Thursday, July 21, 2005

Transcript - Special Session CRA (Purchase of Dolphin Ave Property)

Special Session CRA
July 11, 2005

(Meeting was video taped, but not recorded. Mayor Servian and Commissioner Shelin participated and voted via conference call. Save Our Sarasota transcribed the meeting. It is accurate to the best of our knowledge.)

Vice-Mayor Atkins: The first and only item is to authorize the Executive Director [City Manager is Executive Director of CRA] to sign and submit a written offer to purchase property within the CRA boundaries for public parking.

Director of Planning and Development, Jane Robinson: I think this is going to be one of those times in Sarasota’s redevelopment history where we will look back and say that the stars and the moon were all in the right alignment relative to purchasing this piece of property that we’re here to discuss today for public purpose. The public purchase is for a parking garage. And that parking garage site is encouraged, in fact, is in the Downtown Master Plan that has been adopted and is in almost the exact vicinity of the designation on the plan. Due to the initiative of the CRA Executive Director, our City Manager, this opportunity is before you today. The location is the SW corner of Dolphin Street and Orange Avenue and, as I mentioned earlier, is absolutely consistent with our Downtown Master Plan. But before I recite the administrative recommendation, the City Manager…Executive Director…may have some comments.

City Manager, Michael McNees: Just a few. I appreciate everyone juggling their schedule because this is certainly a time-critical issue.

We’ve been looking at property in this area for some time and this is a particular property that was of interest. And it was difficult to make contact with the owner. They’re out of the country. They actually live in Germany. And I had an understanding that this person was going to be in town for just a couple of days and had managed to make contact and she had agreed to meet with us on Friday…when she was in town. And we got a call Friday morning that she was here and willing to sit down with Jane and I for an hour. And we walked away with the verbal agreement that the City would…that I would come here today and ask you to purchase this property. And we are in a position of either we either buy this proper-ty…now… or someone else is going to buy it this week. The buyer [sic] is very anxious to sell this piece of property.

The asking price is what we are offering, is 4.4 million dollars. And I’ve done some reality checking against some other properties that I would say are in play in the neighborhood on a per square foot price. And even though it sounds crazy, that number per square foot is in line with other contracts I’m aware of in that neighborhood. I’ve seen ranges anywhere from $209 per square foot to $240 per square foot. This one in particular is $215 per square foot.

And we would be able, if we only achieve this particular property, and I’ve provided you a draft engineering study that we’ve already done (as I said, we’ve been looking at this one), you could get 335 parking spaces on the site. Based on the price of this land and the estimate of the engineers that have done the preliminary work on the parking garage, that would come around to between $23,000 to $24,000 per space. Now, I’ll sit here and say, "That’s very high. That’s a lot of money." But the real issue is it’s only going to be higher tomorrow and it is never going to be less than it is now.

Now we also, I’ll say, have an interest in squaring out the block, so to speak, or angling out the trapezoid, as it were, based on the parameters of this property and working on other property to the west which would give us even better efficiencies in the garage, more spaces, and would probably bring down that per space cost some. But that’s more work that we have to do. We know we can construct a stand alone garage on this site, get 335 critically-needed spaces. As you’ll recall, this is the number two need from your parking study, is this area for parking spaces. It’s identified in the area where civic reservations for parking are asked for in your master plan.

And if you asked me, "Is this is a good price?" I’d say, "No, it’s an expensive price. But it is the price." If we’re going to make any headway on the parking issues in this part of town, given the current environment, then I guess the only way I can say it is: " That’s the price of poker." If we want to get into the parking game, this is what it’s going to cost us. So I actually wholeheartedly recommend that you authorize me to go ahead and execute a contract on this property.

There are a couple of contingencies that we’ll talk about. The buyer has asked that a resolution be prepared outlining some of these terms and specifying that as an option, an alternative to pursuing any kind of condemnation, that we would just do a direct purchase.

