A New, Permanent Home for ASA
by Donald Tomaskovic-Devey, University of Massachusetts-Amherst and Secretary of the American Sociological Association
In March the American Sociological Association, at 103 years old, is moving into a new permanent home on the fifth and sixth floors of a newly constructed office condominium at 1430 K Street in Washington, DC. The building has a glass façade facing the K Street bustle, so close to McPherson Square Park you can see the trees and, if not for the traffic, hear the birds. For those who know the District, K Street is easy to remember as the major east-west route through the city. It passes just north of the White House. In fact, the White House is two blocks from ASAs new headquarters. A quick metro ride from Reagan National Airport or Union Station to the McPherson Square stop brings you to our new home.
Research says that one of the most stressful times in a familys life is moving. Most families need a good reason to move and a good reason to pick a particular destination. The decision to move the ASA headquarters was not made lightly and was influenced by both push and pull factors. On the push side, the lease on our office space of the last 10 years at 1307 New York Avenue terminates in 2008. The existing lease was on very attractive terms so we have been paying rent considerably below market rates for some years and saving our pennies for the future. As the expiration of the lease approached, we began an active examination of what we should do as the Association moves into its second century representing the profession and discipline of American sociology.
The Push and Pull of the District
One of the most important questions we faced was whether to stay in Washington, DC. It was quickly decided by the elected Council and Executive Office staff that much of the work of the American Sociological Association is best accomplished from the heart of the nations capital. DC is the geographic center of the scientific and higher education community in the United States. This is true not only for the big science funders like NSF and NIH, but also for other professional science organizations and most important scientific advocacy groups. While members generally experience the ASA through its dissemination of sociological knowledge through the Annual Meeting, our journals, our teaching resource center, and our research on the profession, the ASA is also an extremely effective professional association intersecting with the broader public, the media, and the federal government. Much of that activity goes on in Washington, DC. ASAits members and staffplay a leading role among science organizations, fighting ongoing attacks on academic freedom, influencing the size and direction of federal research funding, and making sure that sociological expertise is present and recognized in the federal legislative and executive rule-making process. So on the pull side we wanted to ensure the financial ability of the Association to stay in Washington over the long run despite the steady upward pressure on commercial rents and real estate.
While our specific decision to move to 1430 was propelled by finding the right space at the right price, the choice of K Street was both fortuitous (three blocks from where we now are) and a little ironic. K Street is famous (or infamous) in Washington for its high concentration of corporate lobbyists and lawyers. As one ASA Council member put it, The good guys are taking over K Street! Part of ASAs work is to encourage the federal government to utilize and fund sociological research, to promote academic freedom at home and abroad, and to support the development of a free and open society. Not exactly a typical K Street corporate agenda, but one that is at the heart of the professional mission of a scholarly association such as the ASA.
Facing uncertainty at the end of our lease, we chose to reassess what type of home ASA needed for the future. A decade ago, ASA sold its original Washington home (a townhouse on N Street) because we could no longer efficiently conduct business from it. While we anticipated buying another space, it was not feasible at that time. We were faced once again with assessing where we needed to be and what type of space would be most efficient and financially prudent, as well as assessing in exacting detail the short- and long-range financial implications of various options to make a consequential decision for the Association.
Rent or Purchase?
Financially, Council, the Committee on the Executive Office and Budget (EOB), and the Executive Office compared three scenariosextending our present lease five more years, renting elsewhere in DC at commercial rates, or buying a facility to house our association for the long run. Les Briggs, the ASA Director of Finance, was both skilled and heroically meticulous in modeling and then outlining the costs and opportunities involved in each scenario. In the short run, of course, the cheapest approach would have been to try to negotiate a new lease at favorable, but not quite as favorable, rates at our current location (five years being the maximum lease we could get). But this option was not clearly available. Commercial rents are skyrocketing in DC, and this option turned out to be expensive in both the long and short run.
