Indianapolis Mayor Greg Ballard’s office is reviewing proposals from five commercial property managers that want a crack at running the City-County Building for the next 30 years.
One of the bidders, who did not want to be named, said most of the proposals would provide the city with a substantial upfront payment—without increasing the city's annual cost of occupying the downtown high-rise. But the official who has been in charge of the building for decades doesn't see how the city can get cash out of the deal without an increase in costs elsewhere.
“How can anybody do that?” asked Ron Reinking, general manager of Indianapolis-Marion County Building Authority. “There are so many costs that are going to be fixed. I’m not sure how you can squeeze anything else out of that.”
The building authority, which has managed the City-County Building for the past 50 years, is making a strong bid to keep its job. The building authority shared its proposal, which is one of five under review, with IBJ. Other respondents could not be reached for comment or declined to disclose details of their proposals, which came in response to a June 6 request for information.
Ballard decided this summer to open the City-County Building to private management because he opted for the city to take title to the building Aug. 1. Previously, the building authority held the title and leased the building back to city and county agencies, which include the Marion County court system and the Marion County Sheriff, which has a jail in the building.
City Director of Enterprise Development David Rosenberg hoped the prospect of entering a long-term pact with a reliable tenant would be so attractive to commercial property managers that they’d offer upfront cash. The city would spend that money on other infrastructure improvements.
At the same time, Rosenberg said Ballard does not want to raise the cost of using the City-County Building.
Rosenberg declined to share the five proposals, which he said are still under review. He also wouldn’t comment on how many of them offer cash in advance.
"We were generally encouraged by the creativity and effort put forth by the respondents,” Rosenberg said.
Four national firms are in the running: CBRE Inc., which expressed an interest back in June; Jones Lange LaSalle; Cassidy Turley; and Colliers International, according to a person close to the bidding process. Gordon Hendry, first vice president at CBRE, confirmed that his firm submitted a proposal, which he said remains confidential. “We’re very excited about the [proposal]. We think it’s the right step for the city to be exploring this.”
As a quasi-governmental entity, the building authority could issue tax-exempt bonds to provide the city with upfront cash. A 30-year bond for $10 million, for example, would require a rent increase of 78 cents per square foot, according to its proposal.
The city last year paid $4.85 million to lease the 731,000-square-foot building, plus a 621-space parking garage, from the building authority.
After subtracting common spaces such as hallways, that rent amounts to $7.29 per rentable square foot, a substantial discount to the going rate of $19 per square foot for downtown Class B office space, the building authority says in its proposal.
The building authority argues that it would beat any market-rate rent, even after accounting for the fact that it doesn’t pay real estate taxes, because of its expert management, cost controls and lack of a profit margin.
The building authority’s rental rate includes unlimited utilities and 24-hour access to the parking garage. The rent has been flat for the past three years because of the city’s ongoing budget crunch.
The building authority’s pitch doesn’t only rely on low costs. It also proposes to improve the south plaza so that it ties into the Cultural Trail on Washington Street. The building authority would pay for the improvements by setting up a separate not-for-profit organization to collect private donations.
“It’s kind of walled off. It’s very formal, and we would want something that would be much more inviting to the public," Reinking said.
The idea is to make the plaza a “wide spot” in the Cultural Trail, which is already a gathering spot for Megabus riders. That stretch of Washington Street will see more foot traffic if the city follows through with its plan to turn a parking lot on the south side of the street into a transit hub.
The building authority also suggests that Ballard broaden the request for proposals on the City-County Building to include all governmental office needs for the next 50 years.