I have been told that there is a Phase I environmental study that was done when this property was last sold about two years ago. We will want to see that because this is a former printing site, for a printing shop. And so we’re interested in seeing that information.

The other detail that we haven’t been able to hammer down---there are five tenants out of a possible 12 in this building that currently exist. There are seven vacancies and there are five tenants. We very much need to see the leases for those tenants. And I have spoken to two of them myself. On Saturday morning two of them were actually in their shops and so I was able to speak to them, have a sense of what’s in their leases, and have a reasonable expectation that they’re all similar, because they’re all entered about the same time. But that is not a certainty. Now I’ve been told by the attorney for the owner that he will have those leases, hard copy, in hand first thing in the morning.

And so what I would ask is that you give me some discretion, based on whether there are any surprises in those leases. For example, if we find out that the five tenants in there have a 20-year lockdown lease that we would have to buy out. Well, that would materially change the cost of this acquisition. And then I would probably say, "Well, let’s either come back and talk about it." This deal would be off. But I would ask that you give me the discretion to evaluate these leases to see whether there are any surprises before I actually execute the contract.

And other than that, there are no other contingencies that I can think of. This would be a fairly straightforward real estate transaction. We would fund it with internal funds that would eventually be paid back by a bond issue against future CRA revenues, that we would probably do at the time we were ready to construct a parking garage, so they would all be rolled together. Mr. Mitchell [Director of Finance] recommends that internal financing’s the most efficient way for us to do it so we wouldn’t need any kind of bridge loan.

It’s important to the seller that this close fairly quickly. They would like to have a closing within 30 days.

So, given your approval today, Mr. Fournier and the buyer’s attorney would have to settle on the terms of the contract. We would execute that and look to close within 30 days.

The only other issue, I would raise, we would immediately then become responsible for the maintenance of the building and dealing with the ongoing day to day issues with the tenants. And we can accommodate that without a lot of trouble.

Commissioner Palmer: Based on the information that we have here in regard to the purchase that occurred in 2003, apparently the sale amount was 1.7 million, is that correct? And the value was $1,146,100, according to this. This is the assessed value on the property. This was, of course, when the peroperty had Serbin on it. They tore it down and they constructed this shopping area. So obviously it’s not only the base property, but it’s also the improvements that are included. And if we put a parking structure on there we have to tear down a shopping center that opened about a year ago.

City Manager McNees: That’s correct.

Commissioner Palmer: There is no way to incorporate that? According to these plans that I looked over very…

City Manager McNees: No, Ma’am. That’s not a realistic…

Commissioner Palmer: Also, in looking over this report again…we have only had this a very short period of time of time…but the information that I see in here in regard to the parking space construction costs, I think the most is somewhere between 13,500 to 14,000 dollars as opposed to the twenty some thousand that you’re speaking of. What is the variation in that price? Are these hard costs as opposed to soft costs?

City Manager McNees: What I was talking about was construction cost and land cost together. The engineering study that you have estimates a range of costs for parking spaces depending on the configuration of the garage. If you have to have liner buildings, it drives up the cost per space considerably, and being that it’s a pretty small site---and those would be decisions you don’t have to make today; those would be later decisions---but the numbers that I gave you were based on the lowest estimate of the consulting engineer for space and the land cost.

Commissioner Palmer: And then the other question I had…you indicated that you had done some research on the sales price of properties in the general neighborhood. Could you give us a little more specific information about that?

City Manager McNees: Actually, what I said was, "I am aware of contracts that are in play." I haven’t got current purchase…and this…I’d be the first to admit this is somewhat speculative. And there is a speculative fever that is taking over this neighborhood and this has become, probably over the course of just the last couple of months, one of the hottest little investment areas in Sarasota. And so I cannot sit here and show you good, solid comparable sales. Because there is no good, solid, comparable property. In that way, this is somewhat speculative. And this is an opportunity that is open to us for only a very short time. And that is essentially through today. And that is the environment that we’re in. And I guess the way I look at it, if we don’t do this today, it is certainly not going to be easier do a it in a week, or in a month, or certainly much less in a year, because people are working to aggregate property in this neighborhood at a fever pitch, as we speak.

