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Minutes - Board - 2015-12-22 �r SAmr4. P V %'4PoRNIO COSTA MESA SANITARY DISTRICT MINUTES OF BOARD OF DIRECTORS SPECIAL MEETING DECEMBER 22, 2015 CALL TO ORDER The Board of Directors of the Costa Mesa Sanitary District met in special session on December 22, 2015 at 9:00 A.M. at 628 W. 19th Street, Costa Mesa. ROLL CALL DIRECTORS PRESENT: Michael Scheafer, Arthur Perry, Robert Ooten, Arlene Schafer, James Ferryman DIRECTORS ABSENT: None STAFF PRESENT: Scott Carroll, General Manager; Alan Burns, District Counsel; Marc Davis, District Treasurer; Noelani Middenway, District Clerk. OTHERS PRESENT: Jack Faris, Voit Real Estate; Jim Mosher, Resident. PUBLIC COMMENT President Scheafer invited members of the public to address the Board of Directors. Jim Mosher, a member of the public, provided commentary regarding the District's reasoning for acquiring a new building and shared that he may provide additional comments at a later time in the meeting. CONSIDERATION REGARDING THE PURCHASE OF PROPERTY AT 290 PAULARINO AVENUE, COSTA MESA, FOR USE AS THE DISTRICT HEADQUARTERS AND RELATED DISCUSSIONS WITH RESPECT TO THE EXISTING HEADQUARTERS BUILDING AND OTHER RELATED MATTERS Scott Carroll, General Manager, presented photos and information regarding the property at 290 Paularino Avenue and its layout. He noted that the property is 11,000 square feet and contains 42 parking spaces. Mr. Carroll indicated that the primary reason for the District's consideration of this purchase is a need for more parking COSTA MESA SANITARY DISTRICT PAGE 2 MINUTES OF THE BOARD OF DIRECTORS SPECIAL MEETING HELD DECEMBER 22, 2015 spaces and more seating area for Board meetings. He noted that the property has ample space for the code enforcement officer and vehicle. Mr. Carroll reiterated that the primary reason for purchasing the new property is in regards to limited parking. He noted that the new property will require improvements such as the installation of fire sprinklers, security doors, and an ADA compliant entrance and restrooms, as well as the development of a boardroom and/or community room. Mr. Carroll also noted that the building contains 21 offices, some of which the District may consider subleasing. He shared that the building does not have a Homeowners Association, and its current tenant's lease expires in April of 2016. Mr. Carroll reported that the total asking price is $3,750,000 (or $341 per square foot). Lastly, he reported that the asking price is similar to comparable properties in the area, but many of the other properties are condominiums that require additional HOA fees. Director Ferryman requested verification regarding the new property's roof inspection. Mr. Carroll replied that the property has not had a roof inspection, but noted that an inspection will take place during escrow and the District will receive a report on the condition of the roof. Jack Faris of Voit Real Estate added that the building was constructed in 1979. Director Ferryman inquired about the number of entrances and exits to the building and how that may affect the District's ability to sublease. Mr. Carroll replied that the District will need to make modifications to the building's entrance. Discussion followed regarding the cost of renovations. President Scheafer inquired as to whether the District would take the generator from the current headquarters to the new building. Mr. Carroll noted that the City of Costa Mesa would require the District to take its generator to the new location. He explained that there is a possibility that the City's condition is negotiable, and that the District can potentially use the generator as a selling point for the current headquarters. Mr. Carroll added that the District can use a portable generator at the new property. Discussion followed regarding the District's generator. Mr. Carroll noted that the property at 290 Paularino Avenue required the fewest modifications out of all the properties that the District researched. COSTA MESA SANITARY DISTRICT PAGE 3 MINUTES OF THE BOARD OF DIRECTORS SPECIAL MEETING HELD DECEMBER 22, 2015 President Scheafer indicated that he agreed with Mr. Carroll and reiterated that the building is in good condition. District Treasurer, Marc Davis, presented his recommendations regarding the purchase of the property. He noted that the property would be affordable if acquired as a lease purchase through CSDA Finance Corporation. Mr. Davis reported that in order for the District to purchase with cash, the District would need to sell an investment. He noted that the District would need to be cautious regarding which investment they sell if they chose to do so. Mr. Davis