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07/08/1993 - Special COMMUNITY REDEVELOPMENT AGENCY July 8, 1993 The City Commission, meeting as the Community Redevelopment Agency, met in special session at the Main Library, Thursday, July 8, 1993 at 9:05 A.M., with the following members present: Rita Garvey Vice-Chairperson Richard Fitzgerald Member Sue Berfield Member Arthur X. Deegan, II Member Fred Thomas Member Phil Henderson Ex-officio Member Lillian Trickel Ex-officio Member Also Present were: Michael J. Wright Executive Director Milton A. Galbraith, Jr. Attorney Cynthia E. Goudeau Secretary The purpose of the meeting is to consider the proposal by Walter T. Krumm Ventures Incorporated to purchase the CRA portion of the Sun Bank (Atrium) parking garage and/or Bilgore property. The potential purchasers of the city-owned Sun Bank (Atrium) Building have proposed purchase of CRA property in conjunction with that building. The purpose of these purchases would be to provide additional parking for the site. Walter Mackey, attorney for Mr. Krumm, the potential purchaser of the property, stated they were encouraged to bid to purchase the building due to a pro-development attitude of the City Commission. He stated their company is only doing major office buildings at this time, however, the Sun Bank (Atrium) Building needs parking. He indicated some of the tenants in the building would have unusual parking requirements as there are 150 employees occupying 10,000 square feet of space. Many of these employees can not afford $35 a month parking fee inside the garage. He stated there is a deficiency in parking in downtown Clearwater. Their solution is to create at least 300 additional parking spaces. They are proposing to purchase the Bilgore site, on which they would construct a parking lot. They have also proposed an option for the purchase of the remaining two floors of the parking garage attached to the Sun Bank Building and an option to purchase the police department property. He stated it appears that the reaction to the price offered for the Bilgore property is that it is not enough. He asked it be considered that they will be paying $900,000 for the additional 300 spaces and that will reduce the demand on public spaces. He stated they do have a difference of opinion with the CRA regarding the value of the land. He stated the parking problem must be solved for the building to be successful. Al Justice, local representative of Walter T. Krumm Ventures Incorporated, stated he has resided in Clearwater for 22 years. He believes downtown Clearwater is ready to begin its rise and he informed Mr. Krumm and Mr. Mackey the time was right to make an investment in Clearwater. However, offices in a downtown environment need to compete with suburban buildings and the lack of parking is a deterrent to continued occupancy in the downtown area. He stated they are justifying offering less than assessed value on the Bilgore site due to them paying $6.9 million for the Sun Bank Building which is over its assessed value of $6.2 million, plus $228,000 will be needed in order to provide surface parking on the Bilgore site. He stated they will also be paying taxes on these properties. Member Fitzgerald requested clarification regarding the document, on page 3, indicating the offer on Bilgore is $180,000 or $2.50 per square feet and the parking would be restricted to the tenants of the building. His second issue was that he was not aware that the City was proposing to do anything regarding the police station and questioned the $2 per square foot on the option to purchase. Mr. Mackey indicated it was $2 a square foot for the land and building and the price was discounted because they would have to remove the building. He indicated it was not known whether or not purchase of the police department property was possible and that other land further away could be considered. In response to a question, Mr. Mackey indicated the police department purchase was proposed due to a natural fit with the Sun Bank Building. Discussion ensued regarding the perimeter parking around the garage that is currently used by the police department. The Executive Director indicated these had not been discussed with the potential purchasers. Member Fitzgerald questioned the wording that the option would be required. Mr. Mackey indicated it would be requested. Mr. Mackey indicated they are also open to look around for another site. It was stated the main thing was to satisfy the need for parking. Member Fitzgerald questioned whether or not anyone from the City had brought up the police department and it was indicated that the potential purchaser is suggesting it due to its proximity to the Sun Bank Building. It was indicated the Executive Director had indicated the spaces around the garage were important to be retained by the police department. Mr. Justice indicated a survey indicates those spaces are part of the parking garage property. Member Fitzgerald questioned how to deal with the police department property as it was city property, not CRA property. The Attorney indicated a public hearing would have to be held at which the property was declared surplus and then the highest bidder of at least fair market value would be awarded the purchase. Member Fitzgerald questioned whether or not there could be a long term obligation. Mr. Mackey indicated that at some point they would need the parking. They could go to another parcel and come back to the police department should it become available. The Attorney indicated an option to purchase would be the same as a contract to purchase and would have the same requirements as an outright sale of the property. Mr. Mackey suggested a right of first refusal be considered as they are trying to keep their parking together. It was indicated the police department property