A report by a real estate consultant released Tuesday recommends Lexington begin negotiating with CentrePointe developers on leasing a new City Hall on the block, but it said multiple issues would need to be addressed.
The report by Jones Lang LaSalle also recommended that Lexington explore building a new government center on top of the Lextran Transit Center on Vine Street.
The consultants looked at five potential sites for a 180,000-square-foot government center and found that CentrePointe and the Lextran parking garage were the best two options. Other sites reviewed include the current Lexington convention center, the block that contains the main branch of the Lexington Public Library and the Lexington Herald-Leader property at Main Street and Midland Avenue.
The city hired Jones Lang LaSalle to identify potential sites for a new City Hall and determine the most cost-effective ways to build a new government center. New developers of the long-stalled CentrePointe development had approached the city last year about the possibility of the developers building a city hall and the city leasing it. The city has been waiting for the Jones Lang LaSalle report to help it determine whether the CentrePointe option was the best use of taxpayer money.
Much of the report was presented Tuesday at a work session of the Urban County Council. The council then discussed some of the detailed financial information of the report behind closed doors for an hour. The council made no motions on how to proceed after the closed session.
Mason Miller, a lawyer hired by the city to deal with CentrePointe, said after the closed session the report showed that CentrePointe was not the city’s only option. It also showed that there were issues with the CentrePointe site that still needed to be settled.
“We are willing to discuss those (issues) but unless there is substantial movement on the part of the developers to make it a more fundamentally fair deal for the city of Lexington and the taxpayers, while we are willing to negotiate in good faith, we are not willing to hand over the city coffers,” Miller said.
Many council members questioned whether any of the report should be discussed in public. But the city’s lawyers advised parts of the report could be discussed publicly.
“The goal is to be as transparent as possible and to discuss as much as possible in (open session),” said Janet Graham, the city’s law commissioner.
Some council members also said Tuesday that Jones Lang LaSalle did not deliver the report they needed to make an informed decision.
The report said because the CentrePointe site has not yet been developed, the plans for a City Hall could be modified to meet the city’s needs.
But several issues would have to be worked out to make CentrePointe work, the report said.
The developers had originally proposed a government building that was too small to accommodate all of the city’s needs, the report said. The developers also had proposed putting retail and restaurant space on the ground floor. The city needs first-floor access for the public.
The current proposal is a long-term lease with no option for the city to buy. The city would like to own the building eventually, the consultants said. There is also the question of whether the city would have to pay $125 a month for each parking space in the proposed three-story underground garage for potentially 500 employees. That would cost the city $62,500 a month.
The report recommended negotiating with CentrePointe developers Matt Collins of Lexington and Bridgeton Holdings of New York to see whether some of those issues could be addressed.
Consultants with Jones Lang LaSalle met with Collins and Bridgeton Holdings during the development of their report. Jeremy Becker of Jones Lang LaSalle said the new developers seemed open to negotiating with the city on some of those issues.
Still, some on council said the details of the developers’ proposal should not be made public. Miller said the city had no obligation to keep the developers’ proposal secret. The proposal includes charging the city $24 per square foot.
Collins, who attended the work session, said he thought the specifics of the proposal would be kept secret, but the developers did not have an “enormous opposition” to those details being made public. Collins said the developers have tried to be as transparent as possible. “We think the numbers tell a compelling story,” Collins said. Collins said he wished that square footage costs for the transit center site also would have been made public.
Collins and Bridgeton announced their intention to take over the site in late August. The original proposal for the site from previous developer the Webb Companies included an office tower, a hotel, an apartment complex with an extended-stay hotel, and restaurant and retail space. But the office tower’s main tenant had to back out after multiple delays. Instead of an office tower, the Collins group had proposed a new City Hall.
Having a government entity as a main tenant would help the developers secure financing for the parking garage and other aspects of the development.
But Becker said underground parking is costly.
“Underground parking is not feasible in Lexington,” Becker said. That means that some type of public funds will be needed to make the three-story underground parking garage work. Former developers the Webb Companies had proposed using tax increment financing — or taxes generated from the development — to pay for the garage. Those bonds for the garage were never sold.
The city has been considering moving out of its current offices for more than a decade.
The city’s main operations are spread among several downtown buildings, including the former Lafayette Hotel on Main Street. Those buildings could cost the city millions of dollars in potential upkeep over the next several years. The Lafayette opened in 1918.
Jones Lang LaSalle also found that the city only needs 180,000 square feet — a savings of more than 69,000 square feet over its current operations of 240,000 square feet. The 180,000 square feet also is less than previous studies had suggested the city needed.
The report noted that there were many pluses to the Lextran site. Lextran is publicly owned. The block where the two garages sit could easily accommodate the size of a new City Hall. But there are problems. Martin Luther King Jr. Boulevard currently runs between the two garages. That portion of the road would have to be moved or eliminated if the city were to build on the site.
The current convention center is proposing a $250 million overhaul and expansion. A new City Hall could be added to those plans, the report said. Putting government operations on the site might also increase foot traffic to the retail areas of the convention center, the report said. If the city is interested in that site, it should move quickly to determine if it is a viable option, the report said. In addition to land just west of Rupp Arena there is also a parking lot on High Street that could fit the city’s needs.
The library block and the Herald-Leader site presented significant challenges that make them less viable, the report said. For example, the library might have to move to accommodate relocation of City Hall. There also are two parking structures in that block that might have to be moved or reconfigured.
The Herald-Leader site isn’t optimal because it’s near the edge of downtown, and it would probably require “significant acquisition costs,” the report said. Rufus M. Friday, the Herald-Leader’s president and publisher, said he had not had discussions with the city or its consultant about the newspaper’s property.
Many council members also complained that the consultants did not look at any sites outside of downtown. Other council members said they felt that the city spent nearly $200,000 and got very little in return. The city has not yet paid Jones Lang LaSalle. The contract was for $198,500.
Councilwoman Shevawn Akers said the report told the council what they already knew.
“I don’t think anybody needs to spend $200,000 to say CentrePointe is an option or the transit center is an option or the convention center is an option,” Akers said.
Councilwoman Jennifer Mossotti said she knew that the report would only focus on downtown sites. But Mossotti, who is a real estate agent, said she was disappointed the report did not include price comparisons of what it would cost per square foot to stay in its current location versus what it would cost per square foot to move to CentrePointe or to build a new government center on top of the transit center.
“That’s the type of information that we need to have,” Mossotti said.
But the consultants said that detailed information was not part of the public report but they could provide it to the council in closed session. Jones Lang LaSalle also said they were told to only focus on downtown sites.
Chief Administrative Officer Sally Hamilton said they will look at the detailed financial information Jones Lang LaSalle said it would provide before deciding if the group met all of the requirements of the request for proposals for the real estate report. That request for proposal required break down of costs and budgets for any potential move be provided as part of its report.
“I certainly agree that it was lacking in details,” Hamilton said. “But we will look at the detailed financial information first and see if it complies with the RFP.”