Keathley's cleanup

Tuesday, November 13, 2007

Mike Keathley of Dexter, Mo., was favorably and deservedly written up in a recent St. Louis Business Journal, excerpts of which I'm reprinting here.

Mike was originally in a family business, IXL Wooden Handle, in Bernie, Mo. After the company was sold to a large conglomerate, Mike stayed on as an executive and traveled a great deal. When this Eagle Scout retired to spend more time with his family, he answered a call by then-president pro tem of the Missouri Senate Peter Kinder to direct the large, bipartisan Senate staff. He was highly respected for his honest, businesslike direction.

After Matt Blunt was elected governor, Keathley was asked to head up the Missouri Office of Administration, in essence the chief operating officer of the thousands of state employees, buildings, maintenance and payrolls,

Keathley has saved the state millions of dollars under the Blunt-Kinder administration. The savings and service improvements have been largely ignored by the media.

The following are excerpts from the Oct. 25 article, "Businessman Beats Bureaucracy":

Mike Keathley has transformed every aspect of the state of Missouri's massive real estate portfolio.

Since being sworn in as commissioner of the state's Office of Administration in early 2005, Keathley has pored line by line through each of the state's office space leases and real estate holdings looking for inefficiencies and ways to save the state money.

Keathley took politics out of the equation when looking at whether to renew a lease or buy a building, according to those close to the real estate overhaul. His efforts have resulted in $20.9 million returned to Missouri coffers through the sale of underutilized and surplus property and a savings of $14.4 million in lease payments this year alone. Once the annual savings is capitalized, the profit to the state as a result of the overhaul will exceed $150 million, according to real estate sources.

"The state took a business approach to maximize value by selling underutilized assets and redeploying the capital. I've seen a few states do this, but frankly, not enough," said Larry Reed, principal of CresaPartners in St. Louis, which served as a consultant on the review.

One of Gov. Matt Blunt's first appointments after he was elected in November 2004, Keathley went to work re-examining the state's real estate portfolio that included hundreds of leases and scores of office buildings in cities across Missouri. In St. Louis, the overhaul has translated into paring more than two dozen leases down to nine. The state sold five properties in St. Louis in the past three years and bought five buildings that better suit its needs. The state brought in $16.6 million through the sale of excess property in the city of St. Louis and St. Louis County during the past three years.

Under Keathley, Missouri ended 89 leases statewide since 2005, dropping its total annual rent payments from $51.2 million in 2006 to $36.8 million in 2007, a one-year savings of $14.4 million.

Of the $14.4 million, the state saved $1 million in rent and operating expenses from the seven leases terminated in the city of St. Louis and St. Louis County.

"He's one of the smartest people I've ever worked with," said Dave Mosby, director of facilities management, design and construction, and a member of Keathley's team. "He grasps a situation, can analyze it and make a decision about the direction we're going to go immediately. He just has an innate business sense."

The state now owns nine office buildings in the St. Louis area, totaling 491,567 square feet of space, compared to five buildings totaling 365,140 square feet when the review began in 2005. In addition to the five buildings the state bought from 2005 to 2007, the state also owns four office buildings in the city of St. Louis: the Wainwright building, Prince Hall at 4411 N. Newstead, the Millcreek building at 220 S. Jefferson and a building at 4811 Delmar.

"In every one of those purchases (in St. Louis), we were able to reduce capital outlays," Mosby said. "We shop until we find a good deal."

The review is nearly complete in St. Louis -- the state is still looking to consolidate four leases in St. Louis by buying a 50,000-square-foot building in northwest St. Louis County.

"It's an advantage being able to utilize the tax-free bonds through the Missouri Development Finance Board (MDFB)," Keathley said. To buy property, the state executes a lease agreement with the MDFB to buy a building for one dollar when the bonds are paid off. "Certainly, that gives us an edge over a private owner who has to buy at higher rates."

Next stop: Kansas City.

The next big push in the real estate review will focus on Kansas City. "We are looking to do exactly the same thing we did in St. Louis in Kansas City," Mosby said. The state has 19 leases in the Kansas City metropolitan area that Keathley said he'd like to consolidate. The state is looking to buy two buildings totaling 100,000 square feet, in Independence and south Jackson County.

The state of Missouri also is looking at its real estate outside of the state's major metropolitan areas. It currently leases space in Cape Girardeau and owns office buildings in Springfield and St. Joseph.

"We're looking at them now," Keathley said. He said there is no set savings goal in place as part of the review. I did not start this with a target number," he said. "We said we were going to do this and see how much we'd save. It's been beyond my expectations. I have saved more than I expected to. -- St. Louis Business Journal, Lisa R. Brown

Here is an excerpt from an accompanying editorial, "Mr. Keathley Goes to Jefferson City":

What a difference a man makes.

For the taxpayers of Missouri, that man is Mike Keathley, who heads the state's Office of Administration.

This week's front page story by Lisa Brown presents the most dramatic example of Mr. Keathley's attention to detail, business acumen and persistence resulting in a savings of an estimated $150 million through the transformation of the state's real estate portfolio.

It is his mission.

However, his willingness to serve the people of Missouri and to bring private business discipline to an unwieldy public sector is nothing short of amazing. That he did so while waging a battle against colon cancer, a private fight in the public spotlight, makes his accomplishments and attitude more impressive.

Mr. Keathley's list of savings includes the rebidding of a one-bidder contract up for renewal for non-emergency medical transport services. Mr. Keathley put the $40 million-plus bid on hold, opened up the bidding and ended up with a new contract as a savings of nearly $15 million a year.

To us, Mr. Keathley looks like Harry Potter, a magician with numbers and bureaucracies, yet he doesn't talk numbers all the time: His passion is history and architecture, with special emphasis on the Civil War in Missouri. He and his governor match wits on historical trivia.

This is a special man who made a difference in our state. As a business leader in government, he has paid dividends many times over for Missouri taxpayers.

I walk into the clubhouse, and it's like walking into the Mayo Clinic. We have four doctors, three therapists and five trainers. Back when I broke in, we had one trainer who carried a bottle of rubbing alcohol, and by the seventh inning he had drunk it all. -- Tommy Lasorda

Gary Rust is chairman of Rust Communications.

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