Valuations highlight Municipal Services Center conundrum

A recent appraisal found that St. Petersburg’s Municipal Services Center is worth $19 million; officials must spend over $13 million on immediate repairs.

In addition, selling the property would require the city to lease the building back from the buyer while a new Municipal Services Center (MSC) is under construction. That would cost between $18 million and $33.75 million in rent over five years.

Councilmember Gina Driscoll has referred to the 10-story building at 1 4^th Street N. as a “money pit.” She reiterated her desire to “sell baby, sell” at an Aug. 22 Economic and Workforce Development Committee meeting.

“The opportunity that we have right now – it’s not going to last forever,” Driscoll said. “Real estate downturns happen. I believe that now is the time for us to get as much as we can out of this, because we clearly need the money for other things.”

The original MSC building opened in the late 1920s. An addition followed in the 1950s, and the city purchased and redeveloped the site to house government operations in 1985.

The 140,589-square-foot facility will likely meet a wrecking ball as the land is more valuable to developers than the aging structure, even after the city completes long-overdue repairs. Officials last renovated the MSC in 1995.

“I think it’s important to note that we understand where you’re coming from – we don’t like it either,” Administrator Rob Gerdes told the committee. “But we’re trying to do the best we can with where we’re at.”

The city has budgeted $6.58 million for capital improvements, about half the total cost through 2029. A study found it would take $54.5 million to maintain the building for another 15 years.

Administrators will soon spend roughly $4.5 million replacing two cooling towers, 25 air handlers and related infrastructure. Repairing cracked concrete around a steel column in the adjacent parking garage is another priority.

Officials also plan to upgrade elevators, waterproof the MSC’s exterior, renovate restrooms and improve fire prevention systems over the next five years. Multiple city council members prefer to sell the building.

Councilmember Ed Montanari expressed displeasure with what he called a “throwing good money after bad type of situation.” Aaron Fisch, real estate and property management director, said the city must complete the capital improvements “regardless of a sale today or sometime in the future.”

Fisch said building a new MSC would take roughly five years. The city would then have to pay between $24 and $45 per square foot to lease it back from a buyer.

Driscoll believes administrators could negotiate a better deal. A previously proposed project would have allowed the city to lease the MSC from a development group for below-market-rate prices.

In February 2021, former Mayor Rick Kriseman selected Third Lake Partners and Echelon to build a new facility across from City Hall. The joint venture offered $12.2 million for the MSC, about $2 million less than its appraised value.

Fisch said the developers offered a “nominal rate” for the first three years. The city would have paid $1.35 million annually for the remainder of the term and completed all maintenance and repairs. The current administration decided not to pursue the complex project due to space and cost concerns.

Driscoll called the site a “pretty prime piece of property” and said a buyer would “work with us” on a lease. She also wants the city, rather than a developer, to construct a new facility.

Driscoll expressed concern for the employees who occupy the building. The MSC now houses 540 staffers across 14 departments. “They deserve better,” she added.

James Corbett, city development administrator, stressed that the facility is structurally sound. He also noted that a buyer would deduct the capital improvements costs from the purchase price.

“There is no way to get around what has to happen in the next five years,” Corbett said. “We’ve already started the process to look for … the new MSC, but it would be at least five years.”

Administrators will conduct a space analysis to discern operational efficiencies. They will also explore moving some services to other city-owned facilities and present their findings to the committee in October.

“As long as we’re seeing forward progress like this, to me, that feels like a win,” Driscoll said.