What's at stake?
The council is set to consider a $42 million, 21-year lease to move the police department just across the street to 2314 Mariposa St.
One of the city’s biggest lease deals to date – housing the future police headquarters – is up for debate this Thursday.
The council is set to consider a $42 million, 21-year lease for a move just across the street to 2314 Mariposa St.
After 21 years, the city has the option to purchase the building for $1.
The new building is owned by River Park Properties III, better known as Ed Kashian, the developer behind several of Fresno’s mega-commercial projects, from River Park to Campus Pointe to Fancher Creek and the Rowell Building downtown, which hosts the Fresno County District Attorneys’ Office.
If approved, the lease goes into effect on Friday.
“The timing is right,” Mayor Jerry Dyer told Fresnoland in an interview. “It’s [the move] been talked about for probably the last 15 years, but we’ve not really had the opportunity to do it until the decision was made to relocate the communication center out of that building.”
Dyer said the process began when Kashian, the building owner, approached then-police Chief Paco Balderrama in 2021 about the chief’s potential interest in moving into the Kashian-owned building across Mariposa Street that was under renovation at the time.
The base leasing rate – $1.76 per square foot, is in the ballpark with what other similar downtown buildings command, according to two commercial real estate brokers who spoke with Fresnoland on Tuesday.
But that assumes the building is basically in ‘move-in-ready’ condition.
“I would expect, at $1.76 a foot, that it’s going to be a new floor, new paint, new AC – turnkey, move-in-ready condition,” said Jared Ennis, executive vice president at Central California Commercial.
And the city paying that rate for a basement, in addition to office spaces, seems a bit high to Veronica Stumpf, a commercial real estate broker with Stumpf and Company.
The city is also paying another $1.20 per square foot to access basement parking.
Rent is free for the first year, and then starts at $1,285,598 per year, and ends at $1,710,087 in the 21st year of the lease.
That figure doesn’t include the city’s utilities costs and property taxes.
The city hasn’t set aside funding for the nearly $30 million lease yet – necessitating a rent-free year to negotiate with councilmembers on how to find another $1.3 million annually.
Councilmember Miguel Arias – whose district includes downtown – isn’t happy about approving a lease prior to finding the money to pay for it, a non-standard practice for the city, according to a Fresnoland review of several city leases.
“Such a significant project outside the budget process and with 48-hour notice to the council and public warrants more time and transparency,” Arias said in a text message to Fresnoland. “Especially given our ongoing labor negotiations and declining budget conditions.”
That’s on top of another $12 million the city plans to spend on tenant improvements, from upgrading the HVAC systems to building out specialty needs for the police department, including holding cells, Dyer told Fresnoland.
Those improvements are wrapped up into a $60-million public safety bond also before the council for approval this Thursday. That bond also includes funding for two projects in the pipeline: A new Fire Station 12 and a new 911 call center headquarters.
The council authorized funding for the new fire station during the June 2024 budget discussions. They also approved resources for the new 911-call center earlier this May. But this is the first time that they’re formally discussing resources for a new police headquarters – on the same day they’re asked to approve a bond for it.
According to Ennis, while it’s normal for tenants to foot the bill for specialty build outs in a leased building – like the holding cells, for example – it’s more typical for the building owner to take on the responsibility of making a building move-in ready – which, in Fresno, includes AC improvements.
Even though the city is having to foot the bill for a new HVAC system, Dyer says it’s still a good deal for the city.
“Mr. Kashian would have liked to have done the tenant improvements for us, but we did not think they would have been done to the degree that we wanted,” he told Fresnoland, in an interview Tuesday.
The $12 million in tenant improvements are subject to the city’s project labor agreement provisions, he added.
Dyer says he expects the headquarters move – if the lease and bond is approved – to happen in the next 12 to 18 months.
Why lease a new building?
The city owns most of the buildings where its personnel work from – with a few exceptions.
Last year, the city leased space from developer Will Dyck to house the brand-new Capital Projects Department on R Street in a building formerly occupied by now-defunct Bitwise Industries.
About a dozen staff in the Planning and Development’s Housing Division are housed downtown at offices in Civic Center Square, across from the federal courthouse, while renovations to city-owned office space on Van Ness are underway.
Why not buy the new police headquarters building from Kashian? He didn’t want to sell, according to an email from Assistant City Manager Ruthie Quinto.
Dyer stressed that there weren’t any suitable buildings in that ideal of a location – next to the courthouse, across the street from the current headquarters.
“You don’t see many of these properties become available, once in a decade,” said Ennis.
But is the leasing cost to the city worth it in the long run?
“The cost of a lease is so much more expensive over the long term, versus owning the property and just maintaining it, which you have to maintain it anyway,” said Ennis.
“I love to see the city own property and get good deals. And if you get good deals for the people, it passes along to the taxpayer, right?”
Stumpf said that she’s seen some government agencies find leasing more advantageous, when they don’t have the staffing to manage their own buildings.
Renovation of the current building is off the table for the city, as well. They estimate it would cost about $7 million to temporarily relocate staff and abate the building from asbestos and other hazardous materials, before making more improvements, according to the staff report.
Instead, the city plans to demolish the existing headquarters building – a decision that will come before council at a later date.
“That’s the beauty of a capitalist market, I suppose,” Ennis said, “a seller doesn’t have to sell.”
The city council will discuss the public safety bond and lease agreement at their meeting Thursday morning.
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