The City's Planning and Community Services Department is seeking office space in downtown Billings due to the department's required move from the Library building in 2013.  An RFP process was conducted in June 2012.  The Council rejected the staff recommendation for a lease and asked that the top five proposers be asked to resubmit their proposals.  A new RFP was issued by the City's Purchasing Agent on January 11, 2013. The five offers went to:

• Billings Business Center – 2718 Montana Avenue
• Crowne Plaza – 27 North 27th Street
• Crane Building – 3005 1st Avenue South
• Rocky Mountain Bank Building – 2929 3rd Avenue North
• Miller Building – 2835 3rd Avenue North

Staff received two proposals in response to the new RFP:

• Crane Building – 3005 1st Avenue South
• Miller Building – 2835 3rd Avenue North

In order to achieve consistency in responses, the City proposed a five-year lease with the option to renew for five (5) additional one-year (1) terms, but reserved the right to negotiate with the successful proposer.  The City also requested costs for 100 MB fiber installed at each of the locations, as well as any estimated costs outside of the square footage rate.
 
A selection committee was formed and included Councilmember Ed Ulledalen, Assistant City Attorney Bonnie Sutherland, Planning and Community Services Department Director Candi Beaudry, Chief Information Officer David Watterson, Facilities Manager Saree Couture, and Purchasing Agent Liz Kampa-Weatherwax.  The committee reviewed both proposals, met on February 11, toured both buildings on February 12, and has unanimously chosen to begin negotiations with the property broker for the Miller Building.  The criteria for selection included, but were not limited to location, price, adequacy of space, quality, appearance, space efficiency, remodeling necessary, parking, technical IT needs, security and schedule for occupancy.

 

The City requested proposals for lease of a minimum of 13,700 usable square feet of office space, of which 9,000 square feet could be located on one floor, with the remaining square footage on adjacent floors.  The office space should be appropriate to house five (5) primary work areas, which may or may not have separate entries.

Both properties met the minimum square footage requirement.  It is the opinion of the selection committee that the Crane building has yet to be configured as office space and the time for remodeling could possibly extend the availability date beyond an acceptable timeframe.  Additionally, the City may extend fiber to the Miller Building for approximately $50,000 with very little or no on-going costs for the five years and beyond. Extending fiber to the Crane building would be cost prohibitive (a minimum of $200,000) due to the distance from other City-owned fiber in the downtown area.  Last, the Crane Building has been vacant and utility costs were estimated by the proposer for an occupied building.  These utilities would be at the City's expense and are difficult to predict.  The Miller Building lease rate includes all utility costs.

In the first year, the Miller Building lease rate is proposed to cost up to $204,723, depending upon a decision regarding the communication lines to the building.  The Crane Building is estimated at $205,379 for year one.

Three of the four Divisions in the Planning and Community Services Department rely on property tax and/or fees for operating revenue.  The Community Development Division relies on federal funding that is capped for administrative activities, including rent.  Neither of the proposals were affordable to the Community Development Division without a subsidy from the City's General Fund.  Therefore, this lease agreement would effectively commit the City and City Council to an annual general fund transfer of up to $60,000 for the Community Development Division.  The other three Divisions have historically paid between $90,000 and $135,000 annually in rent.  This lease agreement is proposed to cost up to $204,723 (including an approximate $3,000 annually for off-site parking), depending upon a decision regarding the data lines to the building.

Staff recommends that Council approve the Lease for Real Property for the Miller Building, located at 2825 3rd Avenue North, for the Planning and Community Services Department and commit to an annual City general fund transfer for the Community Development Division.