by Bradley Parsons
Staff Writer
Before the City spends $23 million to become a downtown landlord, the City Council wants to hear how much it will collect in rent.
The City’s purchase of the 11-story Edward Ball building on Hogan Street was put on hold Monday until its real estate dealmakers can answer that question. The Council’s Finance Committee deferred a vote on a bill that would have made the money available. The bill could get back on track following a meeting later this week among the Council, its auditors and representatives from the City’s Real Estate Division.
At issue is the building’s current tenants and their plans for after the City takes ownership. The Council auditors want to make sure that the City earns enough from the building’s rents to pay for day-to-day maintenance.
The City is scheduled to close on the building May 1. By September of 2006, the mayor’s office plans to start moving City offices to the building’s 400,000 square feet of office space. The Ball Building is part of a mayor’s office plan to consolidate City offices around Hemming Plaza.
But the City will have to start paying maintenance costs as soon as it takes ownership and Council auditors want to ensure that money is in place to pay those costs.
Council auditor Kirk Sherman worried that tenants would move out after the City takes ownership, forcing the City to make room in a tight budget to pay for maintenance.
“We need to have enough lease revenue in hand that’s at least as much as we pay out,” said Sherman.
Sherman said he was frustrated by the lack of specifics provided by the Real Estate Division. He said he couldn’t get answers on how much the City expected to earn or how much it expected to spend.
“I keep asking questions, but I’m not getting answers,” he said. “I keep hearing ‘It will be about this,’ or ‘Maybe that.’ I’m not hearing enough certainty, and I need to know what the final numbers are.”
While the City is pulling the $23 million for the building’s purchase from a bond issue, the money to maintain it would have to come out of the City’s general fund, said Sherman.
Real Estate Chief Bob Williams, who is negotiating the deal for the City, said the specifics sought by the auditors were impossible to provide at this point. As negotiations proceed, he said he will be able to give good estimates he said.
Williams warned that lengthy delays could threaten negotiations. He was able to secure a $23 million price for a building appraised at at $34 million, in part by promising a May 1 closing, he said.
The negotiations have some leeway. Williams said the funding bill could be delayed several weeks without threatening the timetable. So long as the auditors’ questions are answered, further delays shouldn’t be necessary, several Council members said.