|Posted on March 2, 2022|
|Lafayette City Council Authorizes Sub-Committee to Pursue Purchase of Public Use Property|
|By M. D. Jones|
For several years, the Lafayette City Council has been searching for potential property that could be developed for use as municipal offices and other civic purposes without success, according to a staff report presented by Director of Administrative Services Tracy Robinson during the February 14 board meeting. The city leases its municipal offices and holds $5.2 million in reserve under the Municipal Offices Fund. At its December 13, 2021 meeting, council discussed the possibility of using the Fund to purchase property – or multiple properties – downtown that could be used for public purposes and potentially appreciate in value.
At the Feb. 14 meeting, staff recommended that council authorize a subcommittee consisting of Mayor Teresa Gerringer and Deputy Mayor Carl Anduri, who would work with the city manager, director of administrative services and a real estate consultant to identify potential properties and discuss options. with the owners before returning to council to seek approval of a bid.
The purpose of the recommendation, according to the staff report, is that the city does not lose purchasing power as property prices rise and interest rates are low, currently between 1% and 2%. . The city would retain this property and convert it to public use until it finds a more suitable property for city offices and a civic center.
Three considerations were central to this discussion. First, according to the staff report, the city is not permitted by law to invest in real estate unless it is actively used for public purposes. In other words, he is not able to “bank” real estate and hold it vacant. However, the incorrect choice of a public utility could prevent the city from selling the property when it identifies a more suitable property.
According to the report, “Selling the asset and eliminating a use that residents have grown accustomed to in order to develop a civic center/municipal offices may prove unpopular. even if we try to impress upon the public that the property is being acquired with funds from the City Office Fund..This will need to be considered.” An example of this type of scenario would be to convert the temporary property into a public gathering space, public parking lot or gallery. If, after several years of the space being used by the public, the property is sold to a developer, one would expect a public outcry.
The second consideration relates to the legal constraints and timing issues the city might face when selling a property. According to the staff report, “there are legal constraints on the city when disposing of property, particularly property that has been used for parks.” Additionally, according to city attorney Mala Subramanian, selling the property could take some time, as under current law the city would be required to go through the process of offering it to groups of affordable housing and other government agencies and possibly spending time. go through negotiations. Also “if the laws change and certain requirements are put on the city, we’d be stuck with that and so that’s something to consider.”
Finally, the third consideration concerned the financing of interim ownership. According to the services report, in addition to the initial costs of acquiring the property and making it “fit and ready” for the proposed public use(s), estimates of the ongoing costs of maintaining and staffing the property should be considered good. These costs, along with the potential financing cost of the property, should align with the current amount the city spends to lease its office space.
Robinson noted that extensive financial analyzes have been done, adding that “there are absolutely ways for the city to borrow money, similar to a mortgage. The net present values definitely show that over a long period of time, it is much better to be able to own than to rent.”
In his report, however, Robinson pointed out that there is a chance that “we are now in a real estate bubble, and it is possible that the value of any acquired property will fall rather than rise”.
Grace Dixon and David Clark, during the public comment portion of the meeting, were both enthusiastic about the concept.
Council member Gina Dawson said her request would be to explore financial instruments “to make the most of the money we have and maximize it as much as possible”. Council member Wei-Tai Kwok also supported the activity to set this up.
Anduri said the first thing the subcommittee would look for are investable properties to retain the value of the Municipal Office Fund. “If during this transaction we locate a property, whether it is an existing fully built property or land that we can develop, I certainly see ourselves looking at options to develop it and looking at the funding methods, and bring them to the board.”
Council voted unanimously to adopt the recommendation to authorize the sub-committee, which will return with a report.