by Venturans for Efficient & Responsible Government
The 505 Poli building adjacent to City Hall exemplifies why the City of Ventura should not be in the property rental business.
When public money is used to buy rental income property, citizens have a right to expect the city will manage the investment wisely, and that includes when it comes to selling rental property. The City Council makes the decisions, and they rely on the City Manager and city personnel for sound, knowledgeable advice on how to acquire and operate such property.
Here’s the rub. Ventura city personnel have demonstrated that they do not have the knowledge or experience needed to assist the City Council in making decisions in such matters.
505 Poli Confirms That Ventura Is Bad At The Property Rental Business
Appraised for $3.55 million in Sept. 2005, the City of Ventura acquired it in November 2006 for $4.03 million. To fund the purchase $1.23 million in General Funds were used together with another $2.8 million from the Workers Compensation Fund. The use of the Workers Comp funds should have been a warning to the City Council. Later, the interim City Manager, Johnnie Johnson, exposed that budget manipulation.
Then there is the building itself and the adjacent crime laboratory. Both are asbestos-filled, old Ferro-cement structures. The removal of asbestos and hazardous material remediation in the crime lab alone was estimated to cost $500,000-$700,000. The list of deficiencies abounded-seismic conditions, old air conditioning systems, old electrical systems and a 60-year-old elevator that hinders tenant usage.
In 2006, City staff advised the City Council that the city would get a return from the investment in 6.3 to 8.8 years. History proved them wrong. By our simple accounting, the City of Ventura has spent or is obligated to pay an additional $4.6 to $5.0 million with no net rental income to justify the investment over the last 12 years.
Spending More Money Won’t Fix What’s Bad About Ventura’s Property Rental
The latest proposal put forward by the Public Works Department recommends the city sink another $2 million for tenant improvements for just the 4th and 5th floors.
City staff suggested in the report that if the City Council spends the money, 505 Poli will rent for $3 a square foot because of its downtown location. There was no rental comparison survey to support the plan. There was no vacancy survey included. The report also ignored the fact that vacancy is running at 25% citywide on commercial property. Perhaps the city should find out how to value a commercial property and sell it to private companies so that they can at least benefit from the buildings. The entire argument assumes that if “we build it, they will come.” The recommendation also suggests our city would receive a monthly income of $53,413 after the improvements at 100% occupancy. Great promise, but it lacked facts and is unrealistic.
Recommendations
The City Council should follow up on how much taxpayers have spent to acquire, improve and maintain 505 Poli. The total amount may surprise some of them.
The City Council should hold the city staff to a higher level of thoroughness and professionalism before recommending spending taxpayer money.
City government should get out of the property rental income business and find a qualified, reputable real estate company to lease and manage all city-owned rental property.
