Interior ministry rejects joint house as too costly

Photo: RKAS

Ministries to move say their office space costs will considerably grow in the new building, a square meter price jump possibly manifold.

While State Real Estate Ltd (RKAS) is explaining how much cheaper it is to have four ministries in the future Suur-Ameerika joint complex, Ministry of the Interior deemed the costs rise too steep and declined the project.

This winter Ministry of the Interior gave up plans to move, together with ministries of finance, social affairs and economy/communications (MKM), into a new tower to be completed in three years’ time.

According to chancellor if the interior ministry Leif Kalev, it is «somewhat surprisingly» cheaper to remain in the current building at Pikk Street, Tallinn.

«No matter that space used by us would, in the joint building, decrease by more than a third, fixed costs would, in the initial years, substantially increase,» Mr Kalev told Postimees. «According to current calculation, moving into the new building would raise initial years’ costs by half a million euros a year.»

State Real Estate Ltd has, however, said that by use of the new building, the state intends to save €8m over ten years.

Leif Kalev announced interior ministry’s refusal at chancellors’ meeting with RKAS board, on April 9^th this year.

Minutes of the meeting read: «As announced by Ministry of the Interior, the ministry waives the opportunity to participate in the project due to wring input data (number of employees) and additional tasks which would increase staff of the ministry, as well as security requirements that would substantially raise the costs of the building.»

RKAS: they wouldn’t have fit in

According to Ministry of the Interior, the Ministry of Justice will move in their place – the latter thereby having to exit one of the most stylish state facilities in existence, at Tõnismägi 5a and Tõnismägi 8, Tallinn.

In the new Suur-Ameerika house, the dropping out of interior ministry causes quite a shake-up of rooms. Earlier, it was planned to grant them the seven lower floors in the Pärnu Highway side 14-storey tower.

Now, the tower’s zero floor will be facilitating storage premises; spaces planned for interior ministry on 1^st floor will be turned into counselling chambers, 2^nd to 5^th floor will go to Ministry of Justice, and floor 6 will be split between ministries of social affairs and of finance.

The first tower upper part, in its entirety, will be occupied by Ministry of Finance. The other tower, behind the first one when looking from Pärnu Highway, will be divided between Ministry of Social Affairs and MKM.

RKAS is explaining interior ministry’s waiver not by increased costs, but by faulty initial underestimation of their need for space. «Their staff having increased over the past years, they would no longer have fit in there, space-wise, without compromises,» said the RKAS communications manager Madis Idnurm.

As the new house design was launched, before the economic crisis, interior ministry had 220 of staff – now about 260 already.

Saarniit: risk on private shoulders

Interior ministry’s chancellor names yet another reason they refused to move: the current buildings were renovated only in 2009, specifically adjusted for the ministry’s needs. «It would not be prudent not to use the investment already made,» added he.

A third of the Pikk Street building is not renovated, as yet; even so, repairs date back to 1998 and the fixing thereof will take «tens, maybe even hundreds of times less money that the joint building,» claimed Leif Kalev.

According to RKAS chief Jaak Saarniit, it is planned to sell off the ministry buildings currently in state ownership. With no fresh assessment available, RKAS cannot specify the possible selling price.

Asked by Postimees why RKAS is not building the new Suur-Ameerika complex itself, rather seeking a private company to develop it, Mr Saarniit said that thus a big part of the project’s financing and demand risks would be carried by the developer, offering the acquirer greater flexibility with financing methods.

«With concession, the risk of earning back the building costs still lies with the concessioner, which will be paid by acquirer in the form of the right to use the building,» explained he. The latter, among other things, implying the right to lease out the building.

Costs to rise

According to procurement documents published in the public procurements register, RKAS will enter into a building contract with developers, pursuant to which the latter will have to complete and deliver the facilities during 22 months. Right of superficies will be set to 50 years. RKAS will be receiving a one-off building right payment of €7m, as well as agreed yearly payments of €15,000.

RKAS, in its turn, will lease the completed building from the lessee, for ten years – giving it into the use of the four ministries as subtenants.

But how can it be possible for the costly office building to be completed, RKAS earning profits, private company i.e. future concessioner earning profits, and even the state saving money?

According to indicators presented by RKAS, the four ministries will have to do, in the future, with spaces 40-50 per cent smaller than today; and, in the new facilities, their energy costs will be 65-76 per cent lower than now.

«The building will be completed in 2016. In the perspective budget for that year, the ministries yearly costs with the current premises would be €5.4m; in the new building it would be €4.4m,» assured Mr Saarniit.

As compared to current running costs, however, For instance: according to Ministry of Justice, they are currently paying a total of €370,049 for their three office buildings (including the prisons department in Jõhvi – not to be moved into the new complex).

Last year, the sum was €334,560  (VAT included, both cases). Following the completion of the new buildings, however, justice ministry has planned € 730,414 yearly, for office space costs, VAT included – close to double of this year’s costs.

In Ministry of Finance, this year’s office space costs are about €840,000; in the new complex, it will be to the tune of €1.43m.

All in all, the four ministries currently use 20,735 m² of office space; in the new home that will be 11,402 m². For an employee, the figures would be 21.62 m² and 11.89 m², respectively.