It’s Opening Day for Laguna Hills City Hall

When Laguna Hills city officials bought a multistory fixer-upper two years ago, they knew it was the business deal of the decade.

Today, nearly a year and a half after work crews began renovating the 1970s bank building, the glass doors will swing open at the city’s new home on El Toro Road. It will also mark the city’s entry into the landlord business, since the building will house both City Hall and rent-paying tenants.

The way city officials see it, the unanimous decision to buy the property was simply common sense. “Most cities build themselves permanent city halls,” said Assistant City Manager Don White. “But we’re not afraid of taking risks. We’re thinking outside the box.”

When the city bought the $6.2-million complex from Washington Mutual in 2002, it was occupied by long-term tenants, most of whom opted to stay. The 52,118-square-foot complex was renovated for $10.7 million and now has a striking early California design.

Among the amenities are three conference rooms, new elevators and a multipurpose council chambers hall, where a restaurant, Split Rock Tavern, once stood.

Laguna Hills will occupy about a third of the building and lease the rest, generating $100,000 a year in profit to the city after covering the loan payments and expenses.

“It was the right building, the right location, the right size, for the right price and at the right time,” White said. He said Laguna Hills City Hall would bring in enough money from leases to cover its $287,000 annual payment on the outstanding $4-million loan. It will also be enough to cover an estimated $120,000 in City Hall expenses.

During a time when the slow economy has taken a toll on cities, the League of California Cities said that a city taking on the role of landlord isn’t as uncommon as it may seem.

“The bottom line is that with city budgets and staff positions being cut, this is not all that unusual,” said Megan Taylor, the agency’s director of communications. “If you have the space, it makes total sense for cities to enter into those kinds of arrangements.”

Mayor Randal Bressette cited two reasons it was time for the city to move out of its previous spot on Paseo de Alicia: It was cramped, and the city was paying about $500,000 in annual lease payments.

“This is almost as perfect as government can get,” Bressette said. “After we pay for all of the costs of operating the city, we will still net anywhere from about $100,000 to $200,000 annually.”

Another advantage, city leaders said, is that El Toro Road is home to commercial developments, restaurants and hotels. Across one side of the street is Laguna Hills Mall, and on the other is a bustling restaurant.

Next door stands the Laguna Hills Lodge.

As they push to revitalize El Toro Road’s core, including widening part of it, city leaders hope the new City Hall will set a tone for inspired planning.

“A big part of our focus is improving this area, which is going to experience significant changes over the next couple of years,” White said.

The new City Hall has 12 tenants, including a psychiatrist, lawyers and real estate agents. One of those is broker Frank Hill of Century 21 Rainbow Realty.

The company has witnessed firsthand the transformation of the old office building into a new complex. But the real estate company has also lived through the renovation, which Hill said was everything but trouble-free.

There are still cracks on the ceiling, and it leaks when it rains, he said.

But Hill isn’t worried.

“What happened was to be expected, and we know it will be taken care of,” said Hill, adding that Century 21 is the city’s sole neighbor on the first floor.

“There has been some disruption, but we’ve survived it, and when it is all complete, ultimately there will be more people coming in here,” he said.