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Councilors want city to look at renovating 300 Building

April 18, 2016

In the days after Mayor Mike Huether broke a tie vote to move forward with a  $22 million government office building , three city councilors toured a downtown property they view as a missed opportunity for the city.

Council members' interest in the building at 300 North Dakota Avenue suggests the debate over the government building isn't settled.

"In my mind this is a $10 million mistake," Councilor Dean Karsky said. "The public needs to be aware that it is up to the prevailing voters to bring it back for reconsideration."

Councilors Karsky, Greg Jamison and Chrstine Erickson toured the 300 Building earlier this month. It's a stone's throw from the site of the proposed new building site.

Although not listed on the open market, the 76,000-square-foot, six-story 300 Building is for sale, according to Danielle Merrow, who co-owns the building with Todd Broin.

In Merrow's mind, the 46-year-old building would be a perfect fit to address the city’s employee space needs: It’s practically the same square footage included in the $22 million building planned by the city. Pillars, non-load-bearing walls, make remodeling for open office space obtainable; and some enclosed parking is available.

More importantly, Merrow said it’s available for the city to purchase for $6 million.

While it wouldn’t be move-in ready for the city, Merrow’s Realtor Dennis Breske said a full restoration “down to the bones” could be completed for an estimated $4 to $5 million.

“Even if it’s $70 per square foot for all 76,000 square feet, that’s $5.3 million,” said Breske, who used to be part owner of the 300 Building. “That’s $11,320,000 (for purchase and remodel), which is still a savings … of almost $14 million.”

Officials at City Hall, though, say the 300 Building was considered before deciding to build new. Sue Quanbeck Etten, Central Services Director for the city who’s led the administrative office building project for Mayor Huether, said the floor plan, a limited amount of parking and the sheer number of tenants leasing space in the building kept the 300 Building from being seriously considered when other space solutions were being vetted in 2013 and 2014.

“It wasn’t even something we considered because that building didn’t meet any of the criteria that we needed,” she said, although admitting the idea of purchasing the building out right wasn’t entertained – only leasing space.

That doesn’t sit well with the four city council members who dug their heels in Tuesday night and forced the mayor to cast the tie-splitting vote. Councilor Christine Erickson said if Merrow and Breske’s asking price and remodel estimates are even remotely accurate and there’s a possibility that millions could be saved, it’s in the interest of Sioux Falls taxpayers to take a closer look.

“We’ve heard a lot of reasons why we would need this new building, and I would be the first to admit we’d like to have brand new, but it’s hard to understand why we wouldn’t consider this as an option,” Erickson said. “It’s not my money. It’s the people’s money, and we could save a substantial amount of it.”

While the existing tenants in the 300 Building are seen as a drawback by the administration, Councilor Greg Jamison looks at that as a money-making opportunity for the city. The city doesn’t need an additional 79,000 square feet of space that’s included in the building planned at 8th Street and Dakota, which is why the third story will be built as shell, only to be finished when the city grows into it.

Jamison said the 300 Building could work similarly: Use the space needed now and continue leasing the rest.

“We could bankroll this thing,” he said. “It just makes too much business sense. Logic tells you you just can't not look at this.”

Breske estimated the lease payments from existing tenants, not including KSFY-TV's 20,000 square foot north wing that’ll be vacated in coming months , would tally between $400,000 and $500,000 annually. And because the longest of the leases is two years, the city could occupy more and more space for city employees incrementally.

Jamison said conversations among councilors are being had about forcing Quanbeck Etten and Huether's administrative team to double back and take a second look at the 300 Building. The new crop of city councilors being seated in May could also revisit the issue and repeal or amend the ordinance that authorized the $25 bond ordinance needed to finance the planned city administration building.

Courtesy of Joe Sneve, Argus Leader