-----Original Message-----
From: Brian Rice [mailto:[EMAIL PROTECTED]]
Sent: Monday, August 19, 2002 12:40 AM
To: 'Brian Rice'; '[EMAIL PROTECTED]'; '[EMAIL PROTECTED]'
Subject: RE: [Mpls] Park Board Digs
-----Original Message-----
From: Brian Rice [mailto:[EMAIL PROTECTED]]
Sent: Monday, August 19, 2002 12:25 AM
To: '[EMAIL PROTECTED]'; '[EMAIL PROTECTED]'
Subject: RE: [Mpls] Park Board Digs
Dear List Members:
Let
me deal with two birds
with one e-mail. (Annie Young once publicly admonished me to not use the
more familiar saying as it was too violent and ill-befitting a person who
represented an entity devoted to preserving natural resources.)
With respect to the Anderson/Turpin e-mail I wholeheartedly agree. As a new
member I should have known and followed the rules and not commented about
how I felt some comments were out of bounds. I now have a better
understanding of the rules. And I apologize to the group for my failure to
follow the protocol. On the Anderson/Turpin's main point, as a parent of two
boys, I learned the hard way if you give an inch they take a mile. Only with
strict adherence to and consistent enforcement of the rules were we able to
see improved behavior. I think this is true in any human endeavor. (Witness
the strict enforcement of all types of laws the NYC PD and other city law
enforcement agencies employed in the early 1990's that lead to a
dramatically new community oriented policing model that is now in vogue
throughout the country.) If there is no consequence for an act and no
knowledge of the consequence, there is no education as to the acceptable
norm of behavior.
In reply to the
Strand, Hoover
and Cygan posts on the Park Board digs, let me restate and amplify on the
following points.
1. Strand is
correct, there are
different types of debt. With some forthcoming rule changes by the
Government Accounting Standards Board (GASB), units of government will have
to start acting more like business in how their debt is catagorized and
accounted for. The new standard would treat what has been commonly known as
"net debt bonds", ie. expenditures for exclusively used public
infrastructure, as depreciable assets with a specified useful life based on
its character. So land, property, furniture, computers etc. will all be debt
backed up by a useful life schedule. Uniform rules will assist the public
and investors with a better understanding of the true financial condition of
a particular city relative to other cities. The new Park Board facility will
have a very real and very tangible asset to back up the debt.
2. The appraised value of the property the Board is buying is $3.3 to $3.4
million dollars. The city assessor I believe carries a value on it of $3.2
million. The Board is buying the property for slightly less than $3.0
million. The building has 75,000 square feet on two floors. The second floor
contains a significant amount of recently refinished office space that will
need little remodeling. With the purchase price of $3.0 million the Board is
acquiring the building and land at less than $40 per square feet. This is an
extemely good price for this type of facility. I personally know of
similiar suburban property with less freeway access and poorer location that
go would sell for about $50 per square foot. The cost to build new would be
higher yet. Not included in this is the fact that the land has parking
spaces for 200 cars and has a dynamic riverfront location. Quite frankly
because Moore Printing was consolidating their operations in Chicago and
were anxious to move on, the Board got a good price and another buyer was
even prepared to offer more.
3. The Board
is
faced with the need to spend $500,000 in city net debt bonds to repair a
badly dilapidated and badly configured Northside Operations Center. The new
Park Board building will allow the Northside Operations center to be moved
to the new building, thus obviating the need for $500,000 in those city
bonds and achieving a long sought effort to better coorinate administration
and operation functions. The old property which is adjacent to the Humboldt
Greenway could be used for housing, the expansion of Webber Park or other
uses more compatable with the site. Travel time by employees and service to
the Eastside will improve.
4. The southside service
center is vastly overcrowded. Maintaining nearly 6,000 acres of land which
the public dearly loves with only one real operations center is a near
impossiblity. Several years ago we got the State to pay for a substantial
upgrading of the Southside service center using the argument that the State
needs to provide the capital for the regional park system. Similiar sources
will be used for the new facility. In essence the State and Metropolitan
area will be paying a fair share for this acquistion. There are also some
federal grant monies the Board will access. State and federal funds may pay
up to 20% of the approximately $5 million project ($3 million for land and
$2 million for remodeling, architecture fees, moving costs etc.).
5. As Mr Strand pointed out this is definitely not a Target or Block E TIF
district.
6. In the first year
the Board repays $90,000 in
principal and is able to bank whatever appreciation occurs on a $5 million
property. By the end of a 20 year period $200,000 per year is going to
principal repayment and with an assumed 5% annual appreciation the property
would be worth $12 million.
7. The Board
currently has in its budget and pays $430,000 in rent and parking for its
employees. Parking alone is over $100,000 per year and seems never to cease
growing.
8.
Mr. Strand is correct, the current landlord
has a tactical advantage over a tenant: the cost of a move is a big
disincentive to a move. At my old law firm Best & Flanagan, our landlord the
IDS would not move on the rate in the midst of the early 1990's office space
glut. They lost a tenant who had an entire floor and we got the best deal on
class A rent in a decade at a gross of about $20 over a ten year period.
