City of Salem leasing old O'Brien auto site until June 2017

I wasn't aware that the City of Salem was leasing the old O'Brien auto dealership site north of downtown until I read about this in a recent Statesman Journal story, "Salem preps old dealership for homeless warming shelter."

The city of Salem dispatched staff Tuesday to ready the old O’Brien Auto Group space for the homeless to use as a warming shelter while coming winter nights are expected to dip below freezing.

...The city leases the O’Brien property, which would have been the site for a new police facility if the measure to fund it hadn’t failed this November.

O'Brien site when it was an auto dealership

I knew that the City had an option to buy the O'Brien property, but the lease was news to me. So I asked Courtney Knox Busch, who works in the City Manager's office, to send me a copy of the lease agreement. Here it is.
Download O'Brien Site Lease_Council Report 6_27_16

The City of Salem (tenant) isn't paying any cash to Shires Property, LLC (landlord) for a lease of the 37,320 square feet of space in five buildings on 3.51 acres that runs from June 28, 2016 to June 30, 2017.

Instead, the City is responsible for paying all costs of utilities, insurance, property taxes and maintenance of the O'Brien property. 

What the City of Salem is directly paying for is an option to buy the property. The option is to be paid for in two $50,000 chunks.

First option payment: $50,000 on or before December 1, 2016, which doesn't apply to a potential purchase of the property. I'm not sure if this payment has been made. I'll ask Busch if it has. Seemingly it should have been, because there's a Plan B proposal for a new police facility following the defeat of the $82 million bond measure in the November election.  

[Update: Yes. Busch told me the first payment was made.]

Second option payment: $50,000 on or before March 1, 2017, which does apply to a potential purchase of the property. The option to buy ends on May 31, 2017. 

So, assuming the City of Salem made the first payment after the police facility bond measure failed, another $50,000 payment will have to be made to preserve an option to buy the property. Since the earliest a Plan B could be voted on is after March 1, and the option expires on May 31, there's only a narrow window to submit a revised police facility plan to voters without extending the lease/option agreement.

This is why the Salem Community Vision and Salem Can Do Better document, "Plan B for Building a Salem Police Facility," calls for a vote next May. 

It's clear that simply submitting the same $82 million proposal that failed in the November election would be an insult to the will of voters and have little chance of passing. Thus City officials don't have much time to reach out to the Salem community and come up with a collaborative revised proposal that, hopefully, includes the key items in the above-mentioned Plan B:

(1) Put a PLAN B $62 million bond measure on the May 2017 ballot.

This will pay for a perfectly adequate 75,000 square foot police facility AND seismic upgrades to City Hall and the Library — which was the City of Salem plan until the size and cost of the police facility doubled, squeezing out lifesaving funds for making the Civic Center earthquake-safe.

 

 (2) Build the 75,000 square foot police facility on the same “O’Brien” site north of downtown, where the facility turned down by voters was planned. Leave out a new 911 Center and structured parking, since neither of these costly options is needed.

 

(3) Hire new Oregon consultants with a proven track record of building cost-effective police headquarters. Mackenzie and AC + Co Architecture could be good choices.

Comments

[Jim Scheppke]

Do I recall correctly that one of the arguments made for passing the bond measure in November was that buyers were lining up to purchase the O'Brien site, and if the measure failed the site would be lost? If so, why were the proponents not corrected by City officials? That would have been a misstatement, since the City, at that time, had secured the property until the end of May, 2017. Correct me if I am wrong about this.

[Brian Hines]

Jim, you're mostly correct. I remember being told by somebody -- Chuck Bennett, T.J. Sullivan?, am pretty sure it was Bennett -- that if the bond measure failed, the O'Brien site would be lost to the City of Salem.

But actually, as the lease/option agreement says, the City had the ability to pay $50,000 on or before December 1, 2016 to have an option to buy the site that runs until May 31, 2017 (assuming a second $50,000 payment is made on or before March 1, 2017. The City made the first payment, so they've got an option to buy the O'Brien property.

I didn't ask Courtney Knox Busch when the first option payment was made. One would think that this would have happened after the November election, since there wouldn't be a need to pay for an option if an actual purchase of the site was going to happen soon. So even though the City may not have had a purchase option before the election, they had the ability to pay for one up until December 1, 2016.

What confuses the matter a bit is that before the election the City did have a lease that allowed them to use the property until June 30, 2017. My impression, which may or may not be true, is that this "sweetheart" arrangement with the owner of the property (the City isn't paying out cash for the lease, just assuming expenses on the property) was predicated on an assumption that the bond measure would pass.

Thus Shires Property, LLC may have figured that since a sale likely was pending to the City of Salem, the lease was a goodwill gesture of sorts. Also, since the lease terms obviously are different from the option terms, if the City decided not to exercise the option, another buyer probably wouldn't be able to do anything with the property until after mid-2017 when the lease expires. So Shires Property, LLC has essentially gotten the City to assume the costs of maintaining the property (including property taxes) for a year.