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On a fast track.

On A Fast Track

There is another big MAC attack about to occur at the Capitol, and this time Rep. John Miller is convinced he can bring his dream to fruition.

So are other members of the Legislature and influential Little Rock landlords who traditionally have opposed the Melbourne representative.

In 1987, Miller introduced legislation to authorize the construction of a state office complex on the Capitol grounds known as Big MAC II. He failed.

In 1989, Miller tried again and failed again.

This time, Miller has devised a five-phase construction plan with a new phase to be built every two years beginning in 1992. He's playing it coy for now, but fellow legislators say Miller has the votes to start the state on the road to building 591,000 SF of office space and 2,420 parking spaces.

Once the Legislature is finished with the highway program, it will move on to Big MAC II. A bill could be on the governor's desk before the end of the month.

"I've talked to a lot of people," Miller says. "And a lot of people have talked to me. After those conversations, I feel real positive."

There appears to be no organized opposition, leading legislative observers to believe the proposal will sail through the General Assembly as easily as the governor's tax proposals for education.

"It's a done deal," says one veteran lobbyist.

The Downtown Partnership has decided not to take a position on Miller's bill, a move viewed as a tacit endorsement of the phase-in method.

"Our membership feels it is best not to get involved at this time," says Stephen Chaffin, the Downtown Partnership executive director.

"With the blessing of our executive committee, Dickson Flake and John Flake made an agreement with John Miller last year. Even though the membership of the executive committee has changed, we felt that to oppose Mr. Miller at this time would be a sign that we do not negotiate in good faith. We didn't want that.

"Still, some of our board members feel Big MAC II is not good for the state or for downtown Little Rock. There are concerns out there. Those who object believe the interest payments on the bonds used to build Big MAC II will be more than what the state now is paying in rent."

In essence, the Flakes' deal with Miller was that Little Rock landlords would not mount organized opposition if Miller would agree to build the complex over a decade rather than all at once.

Associates say the Flakes believed Miller had the votes regardless of what opposition came from Little Rock. They felt it was better to compromise early than lose a legislative floor fight and perhaps have the entire complex built at once.

"What we did last year was a good-faith effort to mitigate the negative effects of building Big MAC II," says Dickson Flake.

"I don't know of much active opposition to the idea of building this over 10 years. You have to remember that in 1987 and 1989, much of the legislative opposition came from people who didn't think it was a priority in light of the state's financial situation. It had nothing to do with attempts to make the Little Rock real estate community happy."

Funding The Project

Miller plans to fund the project on the front end with financing from the state Public Employees Retirement System and the Arkansas Teacher Retirement System. He says both agencies are "desperate for space." The balance of the funding is to come from bonds administered by State Building Services.

"We will put a 10 percent lid on the interest rates," Miller says. "That will keep the cost down. In the current market, that is a reasonable ceiling. Hopefully, we can issue some of the bonds for as low as 7 percent.

Miller is confident the money the state will save on rent will cover interest on the bonds. There will be minute savings during the first phase of construction since that phase will consist mainly of parking decks and a visitors' center. Under Miller's plan, the retirement systems will have the initial title on the complex.

Legislators from outside central Arkansas are listening to Miller's sales pitch that state offices in Little Rock should be centralized.

"We definitely have a problem with the fact that state employees are scattered around so many locations," says Sen. Joe Yates of Bentonville. "There's a growing feeling that we need to centralize. I think Big Mac II has a better chance of being approved this time than last time because of the phase-in component."

A few members, especially those from central Arkansas, still worry about the hit local landlords would take in what already is a soft real estate market.

Sen. Jay Bradford of Pine Bluff, the chairman and chief executive officer of First Arkansas Insurance, recently rented space in the KSSN Building on Cantrell Road.

"They were great to us," Bradford says. "They gave us a good price, put in nice wallpaper and erected a $2,000 sign at no cost to the company."

Bradford calls the commercial real estate market a buyers' and renters' market.

"Prices are competitive, and I think they will stay competitive for years to come," Bradford says.

Powerful Legislator

Miller is on everyone's list of the most powerful legislators. Even members as respected as Bradford are careful not to criticize Miller personally.

"I have the utmost respect for John Miller," Bradford says. "I just happen to disagree with him on this issue."

John Pagan, one of seven freshmen senators, is also careful not to criticize Miller. Yet he's not prepared to jump on the Big MAC II bandwagon.

"This ought to be an economic decision," Pagan says. "The decision should not be based on the respect we have for John Miller. At the same time, it shouldn't be based on protecting particular landlords. We're going to have to study the numbers.

"This is my first year, but I'm sure on an issue this important we will be given plenty of pictures and plenty of facts. Arms will be twisted on both sides of the issue."

Miller contends there is "not even a controversy" when it comes to "the meat of the issue."

"The only controversy is over the financing method," he says.

However, there is talk that the state should buy existing properties such as the old Stephens complex downtown if it wants to centralize agencies.

"Purchasing a vacant building might be our best bet if we feel the need to do something," Bradford says. "At least we would be supporting private entrepreneurs."

A veteran such as Miller realizes that timing is everything in politics. He obviously believes the time is right for Big MAC II.

"Each time we bring this to the floor, we get more support," he says. "State government continues to grow. The time to begin construction is now."

State agencies lease 1.02 million SF of space in Pulaski County, generating annual payments of almost $10 million. Bradford, who intends to introduce a bill to keep state government out of private business, sees construction of Big MAC II as another example of the state "competing against the goose that lays the golden eggs."

"Sometimes things that look great on paper are not in the best interest of the taxpayers," he says. "The figures we're given will not reflect the decreased taxes that will be paid by the landlords this will hurt."

Third Time The Charm

Will the third time be a charm for John Miller?

"Because of the phased-in approach, his proposal has become more palatable," Bradford says. "This is not going to be easy to stop."

If there is to be opposition at this late date, the question becomes who will lead such opposition.

"I have no idea," says Jim Moses of AMR Realty, an opponent of the Miller plan.

Some have mentioned Little Rock attorney and landlord Graham Catlett, who knows numerous legislators.

"There is no doubt that John Miller is respected, and I respect him," says Catlett in offering the usual caveat. "But I'm confident that this project is not in the best interest of the state economically. I don't consider the fact that the Downtown Partnership did not take a position a significant development in and of itself. What's important is that legislators study all the facts before casting this vote."

Gov. Bill Clinton continues to feel that it would not be wise for the state to commence construction of an office complex at a time when rents are low in Little Rock. Clinton, though, is not expected to veto a bill that piles up significant majorities in both chambers of the Legislature.

"The Realtors are powerful around here, but I think they have seen the handwriting on the wall this time," says Rep. Lacy Landers of Benton. "The votes are there to pass it. Legislators have had to listen to too many people who come to Little Rock and don't know how to find state office buildings. The belief is that they should all be in one place."

If John Miller has his way, most of them will be in 10 years.

"I think we have salved the wounds of the Little Rock real estate people with this plan," he says. "The passage of time heals about everything."

PHOTO : THE LOYAL OPPOSITION: Sen. Jay Bradford (pictured on the left) of Pine Bluff does not think it is a good idea for the state to build Big MAC II on the Capitol grounds. Bradford, shown with Sen. Lu Hardin of Russellville, appears to be in the minority, however. Rep. John Miller's bill to build the complex is expected to sail through the Legislature when it is debated later this month.
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Title Annotation:fast start of construction of state office complex seen
Author:Nelson, Rex
Publication:Arkansas Business
Date:Feb 4, 1991
Previous Article:Abstract business.
Next Article:Leasing prognosis.

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