Problems with the management of city leases have been widespread for some time, as evidenced by a regular flow of performance audits and reports that highlight them. 

Most recently, on January 24th, Jenny Wong, the auditor in Berkeley, California released a follow-up report on a lease audit from 2009 that found a number of areas of concern. Sadly, the follow-up notes that “the city faces the same risks 16 years later,” providing eight recommendations to help managers move forward.

Many of the problems cited in Berkeley have also appeared in the last several years in Long Beach, California, Kansas City, Missouri, San Diego, and the City of Vancouver, Canada all of which were mentioned in our October 2024 Government Finance Review column, “The Drive to Improve Public Sector Lease Management.” That column looked both at common difficulties and at the solutions that were put in place as audit recommendations were addressed.

A few problems cited in the Berkely audit include:

• The lack of a central inventory of leases and the lack of centralized oversight. As the Berkeley follow up audit shows, these problems can cause the city to lose track of its properties. It also means that it’s difficult to stay on top of lease agreements and renewals. 

A similar problem has also recurred over time in San Diego, where a 2022 audit found 24% of leases had passed renewal dates, leading to potential under-charges by the city; neglect of maintenance issues and a host of missed opportunities for utilizing different properties.

• Inconsistent practices and limited transparency of low-cost or no-cost leases. In Berkeley, auditors write that the practice of offering government space at no or very low rent can vary significantly from one lease to another. That means there is no standard practice or policy for when rent can be offered at below market rates. The audit cites “actual or perceived unfairness between current or prospective tenants that do not receive the same opportunities.”

Similarly, a 2024 performance audit in the City of Vancouver, Canada, noted that inconsistency of low-cost lease terms compromised fairness, transparency and accountability. 

• Outdated policies. The Berkeley audit notes that “The City’s lease policy does not accurately reflect its actual practices.” That’s partly because an old plan to centralize lease management fell apart when a Real Property Administrator position was eliminated. While staff in Public Works still carry out some of the duties that were supposed to be centralized under the eliminated position, “no staff person in the city (is) responsible for central oversight of leases and licenses.”

Although the policy continues to address a centralized situation, staff in other departments do not necessarily involve Public Works in the leases that they manage. As the audit says “Public works may not know about leasing decisions until the City Council approval stage, when it is too late to provide direction on the lease terms.

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