Commissioner Palmer: So this price, then, is essentially not negotiable.

City Manager McNees: That is correct.

Commissioner Palmer: And your understand is that if we don’t purchase it, it will got for at least this much if not more from somebody else who is in the wings.

City Manager McNees: That is absolutely my understanding and I think perhaps for more.

Commissioner Shelin: I don’t believe the previous structure was torn down. Parts of the Serbin building were removed, but the building that is there now is the original shopping center that was built many years ago. And it has been cosmetically redecorated on the exterior. But it’s essentially a structure that has existed for some time. I think while the price is extremely expensive, I think this is an area of town where we need to stimulate retail development and it is poised to take off, but parking is a problem for that area. And, frankly, I think the purchase of this site would be a good idea.

Mayor Servian: Several weeks ago when we had sent the city manager off to look at sites, I certainly didn’t expect we’d have one back this fast. But I am extremely pleased that we do. I believe that if we don’t move on this property today and this property is sold, we will be hard pressed to find another parcel in that vicinity for anywhere near this price. And, although I see that there are some contingencies that we have to deal with…I’m a little concerned about the maintenance and tenants issues…but I still think that we need to move forward on this. And I applaud the Executive Director and Miss Robinson for moving so quickly on this.

Commissioner Bilyeu: Let me get this correct. It’s 20,400 square feet of property?

City Manager McNees: By my calculation, according to what was in the engineering study, it’s 80,000. No, excuse me.

Commissioner Bilyeu: I’ve got 102 x 200.

City Manager McNees: That’s right.

Commissioner Bilyeu: So that’s 20,400 square feet. At 4.4 million?

City Manager McNees: Correct.

Commissioner Bilyeu: Now, that’s not even a half an acre. Is that correct? What’s an acre? 43,560?

[Deep sigh] Well, I have to tell you it’s taking my breath away. Here we’re selling a land that’s almost two acres for Plaza Verdi for 4.1 million and we’re OK with that and you’re wanting us to buy not even a half an acre for 4.4 million? Somebody help me out with this please.

City Manager McNees: Well, the biggest difference in the two sites is the Plaza Verdi property is severely encumbered by the easement with the Sarasota Opera, so it’s not free and clear. And the second thing I’d say is, "I’m the first one to agree…this is a lot of money for this piece of property." The only thing I know is that if we don’t secure it, someone else is going to, and then our opportunity to provide the parking that’s needed in this neighborhood will go away with it.

Commissioner Bilyeu: Has anyone ever discussed with Ms. Saunders about putting some public parking in her garage? We were thinking about buying a piece of that parcel that we let her buy and she’s getting ready to build. And I would think that would have been a great spot to spend a few million dollars to her to allow her to build some parking for public use.

Dir. Planning Robinson: I did talk to her about that some time ago and she said she would think about it, as I recall, but she does have plans in our office right now and they do not state that there will be public parking. But initially I think that was the intent, that she would provide some public parking.

City Manager McNees: And all of the parking needed won’t now necessarily be served by this particular project. Mrs. Saunders did agree at the time both she and the city were competing to purchase the old Verizon lot at the corner of Laurel and Orange, that if the city to some degree step aside at that point in time and allow her to acquire that land, she would lease it back to us, we could get parking without having to buy it, and then she would work with us to build public parking into her project when she eventually developed it. And, hopefully we can still do that.

Her project as it’s currently constructed and for which she has submitted a site plan for approval does not include that parking.

Dir. Planning Robinson: And furthermore, I don’t know that there would be much that she could do for public parking, because her project is a big, land-intensive use project with office and residential.

