Sale of City Hall

This is an attempt to provide detail on the sale of the City Hall/Fire Hall building. It is a work in progress... 

History

The City Hall/Fire Station is a city owned facility built with city funds back when the Fire Department was a city department. When the District was formed, all Fire Department assets were transferred to the District. The building was not considered a Fire Department asset. As such a lease was created to account for its usage. The current lease was for 20 years signed in 2002. Here is a copy of that lease agreement: Lease

In 2017, City Manager Kerry Kemp reached out to the Fire District to notify them that in five years (July 2022), the lease for the Fire District’s use of 145 NW Alsea Hwy (the current Fire Hall) would expire. In agreement with both the City Council, and the Fire District Board, a joint relocation committee was formed.

In March of 2019, a joint meeting between the Fire District Board and the Waldport City Council took place. At the end of the meeting, it was regretfully agreed that the only acceptable property did not meet the Fire District’s needs, and the committee was disbanded as the Fire District wanted to explore their options without consideration of needing to accommodate the City. It was reiterated that, due to needed depreciation and upkeep, the rates and terms would need to be negotiated in any extension of the lease. 

In late 2019, a study commissioned by the Waldport Library indicated that the Fire Hall met the criteria for a replacement library in accordance with established criteria. The City has also been approached by a commercial venture interested in specifically old Fire Halls for a potential brewery. In the summer of 2020, the City Council directed now City Manager Cutter to move City Hall to the Umpqua Bank Building. It also authorized the CM to enter into negotiations to potentially sell the former City Hall building as the City’s authorized representative.

CM Cutter met with the Fire District Board. He outlined the concerns expressed below regarding the maintenance and upkeep of the fire building/city hall, and the depreciation if the City kept the building. After negotiations, the City and the Fire District Board agreed to a new lease provision (2021 lease addendum to be added) and to encourage the Fire District to explore their best options for moving forward

Current City Position

The City desires to be the best partner it can be to the Fire District. However, our understanding of the current law's regarding our disposition of the property is as such: According to ORS 271: “real property needed for public use by any political subdivision owning or controlling the property may not be sold, exchanged, conveyed or leased under the authority of ORS 271.300 (Application and administration of ORS 271.300 to 271.360) to 271.360 (Lease requirements), except that it may be exchanged for property that is of equal or superior useful value for public use. Any such property not immediately needed for public use may be leased if, in the discretion of the governing body having control of the property, the property will not be needed for public use within the period of the lease.” 

Given that identified uses were established (including more listed below), the building was not 'surplus' to the public good - in other words, the City has established a legal obligation to provide an "exchanged for property (which includes money) that is of equal or superior useful value for public use". As was discussed with the Fire District, an independent appraisal was needed to establish fair market value. One had been recently completed, and was used to establish a baseline valuation. 

The concern however was that though the appraisal was a fair representation of value, it was a significant burden for the Fire District. As such, a secondary method of valuation was used. This took the market rate for rent in the area of roughly $0.50/sq ft, and determined that from that, revenue for rental of the facility would be roughly $5200/month. Using instead this 'Revenue Replacement model', this equates to a return of 4% on a commercial loan of $1,100,000, so the City believes that it can reasonably argue that a discount of roughly $553,750 from the appraised price provides a reasonable accommodation to the Fire District without depriving the City of revenue it would receive if leased to a third party to meet ORS 271’s legal intent.  

Thus the City set the potential sale price at $1,100,000. 

Established Need

One of the largest considerations is the 'established need' of the City for the building and funds. As one example, the city would like to provide some documentation of projects required for fire safety the city will be engaged in shortly.  In the list provided, our city engineer provides requirements, included in the Waldport Water Master Plan (2020), that the city has over $3.8 million in water line improvements primarily driven by fire flow needs and demand. Detailed here:

Project D – 4 Waldport Heights Transmission Line        (ch 8-7)$871,000
Project D – 5 Highway 34 Waterline Near Nelson Wayside Drive        (ch 8-8)$257,000
Project D – 6 South Transmission Line  (ch 8-8)$1,131,000
Project D – 7 Highway 34 Waterline East of Lint Slough           (ch 8-8) $780,000
Project D – 8 Norwood Waterline        (ch 8-8)$331,000
Project D – 10 Ball Boulevard Waterline          (ch 8-8)$467,000
Total$3,837,000

The City must do these projects in the next decade. These projects do not serve to provide additional water to residents, but meet the requirements for fire flow increases required both from the State, and also from the Fire District to meet higher ratings on fire protection and lower everyone's insurance rates. In the consideration of overall cost to the citizens of Waldport, as required per ORS 271.300, these costs must be considered when evaluating the ‘need’ by Waldport, and as such, an additional discount from our asking price would mean additional costs borne directly by Waldport citizens.

