By By KATHIE HEMPEL / Niles Daily Star
NILES – A purchase agreement has been signed. The City of Niles is now expected to approve the agreement to buy back the old post office building at Monday's council meeting.
"About two months ago Richard Ellis of South Bend, representing current owner, Mary Skinner, approached the city. At the last closed session of the council, the signing of a purchase agreement for $650,000 was approved," Terry Eull, City Administrator, said Wednesday.
The money to buy the building and the parking lot at 322 E. Main St. will come from the approximate $4 million dollar electric reserve fund. The Utilities Department, which occupies 75 percent of the building, will continue to pay rent back to the fund.
"Basically this is a loan from the city back to itself," Eull said.
The controversial 25-year lease to the city was negotiated in 1990 when the city sold the building to developer Earl Fielding for $1. Fielding then restored the building, which was in great need of repairs and had stood vacant for several years.
"The bottom line is the current lease does not expire until the end of 2015. During those eight years, the city would pay at least $525,000 in rent and taxes," Eull said.
Two of the three suites in the building, not occupied by the city, will continue to pay rent and taxes amounting to $100,000 to $125,000 over the eight years. This allows the city to have the $650,000 cost of the building paid back to the electric fund at the end of that period, he added.
Though the city will lose 75 percent off the tax roll, it will gain the building as an asset. The rented suites will still bring in tax revenue as any revenue the city property realizes as profit on city-owned property, continues to be taxable.
The DDA stands to lose approximately $15,000 per year in TIF revenue. The new Chemical Bank building added to its district is expected to more than make up the difference.
The purchase will return the parking directly behind the property to the public. This is seen as another plus to the purchase.
"At this point it makes sense for the city to buy it. What would happen at the end of the 25 years if we didn't? We feel strongly about city services being downtown," Eull said.
The condition of the building is good. Only minor work, including some roof maintenance that will go out to bid, is needed.
Eull and the council are well aware of the past controversy. Both the original sale of the building and subsequent considerations to buy it back have been met with great debate.
"There was a lot of controversy. I understand that. Is it good for the city now? We can't get out of the lease. We need to weigh the past and look to the future. For the city, on paper it is a good deal now. If other circumstances outweigh the benefits, then you wouldn't buy," he said.
City Councilmember, Patricia Gallagher was the sole dissenting vote to the original 25-year lease agreement. She and the rest of the council have been unanimous in their agreement with what has been done to this point.
"I figured 25 years was too risky a situation. With everything figured in it was a two to three million dollar commitment. To me, it was just too expensive."
Eull knows you can't change the past. The money spent on the lease is gone with no gain, no equity.
There had been talk – when a purchase was considered previously – of moving city hall to the building as well.
While Eull said that is not the sole reason for the current purchase bid, he could not completely rule that possibility out for the future.