Commissioner Bilyeu: Well, I’m a firm believer if we would have talked and negotiated with her that we could have done something there. I don’t think we worked as aggressively as we could have to make that come to fruition. And to have her plans come before us and not include public parking, that saddens me very much, especially when now we’re forced to look at buying property. And you can tell me until we’re all blue in the face, but dirt is dirt, and for us to spend 4.4 million dollars for a half an acre when we’re getting 4.1 million for almost two acres…I can’t go along with this.

City Manager McNees: The only thing I can say to that is those conversations with Ms. Saunders were had. I’ve been in her office personally and that commitment to assist us in developing public parking on that site was made. But I don’t have the ability to deliver that…I can’t…I don’t have the…that’s a bird in the bush to me and this is a bird that we can put in the hand. It’s something we can control. And I think if we let it go, we’re back in a position of this situation being not within our control.

Commissioner Shelin: It’s also the case, I believe, that the agreement for the price of the property where Ursa Grae is proposing to build Plaza Verdi was made some time ago and we all know that property values are escalating very rapidly, so there’s clearly is going to be a big difference. But I agree with Commissioner Bilyeu. It is very expensive and it makes me nervous. But I don’t think we have any choice.

Mayor Servian: And also with the issue with the Plaza Verdi site, if you recall, we had the discussion about whether we should go and reappraise that property, but with the increased price of construction, we felt that we would end up upside down in that conversation and therefore we didn’t pursue that.

Commissioner Atkins: One of the things here that’s happening is that there’s a whole lot of water that’s gone under the bridge and there’s no way we’re going to be able to bring that back. And we’re in a situation now where we’ve got to make a decision based on where we are now.

Commissioner Palmer: That is essentially what I was going to say, too. I’m not totally thrilled with the price we’re having to pay for this property. We talked over many, many years about doing some land banking and unfortunately we didn’t have the foresight to do it and you and I are as much responsible for that as anybody else, Vice Mayor. But I think we are in a position where regardless, particularly understanding that there are other offers out there that are at least this much if not more. And that if we don’t jump on this opportunity we’re going to lose it.

There is a vitally important need for parking in the Burns Square…Burns Court…area and if we don’t take advantage of this…whether we do a liner building or just parking, that’s a discussion that will come later.

But we need to get this under our control. And my concern is, yes, it’s a lot of money and I think we’re all very careful about how we spend our CRA and our TIF dollars as well as our taxpayers’ dollars, but this is an investment that I think we have to make in the TIF district for this particular area. And I think Commission Shelin and the Mayor’s comments as well as yours, and I agree with Commissioner Bilyeu, too. I think these are all good points. Again, we are where we are. We could go back and play Monday Morning Quarterback, but it won’t do us any good. So on that basis, if you’re ready for a motion, I will make it…or not.

Mayor Servian: I’m ready.

City Manager McNees: One other comment I’d like to make. Make no mistake about it. We are in competition with, I would say, three or four large scale, pretty deep pocketed development interests for this land and for the other things we’re trying to accomplish downtown. Now we are at a severe disadvantage. We have to do our negotiating here in public. And I would love to sit here and say, "Well, I happen to know this and that about who’s buying what and here and there." But I can’t do that sitting here in public.

All I can tell you is, I believe very firmly that if we don’t lock down this property, it won’t be there in a week.

Dir. Planning Robinson: I’m not sure that this will make you feel any better, but we as a staff deal with developers all the time and what they’re paying for property. And I did talk to a developer who’s very, very savvy in downtown redevelopment, and for the fun of it I asked him what he thought the price of the City Hall property would go for and he said at least 25 million. Now that’s three to four times bigger than this site. But that’s what he told me.

Commissioner Palmer: I would move the recommendation to authorize the Executive Director to sign and submit a written offer to purchase this property to the prospective seller of the property. And, also, in regard to the contingencies, as part of the motion we need to give the City Manager, the Executive Director of the CRA, the authority, if there are circumstances that do come up that are not going to make this possible, to negate the offer.

Commissioner Shelin: Second.

