Photo courtesy of Brinkley Sargent Wiginton Architects.

With nearly 19,000 state and local government police departments operating across the United States, the need to renovate or replace a headquarters, precinct, or substation facility is a critical issue throughout the country.¹ Many police facilities continue to operate well past their useful lifespan and are challenged by size constraints; inadequate security; seismic issues; and outdated heating, air conditioning, and ventilation systems. In order to properly support the law enforcement community, it is vitally important to provide the modern and safe facilities that are essential to sustaining the public safety mission.

Police facilities are typically funded from the government’s capital budget. For many communities, funding for new police facilities is either unavailable or often competes with other governmental priorities. Given the timing and uncertainties of the capital funding process, many projects take years to fund, while others never receive the funding required to address their critical facility needs. Police agencies are also among some of the key services hit hardest by economic downturns and economic collapses. Therefore, police departments often must consider other options if they hope to get these projects off the ground.

Private Development Solutions Can Provide a Path Forward

Governments looking to replace outdated, functionally obsolete police facilities are utilizing private development options as a means to replace or modernize their aging facilities. Increasingly, decision makers at all levels of government are turning to long-term leasing solutions to meet the space and facilities needs of many government functions. In the early 1990s, the U.S. federal government began to expand its use of private development solutions to address critical facility needs for agency tenants. In recent years, state and local governments have followed suit by embracing long-term leasing solutions to meet specialized facility requirements. In many instances, the decision to proceed with a customized leased solution has made the difference between realizing much needed public safety facility improvements and continuing to struggle with outdated facilities that no longer support mission requirements.

When considering private development options, governments should determine their specific priorities and requirements. There is no standard or prefigured approach to a long-term leasing solution, and no two projects are the same. As police organizations consider alternative financing for their facilities’ needs, there are several important elements to consider.

• Length of Lease Term: The term of a government-leased facility can range anywhere from 5 to 30 years depending on the nature of the space requirement as well as government policy on lease terms. For public safety facilities, longer lease terms are often preferable given the long-term nature of the space requirement. Moreover, the government can often secure lower rental rates with longer lease commitment as the cost of financing is reduced and these savings are passed onto the government.

• Scope of Services: All commercial leases fall on a spectrum of services associated with the costs of maintaining and operating the facility. At one end of the spectrum is a full-service lease, in which the private landlord is responsible for paying all the costs associated with operating the facility, including taxes, janitorial service, and utilities. At the other end of the spectrum is a triple net lease, in which the government is responsible for covering these operating expenses. Any commercial lease can be structured to reflect the scope of operating services desired by the public safety tenant.

• Existing Government Property: In some instances, the government may already own real estate land or buildings that could be harnessed for developing the new public safety facility. In these instances, sale-leasebacks, lease-leasebacks, and similar types of transactions may avoid the need for a site selection process and leverage the value of existing government-owned property to reduce the total cost of the project.

• Opportunities for Government Ownership: Under some circumstances, the government may wish to take ownership of the facility upon lease expiration. Operating leases can be structured to include a market-priced purchase option that would provide the government the option to purchase the facility upon lease expiration. Capital leases, including those financed under IRS tax-exempt bond financing, would provide for the transfer of title to the government at minimal expense at the end of lease term.

Benefits of Private Development Solutions

The benefits of a long-term leased solution can be significant and often enable governments to maintain their public safety mission. Notable benefits include

• Project Realization and Acceleration: In contrast to waiting years for capital budget appropriations that may never come to pass, a long-term lease solution can allow for police organizations to address their public safety facility needs more quickly.

• Dedicated Operations and Maintenance: A lease contract can be structured to include the base rental payment as well as operations, maintenance, and repairs to ensure that the facility remains viable during the full term of the government tenancy.

• Shifting Liability for Cost Overruns: A private development solution effectively shifts liability and accountability for all development costs from the government to the lessor. These would include liability for cost increases, schedule delays, changes in financing terms or conditions, and so forth. By shifting these cost liabilities onto the lessor, the government can more clearly and confidently represent to constituent taxpayers and stakeholders the fixed and agreed rent or cost for the project, knowing this value is guaranteed by the lessor.

• Preserve Limited Debt Issuance Capacity: A long-term leasing solution can help preserve a government’s limited debt issuance capacity as lease payments are usually made from the operating budget instead of from the capital budget.

Case Studies in Private Development Solutions

There are a number of successful examples of public safety facilities realized through private development solutions, which have been used to support not only administrative functions but also evidence storage, firing ranges and other training needs, communications dispatch, laboratory work, and other specialized facility requirements.

Oregon State Police Headquarters – Salem, Oregon

In the spring of 2016, the Oregon State Police moved into a 120,000 square foot custom-built headquarters located in Salem, Oregon. Prior to the completion of the 11-acre, three-building complex, the Oregon State Police was divided across seven different facilities, all of which were outdated, overcrowded, and functionally obsolete. After initial attempts for funding a new headquarters were denied by the state legislature, the Oregon State Police opted to finance the project by means of a long-term lease with a private developer.

