City purchasing adjacent City Hall offices

The City Council approved the purchase of the office space attached to the right side of City Hall at its meeting Wednesday night. The space includes the library annex that the city currently rents and three other suites.

The purchase of the 2,613 square feet of office space is being made for future use and as a financial investment, Mike Borja, Administrative Services Manager, said. The approximately $400,000 purchase is in escrow and is scheduled to close on Jan. 25. The property is located in the Canyon Lake Town Center at 31520 Railroad Canyon Road.

“In keeping with the City’s Council’s established goals,” Mike said, “it is anticipated that the purchase of this property would bring several benefits for the city.”

Those benefits include controlling the use of the library annex, generating revenue, future expansion, redevelopment and better investment return.

The city currently owns the space used by the county-run library in City Hall, which the county rents from the city. To provide extra needed space for the library, the city rents a portion of the property being purchased, which is commonly referred to as the “library annex.”

With the county planning on relocating the library from City Hall to another location later this Spring or Summer, Mike said the city is contemplating moving the Council Chambers upstairs into the space currently occupied by the library.

“It would be helpful for the city to control the library annex area so that it could be incorporated into the new Council Chambers,” Mike said.

In addition to the library annex, the property consists of three other suites. Currently, two of the suites are rented out to paying tenants and one is vacant. In the short-term, these suites would provide revenue for the city. Long-term, these suites could provide options for future expansion of city operations.

“As redevelopment of the Canyon Lake Town Center is a likely component of the city’s long-term vision/strategic plan,” Mike said, “and as assembling parcels is a necessary component of achieving redevelopment, city control of numerous parcels in the Town Center will ultimately aid in redevelopment efforts.”

Investing a portion of the city’s reserves in real estate rather than low-interest bank accounts, is another reason the city is moving forward with the purchase of the building. The building’s investment will likely produce higher returns than banks and investment funds can offer, Mike said. Also, the negotiated purchase price is anticipated to be below current market value, which creates immediate equity for the city.

Prior to Wednesday’s meeting, much had already been set into motion by the city staff and the seller to make the purchase process move faster. As the council considered approving the purchase, the purchase of the building was already in escrow. A structural inspection, termite inspection, an evaluation of the current tenant leases and a review of the property’s current profit and loss statement had already been completed, Mike said.

The property inspection revealed the need for a number of minor repairs. The seller has already made those repairs to the city staff’s satisfaction.

Now that the council has officially approved the purchase, Chris Mann, the city manager, will complete the acquisition process. The staff is recommending that the funds for the purchase be borrowed via an existing line of credit at Citizens Business Bank. Some city investments are tied up at the bank and won’t mature until April. Hence, the staff suggested the city make the purchase from the line of credit and then pay it off with revenue disbursements from the county for property taxes, the Fire Structure Fee and the EMS Subscription Program once January funds are received.