To Buy or Not to Buy City Hall

The City of Goleta may be one small step closer to obtaining a permanent home for its City Hall, even though, for now, that step comes in the form of the City Council directing its staff to discuss the matter further, sometime after September 1, with Santa Barbara Real Estate Holding Company, LLC. That’s the company that owns the building and property Goleta has been looking at.

The deal, as proposed, would involve buying land and a building shell at 6767 Hollister Ave., in the Cabrillo Business Park. Several city councilmembers balked at the price, however. Mayor Roger Aceves said it was, per square foot, the highest price for any piece of Goleta real estate. “Could the price be better? Probably, but one of the things driving this is there are no buildings like this in Goleta,” said Councilmember Eric Onnen. More precisely, he said there are only 27 suitable buildings within city limits, but the last one sold nearly 20 years ago.

Unimproved, the building and lot would cost $13 million, with an additional $2.2 million required for interior upgrades to the building. But, city officials said, the city currently only needs half of the 40,000-square-foot space. The other half, they said, could be leased out to help offset the cost of buying the property. The remaining financing would include a $500,000 development credit and a $7 million bond issue. “We did have the option to say forget it, but lots of time and money have gone into it, so the council directed staff to negotiate further with the property owner,” said Councilmember Margaret Connell.

There seemed to be consensus among city councilmembers that some of the non-negotiable tenets of the 90-page sales contract offer more protections for the developer than for the city, which councilmembers did not find an appropriate way to use public money. “There were provisions in the deal that put too much risk on the city,” said Onnen.

Considering the current economic climate and the $1.2 million in budget cuts recently put in place by the city, some councilmembers asked if now is the right time to buy a city hall. “My issue is a question of timing,” said Aceves. “We would have to use our reserves to do this. We’d have to use so much of our reserves that a $4 million line of credit would have to be established.” Onnen, on the other hand, cautioned against missing an opportunity to own. Commercial real estate does not often come available in Goleta, Onnen said. As in private homeownership, he added, the accrual of equity would benefit the city more in the long run than paying rent every month.

For the time being, though, the deal goes back to the drawing board. If the city does end up renewing its lease at City Hall’s current location-130 Cremona Dr., near the intersection of Hollister Ave. and Los Carneros Rd.-owner Bermant Development Corporation has agreed to reduce the lease by $130,000 for the first 18 months of a three- to five-year lease. The city currently pays $374,341 a year, an amount that increases 3 percent annually.