County: We Made Correct Decision

June 6, 2003
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GRAND RAPIDS — Kent County officials rejected a concept from a developer who wants to put a hotel on Calder Plaza because they felt their current administration building can serve their needs for another 15 to 20 years, and because the pro forma they received from the developer would require that a massive amount of public money be put into the project in order for the county to move from the plaza.

In addition, county officials didn't believe the decision they made last week would have any impact on a meeting the developer may have with city commissioners in a few weeks. And if the city does agree to sell to the developer, they said the county would stay put.

Blue Bridge Ventures LLC, a local real estate brokerage and development company, has formed the Gallium Group LLC with global developer Hines Interests LP of Houston. Gallium holds an option to buy City Hall, the plaza and its parking ramp from the city and hopes to build a 24-story hotel on the site.

But first, Gallium has to move the city and the county from the plaza to new locations without adding to either operating budgets. The option is good until October.

The county's Finance and Physical Resources Committee backed a facilities management task force recommendation last week to reject Gallium's bid and remain on the plaza. Roger Morgan, Fritz Wahlfield and Richard VanderMolen, all county commissioners, served on the task force and sit on the committee.

County Administrator and Controller Daryl Delabbio said county headquarters is structurally sound, paid for, and has room for growth. The building has undergone a half-dozen renovations already to accommodate necessary changes, he added, and could be renovated again, if the need arises.

County Fiscal Services Director Robert White told the Business Journal that Blue Bridge has offered to build the county a new 90,000-square-foot building and then lease it back to the county through a 30-year agreement.

But White said the lease carries a $450 per square foot price tag, or about $300 more a square foot than the county would spend if it put up its own building, and county officials consider that cost difference a large public subsidy. White figured the gap would run the county an additional $27 million over the length of the lease.

"They need a subsidy to create equity in the hotel," said White, while adding that the county spent less than $150 a square foot when it built the new courthouse.

"Why would the county take on additional debt?" he asked.

As for the timing of the county's decision, Deputy Administrator Al Vanderberg said the county didn't speak with city officials before the committee vote and hasn't coordinated any action regarding the hotel or the possibility of moving from the plaza with the city.

Vanderberg also said the county told Blue Bridge before the task force first met that the group would review the state of its current building as part of the county's overall look at its facilities, but didn't invite the developer to any of those meetings because the hotel project wasn't the focus of the panel's work.

"This was just a county function," he said.

Vanderberg and Delabbio added that the county has reviewed documents from Blue Bridge for the better part of three years, and both said that each one would raise the county's operating budget from its current spending level.

"We have looked at it in-depth," said Morgan, county vice chairman, of the concept presented by Blue Bridge.

Morgan said the county would study another offer from Blue Bridge, if the developer submits one. He said the county would seriously consider selling the building outright to the developer for the right price, and would use those funds to build a new structure on its own. He also said current policy requires the county to open the bidding on property it owns to the public once it decides to sell.

Morgan didn't think that the county's rejection of the project would influence a decision coming from the city. He said city officials have to make that choice on their own.

But what if the city does sell to Gallium?

"I think we would be staying," said Morgan.

And Morgan was confident that the county made the right choice.

"The direction we took this morning was in the best interest of the county."

           

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