City Council
Meeting: March 3, 2009
Agenda Item: 1-C
To: Mayor and City Council
From:
Subject: Demolition of Improvements Located
at
Recommended
Action
Staff
recommends that the City Council authorize staff to seek permits and bids for
the demolition of the City-owned building located at
Executive Summary
The City closed
escrow on the acquisition of seven lots on
Staff is seeking approval
from Council to initiate the process to demolish the building by early 2010
once all materials being stored in the building have been moved to their new
locations, and to use the lot for surface parking on a temporary basis, rather
than rehabilitate the building for lease to private entities or for City
offices. The anticipated cost for
demolition and resurfacing is $400,000. The long term plan is to redevelop the
entire site and recently acquired adjacent properties for a use consistent with
the Downtown Parking Strategy.
Background
Between March 2003 and December 2005, the City leased the 25,335-square
foot building at
Discussion
In January 2008, the City received a Building Assessment Report that
evaluated the building and estimated the
cost of repairs to upgrade the building for use as City offices or to lease to
private entities temporarily until its ultimate reuse would be determined. The report concluded that the City would need
to repair and replace major building systems, carpeting, and flooring, paint
the interior/exterior, remove mold and complete other repairs at a cost of
approximately $400,000. Staff estimated
an annual maintenance cost of $100,000. In addition, a new occupant would likely
need to invest in tenant improvements.
There are two factors which lead staff to conclude that
rehabilitation of the building would not be cost effective. Currently, the commercial
leasing market in
In addition, staff estimates that the property will be needed for
new construction within five years. The long-term plan for reuse of the City’s
properties on
Given these market conditions, the City would likely demolish the
building in the next few years as part of its broader downtown strategy, the
leasing opportunity would likely attract only short-term tenants, and lease-up
of the building could take several years.
As shown in the table below, based on an assumption that only 7,500 square
feet of the first floor would be leased; that the City would likely need to
offer a rent credit for tenant improvements; and that the City would receive
rent of only $2.00 per square foot per month due to the short-term nature of
the tenancy, the City would need almost five years to recoup its investment.
|
Rehabilitation
Costs: |
Private
User |
|
|
City rehabilitation cost |
|
$400,000 |
|
Tenant improvement rent credit* |
|
$466,125 |
|
Total Cost |
|
$866,125 |
|
|
|
|
|
Lease Revenue: |
|
|
|
Annual
base rent ($2/mo at 7500 SF) |
|
$180,000 |
|
Years to recoup investment |
|
4.8 years |
|
|
|
|
*additional tenant
improvements
If the City were to rehabilitate the building and occupy it as
office space, the investment to make the building habitable for City use would
likely not be recovered within the building’s time horizon. Additionally, none of the City’s existing
leases for administrative space is expected to expire within the near term and
the site is outside the walking distance to City Hall necessary to enhance
customer service and City operations.
If the building is demolished, the property could be resurfaced so
that it could function in the short term as part of a larger, 45,000 sq ft. surface
parking lot, adding approximately 25 new parking spaces to the existing 108
spaces. This parking lot could be utilized
as replacement parking while Parking Structures 1, 3 and 6 are being
reconstructed, as recommended in the Downtown Parking Program EIR, and/or a
portion of the lot could be used as a staging area during the construction. The first parking structure is scheduled to begin
construction in 2011.
Alternative
In addition to the options discussed above, the building could remain
in its existing condition and used short-term for warehousing and storage of
City property until it is programmed for future use. However, long-term use for storage would
require significant investment (e.g. roof replacement) to forestall further
building deterioration.
Environmental Analysis
The property is located within an area studied in the Downtown
Parking Program EIR, certified by the City Council on May 9, 2006 for the
development of new parking resources.
This report can be viewed online at
EIR. None of the conditions described in CEQA
Guidelines Section 15162 and 15163 have occurred which would necessitate
additional environmental review.
Financial Impacts &
Budget Actions
Sufficient funds are available in Capital Improvement Account
Number C172001.589000 in the amount of $400,000 for FY 2008/09 to take the
necessary actions to demolish the building located at
Prepared by:
|
Approved: |
|
Forwarded to Council: |
|
|
|
|
|
Housing
and Economic Development |
|
City Manager |