City Council member Bill Gulliford has introduced legislation to allocate more than $14 million to purchase the Jake Godbold City Hall Annex from the Police and Fire Pension Fund, a move he has said would save the City money long term.
The City has been leasing the building, which Gulliford said Monday is "a bad deal for the City."
The legislation will be introduced today to Council to buy the building.
"It's simply a move to try and save the City money," he said. "The window is there."
The lease at the building, at 407 N. Laura St. across from City Hall, began in 2009.
Legislation approved in 2006 transferred the building to the fund, which completed renovations. City departments began to occupy it in mid-2009.
For the first four years of the deal, the City has paid $1.19 million for annual rent. The next four years, which start this year, the rent rises 12 percent, or annually to $1.3 million.
Rent increases 12 percent every four years through years 41-44.
To date, the City has paid $4.8 million in rent.
The 2006 agreement allows a window for the City to purchase the building every four years, with the next opportunity beginning May 1. To buy the building, the City must notify the fund in writing within 90 days after that date. Once it does, the inspection and closing must be completed within 90 days after exercising that option.
The next opportunity would be May 2017, when the purchase price would increase to $15.7 million, up $1.4 million from the current $14.3 million price.
Gulliford's legislation would allocate the $14.3 million from the banking fund. He said he "hates" dipping into the fund, but said he weighed priorities for long-term savings.
"The way it is, I would hope my fellow Council members look at it as the prudent business decision it is," he said.
Though the purchase price is $14.3, the legislation calls for an amount not to exceed $15.4 from the fund, with the additional $1.2 million used as a reserve.
The project would be added to the City's 2012-17 capital-improvement program if approved by a two-thirds vote of the Council.
A Council amendment to the adopted program last September requires a two-thirds vote of Council members present instead of a simple majority for plan alterations and also requires a statement why it would be detrimental if not approved.
Gulliford's legislation states the deferral of the bill until the next review of the capital plan would be detrimental to the best interests of the community because of the purchase window.
In 2006, the legislation transferred the building to the Police and Fire Pension Fund in exchange for a $3 million reduction to the fund's unfunded accrued actuarial liability. The City is responsible for that liability.
The legislation also waived $4 million in pension obligations as part of an agreement with the fund for the redevelopment of the Laura Street Trio, which has not taken place.
The Property Appraiser assessed the building at $5 million in 2012 and a tentative $5.2 million for 2013.
The $14.3 million City purchase price is calculated by adding the fund's $3 million price plus $10 million of the fund's out-of-pocket building expenses, which have increased 3 percent a year.
In Year 44, the final year of the deal, the City's cost to purchase the building would be $39.7 million.
In previous Council Finance Committee meetings, Council Auditor Kirk Sherman has called the current arrangement a bad deal financially for the City, an opinion he repeated Monday.
He said the repercussions of the legislation would be using $14.4 million from the banking fund.
During a recent Finance Committee meeting, Gulliford suggested using portions of the $9 million Mayor Alvin Brown has allocated for Downtown economic development to offset the building's purchase.
"I'm all for Downtown development but am of the opinion you have a plan first then raise the money," Gulliford said Monday.
Council later approved transferring the money into an account earmarked for Downtown development, but Council can still pull from it.
Brown's administration did not respond to a request for comment by deadline.
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