Costs Jump on City Plan for Building

City officials underestimated the projected annual lease costs of the proposed new Van Nuys government center by as much as $2.5 million, jeopardizing plans to build it at little or no cost to the taxpayer, according to a new report.

The project was proposed last year as a way to gather scattered city offices under one roof and save money.

But the projected lease cost has now jumped 70% above the $2.01 million the city will pay for existing office space.

“This is a totally different concept than was originally proposed,” said Keith Comrie, city administrator, who serves on a committee charged with reviewing plans for municipal facilities. The committee will meet today to review options for the Van Nuys Civic Center.

Tim Lynch of the city controller’s office said the extra costs are of concern, in part because the city aims to reduce, not add to the cost of government.

“Normally you have a combined center to increase efficiency,” and reduce costs, Lynch said.

The project was proposed as a public-private partnership in which a developer would build the new office in exchange for the right to lease it back to the city.

The City Council last year chose The Voit Cos., a prominent Valley developer, to design and build the proposed center, and gave it a name: the Marvin Braude San Fernando Valley Constituent Service Center.

The lease costs were to be paid by uniting under one roof the host of city employees now scattered in rented and city-owned offices around the Valley. At the time, Daniel Rosenfeld, head of the city’s real estate holdings in the General Services Department, said the city might even save by relocating workers, according to published reports. Rosenfeld could not be reached for comment.

“There were expectations or hopes that we could consolidate a lot of leases and it would not be a substantial increase in costs,” said Ron Deaton, chief legislative analyst for the city.

But in a report released by the General Services Department this week, estimates of what the city would have to pay by 2000 to lease space in the new building range from $3.4 million yearly to as much as $4.5 million--more than double the amount the city currently pays on leases for city offices in the Valley, said Claire Bartels, project manager with the city’s general services division.

“We did not have the full extent of our analysis back then. Things have evolved,” Bartels said.

Bartels said the projected costs would even out after 15 years or so, and that after 30 years, the new building might even provide a cost savings over the status quo.

The additional cost would buy added benefits--the new city offices would be more up-to-date, more accessible to the public and would help address the city’s space needs for years to come, Bartels said.

Part of the problem is that the office space currently leased by the city in the Valley is so bare-bones that almost any newer replacement would cost more, said Brad Rosenheim, a land-use consultant who is part of The Voit Cos.’ development team.

“Have you seen city offices out there?” he asked. “Some are literally in trailers . . . a lot are substandard and way, way sub-market.”

But the nearer-term hit on the city’s general fund resulting from moving to better quarters may raise concerns, especially at a time when the city budget is especially tight and reserves are low.

The civic center project, proposed by former Councilman Marvin Braude, is estimated to cost $40 million or more, depending on which of several alternatives is pursued.

How to fund the construction is still being debated. Tax exempt city bonds are a likely option, Lynch said.

Issuance of new bonds to fund the project may be problematic because the City Council is scheduled to soon consider whether to place new limits on the city’s indebtedness. But funds from a previous voter-approved bond measure may also be used, Lynch said.

The lease rate charged to the city will be used to repay any borrowing done for construction.

Still to be decided is whether the new structure would replace the existing city hall building on the site, built more than 60 years ago.

Under existing plans, the old building would either be retrofitted and used in tandem with the new building, or demolished and entirely replaced by the new building. Currently the older building is undergoing earthquake repairs, while still being used as city office space.