbers are revised as more accurate data are available."

Here is the statement from JLL:

“Through the second year of the outsourced facilities management program, total savings is $12.9 million. With continued modernization and maintenance of building systems, energy savings will increase year over year and become a primary driver of overall projected savings of $40 million over the five-year term of the program.”