recommended that the District purchase the property through its Asset Replacement Fund so that it has the flexibility to charge varying rent to funds like the solid waste and wastewater funds. He noted that the benefit of doing so is that the District will not be locked into the amount of rent charged to each fund as the organization changes over time. Mr. Davis added that the typical assumed lifespan for a building is 40 years, and the depreciation and costs of maintenance would be factored into the rent being charged to each fund annually. Director Ferryman inquired about the proposed amortization schedule. Mr. Davis reported that CSDA Finance Corporation provides 2 lease options: a 10 or 20 year lease. He recommended that the District choose a 20 year lease, but noted that the Board of Directors does not require voter approval to enact a lease purchase. Mr. Davis explained that CSDA Finance Corporation's recent interest rates range from 3.5% to 5%. He noted that with a 20 year lease at 3.5% interest, lease payments would be approximately $445,000 to $479,000 annually for 20 years. Discussion followed regarding the potential lease length. Director Ferryman inquired about the current tenant's lease length. Jack Faris of Voit Real Estate reported that the current tenant's lease ends in April of 2016. Director Ferryman inquired about the current tenant's use of the building. Mr. Faris reported that the current tenants are occupying the entire building, but that they have started the process of acquiring a new building and moving. Jim Mosher, a member of the public, provided commentary regarding the acquisition of a new District headquarters. He inquired about the amount of daily visitors the current headquarters receives and commented that the location of the new building is not as convenient or central for the District's ratepayers. Mr. Mosher requested clarification regarding the potential for subleasing the new building and the number of parking spaces needed by the District. He inquired about whether or not the District will incur a property tax liability when purchasing the new building. Lastly, Mr. Mosher requested to know how much the District anticipates making from the sale of the current building. COSTA MESA SANITARY DISTRICT PAGE 4 MINUTES OF THE BOARD OF DIRECTORS SPECIAL MEETING HELD DECEMBER 22, 2015 Mr. Carroll noted that the District receives about 6 visitors per day, including local plumbers and members of the public looking to obtain permits or seek assistance regarding the Sewer Lateral Assistance Program. President Scheafer added that he has received complaints regarding limited parking at the current headquarters and noted that increasing the accessibility of the District's headquarters may encourage higher public attendance at Board Meetings. Mr. Carroll noted that there are only 2 parking spaces available for the public when all staff members are present. Assistant Secretary Schafer shared that she believes the new property is more accessible than the current headquarters. District Counsel, Alan Burns, noted that the District will not incur property taxes on the new building unless the District subleases a portion of it. He noted that the lease will be taxed if the District subleases. Mr. Mosher inquired about the expected selling price of the current headquarters. Mr. Carroll replied that the District anticipates the selling price to be at least $1,000,000. Mr. Mosher inquired about the amount of unused office space and parking spaces the District anticipates at the new property. Mr. Carroll noted that staff would occupy 9 or 10 offices in the new building, which has 21 offices in total. He added that the District would occupy less than half of the 42 available parking spaces at the new property. Discussion followed regarding the topics of discussion during the closed session, which include the price and terms of the property acquisition. ADJOURN TO CLOSED SESSION President Scheafer adjourned to closed session at 9:26 A.M. Conference with Real Property Negotiators Property: 290 Paularino Avenue, Costa Mesa Agency Negotiators: Scott Carroll and Jack Faris Negotiating party (owner): William McFarland Under Negotiation: Price and terms of payment COSTA MESA SANITARY DISTRICT PAGE 5 MINUTES OF THE BOARD OF DIRECTORS SPECIAL MEETING HELD DECEMBER 22, 2015 President Scheafer reconvened to open session at 9:57 A.M. and indicated that the Board of Directors gave direction to the agency negotiators on the purchase of the building at 290 Paularino Avenue. ADJOURNMENT There being no further business to come before the Board, President Scheafer adjourned the meeting at 9:58 A.M. p Robert Ooten Micj.el Scheafer Secretary President