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06/09/1992 CITY COMMISSION SPECIAL MEETING June 9, 1992 The City Commission of the City of Clearwater met at City Hall with the following members present: Rita Garvey Mayor/Commissioner Richard Fitzgerald Vice-Mayor/Commissioner Lee Regulski Commissioner Sue Berfield Commissioner Arthur X. Deegan, II Commissioner Also present were: Michael J. Wright City Manager M. A. Galbraith, Jr. City Attorney Cynthia E. Goudeau City Clerk The meeting was called to order at 6:00 p.m. for the purpose of discussing purchasing the Sun Bank Building. The City Manager stated that while there is not an absolute need for a City Hall, there are significant reasons to acquire one. There has been City Commission discussion for at least six years regarding the desire for a consolidated City Hall and Willingham and Associates was hired to do a space needs study. He stated based on these six years of discussions, he is recommending the purchase of the Sun Bank Building. He is making this recommendation as he feels it is a prudent decision as the building meets the City needs and there is room for expansion. Development on the City Hall Annex site can not proceed until a decision is made regarding where to locate the employees in the current annex building. He stated the recommendation of the Willingham study proposes consolidation of the facilities currently located at the City Hall Annex, City Hall, Utilities Building and the Graphics/Purchasing Building. Projections at the time of the study were that 341 employees housed in the building would require a building of 130,684 square feet. He stated this has been downsized and now the proposal is to house 281 employees in the building. He stated the Sun Bank Building has an outstanding mortgage of $16 million, was appraised at more than $11 million and is on the tax rolls at a little over $10 million. This includes the building and a portion of the parking garage. He stated renovations would need an additional $1.3 million which would be paid from the cash flow from existing leases in the building. He stated after subtracting all operating costs, projected cash flow over the next four years is 3 to 4 million dollars. Once renovations are done, the cash flow would be $1.7 to $2.7 million dollars. If the Sun Bank Building is purchased, he would propose to sell at least two of the sites to be consolidated, those two properties being the annex and the utilities property. There have been some suggestions regarding the current City Hall. One is to use it as an administrative support building for the library. Also, Calvary Baptist Church and Pinellas County may be interested in purchasing the property. He stated he was prompted to start looking at existing buildings after reading Hillsborough County was renting existing space rather than building a new building. Several buildings were looked at but for the size and price, Sun Bank Building is considered to be the best purchase. The City Manager indicated he had also discussed renting space and that to house the annex employees would cost $400,000 to $500,000 a year. Once all the departments are consolidated, he believes the City can save over $200,000 a year in operating costs plus capital costs to replace roofs and air conditioning units in the existing facilities will be avoided. He stated that in considering purchasing this building, his recommendation is that the City become tenants in the building for the next four years, in that, the City would own the property but would retain property management services. This will allow the current leases to be maintained. There will be ample parking for the facility. He stated in order to pay for the building, staff had been able to identify a little more than $10 million that could be available. He stated this was done without stripping out other funds or limiting options for the future. He reiterated he believed the building was of sufficient size to meet the City's needs. It is important that it is located in the core of downtown and in proximity to other City facilities, that it can be purchased for $9.8 million and that after paying operating costs and renovation cost, an additional $1.7 to $2.7 million in cash flow will be generated. In response to a question, it was indicated that loss of interest on the $10 million had not been taken into account. It was stated the building can be purchased for $50 to $60 a square foot and it was questioned what the cost of construction would be. The City Manager reported the State building recently constructed in Largo cost approximately $70 a square foot without land and if the value of the land were added, it cost $92.50 per square foot. Concerns have been raised regarding the square footage per employee being considered and how this building compared to those in Hillsborough County. The City Manager indicated he had called the County Administrator in Hillsborough and their square footage per employee was 200 square feet while Clearwater's was 210. He stated their overall figures had been based on net space while Clearwater's figures were on gross square footage. A statement was made that the interest on the $10 million would compound to $3.28 million and that the continued operation of the annex would have to be subtracted from this. The City Manager indicated he would recommend the annex be closed as soon as possible and the remaining City staff systematically occupy the rest of the building as leases expire. Nineteen citizens, including representatives of the Coalition of Homeowners, the Clearwater Beach Association and the Harbor Oaks Homeowners Association, spoke in opposition to the purchase of the building indicating it would be contrary to State law and the intention of the CRA; that it would take property off the tax rolls; that the money would be better spent on other projects; that there is no need for a new City Hall; the purchase would not help revitalize downtown; the price was too high and there was opposition to the way in which the purchase was proposed and the use of "Penny for Pinellas" funds. Two reports addressing space needs and renovation cost commissioned by the Clearwater Beach Association were distributed. Nineteen citizens, including representatives of the Chamber of Commerce, the Downtown Clearwater Association, the Downtown Development Board and the four City employee unions, spoke in favor of purchasing the building stating there was a need for a new facility; that consolidation of the City offices would improve efficiency and service to the citizens; purchase of the building would address the American with Disabilities Act's requirements; it would help revitalize and stimulate downtown; there is a need to relocate the employees in the annex in order to develop the annex property; that purchase of the building would be good for the image of Clearwater; it would help tourism; the price and location are excellent and there would be spin-off benefits from this purchase. Pictures were shown indicating some of the deficiencies of the current facilities. Four citizens spoke requesting a decision be delayed and requesting further study as there are still unanswered questions. There was a suggestion made that a task force be appointed to study the need for a new City Hall and if this purchase is the best for the citizens of Clearwater. One citizen spoke questioning what would be developed on the annex property and stated that monies need to go back into the community. One