The Main Issue: Notes From The Discussion
I attended the Council Meeting tonight because I thought that if any issue would show where the Council Members are coming from, this one would do it. And it did, but in a surprising way given the statements some candidates made during their campaigns. But be that as it may...
Here is the Main Issue, as it appeared on the Agenda for May 30th, 2006:
Mall Office Building Master Lease. Resolution 2006-16 consenting to the City Administration proposal that the City lease 31,500 square feet of a proposed office building to be built by Boyer Ogden Mall LC on the northwest corner of 24th Street and Washington Boulevard. (Adopt/Not adopt resolution -- roll call vote.)
Once again, David Harmer presented, and the opening had changed very little from what it was before. It was the Administration's stance that the leasing of this space by Ogden City and the construction of an extra two stories would be "beneficial to the city overall" because:
- The six story building would be a Landmark.
- Our agreement with Boyer has us sharing revenues with them, however:
- We will recover all our costs before we begin to do so in this instance, and
- We then share the revenue from this space 50-50 with Boyer.
City cost: -0-
Meaning that the space would be leased immediately and the city would then be making $80 to $100 thousand a year.
The second, entitled, Pessimistic Case, had rows of figures from which Mr. Harmer concluded that we might run in the red for two years, but after that, probably not, and that the rate of return on this investment would be 14%. Mr. Harmer stated that the vacancy rate for Class A office space in Ogden is currently 5%, thereby providing an answer to one of the Council's previous questions.
Councilman Stephenson asked what the difference was between Class A office space and other kinds. The answer to this was that Mr. Harmer was not really qualified to speak to this, that perhaps Mr. Glasmann was better qualified, but that he assumed it had to do with location, parking, design, etc. Councilman Glasmann said that this was correct.
Councilman Stephens asked when the first payment would be due, and the answer was probably July of next year, when the building was finished.
Councilman Glasmann addressed the option of building a four story building now which would be constructed in such a way as to allow the addition of two more stories later on. Mr. Harmer's response was that this add-on would be a million dollars more. Councilman Glasmann stated that this was two years of $400,000. Mr. Harmer stated that others who have adopted this strategy have had building codes change on them in the interim, making the later addition even more costly.
Councilman Safsten asked about prospective tenants. Mr. Harmer stated that he could not "talk specifically about individual tenants," but perhaps the Mayor would care to address this. Mayor Godfrey stated that interest had been shown by a ski company, "governmental related employees," a title company and related businesses.
Councilman Safsten then asked why did Boyer not want a six story building? Answer here was that at the time this decision was being made, PRI announced its plans to construct office space. Boyer therefore did not want to duplicate these efforts. "We're willing to do that to reclaim a blighted area," Mr. Harmer said, not that this area was blighted, but that the difference between the city and Boyer is that the city will take on more risk for the sake of development. "I'm confident that the City would recover the costs," Mr. Harmer said.
Councilwoman Jeske stated that in the City Center, there are parts there that are never rented. She made it clear that we would be liable for areas that remained vacant. Mr. Harmer said again that this was "premiere office space," inferring that vacancy in such a space was unlikely. Councilwoman Jeske stated again that in the event the space was not filled, we would still be "on the hook" for it. Mr. Harmer said here that there would probably be no problem in "terminating the agreement and turning it over to Boyer," if it were only a matter of one or two thousand square feet.
Councilman Stephens stated that this would be a cash flow for the next 20 or 30 years, and Mr. Harmer agreed that it was compatible with the whole "mixed use" plan for the area. Stephens then said, "We're not competing with Boyer, we're working as a partner with them." Mr. Harmer said here that any time we are trying to work in areas like this, we will be somewhat in competition.
Councilman Glasmann stated that with the lease revenues from BDO, we have the money to do this. "I think it's time not to be timid," he said, "now that I've seen the big picture."
Councilwoman Jeske commented that, although it had been stated that we had the money to do this, Ogden City itself has "an awful lot of needs. Have we got the money to meet the needs that Ogden has?"
