“We are the city, we don’t rent,” Ald. Krissie Harris (2nd) said during this week’s council debate about the future of Evanston’s civic center.
Her reluctance to have the city rent office space — rather than own it — appears to be a common sentiment among municipal officials.
Evanston Now was unable, in an online search Wednesday morning, to surface any examples of Illinois municipalities that don’t own their own city hall, although Chicago leased its first two city halls, back in the 1800s.
(If you know of any Illinois municipalities currently running their seat of government in leased space, please let us know.)
Leasing office space is common for both the federal government and the State of Illinois — although neither leases the spaces that are the ceremonial center of their operations.
So the City Council vote Monday night to sign a 15-year lease on space on three floors of the 909 Davis building downtown to become — at least for a while — Evanston’s new city hall — may be precedent-setting.
It might — just might — also turn out to be a financial bargain compared to building new or undertaking a thorough rehab of the existing Civic Center.
As Evanston Now reported Tuesday, the AECOM consulting firm’s report to the city indicates rehabbing the old Civic Center would cost nearly $63 million, not counting the cost of designing the project and furnishing the restored building.
Building a new, smaller Civic Center is estimated to cost somewhat less, but likely would also have additional costs to purchase a new building site.
Those figures don’t include the cost of borrowing the money to do the work.
The city’s chief financial officer, Hitesh Desai, tells Evanston Now that, at current interest rates, the cost of borrowing $63 million in 20-year bonds to rehab the Civic Center would add about $35 million to the project tab.
That suggests the all-in cost of the rehab could be as much as $4.9 million a year over 20 years, compared to a net cost for the rented space of $1.9 million a year for the next 15 years.
Of course, the city would still own the rehabbed building after 20 years, but it would be starting to need substantial maintenance upgrades. And rental rates might have risen substantially.
None of the consultant’s figures address the cost of maintaining a new or rehabbed building over the decades.
The city has been blindsided by those costs repeatedly in the past and has frequently underinvesting in maintaining its existing assets.
So letting “the landlord” worry about maintenance and paying a flat rental rate for annual occupancy costs may turn out to be a good deal — unless the demand for office space dramatically exceeds the supply by the time the lease is up for renewal.
In any case, there’s much more to be learned about an issue that promises to be a big topic of discussion as 2024 progresses.
Leasing space is common in for-profit businesses due to significant cost advantages. Wish I had trust in this council to make a financially sound decision but I don’t and Harris and Reid only reinforce that opinion.
I have never seen anyone run for City Council or Mayor promoting improved building maintenance. When the Council selected it priorities last year, infrastructure was not one of them. With a surplus of office space at the moment, locking in a 15-year lease seems to me to be a financial and political fit. I think there is stigma with renting, but IMO it is a fine way to fund real-estate occupancy.
The new location has all forms of public transit at its door. Adequate covered parking. It will bring both city employees and those who have business at City Hall to downtown, which will benefit restaurants & businesses there. Plus, downtown has the densest residential population in the city, which means many residents can walk to City Hall for business and programs. The annual cost is fixed, so no expensive surprises will arise, making budgeting easier. I don’t always agree with out City Council, but this time I think they got it right.
There are significant costs to owning including the opportunity cost of the funds that you are using to buy the real estate and build the offices. You are also taking the land off of the property tax rolls.
Sell the civic center. Sell Harley Clarke.
Rent downtown.