PROVIDENCE — Rhode Island taxpayers are the owners of a building, off Allens Avenue, that houses a strip club that offers food and drinks from noon to 1 a.m., “lap dances,” “private booth dances” and what it calls a “full-nude room.”

Club Desire, which bills itself as “a high-end Gentlemen’s club,” occupies the first floor of the state-owned building known as One Franklin Square.

More than two dozen state Department of Transportation employees work on the second and third floors under the terms of an agreement that, among other things, requires the club’s owner, Atwells Realty Corp., to provide “a security detail to keep parties away from DOT personnel from noon to 5 p.m. each afternoon.”

The club is supposed to pay the state $7,000 in monthly rent. But the rent was waived for at least 10 months, between April 2005 and January 2006, under an unbid and unadvertised arrangement in which the DOT agreed to repay the club for a reported $95,000 worth of “fire-code renovations” that were made to the building by an unknown contractor hired by the club’s owner. The owner is identified in state corporation records as Gerard DiSanto.

State Department of Transportation officials were unable to provide copies of any of those construction bills yesterday or name the contractor. Explanations of the scope of the work paid for by the state varied.

Initially, DOT support administrator David Sasso said, “We had to expend several thousand dollars down there to bring the building into compliance. … to have a lot of people down in there at that gentlemen’s club.” Later, the DOT sent a clarifying statement: “Rent was deferred to cover $ spent on 2nd & 3rd floor renovations and other building deficiencies.”

The State of Rhode Island’s status as landlord for a strip club came to light this week after an arm of state government known as the State Properties Committee posted its agenda for its first meeting of the year.

The agenda for yesterday’s meeting included an obscure reference to “a request for approval to dispose of 30,246 square feet of land and a three (3) story structure located at Franklin Square in the city of Providence to Fifty Seven Associates.”

Two state agencies — the Department of Administration and the Department of Transportation — refused to release, until after yesterday’s closed-door discussion, a Dec. 15, 2006, memo in which DOT Director James Capaldi explained his reasons for seeking to sell the building back to its original owner.

The state paid $1.911 million in 2000 to acquire the building by eminent domain from Fifty Seven Associates — an arm of the Paolino realty empire — as part of the Route 195 highway relocation project.

In his memo,Capaldi said the first-floor tenant came with the building; attempts to relocate the club had been futile and would be “extremely costly” even if a site could be found because “Club Desires (sic) has alleged in court that they are a ‘displaced person.’… and, as such, are due relocation and reestablishment benefits.”

“Furthermore, as a result of the revised fire-codes, RIDOT has been obligated to make $95,000 in improvements to the structure during the past year.”

Among the benefits that Capaldi listed for selling the building back: “RIDOT would not be obligated for the costly relocation of Club Desires … would receive fair market value for the property … would no longer be obligated for the maintenance, repairs, or liability associated with the property .…would retain a permanent easement (2,695 s.f.) for emergency access to the highway structure.”

Another plus: “RIDOT would have use of the second and third floor through the completion of the I-195 project at the on-going rental rate being paid by Club Desires.”

The only decision made yesterday when the members of the properties committee reopened their meeting after the 45-minute closed-door discussion was to table the request and invite Capaldi to appear in an open session in two weeks to explain the DOT’s future needs at the site and his plans for the 25 to 30 workers.

Capaldi’s memo was prompted in part by an October 2006 letter in which Joseph Paolino — father of the former Providence mayor of the same name — informed the DOT’s Sasso that he was interested in exercising his right of first refusal on repurchasing the building. State law gives any owner of property taken by eminent domain first dibs at buying it back if it is put up for sale.

Yesterday, Joseph Paolino — the son — disclosed that his father’s company had, in April 2004, signed over that right of first refusal to Atwells Realty. He stressed: “Paolino Properties has no interest in this property, does not want to buy the property and is not looking to do anything with the property.”

Among the original arguments for taking the property, according to the DOT’s facilities management chief Bill McCarthy: the threat that the relocated highway would “overhang” a gazebo on the property and the need for parking.

“We took over the entire parking lot because we needed …staging areas for construction, laydown of materials and equipment, and crane placement which would be used to help support the new super structure.” (The DOT was unable over the last two days to locate evidence that a key land-sales committee had since declared the property “surplus to state needs.”)

But with the highway construction in and around the building nearing completion, Sasso explained the logic for unloading the property now:

“One of the things that has happened is that, over the course of time … we get so much money from the federal government. In order to use that federal money … we need to come up with state dollars to support those federal dollars or else those federal dollars get turned back to the federal government and other states get to use them.

“That would not be good for the department, for the governor, for the residents and the taxpayers of the state of Rhode Island. So what we need to do is, we need to sell properties that are declared surplus so we can use the proceeds from the sale of those properties to match those federal dollars. …. There’s a number of properties that are on the block that we do that with.”

This is the third time since 2002 that the DOT has attempted to sell the building — directly or indirectly — to Atwells Realty.

Minutes from a 2002 State Properties Committee meeting reflect an offer by the club owners “to buy 80 percent of the department’s original acquisition at a 10 percent premium over what [DOT] paid and provide the department with 10 years of free rent on the second and third floors.”

But the last serious move was put on hold under warnings from the DOT’s Deputy Director William “Chuck” Alves that it would be inadvisable until various contracts related to the big highway project were nailed down.

Asked yesterday where the governor stood, Carcieri spokesman Jeff Neal said, “the governor was not personally aware [until yesterday] that the Department of Transportation owned a building that included a strip club as a tenant. He was as surprised by that information as anyone else.

“While the governor’s office does not yet have all the details about the decisions that were made regarding the fire code upgrades, it appears that these upgrades may have been appropriate. If something tragic occurred at that location — and the Department of Transportation had not performed the maintenance mandated by law — there is a significant chance that the state and the taxpayers might be held liable.”