Arroyo Grande could get an upgraded City Hall through a swap of properties

After Monday night, Arroyo Grande may be one big step closer to having a new City Hall building.

Or, city staff may have to scrap plans and try to figure out the best way to continue working in buildings that are structurally deficient, cramped, and not completely accessible to those with disabilities.

Arroyo Grande officials have been working for about a year and a half on a proposal that would allow the city to buy the former Farm Credit building near the current City Hall from a private developer and sell some city property to the same developer.

City officials say the plan would be more cost effective in the long run than having to repair and upgrade current city facilities.

The plan would also increase the amount of commercial space in the Arroyo Grande Village, but cut the number of parking spaces available between two current city buildings just off of East Branch Street, the main thoroughfare in the historical Village. Additional parking is proposed elsewhere, but some residents are concerned that tourists won’t find it.

The project, last discussed at the City Council’s Feb. 23 meeting, was delayed to Monday’s hearing to give city staff time to work on conditions that could move it ahead.

But strong opinions on the project from supporters and opponents have created a strained atmosphere that has stretched over several lengthy council meetings and will culminate Monday in council chambers.

“There are people opposed to the whole project based on one piece of it,” said City Councilman Jim Guthrie.

Some say it will be an asset to the Village and should be approved as is, while others – some concerned about the cost – want Arroyo Grande to drop it and look at other options for City Hall.

“We are determined to come up with a method here that meets everyone’s needs … because I do think it is a win-win for the community, the city and the local businesses down there,” said developer Nick Tompkins of NKT Commercial. “At some point everyone needs to make a decision and go on.”

The plan

City staff started talking to Tompkins a few months before he purchased the property at 300 E. Branch St. in October 2008 for $2.4 million.

At that time, City Manager Steve Adams said, the city didn’t want to spend the money to buy the property. However, the space provided an opportunity for the city to consolidate its community development staff in one place, deal with structural and accessibility issues facing the other properties, and keep City Hall in the Village, a goal of a needs assessment completed with community feedback in 2004.

Though some local residents have suggested that the city should look at options outside the Village, to do so would be a policy shift, noted Councilman Ed Arnold.

“Is the premise of staying in the Village still valid?” he asked. “If so, then this project makes financial sense.”

The plan to sell and trade the Farm Credit building for the city properties evolved after Tompkins bought the property.

Under the plan, the city would purchase the 6,305-square-foot former Farm Credit building. Its square footage includes an upstairs conference room, which would be used on a limited basis unless the city made it completely accessible by installing an elevator. The first floor is 5,291 square feet.

Current city facilities total about 5,500 square feet, including a 1,272-square-foot basement at City Hall that is only used for storage.In exchange, the city would sell NKT Commercial two buildings – the Conrad House, which houses the city’s Public Works Department, the former “malt shop,” a 1950s-era building now home to the city’s Building and Life Services Division, and the parking lot in between.

The Conrad House would be restored, and NKT Commercial would construct a 5,700-square-foot commercial building in the area of the current parking lot and 200 E. Branch St.

According to city staff, the sale of the properties would reduce the city’s cost to $1.2 million.

The city has since March 2009 paid NKT Commercial $9,450 in monthly rent for the Farm Credit building – even though the city has not occupied it – and an additional $2,300 a month in operating expenses, including property taxes and insurance.

Adams said the city stopped paying the rent at the end of February and would not start paying rent again until July, per the purchase agreement approved at the Feb. 23 meeting.

That has deeply concerned some residents.

“I don’t think people realize they’ve been paying lease money for an empty building for a year or so,” said Manetta Bennett, a longtime resident who along with several others has created a new group called the Village Alliance. Its members are concerned about the preservation of the Village.

The Farm Credit building was re-appraised by Arroyo Grande-based real estate appraisers Anderson & Co. in January, which determined its value at $2.02 million.

Some, including Councilman Chuck Fellows, take issue with the way the appraisal was done, and suggested the city should determine the building’s true market value by a second appraiser.

In addition, as part of the plan, NKT Commercial would pay the city $80,000 in parking in-lieu fees and construct seven parking spaces where there are currently 15. Normally, a developer would have to pay $24,000 per parking space, but the city is giving Tompkins credit for six spaces because it would acquire 24 parking spots in the Farm Credit building lot.

City officials are also planning to expand a lot on Le Point Street, which could add up to approximately 65 spaces.

In the past month, a plan to close Short Street and create a Centennial Square to honor the city’s 100th anniversary in 2011 was scrapped in favor of keeping the street open to one-way traffic between East Branch Street and Olohan Alley. A smaller plan to recognize the centennial was suggested in its place.

Analyzing space needs

During the special meeting on Monday, the City Council will discuss three conditions that must be met for the project to move forward.

The council will determine whether to lease, sell or maintain the City Hall building; identify specific funding sources and a financing plan to buy the Farm Credit building; and decide staffing capacities at the Farm Credit and City Hall buildings for the 27 full and part-time employees who work in the City Hall buildings on East Branch Street.

