The Renaissance Square Fix is in Bubba - Again…
Posted by Jeff Pruitt - 6/19/09 @ 12:16 am - Filed Under Featured, Local Politics
It looks like the mayor is hell bent on wasting millions of taxpayer dollars on Renaissance Square. From a local paper’s editorial:
City Controller Pat Roller said the administration will be introducing a proposal to Fort Wayne City Council on Tuesday. In addition to the city departments now in the City-County Building, city police would also move into Renaissance Square.
Roller said, “It’s the economics of the deal” that make moving the city to the building a better option now. She said under the previous plan the city would have had to reimburse the county for space at the City-County Building as well as make payments for the purchase of Renaissance Square.
“This way we just have to pay debt service, and then we own the building after 20 years,” Roller said. She also said the purchase price has gone down. The average of two appraisals on the building is $7.3 million.
So let me make sure I get this straight. Instead of renegotiating our lease with the County we’re going to buy and renovate a different building. We’re also going to pull the police station out of the Renaissance Pointe neighborhood which will most certainly hasten it’s demise. We’re also not going to use any of our $20 million surplus to buy the building - instead we’re going to finance it over 20 years and pay an enormous amount of interest. And to top it all off we are going to grossly overpay for said building.
Any appraiser that says that building is worth $7.3 million is either incompetent or on the take if you ask me. The county’s appraisal came in just over $1 million and the deputy mayor himself said that the $7 million figure was a non-starter. So what’s changed? That building has been empty for years with no private tenants. In this market it is essentially worthless - by that I mean it is worth whatever the scrap value is or perhaps 2x that.
In fact, the county assessor has assessed the value at $1.1 million for the last 6 years. But now we’re to believe it’s worth $7 million? Personally I don’t think the city should move from the current city-county building, and I definitely don’t think the police should move from their current headquarters. But even if they did want to consolidate they shouldn’t pay more than a couple million for a building and they should pay cash. Now is not the time for the city to be taking on unnecessary burdens of debt.
And what’s the rush anyway? Do they think somebody else is going to buy the building? Why not wait until they see the city’s finances over the next couple of years before taking on any major projects like this? The best thing for citizens to do at this point is to contact your local council member (citycouncil@cityoffortwayne.org) and let them know that you don’t support the city spending tens of millions of dollars when our current financial situation is so uncertain.
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25 Responses to “The Renaissance Square Fix is in Bubba - Again…”
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@Jeff
As much as I am an avid supporter of downtown redevelopment, I have a difficult time swallowing how someone (taxpayers) could pay 7.3 mil for that building.
I have to question how the assessments on this particular piece of property arrived at such an astronomical amount.
On a grandeur scale, didn’t the US just go through a residential real estate bubble burst, where in many cases assessments and mortgages far exceeded the actual worth of the properties in question?
What is going for 7.3 mil today, very well may be going for half that amount in the near future. Especially if a commercial real estate bubble is on the horizon:
http://www.huffingtonpost.com/sheldon-filger/commercial-real-estate-ma_b_185456.html
Andy,
Good point.
And the appraisals are really just a tool - they aren’t binding. I believe the only time the city is required to pay the average of two appraisals is when they are using eminent domain.
So if the city wants to buy it then they should be trying to get the best deal possible for the taxpayer. Clearly that wouldn’t involve paying $7 million
I think this is a great idea for the City. It’s time we stop wasting our money paying rent, and instead buy some real estate of our own. The police station building is an energy hog and the landlord won’t pay for upgrades to make it more energy efficient. The amount of money we save not paying the energy bill on that building every year will make a sizable dent in whatever debt service we pay on the new building. Plus, we will be able to include the new building in the Energy Savings Contract and come out cash positive on the project. We’ve also got energy block grants coming from the Feds to help improve the new building. Three cheers for the City finally doing something that makes sense!
Jim,
I’m not against the city buying a building per se, but there’s no reason to pay $7 million for this specific building.
Jeff, Do we know who did these appraisals? Last time I checked there is new legislation that requires they be more independent. My house was assessed at $109k, but when I just refinanced they appraised it at $135k. The realtor wasn’t allowed isn’t allowed to select the appraisal companies anymore or tell them what we’re trying to refinance for. The property value of our house actually went up in three three years since we bought the place. Perhaps the economy is actually turning around.
I’ve never compared commercial property assessments to the actual sale price, but my guess is there are other similar instances where assessments come in under what the appraisals and final sale prices do. Sounds to me like the current owners should be glad that the assessors office isn’t more realistic in their property values, otherwise they’d be paying a lot more property taxes…that is unless they could get an abatement from City Council…LOL!