was city-owned and not CRA and this would have to be considered at another time. Member Fitzgerald questioned paragraph 3, regarding the 5 year option on the first two floors of the garage. Mr. Mackey indicated the option would be immediate but the actual purchase would come within five years. Member Fitzgerald suggested that as parking is a primary concern, that if they obtained the entire parking garage at this time, that would give them 400 spaces. Mr. Mackey indicated it was a factor of timing of the equity and the amount of money to be put into the building right away. He stated there would be some remodeling, air conditioning work and glass issues to be addressed. He also indicated that the parking in the garage would probably continue to be a fee arrangement. Member Fitzgerald questioned whether or not there would be some compensation for the option and Mr. Mackey indicated it would go with the purchase of the building. Member Fitzgerald questioned whether or not bonds had been used to pay for the garage. The Attorney indicated there were two series of bonds that would need to be defeased. He stated if the option were for five years, they would have to be defeased during that time. The Executive Director indicated a minor complication would be that the Traffic Engineer will have to certify that revenues of the parking system would not be adversely affected. Mr. Mackey indicated that cross easements are also a problem that needs to be addressed. Member Fitzgerald questioned the proposal to purchase the garage for $700,000 and how that equated to the valuation of the property. The Executive Director indicated the assessed value of the property is $1,441,000 for the CRA half of the garage. He stated this equates to $6,200 per space. Member Fitzgerald commented the offer was $3,500 per space. Member Thomas questioned on operating costs for the building what the management fee was. The Executive Director indicated it was $5 to $6 a square foot. Member Thomas questioned whether or not the CRA was currently paying taxes on the parking garage. The Executive Director indicated he did not believe so. However, if we leased the spaces to others, he believed taxes would be owed. Member Thomas expressed the opinion that the garage was a more advantageous parking parcel to the building. Mr. Mackey indicated some people are intimidated by the elevators and the walk way and the tenants were concerned regarding city use. Member Thomas reiterated his opinion that the spaces in the garage would be more desirable at this time. Member Thomas questioned the price of land in downtown. The Executive Director indicated land with a better location is at approximately $7 a square foot and the $5 per square foot offered was based on that. He further indicated the property is on the tax rolls at $6 a square foot. Member Thomas expressed concerns regarding selling property at a loss with the belief that the difference can be made up in other revenues such as taxes. He stated if the Bilgore site is developed as a parking lot, the CRA would not be able to recover the difference in cost. Member Thomas disagreed with the way the proposal is structured. He stated having a right of first refusal on the police department may be okay. He felt the parking garage should be purchased immediately as part of the building so that structure would go on the tax rolls immediately. He stated it would be good for the City and for the building. He expressed concerns regarding the green space proposal and stated he was confused regarding the parcels of land behind the building. The Executive Director indicated the eastern most wall of the building is on the property line and the City owns the adjacent parking lot. He stated there is a driveway on our land and an alley that accesses the Brown Brothers building. Member Thomas indicated this parking was necessary for those businesses. Mr. Mackey indicated they were wanting to address the overall green space in downtown. Vice-Chairperson Garvey indicated this would be happening within the next few months. Mr. Mackey indicated the back side of the building is "a mess". He stated the back of the building should be a service for the people. He indicated there was also a need to soften up the area with green space and the CRA and the potential purchasers need to work jointly regarding this. Vice-Chairperson Garvey expressed concern regarding losing parking spaces in order to do this. Member Thomas agreed stating we needed to soften it but the parking was needed. He also indicated it would serve no purpose to make the Sun Bank Building successful and destroy other businesses. Mr. Mackey indicated they would enlist the support of their neighbors. Member Thomas went on to other portions of the contract stating that regarding closing costs it was very clearly stated in the bid that the buyer would pay all closing costs. He then returned to the parking issue stating he did not realize that high-rise buildings had been constructed in downtown with no parking. He stated the City Commission will have to address this in the downtown. Vice-Chairperson Garvey indicated that when downtown was rezoned, the parking requirements were relaxed in order to encourage people to move to the downtown area. The Executive Director indicated that the Garden Avenue garage was constructed in order to supplement parking for developments. He indicated that during discussions with Met-Life regarding occupying a downtown office building, parking was a key issue. He reiterated downtown has to compete with a suburban environment and that tenants of the Sun Bank (Atrium) Building have also complained regarding the lack of free parking. Member Thomas reviewed the cash flow on the building stating the City could profit $900,000 a year. He stated it would be a better deal for the City to operate