A council subgroup has recommended the city relocate all the City Hall complex staff to the Farm Credit building and lease City Hall.

Improvements to fit the staff into the building could cost about $410,000.

“If the project doesn’t get approved, I believe in a very short period of time we’re still going to be faced with very expensive, extensive maintenance of City Hall, the Conrad House and the Building and Life Services building,” said Mayor Tony Ferrara. “Our exposure to liability would be considerably greater if the project does not get approved.”

If the project is passed, Adams estimated it will cost about $60,000 to install fire sprinklers to the Farm Credit building as well as other miscellaneous costs to consolidate its building and public works staff under community development.

Installing an elevator to add access to the second floor would be an additional cost.

If the project is not approved, Adams said, it will cost more than $1 million to upgrade City Hall, including installing an accessible bathroom because the walls would have to be gutted to fit all the current staff in the building.

An additional $350,000 would be needed to repair and make upgrades to the Conrad House. The cost of upgrades to the Building and Life Services building has not been determined, he said.

‘Too complicated’It has been some time, locals say, since a project has been so divisive.

Part of the reason may be that the public may not have been clear initially on all aspects of the project. For example, three people spoke at the February 2009 meeting, where council members approved the lease with NKT Commercial.

At the Feb. 23 meeting, 24 people spoke.

“I think it got too complicated,” said Shirley Gibson, who lives in Halycon but grew up in Arroyo Grande. “If each part of the project had been considered on its own merit, than it might have been clearer to the public.”

As to the perception that the city may have not been upfront about all parts of the plan, Ferrara said: “We could always have done a better job of disseminating that information. We’re not trying to hide anything and the accusation that we are is unfounded.”

However, various pieces of the project – from the parking to the commercial addition to the Village to the destruction of the “malt shop” to the cost – have prompted various responses from the community, and even from the council itself.

“When you have a crown jewel, why are you trying to turn it into a different diamond?” said Ira Hughes, owner of Ira’s Bike Shop in the Village.

Residents Gordon and Manetta Bennett have collected about 250 signatures from people concerned about the project, including the closure of Short Street.

Meanwhile, the Arroyo Grande Chamber of Commerce’s board supports the project, said CEO Judith Bean. “We think the new retail will contribute positively to the economic vitality of the city,” she said.

The Village Improvement Association’s board of directors has endorsed the project; through it does not represent the opinions of its nearly 60 members, said Executive Director Bob Lund.

“From an astute business standpoint, this is what makes economic sense,” said Lund, owner of Lund’s Gifts & Fine Wines, located in the Village. “There will be a time when the economy will rebound and we will need to beef up (city) staff.”

Council views

Council members are split on the project.

“I view the entire project as an opportunity for the Village and for the city,” said Ferrara, who has supported the project from the outset.

Councilman Joe Costello also believes the project is a solid solution that is a “fairly economical way of dealing with the problem” of needed repairs to city buildings while also attracting tourists to the Village.

“If this fails we’re going to have the re-examine things but we can’t continue with the way things are,” he said.

Guthrie said he opposed the project at the beginning because he felt Farm Credit provided more space than the city needed. But he voted to keep the deal alive so that staff could determine whether employees could fit into the Farm Credit building and look at other options, such as leasing or selling the current City Hall building.

“When you look at the number of pieces to this project – eight – and if you object to any of them this project is dead,” Guthrie said. “I started to realize I needed to open my look at it a little bit.”

Arnold said he thinks the city may be able to fit its staff into the Farm Credit building.

“For me, if we’re going to consolidate, we need to consolidate 100 percent,” he said.

Fellows is the only one who has said he would like to see the entire deal fall apart because he believes the cost is too high. If the city is going to buy the Farm Credit building, he said, it should pay the “proper price” for it.

“Rents are way down and if they city was not a government agency with taxpayer money to spend they would be saying … we should be paying half of what we’re paying and that disturbs me,” he said. “In a down market when lessees are negotiating hard, we’re not negotiating at all because it’s all tied together, and that’s what’s bugging the public and me.”

Other options

Several local residents have suggested the city look at leasing or purchasing buildings other than those on East Branch Street. A few have pointed to available properties on Station Way: about 4,000 square feet at 200 Station Way, about 10,000 square feet at 230 Station Way, and 4,622 square feet, not including 900 square feet storage space, at 260 Station Way.

The latter property is available for about $7,623 a month, according to Winfield Shiras, vice president of Daum Commercial Real Estate.

Robert Anderson, who owns the properties at 200 and 230 Station Way, estimated the monthly cost of the 10,000-square-foot property at about $16,000.

“These are essentially brand-new buildings,” he said.

Meanwhile, developer Tompkins said that the city could simply purchase the Farm Credit building and keep the other buildings, if it wanted to go that route.

“It’s clearly not my first pick but I’ve always told them it’s up to them,” he said.