Wednesday, January 17, 2018
News Roundup

Dunedin mulling over creative financing options for a new city hall

DUNEDIN — City officials are exploring options they believe could lower or even eliminate the $5.1 million price a consultant is estimating for a new city hall.

City commissioners last year hired a Dunedin architectural firm, Inside Out Group, to do a space needs analysis and determine how much it would cost to merge the deteriorating current City Hall with two other government administration buildings.

The official answer: roughly $5.1 million for 19,000 square feet of space.

City Manager Rob DiSpirito and finance director Karen Feeney say they are hopeful, though, that the city could get the new government annex built for as little as $2.5 million or even zero dollars up front.

That could be accomplished, they said, by selling two city-owned properties and using the proceeds to lower borrowing costs. Or even better, they said, commissioners could contract with a developer who would build the annex for the city then lease it back as part of a mixed-use development akin to the downtown gateway project.

"I really feel, given its location in this city, there'd be a great deal of interest to follow whatever vision we have versus a private developer's," DiSpirito told commissioners during a Tuesday workshop. "It could be a win-win."

The annex would allow Dunedin to consolidate City Hall, at 542 Main St., and the Municipal Services Building, at 750 Milwaukee Ave., into a two-story structure to be built on an existing parking lot beside a third city-owned building at 737 Louden Ave. The new structure would be attached to the Louden building, which currently houses Pinellas County sheriff's deputies and the city's Economic Development and Planning departments.

The Municipal Services Building would be torn down and the site converted to a parking lot.

The buildings have been targeted for replacement since 2000, when the first of two space needs reports deemed City Hall and the Municipal Services Building "functionally obsolete."

In both buildings, officials say, there are roof leaks, faulty ventilation systems, bathrooms or other spaces that can't accommodate wheelchairs, insufficient security, vermin, and inability to withstand a Category 5 hurricane.

Officials say city staffers have documents stuffed into "every nook and cranny" in those buildings and the reports recommended that the city upgrade its administrative space from 16,415 square feet to 22,300 — a number Inside Out Group retooled to 19,000 in light of staff reductions.

But perhaps most important, officials say, the new annex would improve customer service and even aid in employee retention by eliminating a confusing maze of buildings and creating a safer, cleaner one-stop-shop.

"We've reached the point where tinkering isn't going to solve it," Commissioner Ron Barnette said, referring to roof patches and other temporary fixes over the years.

The $5.1 million price includes costs for building materials, architectural design, renovations to the existing Louden building and a contingency fund.

Staff said financing the project through traditional means wouldn't work: There's not enough money in Dunedin's general fund to pay off a $5.1 million loan at a rate of about $300,000 annually for the next 30 years. And dipping into the Penny for Pinellas, a local-option sales tax that might not be renewed by voters after 2020, would "seriously impact and delay" other capital projects on the list.

Instead, staff is recommending that commissioners either:

• Sell two city-owned properties — the Jernigan tract (on the west side of the gateway project, on Milwaukee Avenue) and a public parking lot (the former First Baptist Church site, across the street from the Louden building) — for a combined $2.575 million. Both sites were purchased years ago as potential City Hall sites.

"Now that we know we don't need those parcels, why not try and use the land as a tool and extract that money back out and apply it toward construction costs?" DiSpirito said.

• Put out bids for developers interested in the parking lot site (or possibly the combined Jernigan and gateway sites, if ongoing negotiations for the gateway site fall through).

On the parking lot site, the city would draw up a contract requiring a mixed-use project that preserves public parking and also puts the site back in tax-generating status. That same contract would also state the developer would build the nearby government annex for the city, lease it back to city officials at a rate that equals the difference between the land and the cost of construction, then relinquish ownership of the depreciated building to the city at the end of a roughly 40-year lease.

In essence, DiSpirito said, the city, managing lease payments through either the Penny or general fund, would be able to avoid interest fees and pay off the new city hall at a lower price and longer length of time than a bank would allow. And the developer would get a stable, long-term tenant as well as generate revenue from a business built over the parking site.

As bank lending has dried up, "this kind of lease-back arrangement isn't unusual," DiSpirito said of the preferred second option. "It's taking a progressive approach that's been tried and true across the country."

Vice Mayor Julie Ward Bujalski said she doesn't "necessarily like to be in the real estate business as a city," but called it "a creative approach ... if you can accomplish it."

She and her colleagues agreed that it was past time that they upgrade their administration buildings, especially in light of the more than $20 million the city has already spent remodeling or replacing obsolete buildings based on the earlier space needs studies.

"If we get a Cat 2 or Cat 3 storm through here ... you've got to be responsive. We don't want to be out of business, so to speak, if a building's not there," Mayor Dave Eggers said.

Commissioner Julie Scales said she believed DiSpirito's proposed lease-back approach might balance the community's needs and desires better than the other funding options. She cautioned, though, that the city should have something that fits "21st century standards and codes" but also isn't a palace.

"When you look at the things we've done over the last 10 or 12 years, the facilities we've invested in have been investments for our general public. And I think that's paramount," she said. "That's what we're here for."

At commissioners' request, staff will pursue a long-term lease with the Sheriff's Office and gather figures from other cities that have recently built new city halls for construction cost comparisons.

Keyonna Summers can be reached at (727) 445-4153 or [email protected] To write a letter to the editor, go to tampabay.com/letters.

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