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CL-2403 New Business   Item #: E.       
Meeting Date: 10/06/2020  
Subject:    Approval of Lease Agreement and Purchase and Sale Agreement.
From: Scott Booth

COUNCIL ACTION
Business Meeting:     10/06/2020
SUMMARY
The City received three proposals related to the construction or renovation of a building to serve as the new Police Department Headquarters. The winning bid was able to provide the most cost-effective option that also happens to best meet the needs of the department. The proposal can be described as follows:

It will be located at the former Dan River Mills executive office building located at 2291 Memorial Drive. There will be a combination of historic restoration of the existing building and new construction.  The total cost is expected to be $17 million, which will be financed.  In order to capture the best price for the City, the following structure is needed:
 
1.      The developer plans to use historic tax credits to lower the cost of the renovation of the existing building. The historic building will be subdivided from the rest of the property and the plan is to lease that portion for a period of fifteen years with a first right of refusal during the entire 15-year term of the lease. After negotiations, the developer has agreed to not offer the building for sale for the first seven years of the lease. Beginning on the first day of the eighth year, the developer can offer the building for sale. The developer may not sell the premises, however, without the written permission of the City. The monthly lease payments for this portion of the project during the first seven years is $80,424.29. This monthly rate will decrease to $60,000 beginning on the first day of the eighth year.  Due to the requirements of the Federal Historic Tax program, the property has to be owned by the developer for at least five years. 
 
2. The developer will build an additional building adjacent to the existing historic building on a separate lot for $8,000,000.  The City will enter into a purchase and sale agreement for this property and the developer will owner-finance the cost of construction under the following terms: $2.9 million upfront payment toward specific tenant up-fits and payments of $45,573.76 each month for first seven years of this agreement with the ability to make a balloon payment of $3,057,802.41 on the first day of year eight to finalize the purchase of this property. 
 
Should the casino referendum pass, the City will use $5,924,000 from the initial $20 million payment from Caesars to pay towards specific tenant up-fits for the new construction, and to set aside two years of lease/purchase payments.  After the initial two years, the City will use gaming tax revenue proceeds to pay lease/purchase payments.
 
Should the referendum fail, the structure of this agreement will likely change and the City Council would need to determine whether it is willing to raise taxes to cover the cost.
BACKGROUND
After years of minor construction efforts to the existing police space and expanding police functions to other parts of the Municipal Building, public library spaces, and the Green Street Recreational building, the need for a new police facility was introduced to City Council during the Fiscal Year 2014 budget process.  

In 2016, the City funded a city-wide space study that identified a police facility as the number one City space need. In 2018, a second space study was funded to specifically identify and define the space needs of the Police Department.

In 2019, the City enlisted the services of Dewberry Engineering Consultants to identify and evaluate possible sites within the city for a new police facility. Ten sites were identified, evaluated and presented to the City for consideration.

In May 2020, the City issued an RFP inviting qualified developers to respond to a Request for Proposals (RFP) concerning the construction of a new or renovation of an existing structure to lease to the City of Danville, with an option to purchase, to serve as a new Police facility.
 
Three entities responded to the RFP as listed below:
 
Company
 
Company
Location

 
Proposed
Estimated Cost

 
Proposed Site Location
 
Blair Construction
 
Gretna, VA $17,750,000 Dan River Mills Corporate Building
HBA Architecture & Interior Design, Inc.
 
Virginia Beach, VA $25,000,000 Site not identified
FD Stonewater Arlington, VA $28,149,738 Former Danville Toyota site
 
After careful review of the RFP responses, the Blair Construction bid was selected to begin term negotiations for development and leasing.
RECOMMENDATION
Staff recommends the approval of both agreements under the condition that all obligations outlined in these documents are contingent upon the passage of the casino vote referendum on Tuesday, November 3, 2020.
 

Attachments
Resolution
Lease Agreement
Resolution
Purchase and Sale Agreement


    

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