Kentucky Court of Justice
Administrative Office of the Court signs lease-to-purchase contract on Home Depot property in Frankfort
FRANKFORT, Ky. – The Administrative Office of the Courts will move its facilities to a new location in Frankfort under a lease-to-purchase contract signed last week with Home Depot. The agreement will allow the AOC to purchase the vacant 14-acre Home Depot property at 1001 Vandalay Drive in Frankfort and consolidate its facilities into one building from seven.
The Judicial Branch currently pays $1.3 million a year in rent and utilities to house the AOC in 139,000 square feet throughout seven buildings at 100 Millcreek Park in Frankfort. The AOC has spent $15.8 million in rent and renovations on the Millcreek campus since 1987.
“This move will mean significant long-term savings for the Judicial Branch,” AOC Director Laurie K. Dudgeon said. “The AOC will save $200,000 a year for the length of the lease and we’ll own the building outright in seven years, with the intention of paying it off sooner to reduce the purchase price. We’ll save at least $1 million each year in rent once the purchase is complete.”
Dudgeon said the AOC will solicit bids to renovate the facility to meet the current and future needs of the agency. “Recent personnel reductions have left the AOC with excess space at the Millcreek location and we’ll be able to house all 240 employees in one building in the Home Depot space. We’ve been preparing for the possibility of this move for nearly two years and have earmarked one-time savings from our facilities budget and criminal record report revenue to cover the cost of the renovations.”
The AOC was facing significant renovation costs at the Millcreek location to consolidate buildings and reconfigure space for its smaller workforce.
The Kentucky Court of Justice Rules of Administrative Procedure (AP Part V) permit the AOC to enter into a lease-purchase agreement. The KCOJ rules parallel KRS 56.806, the statute concerning the lease-purchase of property by the Executive Branch. The AOC received two bids in response to a lease-to-purchase solicitation in July 2010. Home Depot was the sole bidder that met the square footage and single-building requirements set forth in the solicitation.
The AOC intends to reduce the maximum lease-to-purchase price of $5.9 million by paying off the property sooner than the seven years allowed under the contract. An appraisal obtained by the AOC valued the property at $10.4 million after renovations. Home Depot paid $11 million for the unimproved property in 2003.
“This is a win-win situation for the Judicial Branch, Frankfort and the state,” Dudgeon said. “The court system will acquire efficient office space at a reduced cost, Frankfort will benefit from the occupation of a building that has been vacant for years and the state will gain instant equity in a prime commercial property.”
The AOC could potentially occupy the building within a year of renovations, which could begin in the spring of 2012. The AOC will convert 62,000 square feet of the building’s 94,900 square feet into office space, with the remaining square footage to be used for its warehouse.
Dudgeon said the AOC decided to pursue savings in office space after several years of cost-cutting efforts in other areas due to state budget reductions. Since 2009, the AOC has absorbed a 26 percent reduction in state appropriations, reduced its workforce by 282 employees through layoffs and attrition, implemented significant operating cuts and streamlined the AOC’s organizational structure.
The Administrative Office of the Courts is the operations arm for the state court system. The AOC supports the activities of nearly 3,300 court system employees and 403 elected justices, judges and circuit court clerks. As the fiscal agent for the state court system, the AOC executes the Judicial Branch budget.