The city council’s ‘Building The Commons’ Committee has announced that it is holding another open house at the O'Reilly complex on Thursday, Sept. 10, at 5 pm. The O’Reilly complex is located at 1003-1007 Gravenstein Hwy. North.
This meeting will follow the same agenda as the last meeting at O’Reilly, which we covered in depth here, except this time there will be an open public comment session after the presentation. (See the agenda for the Open House at the end of this article.)
After the last meeting at O’Reilly, the vast majority of attendees seemed excited by the prospect of moving the library, the senior center and city hall to O’Reilly as part of the Sebastopol Commons.
Franny Minervini-Zick was particularly enthusiastic.
“It sounded like it was totally doable. I think there’s a lot of excitement, and I hope it happens,” she said, though she noted she was going to take the information from the meeting back to her finance-minded husband, Glenn Minervini-Zick, so he could kick the tires.
Kick the tires, he did. In fact, he wrote a letter to the city council about his thoughts, and we felt it was worth reprinting.
The council is scheduled to make its decision about what to do next with the Sebastopol Commons at its meeting on Tuesday, Sept. 15, when the ‘Building the Commons’ Committee will give its final report.
Here’s Glenn’s letter:
Hello Sebastopol City Council Members,
In a recent Sebastopol Times article regarding the Commons proposal, my wife, Franny Minervini-Zick, volunteered me to “kick the tires” on the proposal.
As the proposal itself acknowledges, many of the assumptions underlying the presentation have not yet been researched, calculated, or verified. I therefore reviewed the materials at a high level and will be happy to help with further review as additional information becomes available.
In the meantime, I believe there are several important questions that can—and should—be addressed before the City commits to a more extensive and costly due-diligence process.
Please see my preliminary review below. I hope it contributes constructively to the discussion.
Best,
Glenn Minervini-Zick
CPA, retiredPreliminary Viability Review
Creating the Commons Proposal
To: City Council
Subject: Recommended Preliminary Review Before Authorizing Full Due DiligenceThe Creating the Commons proposal has opened an important discussion about how Sebastopol (“the City”) might address the space needs of the library, City Hall, Senior Center, and potentially other nonprofits. The O’Reilly property may ultimately prove to be an excellent opportunity.
At the same time, several of the assumptions that make the proposal financially attractive have not yet been tested, as noted in the slide deck. Fully investigating them could require substantial expenditures for consultants, architects, engineers, and financial and legal advisors.
I suggest that the City Council take a preliminary step before committing to that level of expense.
Rather than trying to answer every question about O’Reilly now, the City should first determine whether the basic concept appears viable. I believe four questions can provide that initial reality check.
1. Are there financially sound and eligible tenants who can pay the proposed rent for the O’Reilly space?
The proposal depends in part on rental income from space in the O’Reilly building that would not be used for City functions. The assumed rent of approximately $1.75 per square foot should therefore be tested before it becomes a foundation of the financial plan.
The City should talk directly with the proposed tenants and determine whether they are genuinely interested, financially capable of paying the proposed rent, and willing to make a meaningful commitment.
Currently, the three major proposed tenants—the library, City Hall, and the Senior Center—pay between $1 per year and no rent. If 42,000 square feet is required for these uses, their combined monthly rent at O’Reilly would be approximately $74,000 per month.
There is an additional consideration: tax-exempt financing may restrict the type and amount of private use of the building. The City should establish, at least preliminarily, whether potential tenants and their proposed uses are compatible with those restrictions.
2. Is there a realistic market for the remaining space?
Even if the proposed tenants are viable, the City could still be left with a substantial amount of space to rent. The proposal assumes a break-even budget at approximately 50% occupancy. Renting additional space beyond that level would either create surplus cash or help cover expenses that have not yet been fully determined.
The City Council should therefore ask a simple question: Who would actually occupy the remaining space, and is there a realistic market for it?