City Attorney, Robert Fournier: Before you vote on the motion, I just wanted to ask the maker if you would include in the motion the authority to have the Chair execute the resolution that was referenced to because that’s important because you as the Community Redevelopment Authority are only authorized to spend funds in furtherance of the goals of the master plan, the Community Redevelopment Plan, so that would document that.

Commissioner Palmer: I would add that to the motion.

Vice-Mayor Atkins: It has been moved and properly seconded and an elongated motion has been made…would the clerk like to restate it or are we clear on the motion? [Indications it was clear]

Commissioner Palmer: Well, I think that the Planning Director did indicate this was totally consistent with the Downtown Master Plan. In regard to civic spaces, it’s been identified in that plan in this particular area.

And I think the point that was made regarding the Ursa Grae [Plaza Verdi] property is that at the time that was initially appraised and dealt with in regard to Ursa Grae, the property obviously was assessed at a lower value. But we’ve had a 350% increase in taxable value in the downtown as well as in the property values. It is going out of sight. There’s no doubt about it. If for some reason this doesn’t move forward and the City takes this over, I have no doubt whatsoever the City could pass this through and make some money on this property because of the value of it. That’s not what we’re intending to do. Our purpose is for the purpose of a parking garage. And that’s what the public interest is here. But based on land values in this area, I don’t think there’s any doubt that it is worth 4.4 million, even though it’s a high asking price..

Commissioner Shelin: We have a crying need for parking downtown and 335 spaces would be an incredibly good addition to downtown. We also need to stimulate retail development to make our downtown really viable for the residents living there and I think this will help to do that.

Commissioner Bilyeu: I’m not opposed to, and I know that we need, parking downtown, and I’m not opposed to that. It’s just funny that…if we were spending excess money for something that was for the good of all of Sarasota, I could probably vote for this. But this is going to be for a few people in the neighborhood there that need parking. I I understand they need parking, but I think for us to go out and spend this kind of money and these kind of dollars on something when we can’t even get, I think, the correct value for our property… And we can talk until we’re blue in the face about it…I’m still not agreeing with what our property is worth. You can count all the encumbrances you want, if this property is worth 4.4 million, that at Plaza Verdi is worth 16 million dollars. I’m not going to vote for with this. I don’t think this is a good decision and with this happening like this, no wonder people love coming to this city.

Mayor Servian: I would just like to reiterate the fact that not only is this consistent with our Downtown Master Plan, but it is also consistent with the parking plan, the parking study that’s been done. That is an area that is number two on our list. The other area is Palm Avenue area and we’re addressing that. This is number two. And we are in direct competition with the private sector. And we move now or we lose it. And not only do we lose that site, but we lose the opportunity to fulfill our Downtown Master Plan or our parking plan.

And this is an investment that is for the public good and for the greater public good. We get too many criticisms when we’re investing in projects and people misperceive it as giving the developers money. This is an opportunity for us to make a clear cut investment in pure municipal parking which everyone is screaming for. And I applaud the administration for moving forward and moving as quickly as they did.

Vice-Mayor Atkins: I’d just like to say this is an amazing process that I’m going through here, too.

But it’s probably in a whole another different way. I thought in whole different kind of way, because what I thought about when I read the price of this land, I thought "Wow! They’re going to spend all the money before we spread the CRA!" And I’m more concerned about that sharing some of this wealth that we have made the sacrifice to generate downtown. And so I just want to have us as a Commission and a CRA to look out into the future and make sure that we’re remembering that the rest of us who made the sacrifice for the CRA to grow to this extent. And it’s been twenty years of this process and now is the time to also continue to look at how we’re going to encourage the county to participate with us in spreading some of this wealth.

I don’t want our competitors out there just looking at possible land purchases to think that we’re going to be so easily taken so often. But this is a space that we truly need, it’s an identifiable need, I think it’s for a greater good than just the commercial owners in that area. I’m going to support this with the caveat that we continue to understand we have greater responsibilities.

Passed by voice vote 4-1. Yes: Servian, Atkins, Palmer, Shelin No: Bilyeu

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