In effect, if we transferred the station for a discount, the additional cost would be borne entirely by Waldport. If we sell it as prescribed, at least a portion of the costs would be borne by those users outside the city in the district (many of whom these waterlines serve incidentally). Per our fiduciary duty, the most beneficial and least costly solution to Waldport citizens is to sell at the proscribed price. 

But aren't we paying twice? 

Really, No. Technically, over 30 years ago, the Fire Hall was built by the City with City taxpayers funds. It was $80,000 for the Fire Hall in 1985, and another $129,000 for the City Hall in 1989. It can be argued that 'yes, a small fraction of taxpayers in the District, some of whom are Waldport Taxpayers would pay for the building twice' - but that only applies to residents of Waldport at that time - realistically, most residents of the district have never paid for the Waldport fire hall. Also of note, the citizens of Waldport paid for the building, not the Fire District - and then the city gave the Fire District all of the Fire Department equipment when they became independent. So, the citizens of Waldport have already given the District a lot of resources. Finally, the cost to the taxpayers of this building was significantly less than its current value. In fact, the proposed discount alone is roughly 3 times its original price. It's like arguing that you shouldn't have to pay for a remodel since you already bought the house.  

However, let's look at the math:

Let's make some basic assumptions. Waldport has 2100 citizens roughly. A refurbished station will cost upwards of $5 million. A new station elsewhere was recently constructed by the city of Yachats at $8.3 million from scratch, but construction costs have greatly increased - as have land costs. But we'll stick with these assumptions. Waldport makes up 60% of the taxing District for the Fire District (see below). That means, any cost to the District, the taxpayers in the City pay roughly 60% of the cost. The Fire District want to apply for seismic upgrade grants which will pay up to $2.5 million of the cost of the refurbishment for buildings it owns only. Finally, we will only consider the water projects related to fire in the comparison - USDA matching water grants average between 25% to 50% match. We'll assume 40% overall match over several programs for water projects. 

  • If the City continues to lease for $1:
    The Fire District won't get the seismic grants from the state, meaning they have to pay the full amount. So, cost to the Fire District is: $5,000,000. Since Waldport makes up 60%, we can say that $3,000,000 for the refurbishment of the Waldport Fire Hall. Now, the City of Waldport won't have any match, and will have to take a loan for the water projects addressing fire flow, so will have to pay for the full amount of the Water projects, roughly $3,837,000. 

    Thus, the overall cost to the City of Waldport taxpayers is: $6,837,000 or $3256 per resident. 
     
  • If the City sells for $1:
    The Fire District will get the seismic grants for refurbishment, so the cost to refurbish will be roughly $2,500,000, or only $1,500,000 to Waldport citizens. The City still has to do the water flow projects just as before, so $3,837,000.

    Thus, the overall cost to the City of Waldport taxpayers is: $5,337,000 or $2,541 per resident.
     
  • If the City Sells for $1,100,000:
    The Fire District will get the seismic grants so the cost to refurbish will be roughly $2,500,000, or $1,500,000 to Waldport citizens. Plus they paid out $1,100,000 so another $660,000 to Waldport citizens. The City still has to do the water flow projects, but now it has matching funds, so will only have to spend 40%, or $1,534,800.

    Thus, the overall cost to the City of Waldport taxpayers is: $3,694,800 or $1,759 per resident.

Thus, inescapably, the most affordable option for citizens of Waldport is for the District to buy the building for $1,100,000. With $1,100,000 in matching funds, the city will be able to leverage that into significant grant match. It would cost everyone in the city MORE to sell the building for LESS. 

Can the District simply move out of the City or find a different Property? 

Yes. It certainly could. But, they have requirements which they need to meet. The City of Yachats recently built a fire station, and it cost nearly $8.3 million. State requirements dictate the Fire Hall must be within a certain distance - so moving too far away would dramatically increase insurance rates.

But the City is not forcing the Fire District to do anything. We actually encouraged them to explore finding a new location. This is actually the best spot available for them. Most property which could meet their needs is nearly $800,000 or more and doesn't have a building in which to remodel for seismic grants.

But the City gets so much more in taxes?

Actually no again, here is the comparison for 2021:

City: Total assessed value for taxes: ~$245,646,890, Tax rate: 2.6831
Fire District: Total assessed value for taxes: ~$416,882,920, Tax rate: 2.3409 

The District has a much larger tax base and nearly the same effective tax rate. 

Does the Fire District Board agree? 

The City cannot speak for the Board. But they have hired an independent third party company (the Mackenzie Group) to explore options and tell them exactly what their best option in terms of costs. The Fire Chief and City Manager speak regularly as the managers of each entity, and continually bring the best options to our Boards and Council.  

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Conclusion

The City has established that laws under ORS 271.300 require that it cannot simply give away the property if need is established. A City need is established both by alternative uses, and by fiscal need. Though a partner, the Fire District is a separate taxing entity, regardless of 'history'. And through analysis, the lowest cost option for any citizen in the City is the sale of the building to the District. It is therefore the City's position that its fiduciary duty is to proceed with the sale price as prescribed.