citizen spoke indicating that if there was a need for the new City Hall, the building should be purchased but that all needs of the City should be addressed. A representative of the seller of the building spoke indicating they have worked with the City for several months and the City has done a thorough job in getting all the information together. He stated the price is a very good deal and it will cost less to purchase this building than to build a new one. He stated the June 30th deadline is a real date and the owners of the property intend to place the property on the market after that time. In response to a question, the City Attorney indicated that use of the "Penny for Pinellas" funds was proper. A question was raised regarding the outstanding CRA bonds for the Sun Bank Building. Dan Deignan, Finance Director, indicated that as it currently stands, the debt service on the bonds will remain in place until the year 2007. CRA revenues will be sufficient to pay off the debt service even if the Sun Bank Building property is off of the tax rolls. A question was raised regarding whether or not a referendum would be required. It was indicated a referendum would not be required for a cash purchase of this building. Should it be decided to issue general obligation bonds, a referendum would be required. If revenue bonds were issued to pay for the building, it would meet the public health and safety exemption and therefore a referendum would not be required. It was suggested the Commission first resolve the issue regarding whether or not there is a need for a new City Hall. Discussion ensued regarding the need for a new City Hall with opinions being expressed that there was need to consolidate the facilities to improve efficiency, services to the citizens and working conditions for the employees. Some concerns were expressed that while working conditions and efficiency needed to be improved, there may not be the need for a new facility. A question was raised regarding although there is a need, if purchasing the Sun Bank Building is the best decision. A suggestion was made the City consider building a new City Hall on what is commonly called the Bilgore property. It was stated that the issue of tonight's meeting was the purchase of the Sun Bank Building but there was some feeling that decision could not be made until the need for a consolidated facility was established. Commissioner Fitzgerald moved that the Commission establish that there is a need for a consolidated City Hall for the future of the City. The motion was duly seconded and carried unanimously. Commissioner Regulski moved to deny the recommendation to purchase the Sun Bank Building. The motion was duly seconded. Discussion ensued regarding the motion with concerns being expressed that to not purchase this building would be a missed opportunity. It was stated that although the building may be in excess of what the City needs, it can be purchased at a lesser price than a smaller building could be built. It was also stated that purchase of this building will go a long way to address the Americans with Disabilities Act. Meeting those requirements in the existing four facilities will be much more difficult and more expensive. It was stated it was felt that purchase of this building would be good for the image of Clearwater, that it would free up the annex property for development and that consolidation of services in one building would be more efficient and would provide for better service to the citizens of Clearwater. Concerns were expressed that if the building is not purchased, building a new facility would be a lengthy process. Opinions were expressed that purchasing this facility would not be the starting point of revitalization of downtown. Concerns were also expressed that the Sun Bank Building was not energy efficient and a memorandum from the Energy Office was referred to. There were also concerns that there were renovation costs involved and there were things in the building that needed to be fixed according to a report from the City's Consulting Engineer. Concerns were also expressed regarding a bar currently leasing a portion of the property. Concerns were also expressed regarding the construction of the building; it being a glass wall with pins that would rust. Removing the property from the tax rolls was also considered to be a negative aspect of this purchase. It was also stated that it was felt that the tax roll value of the property given to the Commission was too low and based on 1991 figures not 1992 figures. In response to the question regarding the value of the property according to the tax rolls, it was indicated there are two parcels, the one on which the building is located and the parking garage. Dan Deignan, Finance Director, indicated he had checked the assessed value of the property today and that it had increased over the past year and was a little more than $10.2 million. In response to the concerns expressed regarding the memorandum from the Energy Office, the City Manager indicated that this memorandum had not been forwarded by the General Services Director because it was felt the assumptions used in the memo were inaccurate. In response to questions, the City Manager indicated the recommendation is to allow existing leases, including the one for the First National Bar, to expire normally and the current property manager be retained. The cost for the property manager has been included in the cash flow projections. Concerns were also expressed regarding whether or not the City was comfortable that the leases in the building could not be broken. It was indicated the leases have been examined and there are in favor of the property owner but it would not prevent somebody from attempting to break their lease. However, the City could take enforcement action if this is the case. Further discussion ensued with it being indicated that there is some feeling that there is a great need for consolidation but there is also a need for additional information. Upon the vote being taken to deny the recommendation, Commissioners Deegan and Regulski voted "Aye"; Commissioners Fitzgerald, Berfield and Mayor Garvey voted "Nay". Motion failed. Commissioner Fitzgerald moved to continue this item to the meeting of June 18, 1992. The motion was duly seconded and carried unanimously. The City Manager requested that in order to have all information available for the meeting of June 18th, that the Commission indicate to him tonight the information they need. The following information was requested: 1) Recomputed cash flow taking into account interest lost on the $10 million adjusted by the amount not saved by continued operation of the annex; 2) Response to and/or verification of the Energy Office memorandum; 3) Verify value of the Sun Bank Building; 4) How the Sun Bank Building meets the Americans with Disabilities Act; 5) Cost of needed repairs to the building noted in the consulting engineer's report; 6) Closing date, closing cost and whether another broker would be involved; 7) Response to reports submitted by Clearwater Beach Association; 8) Additional information regarding occupied square footage in current facilities; 9) possibility of option to purchase; 10) How would programs currently conducted in the City Hall Annex Community Room be accommodated; 11) Sample lease of Sun Bank tenants; 12) How will taxes from lessees be collected; and 13) Cash purchase compared to issuing bonds for purchase. The meeting adjourned at 11:04 p.m.