City Hall to relocate by end of the year

March 4, 2011

By Tim Pfarr

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UPDATED — 4:25 p.m. March 4, 2011

Council turns down offer to use both floors of current building

Newcastle City Hall will move to the second floor of the Newcastle Professional Center, 12835 Newcastle Way, by the end of the year. By Tim Pfarr

So long, 13020 Newcastle Way. The City Council voted to move City Hall to the 7,500-square-foot second floor of the Newcastle Professional Center, 12835 Newcastle Way, by the end of the year.

City staff recommended the move, expected to cost $250,000.

City Manager Rob Wyman said it is the state of the current facility that prompted the recommendation. The city’s lease with current landlord Jim Denton expires at the end of the year.

However, Denton submitted a revised lease offer to the city Feb. 4, in which he offered to allow City Hall to occupy both floors of the building, doubling City Hall’s square footage.

The council held a special meeting Feb. 7 to discuss Denton’s new offer and possibly rescind its previous decision. However, the council was still in favor of moving, with councilmen Bill Erxleben and Rich Crispo and Councilwoman Carol Simpson dissenting.

The city will pay rent at its current site through the end of the year; it will not be required to pay rent in the Newcastle Professional Center until next year.

The city has rented its City Hall space above Newport Manufacturing for 15 years.

A new home

Wyman signed the lease with Strange immediately after the Feb. 7 meeting. Next the city will hire an architect to design the layout of the new space.

The current four tenants on the second floor of the Newcastle Professional Center will move to the third floor to make space for City Hall. The city will then have the second floor remodeled to accommodate its offices and Council Chambers.

Wyman said he was unsure of when City Hall would make the move, but it would likely be later in the year, possibly in September.

The King County Sheriff’s Office will also use space in the building, in which it will have “hot desks,” available to any King County Sheriff’s deputy to use to file reports while in the area. The sheriff’s office will pay about $17,000 annually for the space.

The new City Hall will include utilities and some operational costs, such as janitorial services, in the monthly rent.

The parking lot will include 27 spaces for employees and visitors during working hours, and as many as 63 spaces for after-hours City Council meetings. About 60 overflow parking spaces will be available at Valley Medical Center, 7203 129th Ave. S.E.

City Hall now has 17 parking spaces and about 20 overflow spaces available at nearby Precision Auto Craft.

City staff members say the new location will allow them to better interface with the community, advertise city meetings in the building’s lobby and increase attendance at city meetings.

They also said it would improve the city’s image, which they believe is adversely affected by appearing to be operated out of an industrial facility.

Mayor John Dulcich manages the corporation Newcastle Investments, which owned half of the Newcastle Professional Center from its construction in 2007 until March 2008. The corporation sold its half of the ownership to Geoffrey Strange, who had owned the other half.

The corporation is still active, according to the Secretary of State, but Dulcich said the corporation no longer does business. He said neither he nor Newcastle Investments has an interest in the Newcastle Professional Center.

The split decision

The proposal to move elicited an emotional debate from the City Council.

Deputy Mayor Steve Buri said it would be a good time to make the move, given the economy.

“Ultimately, it’s a question of whether it’s a sensible investment,” he said. “This is not just an additional expenditure.”

Councilman Sonny Putter said the move would give the city a more professional look, as he said some have commented that City Hall looks temporary.

“For too long, we’ve felt like this city is a temporary city,” he said.

Councilwoman Lisa Jensen said it would be easy to say no to the move, but that moving was the right decision, as it would move City Hall to a central location near the soon-to-be Newcastle Library.

Mayor John Dulcich said the move is a logical one, increasing employee productivity in a nicer location.

However, Crispo said voting against the move was simply a matter of priorities. He said it would be more beneficial to residents to use the money it would for the move for things such as additional street maintenance.

Simpson said she likes the new facility, but a $250,000 moving bill was simply too hard to swallow.

Erxleben said the city is just one more road failure from falling into the red.

“Anyone who has looked at our budget analysis for the next five years has seen that we’re headed for deep trouble after 2013,” Erxleben said. “This is not the time.”

The cost

*The $250,000 the city will pay for the move and remodeling of the new site. Some minor repairs will need to be done to the Newport Manufacturing building before the move, Wyman said. He said the repairs will likely cost less than $10,000.

Had the city stayed in the Newport Manufacturing building, it would have needed to make $100,000 worth of repairs to the building during the next five years, Wyman said. However, if the city had taken Denton’s offer, he would have paid for half of the repairs.

Outside, the stairs and wheelchair lift would have needed replacement. Inside, a wall would have needed repair or replacement, as would the carpet, which is torn in spots and trips employees.

“We have a significant number of people who almost face-plant around City Hall on a regular basis,” Wyman said.

To pay for the move, city staff brought forward two options. Both options call for a $25,000 draw from the city’s Surface Water Management capital projects fund. One calls for the remaining $225,000 to come from the Real Estate Excise Tax fund, and the other for it to come from the city’s cumulative reserve.

Excise taxes from home sales provide REET funds. It is typically used for transportation projects, such as road maintenance and sidewalk construction. If the city were to use this money to pay for the move, the REET fund would run out of money in 2013, according to the city’s projections. If not, the REET fund is expected to dry up in 2014.

Wyman said the city’s projections are very conservative, but if the REET fund were to run out of money, the city would need to cut back on capital projects or transfer money to it from a different city fund.

The city’s cumulative reserve fund has $1.5 million for capital purchases or unforeseen operating costs, although the city has never drawn money from the fund to pay for capital purchases.

Rent in the new building will increase steadily for the next five years, rising from $22 dollars per square foot in 2012 to $28 per square foot in 2016.

The cost of renting the space for the next five years will be $882,705. This is about $78,000 more than the city would pay if it extended its existing lease for five years, and about $275,000 less than it would pay renting both floors of the Newport Manufacturing building.

Craig Hill, senior vice president at the Seattle branch of real estate firm Grubb & Ellis, said the rent in the new facility is fair.

“It sounds like a very good deal. They must have had a good broker,” he said, adding that the free rent in 2011 is an attractive element of the lease. “That’s a great concession.”

The foregone alternatives

City staff also considered other alternatives to the city’s lease, such as constructing a new building, but considered it to be too expensive. Wyman said there is no other office space available in the city.

In Denton’s revised lease, he offered to drop the city’s rent from $13.20 per square foot per year to $9.75 per square foot per year. After 2016, this rate would increase by 2 percent per year.

Using both floors of Denton’s building for the next five years would cost $1.15 million, but the lower floor could have served as a maintenance facility. In addition to paying for half the building repairs, Denton said he would also pay as much as $50,000 to help remodel the downstairs.

Wyman said city staff is now evaluating options for a maintenance facility.

City Hall also has a $50,000 backup generator that it may not be able to take with it. The generator allowed City Hall to serve as an emergency shelter. Wyman said other facilities, such as the Coal Creek YMCA, could act as an emergency shelter if City Hall cannot take the generator to the new location.

* This story contains corrected information.

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