This can initially be explored through existing market information and conversations with local real-estate professionals, rather than commissioning a formal market study.
There appear to be conflicting indications regarding potential demand. I have heard that there may be interest from significant enterprises in the Santa Rosa area. At the same time, the Council should determine whether the O’Reilly building’s recent history of remaining substantially unrented indicates a meaningful challenge in attracting tenants.
The objective is not to prove that every square foot can be rented. It is to determine whether the rental assumptions are based on a plausible market or primarily on an assumption that the space will eventually find tenants.
3. Does the project still make sense if the assumptions are less favorable?
The City Council should ask what happens if the project does not achieve the proposed rent or full occupancy.
A simple analysis of the existing financial model could show what happens if rents are lower, occupancy takes longer to reach its expected level, or the project costs more than currently estimated.
The purpose is simply to determine whether the proposal is financially resilient or dependent on optimistic assumptions.
4. Is the City prepared to become a major commercial landlord?
If the City purchases O’Reilly and rents a substantial portion of the building, it will take on responsibilities that go well beyond those associated with owning a conventional civic facility.
Before moving forward, the City Council should have a preliminary understanding of who would manage the property, how leases and tenants would be handled, and what responsibilities and risks the City would be assuming.
Just as important, the Council should consider whether becoming a major commercial landlord is something the City wants to undertake.
Public Engagement
The publicity surrounding the O’Reilly proposal appears to have awakened broader public interest in the City’s long-term facility needs. Conversations around town suggest that residents want a greater voice in deciding how the City’s space needs should ultimately be addressed, rather than simply responding to a decision about one particular property.
The City Council should take advantage of that interest by holding additional Town Hall sessions during this preliminary phase. These meetings could explain what is currently known, identify the major questions still being considered, and, most importantly, give residents, nonprofits, and other interested parties an opportunity to suggest alternatives and express their priorities. Engaging the community while the range of possibilities is still open would make the eventual decision both better informed and more broadly supported.
Recommended Approach
I recommend that the City Council treat these four questions as a preliminary viability review, not as a substitute for due diligence.
If the answers are encouraging, the City Council would then have a stronger basis for authorizing the more expensive work necessary to evaluate O’Reilly fully and compare it with other alternatives.
If the answers are not encouraging, the City can reconsider the proposal before spending substantial public resources.
This approach does not reject the Commons proposal. It simply asks the City to test the fundamental assumptions before investing heavily in proving them.
The central question is: Is there enough evidence that the Commons concept can work to justify spending the time and money necessary to determine exactly how it would work?
Invitation and agenda for the O’Reilly Open House on Sept. 10
The Council’s Committee “Building The Commons” is holding another Open House at O’Reilly at 5 pm, tomorrow, Sept. 10, at 1003-1005 Gravenstein Hwy. North.
Come see the buildings with your own eyes and learn about this past year’s work to find a location for a community services hub. Info attached and in the link below. Ask questions, give feedback!
The first Open House in August was held in the mid-afternoon. This one will be held in the early evening so more folks or new folks can attend. Be there and bring your friends and neighbors!
Open House: 5 pm
Freely walk around the O’Reilly Building
Public Presentation: 5:30 pm (ITEM B-Slideshow & Summary Page)
Community Needs Assessment (5 min)
SWOT Analysis of Potential Locations (10 min)
Financial Viability of O’Reilly (15 min)
Presentation Summary
Community Engagement
Public Comment (See comment card below)
Following the presentation, there will be additional time to tour one of the O’Reilly buildings.
And this would require selling the current city hall and library. Are there restrictions? Is there a market? What is the value of those properties? Timing of such a sale, viz. O'Reilly. Advice: keep the cart behind the horse.
Great letter! I wonder if the city council will take it to heart. Are they willing to listen to a CPA? Have they gotten a CPA to review and work with them regarding the water and sewer money, like the Grand Jury said they should do? We shall see.............