Zero Is Just Under 3 Million

November 27, 2002
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GRAND RAPIDS — Although City Hall is paid for, taxpayers spend over $2 million each year to keep it open.

And it would cost them about seven times that amount to bring the building that is about to turn 34 years old up to code, an improvement project that will likely have to be done in the near future if the city stays on Calder Plaza.

Those are two key financial issues being discussed by city staffers and developers of a proposed hotel for the plaza. The numbers are being closely scrutinized because Gallium Group LLC has a one-year option to buy City Hall, which is on the plaza, along with the parking ramp underneath it and then use that space to build a hotel.

To make a deal work, however, the firm has to relocate the city offices to another downtown site without increasing the operating or improvement costs for taxpayers, and the developers feel they can do just that through a 30-year land contract.

For the past few years, the city has allocated roughly $2.6 million to operate the building and the ramp.

But the hotel discussions have revealed that the city has lowered the operating expense for both to about $2.3 million for the 2004 fiscal year. And the talks that Gallium have held with the city since July have resulted in an estimate of how much it would cost to upgrade the current City Hall to today's building standards.

"What we think it's going to be is about $15 million," said Jack Buchanan, president of Blue Bridge Ventures LLC, which has partnered with Hines Interests LP in the Gallium Group. "That will essentially bring it up to code and add some other things."

About $12.5 million would be spent on code upgrades, such as removing asbestos and making the structure more handicapped accessible, while another $2.5 million to $3.2 million would be spent to make some cosmetic enhancements that are found in newer buildings.

"I think conservatively it will cost $15 million-plus to update the building, and a majority of that is repairs that they have to make to bring the building up to code," he said.

That figure underlines the point that Buchanan has tried to make to the public since the negotiation process began: If the city doesn't move that doesn't mean taxpayers won't be paying more for City Hall to remain on the plaza.

"It's not a freebie to stay there. It's a pretty expensive building to operate," he said.

Buchanan said if the $15 million upgrade charge was amortized over 30 years, the length of the land contract he has proposed, then the annual cost for the city to stay on the plaza would be $2.8 million — and that is the target figure the developers are trying to hit in their attempt to get to zero.

"If they don't stay there for 30 years, then our task is a heck of a lot easier," he said.

What Buchanan means by that is, if the city only stays in that facility for 15 years, then the cost to the city to occupy it rises to about $3.3 million per year — a number that gives the developers an extra $500,000 cushion to reach zero.

Buchanan also noted that the capital improvements made to the structure and the ramp would largely be for needed repairs and wouldn't necessarily add revenue or value to either the building or parking garage.

"The bottom line is if they stay for 15 years the cost to occupy that property is $3.3 million per year starting in 2004. Obviously that cost is going to go up with inflation and other factors that go along with that," he said.

City Hall opened in 1969. Skidmore, Owings and Merrill designed it, and it resembles the Federal Plaza Building in Chicago and the Dominion Center in Toronto. The building has a steel frame and is covered in brown Canadian granite.

Gallium wants to erect a 24-story convention hotel, likely to be operated by Marriott, on the plaza. Calder Plaza is across Monroe Avenue from the new DeVos Place convention facility that is under construction.

Buchanan and Assistant City Manager Gregory Sundstrom are expected to meet with noted high-rise architect Richard Keating in Los Angeles this week to discuss the design of a new City Hall. Keating is the architect for the hotel project.           

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