Jim, appraisal/schmaisel - something is only worth what the market will pay. There is no market for this building and there hasn’t been for a long time. Offer a million flat
I’m not an appraiser, but I’m sure they use some kind of formula based on sq. footage, area of town, and similar sales prices. Also, an appraisal values doesn’t mean that’s what you pay for something. We paid $20k under what our appraisal came in at for our home. To my knowledge no one knows what the City’s latest offer is for the building if there even is one. I agree that a lack of competition on buying the property should be a big bargaining chip for the City.
Jim-It is my recollection that the City and County jointly developed the building but the County took ownership and responsibility for paying the bonds,utilities,and maintenance. The “rent” paid by the City is money the taxpayers of the City pay to themselves since we all are residents and taxpayers of Allen County. As Pogo says, ” We have met the enemy and he is us”!! If the cost is too high then the City should renegotiate when the lease expires in the next couple of years and save the taxpayers the cost of buying and renovating another building plus losing the taxes currently being paid on the Rennaisance Bldg.But for God’s sake get someone other than Leatherman or Haffner to do the negotiating!!I smell someone trying to pay off a political debt or searching for a “legacy” to leave.Save us from small minded politicians with huge egos!!
Jim…I am an appraiser. There is no new legislation requiring appraisers to be more independent. The law has always required them to be independent. It currently is and always has been a violation of federal law for a Realtor (or any party to the transaction other than the lender or its representative) to pick an appraiser when the appraisal is for the purpose of a federally insured mortgage. Since there is no question of a federally insured mortgage in the city’s purchase of RS, the city and/or the current owner of the property are legally able to hire an appraiser to appraise the building and provide them with “their opinion” of market value. Never forget an appraisal is only an opinion of value. Even if the city or the owners or any other party hires the appraiser, the appraiser must still provide an unbiased (independent) opinion.
Jeff is right when he says that the building is only what someone is willing to pay for it. The problem with this transaction is the same problem that exists in most government purchases. The people making the purchasing decision are not using their own money, thus this is not a typical arms length transaction. I am suspicious of the sale price of any transaction when one party or the other doesn’t care what the transaction costs.
The other thing that is not being talked about is what is the loss to the tax base. A property assessed at 1.1 million (unless it is a McDonalds and has abatement) is contributing to the tax base…Once purchased by the city it will not be. Is this cost to the city accounted for?
L. Marine - I believe the plan is for the police move into the City/County Building, then the City will still pay rent to the County. The police won’t have to pay rent to their current building’s owner. That’s part of the reason to move on purchasing RS now, since the police station building lease is ending soon.
Jon Olinger - I refinanced with Ruoff Mortgage last month. They told me that due to new federal regulations that started in March, they couldn’t choose which appraiser they were going to use and they couldn’t communicate with the appraiser about how much the property owner was trying to refinance for or obtain a mortgage for. It was explained to me that this was an effort to make the process more tamper-proof so property’s were appraised for more than they were actually worth. He made it sound like up to then they could communication that info to the appraiser.
I agree that a building is only worth what someone is willing to pay for it, but I think you are mistaken if you think the Mayor or anyone in the top rankings of the City takes lightly the spending of tax payers dollars. They know the public implications of spending unwisely, especially in this Mayor’s first term.
As for the loss of tax revenue, that is a fair point. I’m sure someone has considered that when weighing the options. I wonder if the current police station building is being assessed taxes. The City is renting that building from someone other than the government, however, it wouldn’t surprise me if they have some sort of abatement on that property.
I am quite dismayed with the ease at which City Council hands out tax abatements. If businesses aren’t profitable enough to pay taxes on their property, then they need to find a different business modely, or perhaps pay their top officers a bit less. C-level manager pay has rise way out of control.
Jon,
Perhaps the city did the potential loss of tax revenue into account. When you think about it that way, it makes perfect sense to pay $7 million for a $1 million building instead of a $7 million building.
So who owns RS? I tried looking it up using the address of 202 E. Berry, but it doesn’t come up in the records.
Also, Jim, in reference to your increase in appraisal value - mine went up almost $45,000 in one year. I negotiated a reduction, but I about fell off my chair when I first opened the new appraisal last year.
This is the reason that the tax caps are a joke to me. Need more taxes, just increase the appraisal value. The 1% cap on residential can be manipulated by adjusting the appraisal value.
Okay - never mind on who owns the property. I went back and looked - George Huber’s name comes up.
A look at appraisals for the vacant Marshall Fields anchor at Glenbrook indicates that the appraisal value of $7 Million is not out of line for the Huber building. One thing I noticed was a land value of $500,000 per acre. This would mean that the $1.1 Million for the future City Hall may be for land only.
On the other hand, Glenbrook continues to appeal its tax bill.
Charlotte,
It’s actually 200 E Berry in the property tax records - I linked to the file in the post.
Gadfly,
Why would you compare the property at Glenbrook to RS? I don’t see any similarity whatsoever.
Jeff,
1. What did the City-County pay for the use of RS during the library rennovation? Would that, adjusted for current market conditions, provide a more realistic market value?