Mr. Harmer responded with the anecdote about the unemployed man who needs his house repaired. Does he hire a contractor, or does he go get a job to get money to hire a contractor? Explaining this further, he said that we have been losing revenue, and that currently, "there isn't any way we can get to where we need to get," without exploring options such as this one.
Councilwoman Jeske responded to this by asking rhetorically that weren't we spending money that could be spent on the infrastructure on this? Aren't we taking money away from the infrastructure? The answer was, not all of it. Mr. Harmer went on to say that if we are very successful in this endeavor, we will then have $100,000 more a year to spend on infrastructure, and that in his opinion, this was a case of "reasonable risk and reasonable return."
Councilwoman Wicks remarked that this was using taxpayer funds to make lease payments.
"We are making investments that a private investor won't do," Mr. Harmer said.
"Risk is subjective," Councilman Glasmann said. He went on to speak on favor of the project, stating that it had "location, location, location," and would attract such enterprises as The Gap and Old Navy. It has to be a building that is "majestic" and "eye-catching," and. "We absolutely have to make it a success."
Councilwoman Jeske remarked that the stock market in the last two weeks has not been the most favorable. Mr. Harmer responded that the stock-market fell because of "interest rate concerns," and that actually, performance indicators are good.
Councilman Stephens said that we need to be concerned with the needs of the people of Ogden. This project will be "providing creative revenue for our city."
"This prospective vote is killing me," Councilman Safsten said. "What we have now isn't going to cut it....What do you do?...This is not the catalyst that the rec center was...This is a revenue question...Are we building ourselves a revenue stream or not?
Councilwoman Jeske stated that we will have a revenue stream. Inference from the completed Junction, rec center, etc. "Are we getting greedy?" she asked.
Mr. Harmer stated here that The Junction project has gone on so long that the benefit of the tax increments from it are of not as long a duration as other RDA projects---in fact, they will cease in 2014.
Councilman Stephenson said that he remembered that when the old Ogden City Mall was built, it was seen as a "save all, end all." Whereas actually, creative investment is an ongoing process. Mr. Harmer said here that in investment, diversification was important.
Councilman Stephens said that we do need to create other revenues. We are now reaping the benefits of a previous council's decision to develop BDO--this is the same thing.
"We've invested a lot of money," Councilman Stephenson said. "We don't have a choice." He went on to say that adding two floors to this four story building shows leadership, and that the building would be a symbol, and moved to pass the resolution. There was a second.
Chairman Garcia stated that a previous council had also resolved to use the BDO lease money for infrastructure. If we do this, what will be left for infrastructure?
They ran the vote. There was an agonizing pause before Councilman Safsten's No.
And jumping to the end of the meeting, here are snippets of council comments about the vote:
Councilman Stephens: "We missed a great opportunity to create revenue for our city..."
Councilman Glasmann: "As a realtor, we did indeed miss an opportunity..."
Councilman Safsten: "I am not excited about the vote tonight. The negatives outweigh the positives to me...I just did not like the risk of it...It was an extremely close call for me..."
Chairman Garcia: "I echo what Rick said..."
Councilman Stephenson: "Tonight, we've sent a message that even we are not optimistic..." (about Ogden's future.)
Councilwoman Jeske: "We've sent a message that we care about our citizens and our infrastructure..." She mentioned the long time it took to repair Country Hills Drive because the city didn't have the money to do it, (Dian: I believe the money for those repairs was taken from the snow removal fund,) and ended by saying, "We can't operate that way."
Councilwoman Wicks: "We've sent a friendly message to businesses..." (that we will not compete with them.)
End of Main Issue. Stay tuned. And as always, if there are errors or misinterpretations, please correct them.
You can read Ace reporter Schwebke's Standard-Examiner headline story here.
And even your humble Blogmeister feels compelled to get into the act, by offering his own $.02.