Finding another 25,000 square feet around City Hall would not be easy.
9. The Board staff has been extremely conservative in its estimates.
Mortgage payments are scheduled, a repayment of borrowed Park Board reserve
funds with interest is included and a significant operations and reserve
fund is maintained. The repayment of the tax exempt mortgage note requires a
yearly payment of $256,000. The Board currently spends $430,000 on rent and
parking. This means the Board starts with a savings of $176,000. The Board
to be prudent wants to repay its self insurance reserve fund with interest
at the amount of $81,000 annually. They don't need to do this, but should a
catastrophic loss occur they don't want to raise taxes to pay for a
contigency as yet unknown. The analysis assumes a starting operations and
maintence cost of $200,000 per year. The Board currently rents 25,000 sq
ft. Plans call for about the same amount of space for the administrative
functions and about 25,000 sq. ft. for operations consolidation. In my view
this is extremely high but in the government world also within the realm of
prudence. To make the numbers work, the Board is betting that it needs to
rent out 25,000 sq. ft. at $4 per square ft. This also is a very
conservative assumption. Rates as high as $10 per sq ft are not unheard of
in the private sector for this type of property. In fact since the purchase
was announce there has been considerable interest from both public and
non-public sources. If however no renters materialize, the Board could
forego repaying itself and still have the $176,000 to pay operational and
building maintenance costs.
10. An intangible aspect is
the location. And it, in my view is a dynamic location, that well suits what
the Board stands for and a significant part of what the City future is and
will be--the Mississippi Riverfront. When the city faced huge declining
property values in the early and mid 1990's the only areas that held up were
the areas where there was park land. Any developer or property owner who has
bought where the Park Board has bought in the last 120 years in this city
has made a killing. Some people may think the ParkBoard doesn't know much.
But let me tell you the one provable point is that the Park Board knows real
estate! And its got about 6,000 acres of land that everyone would like to
own. And I'll predict again this may be the best one yet.
11. I'll concide Walt Cygan's and the Mayor's point about the need for a
more cooridinated approach on City property acquistion. However, if that is
the goal such a planning effort is one monumental undertaking. Hennepin
County has one of the best space planning models that any government in the
State has. They have an entire department that does it. The County also owns
whenever and where it can because they know owning is much better than
leasing. They have done a great job at co-locating the courts, the libraries
and the service centers. And they have been doing it for nearly 40 years.
Trouble is the City has been haphazard at best, letting agencies, including
one this year, to fend for themselves. Should it change? Perhaps. Start it
now on this deal? The judgement of the Park Board faced with a lease
expiring in 8 months and presented with more than a Golden Opportunity said
no. And I for one think they are right.
12. Virtually
every time government builds a building the public in Minnesota and probably
everywhere else has an opinion--usually not good. Cass Gilbert's Capitol
was criticized. The Hennepin County Government Center was reviled. In the
end I'm hardpressed to think of any Government office project that hasn't
proved out to be a great investment. In many cases, like in St. Paul they
literally turned communities around. At one point Governor Perpich talked
quite seriously about a massive campus for Metro State near the Holman site.
Some viewed it as pie in the Sky. Sen Randy Kelly didn't and got the campus
on St. Paul's Eastside and the rest is history.
13.
The
riverfront could be great location for the city to follow the County's
model. Several city services could fit there. In fact, the city already has
several disjointed operations just blocks away on the river. The Park Board
has the space and got it at a hell of a price. Should the Park Board wait
for City Hall to get its act together on an issue which has failed to do for
decades? The concept sounds good but real life today, I think, dictated a
different outcome.
Brian Rice
-----Original Message-----
From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]]On Behalf Of
Walt Cygan
Sent: Sunday, August 18, 2002 10:06 PM
To: [EMAIL PROTECTED]
Subject: RE: [Mpls] Park Board Digs
In response to Gary Hoover writing:
> 3. What other issues enter in to the decision "rent"
> or "Buy" for the Park
> Board -- other than the narrow "rent or buy"
> question?
David Strand wrote:
> Therefore, the Park Board building purchase likely
> improves the collective financial footing of the city
> in the eyes of bond raters and others and should not
> be beaten down simply for being an additional debt
> burden.
As one who wrote against the Park Board's override of R.T.'s veto, this
misses the point as I see it.
If the best financial deal is for the Park Board to own their own
headquarters, then great. But first, let's look at all of the options
from a city-wide perspective. Perhaps, there is enough space, given
current buildings already owned by the city, for the Park Board to have
room for their HQ without the need for buying a building *or* leasing
any external space. This would save the amount already being spent by
the Park Board for their current digs, without the expense of another
purchase.
Maybe, given all the needs of all departments and other external renting
already being done, a building could be purchased that would satisfy all
of the needs and result in an overall savings compared with current
plans, including the Park Board's planned purchase.
The only way to know what the best deal is would be to do the work of
planning the needs for all departments. But the Park Board doesn't want
to participate. They want to do their own thing, limiting the ability of
the city to assess what the optimal space planning solution would be.
That's *my* understanding of R.T.'s point.
Walt Cygan
Keewaydin
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_______________________________________
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