The state-of-the-art facility was completed within budget and on schedule and features an 82,000 square foot office building, a 30,000 square foot fleet services/IT support building, an 8,000 square foot tactical equipment storage warehouse, and surface parking for more than 400 campus employees. The building was constructed to allow considerable expansion options if the department experiences unexpected growth during the lifespan of the facility.

Borough of Somerville Emergency Services Complex – Somerville, New Jersey

In August 2019, the Borough of Somerville, New Jersey, issued a request for qualifications/proposals for the design, build, financing, and sale/leaseback of an Emergency Services Complex. The project would allow the borough to relocate its four fire companies, police headquarters, Office of Emergency Management, and First Aid Squad into a new public safety facility. The borough anticipates a sale/leaseback arrangement where the new facility would be constructed on 1.7 acres of vacant land owned by the borough. Under the proposed agreement, the development partner would assume all costs associated with the design and construction of the facility, as well as finance the construction of the facility, with the intention that it will be compensated through lease payments for the facility over an agreed-upon term.

Through this process, the borough has recognized the importance of drawing upon private sector development expertise for all aspects of the project. As a result, the procurement focused on identifying the most qualified developer to work with the borough to define the details of the project and establish a definitive redevelopment plan. In lieu of requesting specific design plans and pricing for a new facility, the borough invited proposed teams (developer, architect, engineer, general contractor, etc.) to demonstrate relevant experience and financial soundness to allow the borough to identify a development partner capable of undertaking a project of the required size, scope, and duration. Once selected, that partner would gain exclusive rights to negotiate an agreement with the borough to develop the Emergency Services Complex upon completion of a development feasibility study.

The Salinas Police Service Center – Salinas, California

In August 2018, the City of Salinas Police Department broke ground on a $40 million, 69,000 square foot Police Service Headquarters. The city is financing the new police headquarters complex using tax-exempt debt that offers a longer term than traditional taxable debt and has a lower interest rate relative to private financing. Under a 30-year lease agreement, the city will lease the police station for $4.8 million annually. The city plans to pay the police building rent with a portion of revenue from a half-cent city sales tax.

The previous police headquarters building was a single-story, concrete structure built in 1958, and it was far beyond its useful life. It was severely overcrowded, with workspaces located in original jail cells and archived police records found in nearly every space in the building, including narrow mechanical and plumbing chases. The facility was in a serious state of disrepair, with outdated and inefficient plumbing, power, heating, and cooling systems.

The new police headquarters is a modern, efficient public safety facility designed to accommodate anticipated future growth. The facility consists of two buildings. The two-story 44,300 square foot headquarters building serves as the essential services administrative building and includes detention spaces, a community room, and a community plaza. A second 25,000 square foot support building provides police support services, including evidence intake and storage, crime lab spaces, and an indoor firing range.

Vancouver Police Department – Vancouver, Washington

In October 2019, the City Council in Vancouver, Washington, authorized the relocation of the Vancouver Police Department to a new lease-to-own facility. The lease term is for 63 months, with an option for the city to purchase the property at the beginning of year three for approximately $10 million. The lease agreement covers the facility lease, interior maintenance, and improvements to the building.

The current headquarters building no longer meets the critical needs of the Vancouver Police Department (VPD) due to the size, configuration, and operational limitations of the building. In the mid-to-late 2000s, the city invested in two new patrol precincts and a new evidence facility to replace the previous police facilities in downtown Vancouver, which had been built in the 1960s. Although these precincts were designed to accommodate some future growth, they did not include space for police headquarters, administration, or training. Over time, increased VPD staffing and the addition of an in-house police records unit have overburdened the capacity of current VPD facilities. The current VPD facilities also lacked any space dedicated to training, and VPD has historically been forced to rely upon donated space from local businesses.

The new VPD police facility will provide more than 44,000 square feet of space on two floors and will house the VPD Office of the Chief, Administration, Finance/Logistics, community volunteer offices, the Training Unit, and specialty functions currently located in west and east precinct locations. With nearly triple the square footage of the current location, the new headquarters building will have room for dedicated training space for the department. VPD expects to begin moving into the new building by the end of 2021.

Conclusion

Eventually, every police organization will face the challenge of renewing or replacing its aging and obsolete facilities. Public safety professionals deserve modern, efficient, and well-functioning resources to support them in doing their jobs every day. As officials consider the renewal or replacement of police facilities, it is important to understand the breadth of options available to meet this need. While many governments often give first consideration to a government ownership model, evaluating all available options—including long-term leasing solutions—is imperative to making the most informed decision on how best to address these critical requirements of public safety facilities.

For more information on private development options for new police facilities, or any of the case studies reflected above, please contact the IACP at LeadershipServices@theIACP.org.

Note:

¹ While there are also a significant number of federal public safety facilities in the United States, this article is intended for state and local governments who may wish to consider private leasing as an alternative to the traditional capital budgeting process.

Please cite as

Nick Iauco and Norm Dong, “State and Local Public Safety Facilities Alternative Financing Options,” Police Chief Online, July 21, 2021.