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SACRAMENTO-California Gov. Arnold Schwarzenegger on Monday said the state Department of General Services has saved the state $27 million on commercial leasing rates by renegotiating the terms of its commercial leases. The effort could eventually total $80 million to $100 million, he said.

A source with the Department of General Services tells GlobeSt.com the $27 million is the amount the state expects to save over the life of 36 renegotiated leases. The state has 2,000 commercial leases, he says, and the effort to cut occupancy costs is ongoing. The goal is to renegotiate about 300 leases, the savings from which could total $100 million over the term of the lease commitments, according to the source, who estimates the state will save between $10 million to $12 million of the total in the 2009 to 2010 fiscal year.

The state typically inks eight-year deals, with the first four years guaranteed and the final four not guaranteed, which is to say the state could up and leave with very little notice or penalty. The leases that were renegotiated were mainly the ones that were in the second four-year period, and in most cases the state exchanged additional guaranteed years of rent in exchange for lower lease rates, according to the source.

“In nearly all the cases we have entered into new 4/4 contracts,” the source says. “There have been a couple instances when we may have gone out longer or we may have renegotiated a better rate on a property that we are actually going to be leaving in the next couple years, but the majority have been renewals.” Last month , amid news of the state having to issue IOUs (registered warrants) to service providers, a DGS spokesperson told GlobeSt.com that building owners leasing to the state would not receive IOUs in lieu of rent but rather would simply receive letters informing them their payments would be late. This week, DGS spokespeople tell GlobeSt.com that was erroneous information and that, generally speaking, state departments funded through the state’s general fund would indeed issue IOUs in lieu of regular warrants (checks) to building owners, if necessary, and that other departments not funded by the general fund would have to make their lease payments with regular warrants. A source with the California State Controller’s Office generally confirmed the statement.

Gov. Schwarzenegger last month directed all state departments to develop and submit plans to decrease their future spending on contracts and purchases by at least 15%. The order also called for a reduction of state spending through eliminating the funding of contracts entered into by state agencies and departments after March 1, 2009 for all goods and services excluding those necessary for public safety.

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