Issue: Arizona Department of Agriculture

The Arizona Department of Agriculture plans to move its laboratory from the Capitol Mall to a building in Chandler, despite opposition from lawmakers and the industry.

Fifteen state legislators sent a letter late last month to Agriculture Director Mark Killian asking that the department refrain from moving forward with a lease agreement for a new building in Chandler until the issue could be further studied.

They said that the yearly rent at the new building was roughly three times more than what the Legislature approved in this year’s budget to cover rent at the existing location, and that the department was proposing to use a fund sweep, outside of the budgetary process, to cover the costs.

According to the letter, the relocation would cost between $500,000 and $900,000 in the first year alone, plus $400,000 every year after that in rent.

Lawmakers suggested that the department contract with a private laboratory or consider moving the lab into a state-run building until a less expensive solution could be found.

But the opposition effort, which is being spearheaded by Rep. David Cook, R-Globe, was futile.

In response to lawmakers’ concerns, Killian said the department explored all of its options and the Chandler location was the most viable. He said the Agriculture Department and the Arizona Department of Administration are working to make the move in December.

In an August 10 letter, Killian said the department’s lab is currently housed in a building that “has reached the end of its useful life,” and it must be relocated.

The lab, located at 1520 W. Adams Street, is one of two buildings adjacent to an ADOA parking lot that are slated to be demolished early next year, ADOA spokeswoman Megan Rose said.

Rose said the decision to demolish the building and another building that houses the state’s data center is part of ADOA’s capital improvement plan and has been in the works for a while. The demolition was approved by the Joint Committee on Capital Review on July 24.

The state agriculture lab is charged with performing laboratory testing, certifying government, industry and private labs that provide agricultural services, and it also conducts agriculture product and residue testing – services that are all required under state statute.

Killian said because of the critical work the laboratory is charged with carrying out, it was imperative to find a suitable location that could meet the state’s need. It wasn’t an easy task, however.

Rose said before deciding on the Chandler location, ADOA looked at moving the lab to a state-owned space on the Capitol Mall, but none of the existing buildings had the necessary square footage or infrastructure.

ADOA also met with University of Arizona officials to see if space could be made available at a university laboratory, but Rose said that wasn’t a viable option. Killian wrote in his letter that the university responded to the state’s inquiry with a proposal to lease space to the department that would cost $10 million up-front for tenant improvements and an annual rent of $500,000, which he said was cost-prohibitive

Killian said the department also looked into partnering with a private lab, but because the state is required to certify food safety, outsourcing the work wasn’t an option. He said if the department outsourced the work, state statute would still require the department to certify the private lab’s results, which would lead to “operational duplication and cost increases that would not add value.”

He said the Agriculture Department used a state-contracted real estate broker and ADOA conducted two searches for properties. After reviewing 20 properties that were identified in the searches, the agencies settled on a multipurpose property in Chandler near Loops 101 and 202.

The lease agreement would exempt the department from paying rent for the first seven months of a seven-year lease. The annual cost of renting the building is $438,300 in fiscal year 2020 and $473,100 through the end of the lease in 2026, more than lawmakers had initially anticipated.

The department will also have to pay the first $500,000 in tenant improvement costs and the landlord will cover additional costs. Killian said the property contains space that is currently built out as a laboratory, minimizing the amount of work that will need to be carried out prior to moving in.

And he estimated that the cost for the physical relocation of the laboratory will be roughly $100,000.

That would bring the total the department will be on the hook for in fiscal year 2019 to $600,000.

The department’s decision to move forward with the relocation has led industry leaders to reach out to the Governor’s Office in hopes of coming up with a better solution, Cook said.

He said leaders from the Arizona Cotton Growers Association, Western Growers Association, Arizona Nursery Association and the Arizona Crop Improvement Association met this week with Hunter Moore, Gov. Doug Ducey’s natural resources policy adviser, in an effort to find an alternate solution to relocating the lab.

Cook said the Legislature and industry leaders should have been involved in discussions since the beginning, and he said the department is steamrolling agriculture producers who pay into the fund that is being used to cover relocation costs.

Kevin Rogers, executive vice-president of the Cotton Growers Association, said the groups’ major concern is that they weren’t made aware of the proposed relocation until just recently, even though the demolition of the building has been on ADOA’s radar for months.

He said the industry has also taken issue with how the department plans to pay for the relocation, which he said the industry sees as a fund sweep.

“We’re not happy with the fund sweeps at all. These are dollars that we self-tax ourselves for specific uses and we’re not happy any time you sweep funds, especially without much discussion in the process at all,” he said.

In his response to lawmakers, Killian said the department has long had the authority to use revenues collected from fees to “facilitate the administration of key agriculture laboratory functions.”

“In fact, four of the five funds have historically been used for this purpose,” he wrote.

Rogers said the groups are hoping to work with the Governor’s Office, the Office of Strategic Planning and Budgeting, and the Agriculture Department to come up with a more cost-efficient solution that will still meet the department’s needs.

He said one option they are advocating for is partnering with the UofA, which has an extensive lab program at the Maricopa Agriculture Center, and he said industry leaders are pushing the department to continue conversations with the university to see if they can strike a deal.

“Are there other options short of spending the type of dollars they’re proposing to spend?” Rogers said. “Maybe the answer is ‘no,’ but we’d like to have a dialogue to make sure we’re spending tax dollars and grower dollars the best possible way. We completely agree we need a new lab. The existing lab is falling apart and the building is being condemned. However, we wish we would have been involved in the discussion back in the spring when the Legislature was in session so that they could have helped us with a solution and so that we would have had a little bit more time to come up with some more options rather than just jumping right into a new facility.”