Rec center sale: St. Mary's offered $1M more than winning bid

Chase Cook
Contact Reporterccook@capgaznews.com
City left a $1 million on the table in Old Recreation Center sale.

The Annapolis City Council left about $1 million on the table when it decided to sell its old recreation center for condominiums and reject a proposal by St. Mary's Schools and Parish to use the structure as office and gymnasium space.

Now that the city has signed a contract with 02/Lafayette, which proposed six to eight condos for the property, the proposals from all bidders have been released. They show that St. Mary's offered $2.5 million up front compared to 02/Lafayette's roughly $1.5 million.

But supporters of the decision say the condos will generate more revenue for the city over the long term, through property taxes.

St. Mary's had offered to give $500,000 of its total $2.5 million to the city in lieu of property taxes.

The church also pledged to share up to $25,000 annually from the property's rental income, when parts of the building were rented out to groups like the Annapolis Boat Shows.

Altogether, eight groups submitted proposals. While some have argued the city picked the wrong bid, the bulk of the complaints have focused on the way the decision was handled.

"The whole process was flawed and we should go back to square one," said Alderman Fred Paone, R-Ward 2.

The city had intended to sell or lease the 70-year-old structure at 9 St. Mary's St. since 2009, when it was superseded by the opening of the Roger "Pip" Moyer Recreation Center. The building was acquired from the federal government in 1976.

In 2013, a request for proposals was released and the city got three bids. Wanting more options, the city threw out those bids and put out another request.

Eight bids were considered at a February 2015 meeting: from St. Mary's, 02/Lafayette, ARC House, Annapolis Shakespeare Company, Ashbourne Developments LLC, Pilli Development, Annapolis School of Seamanship and University of Maryland Center for Environmental Science.

Some bids called for nonprofit uses of the structure, some for residential condos.

Trying to streamline the process, the city set up a committee to examine the proposals and winnow them down.

Mayor Mike Pantelides said that while City Manager Tom Andrews has authority to sell buildings without council approval, they created the committee to involve the council in the decision.

The committee recommended three candidates to the council: 02/Lafayette, St. Mary's and Pilli Development.

Three applicants — Annapolis Shakespeare Company, Ashbourne Developments LLC and Annapolis School of Seamanship — were disqualified because their plans were too ambitious or didn't meet the zoning requirements.

The three organizations protested, saying the city hadn't provided enough guidance.

But the City Council didn't go along with the committee's recommendations. It allowed all five qualified bidders to make presentations.

Pantelides, who supported the St. Mary's proposal, said the city should have gone along with the committee recommendations.

"I would have stuck with the original three," he said. "St Mary's was close to a $1 million more, but the majority of the council felt strongly about (residential use)."

After a lengthy debate on the five remaining bids, the council narrowed the field to two: 02/Lafayette's residential proposal and the UMCES request for a 30-year lease to use the structure for offices and meeting rooms for The Annapolis Institute for Environmental Solutions.

St. Mary's didn't make the cut. The council chose 02/Lafayette over the University of Maryland proposal.

Surprises

The whole process was strewn with surprises, said Stephen Means, chief administrative officer St. Mary's Parish and Schools.

First, Means said, all of the bids were thrown out. Then the field was narrowed to the top three. Then the top five. And then St. Mary's was abruptly out of the running.

St. Mary's used to own the property, and the sale was a unique opportunity for it to reclaim that building, he said.

The church wanted to have offices downtstairs and an athletic area on the old basketball court upstairs.

"Our bid is sincere," Means said. "We worked this very hard and gave it a tremendous amount of time and thought and energy."

The contract between 02/Lafayette and the city was signed in mid-December. Jim O'Hare, a managing member of 02/Lafayette, said his company has two years to acquire permits before closing on the property. He estimated that acquiring the permits and finishing development will take two-and-a-half years.

O'Hare said that while the process was "not as efficient" as it could have been, he had no complaints.

"I thought it was sometimes uneven, but also very thorough," he said.

After 02/Lafayette was selected, Paone, who had been critical throughout the procedure, made a last-ditch effort to get the city to restart the process before finalizing the sale with the developer.

Paone said he requested the full proposals but didn't receive them, although he did get write-ups on them from the city.

He still believes the city should start over.

"There were some people who didn't know what should be done, including me," he said.

Pantelides said council members had access to information on the bids, and that if they didn't get it, that was because of a "lack of their effort."

Alderwoman Sheila Finlayson, D-Ward 3, thinks residential use of the property was the right call. Over enough time, Finlayson said, it will be more lucrative than the St. Mary's proposal.

But the city missed a chance to provide affordable housing in an area that lacks it, she said. Finlayson had wanted workforce housing for city employees, police officer and firefighters.

"My interest was getting the building back on the tax roll," she said. "We are perpetuating the disparity between the haves and have-nots."

Learning from doing

The process could have been improved, said Alderman Joe Budge, D-Ward 1.

Budge supported the residential option. But he said the city could benefit by learning from the process.

"I wouldn't characterize it as good or bad," he said. "It was a learning experience."

Budge said internal discussions could lead to code changes or written-out processes for selling larger properties.

"We need to have a much clearer process for property sales," he said.

The eight bids

While the bids were being discussed, city officials declined to release the proposals to the public, saying they didn't want to disclose proprietary information or undercut negotiations with bidders.

But the full proposals have been released now. Here they are, in summary:

•St. Mary's — $2.5 million to use the property for offices and gymnasium space. The property was not to be used for classrooms.

•ARC House — $1.1 million to refurbish the structure into nine residential units.

•Annapolis Shakespeare Company — A 49-year lease allowing renovation of the property for the company's theater and its educational activities. The company estimated the lease would generate more than $1.1 million for the city, along with other economic benefits of a large theater center. The company pledged more than $7 million in renovations over five years.

•Ashbourne Developments — $1 million to buy the property and renovate it into 20 properties. When the city disqualified the bid, saying there would be too many units, Ashbourne said it would reduce the number to meet the city's criteria. But it was never allowed back into the bidding.

•Pilli Developments —$1.45 million, with an additional $100,000 if the developer could acquire approval for eight units at the property.

•Annapolis School of Seamanship — A $1 million purchase via a 30-year mortgage at a fixed rate of 3.5 percent. The school wanted to use the property to create a "maritime center" in downtown Annapolis.

•University of Maryland Center for Environmental Science — Leasing the property from the city for at least 30 years at $10,000 per year, to create the Annapolis Institute for Environmental Solutions. UMCES pledged to spend $2.8 million on renovations.

•02/Lafayette — $1.525 million to purchase the building for development into six to eight residential units.

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