Central office financing bids come in lower than expected

SALISBURY – The proposed school central office will cost $2.7 million less than expected, thanks to low construction and financing bids, city officials said Tuesday.

“It would be a dereliction of our duty as community leaders to not go forward with this project,” Councilwoman Karen Alexander said at a called City Council meeting. “This economic environment is really unusual historically. To have all of that come together at one time is pretty amazing.”

Construction bids surprised city and school leaders last week when some came in $1 million under budget. Then, city officials were “ecstatic” when SunTrust Bank offered to finance the project at 3.12 percent interest over 15 years, better than the expected rate of 3.75 percent over 20 years.

City Council voted Tuesday to award the financing contract to STI Institutional and Government Inc., a subsidiary of SunTrust. If the state’s Local Government Commission gives the city approval to borrow the money, the council plans to award the construction contract Sept. 6.

Marand Builders of Charlotte has the low bid of $6.9 million for the building and $346,000 for extras including a decorative dome, custom desk for the Board of Education and special data wiring, for a total of $7.25 million. That’s less than the $8.5 million the city estimated the project would cost.

City Council members made it clear they want the building to have a dome, even if the city has to chip in.

To construct the office building, the city plans to borrow $7.37 million over 15 years, down from $8.37 million over 20 years. With the lower interest rate and shorter time frame, the city would pay $9.5 million over the life of the loan, as opposed to the expected $12.2 million, according to Assistant City Manager John Sofley.

The city would borrow the money on behalf of Rowan-Salisbury School System, which hopes to lease the three-story, 62,000-square-foot office building planned for 329 S. Main St. The state must also give the school system permission to enter into a lease agreement with the city.

If approved, the school system would make the debt payments for the city, using state sales tax revenue earmarked for capital outlay.

City Council also voted to approve a resolution of findings of fact regarding the project, required by the state as part of the application process. The resolution says the office building is “necessary for the city to continue with downtown redevelopment and the implementation of the Downtown Salisbury Master Plan.”

The city is using a state law that allows cities to borrow money for economic development in central business districts. Pete Bogle, director for Rowan County’s Building Codes Enforcement Department, said he believes the city could land a developer for the nearby vacant Empire Hotel within a year of building the central office.

A parking lot promised to the school system and Integro, which is building a $3.2 million headquarters next to the central office site, is not included in the $7.37 million project. The city has pledged to provide about 200 parking spaces, most of which would be new construction.

Bidding and constructing the parking lot will come later, Sofley said. Parking lot construction crews would need the same staging area currently used by Integro, he said.

Councilman William “Pete” Kennedy, a real estate agent, said the city has experience managing property — the seven-story Plaza owned by Salisbury.

Kennedy and other council members said they are willing to help pay for the decorative dome if the Robertson Foundation doesn’t cover the total cost. The foundation had agreed to pay for a $125,000 dome, but the decoration will cost $234,959.

If the foundation doesn’t pick up the tab, Sofley said he’s not opposed to making up the gap since the project came in under budget.

Alexander said the city should pitch in to place the dome on the building, “which is going to be an example of our institutional and governmental care for our community and last for generations.”

Supporters had to find a private donor to fund the dome after it was cut from the project to meet a smaller, $6 million budget set by Rowan County commissioners, who originally were going to fund the central office. A majority of commissioners later pulled their support for the downtown location, and the city took over.

“The decision to strike the dome was a legacy decision from another government agency and as Mr. Sofley so aptly said, this is now our building,” Mayor Pro Tem Maggie Blackwell said.

“Make sure that dome goes on there,” Mayor Paul Woodson added.

City Manager Doug Paris said the low bids on the project mean the school system will save $2.7 million, not the city.

“It’s not necessarily our money we are saving, it’s the school system’s,” Paris said.

If approved by the state, the school system would enter into a 35-month lease agreement with the city. City and school leaders chose the short-term lease to avoid needing Rowan County commissioners’ approval for the project.

But the arrangement would require the Board of Education’s vote to renew the lease every three years, while the city carries a 15-year debt.

Regardless, City Council members want to move forward.

“The window is closing,” said Councilman Brian Miller, a banker.

If the city had waited a few more years or even months to bid the office building, the interest rate would have been higher, Miller said.

“God is smiling on this project to this point,” Miller said.

Construction costs also would have gone up, said Alexander, an architect. Even since the city opened construction bids last week, costs for certain materials have increased, she said.

The city has the opportunity to help fill a critical need in the community that’s been known for more than two decades, Alexander said. Rowan-Salisbury School System has never had a central office and currently houses administration in five locations, including the dilapidated Long Street office.

“To have administrative staff working in that building, that is an embarrassment to our county and our citizens,” Alexander said. “They are working in conditions that are third world. We should not wait another day.”

Paris said the terms of the loan allow pre-payment with no penalty, so the school system could buy the building at any point. School officials have said they plan to lease, not purchase, the building.

Kennedy pointed out that most of the 80 people who spoke in favor of the new central office at a recent public hearing lived in Rowan County, not the city of Salisbury.

“A majority of citizens were from Rowan County pleading with us to do something,” he said.

Contact reporter Emily Ford at 704-797-4264.

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