The plan could save $4.8 million over 30 years, though savings might not start until 2019
Believing that in the long run it is cheaper to own than rent, the Minneapolis Park and Recreation Board is trying to buy a headquarters building and move from downtown office space to north Minneapolis in a year.
The board voted 7-1 on June 5 to buy 2117 W. River Road North for $2.9 million. The building is near the intersection of River Road and Broadway Avenue.
Moore Business Forms owns the two-story building. The property has a taxable market value of $2.36 million, according to the Hennepin County Assessor's office.
Park Board Commissioner Vivian Mason cast the sole no vote; Annie Young was absent.
At press time, the Park Board had not secured a purchase agreement. Another party also was trying to buy the building. After its first bid became public, the Park Board upped its bid by $75,000, to just shy of $3 million, said Park Board president Bob Fine.
Counting building renovation, moving and other costs, the project's price tag would top $5.5 million, said Don Siggelkow, assistant superintendent for development.
The Park Board is asking the City Council to issue bonds to cover most of the costs.
Mason said she questioned making such a financial commitment, given the Park Board's critical unmet maintenance needs.
"At a minimum, I think the public should have been involved in the process, when we are talking about this kind of money," she said. "I am surprised we didn't even inform the public or have input of what they think of spending the money this way."
The Park Board's lease with the Minneapolis Grain Exchange Building, 400 S. 4th St., expires next May, Fine said. The Park Board now pays $325,000 a year for rent and parking, an amount he called "a fortune."
The savings in rent and parking would cover the bond payments for the building purchase, plus improvements, Fine said.
"It will cut out future rent increases," he said. "It is on the river. It identifies the Park Board with the river."
The savings would be a long time coming, however. According to one financial estimate prepared by Park Board staff, the board would break even through 2018, meaning the future bond payments would equal the current rent and parking payments.
In 2019, the Park Board would start saving money, estimated at $79,000 that year. By 2033, the cumulative annual savings would be $4.8 million. (Those estimates were made before the board upped its bid by $75,000.)
The Park Board's costs will increase if the City Council does not approve the bond sale and the Park Board has to find alternative funding. The cost estimates assumed a 5 percent interest rate.
The Park Board based its projections on downtown rent costs increasing by 24 percent in 2003 and 3.5 percent annually thereafter. Mason questioned whether the Park Board couldn't negotiate a better lease with the current landlord.
Fine said the new location is convenient to an I-94 exit would make it easier for people to attend Board meetings. The property has a 200-car parking lot.
The Park Board's north Minneapolis maintenance operation could move to the first floor, and possibly park police, he said. Offices could go on the second floor. The Park Board could have extra space to rent.