however, there was a concern about the City competing with the business sector. He stated he was willing to facilitate dealing with the sale of the Sun Bank (Atrium) Building if they would purchase the garage now, in total, for $700,000. Member Berfield expressed concerns regarding the 5 year option on the garage and stated she would prefer they purchase the remaining two floors at this time. She questioned what was owed on the bonds. City Finance Director, Dan Deignan, stated there was approximately $1.6 million outstanding on the bonds and it would take another $300,000 to defease them. She questioned when the bonds would be paid off if nothing changed. Mr. Deignan indicated they would be paid off by the first of October, 2006. Member Berfield questioned if they were willing to look at a site other than Bilgore and Mr. Mackey indicated they need the open land but if Bilgore were to become a stumbling block, they would work together to find a solution. Member Berfield questioned how full was the parking garage at Garden Avenue. The Executive Director stated it was probably less than half. He also indicated that part of the Garden Avenue garage is dedicated to the NCNB building. Member Berfield questioned a statement by Mr. Mackey regarding air conditioning problems in the building. Mr. Mackey indicated that half the condensers were due to be replaced. Mr. Justice indicated that 8 of the condensers had already been replaced with 6 remaining to be done. He stated they were also updating the control system. Member Berfield questioned whether the building was a Class A building. Mr. Justice indicated that Class A is very subjective carrying a heavy burden regarding services. He stated Mr. Krumm would put it in Triple A condition. Member Berfield questioned if there was a problem with Bilgore, would the party still be agreeable to working with the City to address parking. Mr. Mackey indicated as long as they can get it for a reasonable price and a convenient location. Mr. Justice indicated if down the road, something could be done regarding the police department, they would be glad to work on an exchange for Bilgore. Member Deegan questioned whether or not the offer to purchase was a firm and binding offer. Mr. Mackey indicated it was not. Member Deegan questioned whether or not they were willing to do so without resolving the parking issue. Mr. Mackey indicated they would not want to go into an environment of not knowing regarding the parking. He stated the parking problem has to be solved. Member Deegan questioned whether or not the parking was a deal breaker and Mr. Mackey indicated it was. Member Deegan questioned whether or not the intent this morning was to come to a resolution. Mr. Mackey stated he is a partner with Mr. Krumm and is not asking for a hard and fast commitment. He stated this is the first time they have met with the CRA and they are glad to sit down to continue to discuss this. Member Deegan stated an alternative would be for the CRA to lease the Bilgore property rather than sell it. Mr. Mackey indicated someone would have to improve it and the acquisition is only 30 to 40% of the cost. Member Deegan expressed concerns that the CRA members had not had a chance to discuss the proposal among themselves. Ex-Officio Member Trickel left the meeting at 10:58 a.m. Member Thomas questioned whether or not a decision could be made today without Mr. Krumm's approval and whether or not they would accept purchasing the garage for $700,000. Mr. Mackey indicated they would not purchase it for $700,000 up front. Member Thomas suggested the building be purchased for $700,000 with $500,000 being financed at 5% for five years. Mr. Mackey indicated he could not make that commitment without other parking. Member Thomas questioned if this could be resolved if the City created parking on Bilgore and allowed the parking garage to be purchased with an agreement that 150 spaces would be provided on Bilgore. Mr. Justice indicated metered parking would not meet their need and Member Thomas indicated the parking in the garage could be made free. Mr. Mackey indicated it would cost money to make the garage free and therefore their proposal would be to charge for spaces in the garage. Member Fitzgerald indicated the proposal had been made and discussed. Mr. Mackey indicated that with the comments received they could come back to the CRA for a final decision. Vice-Chairperson Garvey indicated the CRA needed a chance to think about and discuss the proposal. Member Fitzgerald emphasized that closing costs are to be borne by the purchaser. Mr. Mackey indicated that in the contract with City Corp, the seller paid the closing costs. The Executive Director indicated the Commission did say to use the contract for the purchase from City Corp. That and the Commission's direction regarding all closing costs to be paid by the current purchaser, were in conflict. Member Fitzgerald indicated there was a third option and that was to keep and use the Sun Bank Building as City Hall. He stated he disagreed with Member Berfield that the building was less that what thought. He agreed with Member Deegan that there was still work to be done to digest the proposal and today's conversation. Member Thomas questioned the $250,000 to be put in the building saying $150,000 were for air conditioners then what would be for elevators. Mr. Mackey indicated they did not have the cost on the elevators. He stated to finish work on the inside would be $1 million including the glass issue. Mr. Mackey stated they have looked at the City's option regarding owning the building and felt that a one-story structure on the Missouri Avenue site would have less operating costs. Consensus of the CRA was to schedule further discussion regarding this issue for the July 12, 1993 CRA meeting. The meeting adjourned at 11:18 a.m.