New Municipal Services Center would be a financial win for the city, administrator tells committee

The financial benefits of a plan to build a new Municipal Services Center outweigh the costs of the plan, the city’s development administrator told a City Council committee.

The project would generate as much as $5.7 million in new property tax revenue over 10 years, Alan DeLisle told the Council’s Public Services & Infrastructure Committee Thursday as he provided a high-level update on the plan.

The city is working on a term sheet and development agreement with a joint venture between Third Lake Partners and Echelon, the team that Mayor Rick Kriseman selected in February to build a new Municipal Services Center and renovate the existing MSC. DeLisle said he hopes to present the development agreement to the Council “as soon as possible,” but he declined to specify a date.

St. Petersburg Municipal Services Center (Google maps)

The Municipal Services Center at 1 4^th St. N. is an 11-story building, constructed in 1925, that houses city offices such as billing and collections administration, code compliance assistance, construction services, economic and development services, finance, and real estate and property management.

While specifics are still subject to change, DeLisle highlighted several aspects of the project:

• The city would sell the existing Municipal Services Center to the Third Lake/Echelon joint venture for $12.5 million. That allows the city to avoid about $37 million in deferred maintenance costs on the existing MSC.
• City staff would remain in the existing MSC rent-free for three years, while a new Municipal Services Center is being built at the west end of a city parking lot on 2^nd Avenue North across from City Hall. The proceeds from the sale of the existing MSC would be used as a down payment on the new MSC. Locating the new MSC across the street from City Hall would enhance city efficiencies and productivity by creating a city campus, DeLisle said.
• A new apartment building with a minimum of 20 percent workforce housing units would be located on the east end of the city parking lot across from City Hall. The workforce housing would be for individuals or families whose household income is 120 percent or less of the area median income and would remain workforce housing for at least 30 years.
• A new parking deck with 400 to 550 parking spaces would be located between the new MSC and the new apartment building.
• After the city staff moves to the new MSC, the Third Lake/Echelon joint venture would either renovate the existing MSC into 120,000-square feet of Class B office space or redevelop it with restrictions.

A redeveloped site would be required to have 50,000-square feet of Class B office space. Class B office buildings have utilitarian space without the higher-end finishes of a Class A development. They also have lower rents than Class A buildings.

A redeveloped site also could include workforce housing. Between the new apartment building on 2nd Avenue North and the redeveloped site at 4th and Central, at least 31 percent of the total housing would be have to be workforce housing.

The overall project would generate about $569,580 in new property taxes annually, DeLisle said. Including the sale of the existing MSC, free rent, the value of workforce housing, and avoiding deferred maintenance costs, he calculated a total financial benefit to the city of $58.2 million without including the new property taxes, and $63.9 million including 10 years worth of property taxes.

The city also would have about $39.75 million in costs under the deal. The biggest cost would be financing about $33 million for the new Municipal Services Center. Another cost would be giving the city parking lot, which is valued at about $3.9 million, to the developers. Additionally, there’s a $2.75 million gap between the appraised value of the existing MSC and the sale price.

Still, the benefits outweigh the costs, DeLisle said.

“If we look at the value without property taxes, it’s about $18.5 million in the city’s favor. If we look at the value with property taxes, it’s about $24.2 million in the city’s favor,” DeLisle said.

City Council Chairman Ed Montanari, who sits on the public services committee, said he views the deal as five separate transactions – selling the existing MSC, renting it back for three years, building a new MSC, building a parking deck, and building a new apartment building. He said each transaction should be analyzed separately and he wants more information on each of them.

The committee was not asked to make any decisions on Thursday, but Council member Darden Rice, who chairs the committee, said she appreciated the update.

“We’ve been talking about what to do with the Municipal Services building for years now, and I think that the opportunity to have a good financial deal for the city, to activate the dead space on Central Avenue and upgrade that corner, and the opportunity to have new workforce housing and new Class B office space right across the street from City Hall — that to me is very exciting,” Rice said.

Closer look: Alternative plan for MSC

During the Public Services & Infrastructure committee meeting, Council member Robert Blackmon reiterated a proposal he’s brought up before. He wants to move most of the city offices in the current Municipal Services Center to the largely vacant Tangerine Plaza on 18^th Avenue and 22^nd Street South, which Blackmon said would save taxpayer dollars and help the neighborhoods around Tangerine Plaza.

“That’s not what the community wants there,” DeLisle, the development administrator, said. “They want a grocery store. They want affordable housing. That’s what we’re bringing forward. In terms of the MSC building, we want that proximity for greater interaction and greater productivity.”

Blackmon picked up some support for his plan in the committee meeting, when Council member Gina Driscoll suggested it might be a good idea to spread out some city services instead of concentrating them at the MSC.

“Go department by department in that building and say what needs to be close to City Hall for better government and better communication with that proximity, and what services are there that are more outward facing and public facing that could be in places more convenient for everyone,” Driscoll said.