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Bus building blues

SLO Regional Transportation Authority spent $4.6 million to customize a privately owned building it rents but likely can never afford to own

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UNDERWATER SLORTA :  took out a loan to construct headquarters it rents - PHOTO BY STEVE E, MILLER
  • PHOTO BY STEVE E, MILLER
  • UNDERWATER SLORTA : took out a loan to construct headquarters it rents
Like many homeowners who made bad real-estate choices when times were good, San Luis Obispo Regional Transportation Authority is burdened by a risky deal turned sour.

Times are tough for the RTA. Federal and state transportation funding that had been mother’s milk to it and other public bus companies has become scarce. Costs are rising, especially salaries for drivers and mechanics who now have Teamster representation. Fare increases may deter riders and the end of bleak financial times is nowhere in sight.

The agency was looking for new headquarters in 2006, having outgrown the facility it leased at the time. The leadership wanted to own a building in which to store and repair buses that would also have room for administrative offices. They settled on 179 Cross Street, a 22,000 square-foot building located a block from Tank Farm Road, which is conveniently positioned at the center of RTA bus routes.

There was a catch: The building was nothing more than a shell. However, The RTA decided to spend $4.6 million to customize the building, equipping a cavernous bay with hoists and other repair equipment for buses, as well as constructing offices and conference rooms. The building “is divisible into eight suites and has a total of 10 roll-up access doors,” according to the website for the commercial development containing the headquarters.

The money for the headquarters came from two sources: a 25-year loan from Santa Lucia bank for $3,900,000 and $740,000 from State Proposition 1B. Prop. 1B was a $20-billion bond referendum passed by the public in 2006, “to fund transportation projects to relieve congestion, improve the movement of goods, improve air quality, and enhance the safety and security of the transportation system.” According to the ballot measure, $4 billion was intended “to make capital improvements to local transit services and the state’s intercity rail service. These improvements would include purchasing buses and rail cars, as well as making safety enhancements to existing transit facilities.”

The RTA does not own the building it poured $4.6 million into—and likely never will. The RTA rents the building for $25,000 a month, with an option to buy the property. But transit insiders doubt the agency will ever have enough money to do so. Even if the money were available, the RTA would wind up paying far more than the building is worth. The county recently assessed the parcel at $2,590,734: $1,090,734 for the land and $1,500,000 for improvements (in other words, the building).

Cornerstone Development owns the building.

Richard Paul, who owns Cornerstone Development, has few complaints about his tenant; he wishes they would be cleaner but otherwise, he’s content. The RTA has had three windows of opportunity to buy the building, Paul said, one of which has passed.

He said he could have constructed the building for much less than the $4.6 million the RTA spent to create their headquarters. He said RTA had to adhere to government prevailing wage requirements, which he thinks drove up costs. The RTA has a ten-year lease with an option to stay longer, Paul said, though he does concede he may end up with a built up building. “That’s capitalism 101,” said Paul. “It happens this time this way, other times it works differently.”

David L. Lilly was head of RTA when the real-estate decision was made. His employment contract was not renewed, at least partially because of delays in the construction of the headquarters building, according to Dave Romero, mayor of San Luis Obispo and a former member of the RTA board.

The board, which governs the authority, is comprised of representatives of the cities throughout the county and four county supervisors. The RTA board never voted on the specifics of the lease agreement, though it did vote to pursue a lease agreement on Aug 2, 2006 and a revised agreement on October 4, 2006. It delegated the authority to approve the buy/lease agreement to an executive committee made up of a few board members.

Romero was the only board member who spoke up at board meetings about the terms of the lease. At the October 4 meeting he said, “Maybe I missed it somewhere. I’m concerned, did we ever at a public meeting discuss taking action about leasing and acquiring this property?”

Romero then said he felt uncomfortable with the lease agreement being delegated to the executive committee when they were “committing millions of dollars for a long period of time.”

He was cut off by county supervisor Katcho Achadjian, also a member of the RTA board, who said the authority had been delegated to the executive committee by the full board. Romero wanted the project to come back to the full board for approval. The rest of the board members were not interested in that request.

Lilly, the RTA president, insisted to both the board and the executive committee that the RTA needed to sign the lease as soon as possible. “We are running short on time,” Lilly said, according to the minutes of an executive committee meeting. “We have not started doing anything in terms of drawing plans because we do not have a lease nor picked a contractor.”

 The committee approved the lease though the specifics of the contract were never voted on by the RTA board. A year later Lilly was let go on the same day he tried to get the RTA board to agree to a new service contract with a company that had hired the consultant who had written the contract proposal for the authority.

Finally, there was another blow to the project. Ride-On Transportation, a nonprofit shuttle company that was interested in sharing the facility, pulled out of the arrangement. Ride-On was to pay $9,000 monthly rent, an income the RTA counted on. Many of the offices in the building have never been occupied, though the RTA has tried to lure tenants at a rate far less than the authority pays.

County transportation officials admit nearly everything about 179 Cross St has not turned out well. Though it is unlikely transit funding will be available to purchase the building, SLO RTA has too much invested to walk away, according to a county executive.

“I like to think it will all work out well in the end,” he said.

Staff Writer Robert A. McDonald can be reached a rmcdonald@newtimesslo.com.

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