2. Why is the City giving George Huber a payday, assuming they pay $7+M for a building recently appraised at $1+M?
Jeff . . .
You are correct, my point is they are not the same. Both properties have been vacant for several years now and have dissimilar valuations. MF certainly has had no more appeal to the retail trade than RS has had to any tenant … public or private.
However, the city has changed that balance. Suddenly there is a viable use for the RS building, so now appraisers will use occupied buildings for “comparables.”
Additionally, it would seem that valuations are politically motivated. When Huber’s buddy is the head politician, his building valuation is promptly lowered. But for sure, politicians see to it that valuations will be continually jacked-up on that bankrupt company that is suing for lower taxes. Unfortunately, according to friends, it is the mall’s tenants who are being punished by the taxing authorities.
Fred,
Excellent questions. The Library paid $55k/month + utilities while they leased that building ~$2.70/sq ft.
My guess is that buying the building for $7.3 million and financing it for 20 years would ultimately cost the taxpayer $12.5 million - and that’s probably being generous. Also, it doesn’t include renovation costs.
So I think every citizen needs to ask if that type of expenditure makes sense in this economic climate. Also, shouldn’t we be looking at consolidating city-county government and not expanding it into two separate buildings - giving them both more room to grow?
Jim,
You are correct in that as of May 1st new administrative laws went into effect prohibiting Mortgage Brokers from ordering appraisals on loans going to Fannie Mae (conventional conforming). Lenders still can order appraisals directly (Ruoff is a broker, not a lender). The new law does not affect FHA or Nonconforming loans at all. Realtor’s and homeowners have never legally been able to order the appraisal if the purpose of the appraisal if for a mortgage.
The new law is, of course a joke. Prior to the law it was illegal for a Broker, Lender, Realtor, etc… to put pressure on appraisers to come up with predetermined values. The new law moves appraiser contact to new “Appraisal Management Companies (many times owned by the Lender). There is no law prohibiting the AMC’s from pressuring appraisers. Thus now we have less control over those who had contact with the appraiser than we did prior to the new law. Government at it’s best
Just for clarification, the building isn’t assessed at $1.1 Million, that’s just the parking lot in front of the building. The Renaissance Square building is a different parcel # from the parking lot. Here is its property record card: http://www.allencounty.us/custom/property_cards/pdfs/021202432002000074.pdf
Stanley,
Good catch. Looks like I was using the land assessment coupled with the number from the story in a local paper.
At least that clears the discrepancy up. Now it’s up to council to decide if they want to spend $7+ million on that specific building.
I could live with offering $2 million and paying cash…
The fix is now officiallly in since the Mayor announced this morning that he plans to buy 200 E. Berry and move the Police,Neighborhood Code and all units currently in the C-C building (save 911and maybe other comm units)there. There are some financial projections in the announcement but not enough detail to do a proper analysis(long on spin-short on facts!!).One limiting factor added to the release as sort of an after thought in the last para. is that City Council has to approve the purchase,renovation money etc.
It is interesting that the issue is scheduled to be introduced at tonight’s session of Council but they have received no prior notice of any details or financial projections prior to the announcement.Sounds like another case of getting the cart before the horse and the admin. going it’s own way without including the elected reps. of the taxpayers until the last minute. This nonsense needs to stop or the admin. will lose any credibility it may have(if any)!!
Last night Indiana’s Newscenter reported that Council members were given information regarding the deal on Monday.
VOTE NO! Yet another way to blow more taxpayer dollars and raise my taxes, yet again. What a joke! Does this Mayor ever learn? Now it is estimated at a total 20 year cost of $26.3 million. ARE YOU SERIOUS RIGHT NOW?
just wanted to say for all the jerk - off’s that talk sh*t from the comfort of their cozy 9-5 job or sitting on their a** on unemployment.. have you ever personally been thru the building? have you actualy looked at the obvious location .. ? have you ever met George Huber ? i could go on and on about life and the b.s. we all go thru .. i have on all of those above.. and i’ll say it is right in line near cutting bone.. we are past stripping fat.. have you seen Ian Rolland’s old office.. I have personally .. I demo - ed it.. I guess that says enough it’s a done deal.. I seen a handful of city and county boys walking thru lately that wana know how the progress is going? .. 7 million dollars… thats a fair price in all reality… Oh by the way if you think Mr. Huber is benefitting off this deal.. so over the top.. maybe you otta consider all the other properties he has owned. operated.. been a huge impact on the community with.. then maybe you’ll not be so quick to judge.. R.S. is huge much bigger inside than it looks outside, has issues.. but will be modestly fixed.. I personally believe it is a move toward a good direction… and believe me when i say them city and county boy’s have there eyes sparkiling like a kid in a candy store when they get to the taj mahal on the 4 th floor..