Testifiers, officials say renting space for county is costly
Council mulling purchase of Maui News buildings in Wailuku
Testifiers and financial advisers used the county’s decision not to purchase One Main Plaza in arguing Wednesday that Maui County could save rent money by acquiring a 6.3-acre, $9.8 million parcel in Wailuku that includes The Maui News offices.
One Main Plaza, a six-story professional building housing several county agencies, has cost the county more than $21 million in rent and common area maintenance since 2006, county Finance Director Scott Teruya said during the Maui County Council’s Budget, Finance and Economic Development Committee meeting Wednesday night.
Seeking more office space due to a crowded Kalana O Maui County Building, the county had an option to purchase One Main Plaza for about $10.5 million in 2005, but the council voted against it, county reports show.
“Even before I got involved with Realtors, often people would bring up the failure of Maui County to purchase the One Main Plaza building,” Jason Economou, who works at One Main Plaza and represents the Realtors Association of Maui, testified during Wednesday’s meeting. “Don’t pass this up — don’t be the laughingstock for the next decade over your failure to purchase this property that will be useful and will be profitable.”
The Maui News has a letter of intent from the county to purchase the land and three office buildings on the newspaper’s property at 100 Mahalani St. If approved, the purchase would not be allowed to exceed $9.8 million.
With some warming to the proposal, council members in committee again discussed the possible acquisition, which is also listed on Friday’s council agenda. The committee did not take any action on Wednesday.
Council members have expressed some concerns about making a purchase of nearly $10 million during a pandemic when revenues have declined and many departments have been forced to cut back. Others have pointed to the money the county could save if it moved away from renting and more towards owning properties.
Christine Choi, a financial adviser for the county, and Julia Kim, an underwriter for the county, said during the meeting it’s an “opportune time” for the county to make the purchase due to historically low interest rates and the county’s excellent bond rating.
The borrowing rate for 20 years would be 2.2 percent, Choi said.
“In terms of the cost-benefit analysis . . . the debt service on this bond transaction versus your rental payments — there is obviously a significant benefit in terms of cash flow impact,” she said. “General fund cash flow will actually result in a positive benefit in terms of paying less in rent, not paying rent and paying less in debt service than what you would have paid in rent.”
Kim added that it’s a way to “reduce the county’s cost as well as have additional assets.”
Instead of using cash, the acquisition would be backed by bonds, borrowing that is designated solely for capital improvements and capital purchases — and not things such as rental assistance or food buys, Baz said.
Teruya had said during a previous committee meeting that the debt service in acquiring the building would be about $600,000 per year, or about $50,000 per month. The saving of rent leases by purchasing the parcel and moving county staff out of existing leases would generally be about $50,000 to $60,000 per month.
The county pays $285,681 per month, or $3,428,175 per year, not including escalation, for rent and maintenance for the 93,690 square feet it currently rents, according to county documents.
County staff in the following departments and agencies rent space: County auditor, Environmental Management, Finance, Housing & Human Concerns, Management — Information Technology Services Division, mayor — Office of Economic Development, Planning and Water Supply. Liquor Control, Public Works and Transportation currently rent and will be relocating to the new service center building in Kahului.
In mulling the Mahalani Street acquisition, the mayor asked that the council be given the first opportunity to use the space. If they decline, then the administration would still pursue the purchase and plan to move in departments, possibly beginning with the ones with the highest rents.
Committee Chairwoman Keani Rawlins-Fernandez said Wednesday that the acquisition is a good one for the county regardless of whether the council moves to Mahalani Street.
“I agree with the administration’s direction in consolidating into spaces that our county owns and stop paying the mortgage for other places like One Main Plaza,” Rawlins-Fernandez said.
Council Member Yuki Lei Sugimura, who initially had several questions about the possible purchase, said Wednesday that the acquisition would be saving money in the long run.
“It’s something we need to do — we need to consolidate our leases and our CAM (common area maintenance) costs,” she said.
An appraisal report dated Oct. 29 by Fukuda Valuation & Consulting LLC said that the market value of the fee simple estate of The Maui News property is $10.2 million. If the sale goes through, The Maui News will lease 23,151 square feet in the rear building from the county and continue operating at its current location.
The county negotiated a lower sales price provided there’s no rent owed for the first two years. If The Maui News were to stay, the monthly rent would be $10,000 from months 25 to 36, Teruya had said.
* Kehaulani Cerizo can be reached at firstname.lastname@example.org.