In the short run, purchasing our own space was clearly the most expensive option, even with the down payment we had from the sale of the ASA townhouse. But over the long term, purchasing was the best financial option. While we would be paying more each year in occupancy costs, we would be building ASAs equity in the new offices prime real estate. What made purchasing financially possible in the short run, however, was the willingness of the District of Columbia to issue low-interest, tax-free bonds to help finance our purchase. Figure 1 summarizes these analyses with a simple report of projected cash expenses for the three options over 15 years.
Buying an office condominium was not the cheap decision but it was the wise one. The ASA closed this past November on two floors of condominium office space totaling 13,016 square feet. We paid $2 million in cash toward the purchase price of $8,229,440. We financed the remainder plus additional costs for building out the new office space, design, moving, and all the associated fees and charges of buying ASAs home, bringing the total financed costs to $8,000,000. Thanks to the District of Columbia and PNC Bank, our financing is at 4% through the sale of 30-year low-interest tax-exempt bonds.
The long-term analysis for this decision was the same as it would be for any home buyerover the long term, buying is cheaper than renting. While the bond purchasers get the tax benefit (which the tax-exempt ASA doesnt need), ASA adds a portion of our annual occupancy costs to our own real estate equity for the benefit of the Associations members in the decades to come. Just like any new home buyer, we also had to be sure we could afford the annual occupancy costs in the short term. The answer was yes for two compelling reasons.
First, the Association had saved for the last 10 years for this purpose. The proceeds of ASAs townhouse, sold in 1998, were placed by Council in a restricted long-term investment account for use to support the costs of the ASA headquarters, either through rental or purchase. By the end of last year that account had grown substantially, enough to cover most of the $2-million down payment on the new space.
Second, the ASA has been averaging an operating surplus of around $400,000 over the last six years, primarily reflecting the below-market rent for our current offices. It also reflects the growth of the Association membership, several new revenue streams, cost containment and a typically conservative approach to budgeting by the Association.
While the annual cash cost of the new office space will significantly increase, most of this can be accommodated within the current budget. Another source of revenue is rental income for some of the new space the ASA does not currently need. Because this fiscal year (2008) ASA will have the costs of moving and three months of rent on the old headquarters, as well as the new space for a full year, we anticipate a modest deficit, but we have reserves to cover it. This is because the Association has been building reserves to meet an appropriate operating principle of maintaining reserves of about 60% of annual operating costs. We expect quickly returning to a balanced budget.
The Process So Far
The new ASA headquarters occupies the fifth and sixth floors of the building. We have an internal staircase for easy access between floors and have designed plenty of public space for meetings, lunch, and the like. We have employed minority and female small business contractors from the District for much of the build out work and have also insisted on high environmental standards in all building materials and furnishings. New office furniture was selected to meet the highest ergonomic standards. We even have a closet for bicycle storage. As we enter our second hundred years as a professional association, we have bought and designed a headquarters space to support the long-term work of the Associations members and staff.
Tremendous energy and thought went into this move. Les Briggs ran and reran the financials until everyone was satisfied. Sally Hillsman, ASA Executive Officer, carefully researched and laid out the decisions to be faced before and after we had decided to go forward. This added the complicated tasks of negotiation, design, and contracting to her already full schedule. The ASA EOB Committee met numerous times to check and recheck the financial and administrative details of the contract process. ASA Council listened closely, queried all proposals, deliberated, and voted unanimously to purchase this new property. Franklin Wilson, the Secretary of the Association during the decision-making period, ran the process with an unrelenting concern for the wellbeing of the members and their Association. The ASA staff collaboratively informed the design work, ensuring that we developed a space both functional and friendly.
As you are reading this, the ASA staff is in the process of moving. They are probably excited and more than a little stressed, just like anyone moving into a new home. Lets wish them a good journey, a quick and pleasant adjustment to their new home, and continued success in pursuing the Associations work with and on behalf of our members and sociology.
Please note: ASA offices will be closed March 12-14 for the move to K Street.