Detroit Public Schools Property Transaction: New Center Complex


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Detroit Public Schools Property Transaction: New Center Complex

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Detroit Public Schools Property Transaction: New Center Complex

  1. 1. Detroit Public Schools Property Transaction: New Center Complex Objective: Consolidate Detroit Public Schools’ Central Office and Information Technology staffs into a cost-effective, efficient, safe working environment while simultaneously ensuring adequate parking for employees and convenient access to parents and guardians of DPS students, many of whom rely on public transportation. Rationale: The former School Center Building (Maccabees Building) and adjacent Marie Donnelson Building, which previously housed DPS administration, were in severe disrepair because of deferred maintenance. • Repairs to address significant safety/code issues; malfunctioning elevators; crumbling exterior stonework; roof, window, mechanical and PA system repairs were estimated to be at least $11 million. • Even if these repairs had been made, operational expenses were an estimated $3.5 to 4million per year. • Furthermore, the district was partially subsidizing parking to the tune of $360,000 per year because there were only 105 DPS parking spaces vs. the needed 700. • An attempt was made to provide parking for all staff at a new parking garage through a partnership with DIA, Science Center and others and would have cost DPS approx. $11.3 million. DIA backed out of the arrangement and they owned the land for this proposed garage. Course of Action: The properties that best met the district’s various needs were located in the New Center Area of Detroit. Aside from downtown, this is the most accessible location for all Detroiters. • DPS purchased a five-floor condominium in the Fisher Building and 720 parking spots worth $13 million for a total of $24.1 million. Because of existing long-term leases on some of those floors, transitions space was provided in the Kahn and other New Center buildings until those leases expired. • Five DPS properties were sold to Wayne State University for a total of $9.12 million and approx. $7.8 million was available to partially offset the cost of consolidating DPS central office and IT staff in the New Center Complex. • DPS staff relocated in 2002 to the New Center Complex (Fisher, Albert Kahn and New Center). • The consolidation and move reduced the space requirement by approx. 51,762 square feet, or 16 percent. • The sale of the School Center Building and purchase of the Fisher Building office condominium were disclosed to the DPS Reform Board Chairman, the sitting governor and the state treasurer in 2002, a year before the sale closed. • Miller Canfield began legal work on the transaction in January 2002, more than a year before the sale closed in February 2003. • All Capital Improvement Program expenditures – including the Fisher condominium purchase – were approved by the state treasurer and independently audited annually by the accounting firm of Plante and Moran.
  2. 2. Cost Savings/Return on Investment: The purchase of the five-floor condominium at the Fisher Building will provide $13.8 million of operating savings to DPS in the first 10 years vs. remaining in the School Center Building and purchasing an additional 600 parking spots, making the necessary repairs and paying for operations costs. The entire Fisher Condo transaction has a payback of about six years and with all lease considered a payback of about ten years. • The costs for both capital and operations associated with staying in the Maccabees Building would have been $57 million over 10 years compared to $55.3 million over 10 years for the Fisher space, which includes 720 parking spaces and no charge for common area maintenance, security, heat, and maintenance/repair costs. (See Item A) • At 65 percent efficiency, the DPS purchase, including common space and after subtracting $13 million for 720 parking spaces, equals $52 per square foot, not the $182 per square foot that the current emergency financial manager has publicly stated. Furthermore, the figure of $52 per square foot is not adjusted for the fact that there is no charge for security, heat, and maintenance. • Currently, total operating costs after the move to the New Center Complex, including all leases, is about $1.7 million per year plus electricity. In 2013, the net annual operating savings from consolidating and downsizing the DPS headquarters will be about $3.2 million per year…inperpetuity. • The current $1.7 million annual lease cost for all space in the New Center area represents 0.14 percent of DPS’ 2008-2009 fiscal year expenditures. Item A: DPS Headquarters Relocation: 10-Year Comparative Analysis New Center Complex Relocation Cost of five-floor Fisher condominium with 720 parking spots: $24.1M Build out: $17M Electric: $3M Leases, including parking deck and Welcome Center $19M Offset for sale of School Center Building (Maccabees and other properties): $7.8M Total cost first 10 years: $55.3M Remain at School Center Building Repair and renovation of Maccabees and Marie Donnelson buildings: $11M to $14 M Operating costs: $3.5M to $4.0 M per year Parking (600 additional spots near DIA or other facility): $11.3M Total cost first 10 years: $57.3M Notes: • Fees and costs for a site to conduct professional development not included in figures for remaining at School Center Building but would be necessary • Analysis mixes capital and operating dollars ###