HB0694 PH 4.16.2025 COM — Senate Hearing Report

Senate Commerce Committee

Aaron Jones  271-2609

HB 694-FN, requiring leases of land, buildings, or space by state agencies to be at fair market value.

Hearing Date: April 10, 2025

Time Opened: 10:00 a.m. Time Closed: 10:10 a.m.

Members of the Committee Present:  Senators Ricciardi, Murphy, McGough, Fenton and Reardon

Members of the Committee Absent  : Senator Innis

Sponsors:  

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Who supports the bill:  Representative Vanessa Sheehan, Derek Ferland (Sullivan County), Kate Horgan (NHAC)

Who opposes the bill:  Sarahlynn Williams

Who is neutral on the bill:  No one

Summary of testimony presented in support:

Senator Keith Murphy, on behalf of Representative Judy Aron

• This bill would require leases of land, buildings, or space by state agencies to be at fair market value.
• This bill was filed at the request of their county manager, Derek Ferland, who has dealt with these types of leases.
• The latest Executive Branch Operating Lease Inventory, which is published by the Department of Administrative Services, found there were approximately 90 active leases as of July 1, 2024.
• This bill would require the renewal of a property leased by a state agency to be leased at a fair market rate unless a sub-market rate was agreed to by the property owner.
• Often, the state forces terms on entities when they lease properties. In many cases, the amount of the renewed lease does not cover the real cost of the property. Consequently, costs are downshifted on to local taxpayers.
• In Sullivan County, for example, the state has forced a lease agreement amount on a lease renewal for a courthouse, which is less than market value for the space. Taxpayers have had to pay the difference in taxes and other costs associated with the property.
• Since the state does Request for Proposals for new leases, this bill would only apply to lease renewals. This would allow for a recalibration of the lease payment in the event inflation increases over a 3- or 5-year period, or if there are emerging factors that drastically impact the cost of commercial leases.
• The original bill did not address the other elements that might be included in leases, such as utilities and custodial services, which are known as a consolidated lease. These items, however, should be negotiated in addition to the baseline cost of a building. Similar language was added into the bill by the House Executive Departments and Administration Committee.
• Lease renewals should be negotiated on fair market value, not a continuation of lease amounts from prior agreements.

Derek Ferland, County Manager, Sullivan County

• In his role, Mr. Ferland said he has participated in three lease negotiations with the state for a space in Newport for the superior and probate courts.
• Presently, there is guidance on procurement for purchasing properties and eminent domain, but there is nothing governing the process for when the state leases its real estate.
• The state has 90 leases that cover 2 million square feet at $14 million per year.
• Mr. Ferland said there needed to be more guidance for the state, who is the tenant, and the subdivisions, who are the landlords.
• Consolidated leases include custodial services and electricity. Over the past 5 years, those costs have risen significantly.
• Mr. Ferland did not believe the negotiation process had an opportunity to recalibrate what was considered a fair market lease, which included the value of the bricks and mortars as well as the additional services required by the state.
• Leases should be fair and non-contentious for both parties. Mr. Ferland said neither party won a negotiation because it came from taxpayers.
• This bill sought to provide statutory guidance to help oversee the process to ensure it is more efficient and responsive.
• Senator Reardon said she negotiated with the state on behalf of a client, and it was a liquor store that was valuable, and it had a long-term lease. From her experience, it was a race to the bottom for what was charged for rent. She asked how it would advance the case of the landlord if the lessor could agree on a lower amount.
  • Mr. Ferland stated it would provide flexibility for a landlord to accept something below fair market value if there were a long-term interest in maintaining the state as a tenant. They were concerned with ensuring there were no revenue gaps, which do not cover costs, such as electricity, maintenance, and repair. Their courthouse is 140 years old, and it has issues. If he did not have those concerns, he said he would be motivated to ensure they did not build a courthouse elsewhere.

Kate Horgan, on behalf of the New Hampshire Association of Counties

• The Association supported the bill as it was amended by the House.
• This bill does not require fair market payment, but it would maintain flexibility.
• Ms. Horgan said what is leased to the state are unique properties like a courthouse.
• The state could rent other properties, but they would not meet their needs, so they are locked into specific types of buildings.
• Ms. Horgan said some counties have set up different types of leases, such as Cheshire County, which they would be happy to keep pursuing.

Representative Vanessa Sheehan

• Representative Sheehan said she chaired the subcommittee that worked on this bill.
• This bill would improve the process of lease negotiations between the state and political subdivisions, which would make them more efficient and equitable for both parties.
• This bill also described the reciprocity for fair market rate lease renewals between the state and subdivision regardless of who is the lessee or lessor.
• Additionally, this bill would add negotiations for other expenses that are not limited to utilities and custodial services.

Summary of testimony presented in opposition:  None

Neutral Information Presented:  None

AJ

Date Hearing Report completed:  April 16, 2025