Plans for medical office, relocating Citrus Heights city hall move toward hearing stage

04/25/2014 12:00 AM

04/25/2014 12:24 AM

A controversial proposal to relocate Citrus Heights’ city hall to make way for a new medical office building will soon head to city government leaders for a decision.

The last in a series of community outreach meetings is scheduled Wednesday regarding the pair of proposed development projects that Citrus Heights officials say would amount to a $50 million investment in the city, the largest since incorporation 17 years ago. The Planning Commission is expected to consider the proposal in June and the City Council, in July.

Dignity Health proposes to construct a three-story medical office building at Greenback Lane and Fountain Square Drive, site of the city’s current Civic Center. The city, in turn, proposes to build a new city hall on a city-owned parcel at 7625 Antelope Road, between Sunrise and Auburn boulevards.

City Manager Henry Tingle and Brian Ivie, president and CEO of Dignity Health’s Mercy San Juan Medical Center, said they see the cooperative effort as a win-win for the city and the health care provider.

With no room to expand at its Coyle Avenue site in Carmichael, Dignity Health has spent eight years seeking property for additional offices. The search focused on the Citrus Heights area, Ivie said, noting that 5,000 Citrus Heights residents received medical services at the Coyle Avenue offices last year, accounting for 24,000 visits. The expansion is driven by an anticipated demand for health care services due to an aging population and implementation of the Affordable Care Act. The new facility would employ 50 physicians and 120 support staff, all new hires.

At the same time, Citrus Heights is faced with replacing aging city office buildings, constructed in 1977 to house a nursery and retail shops. With the payments Dignity Health would make over 15 years for lease of the Fountain Square land, plus anticipated savings in building operation and maintenance costs, Tingle said, the city could have a new $18 million city hall for a net cost of about $5 million.

“It’s one of those once-in-a-lifetime opportunities for the city,” he said.

Reaction from the community has been mixed.

The Citrus Heights Regional Chamber of Commerce board of directors has sent a letter to the city endorsing the Dignity Health project on the Fountain Square site.

“It’s a great economic development opportunity for Citrus Heights,” Evan Jacobs, chamber board chairman, said. “Dignity Health has a long history in our area and is a good community partner. The project creates 170 permanent new jobs, many construction jobs and will bring thousands of patients and their families from around the region to Citrus Heights every week. Many of those folks will grab lunch in nearby restaurants and visit the shops a the Sunrise Market Place.”

Some residents voiced less enthusiasm for the paired projects. Chuck Engvall, a longtime resident of the Binet Estates neighborhood west of the Civic Center, said he has attended many of the city-sponsored community meetings over the past several months to discuss the proposed projects. Engvall said the community seems to be about evenly split on whether a new city hall is needed, either at Fountain Square or elsewhere. But he estimated about 75 percent oppose abandoning the current civic center to build at a new site.

Engvall’s wife, Joy, a member of the Arcade Creek Neighborhood Association board, said the association agreed not to take a position on the proposal, “because there are too many different opinions.” A large group within her neighborhood is opposed, she said, particularly residents living near Fountain Square.

Doyle Champlain, a board member of the Sunrise Ranch Neighborhood Association, which represents the Antelope Road area where the new city hall is proposed, said his association also has taken no position on the proposed projects. He said Councilwomen Jeannie Bruins and Sue Frost had attended neighborhood association meetings to explain the proposals.

“It’s refreshing how transparent they’ve been about getting information out,” he said.

Some people are concerned about building a city hall in a residential area, Champlain said, while others think it is a good location. But the association has held off endorsing or opposing the project until more is known about the financing issues.

“We want to see what all the options are,” he said. “There are a lot of questions regarding what the actual agreement with Dignity Health would be, or is.”

Tingle said Panattoni Development Co. would construct the Dignity Health Office Building and arrange financing through the nonprofit California Statewide Communities Development Authority, which would have ownership of the building for 15 years. Dignity Health would make lease payments to the authority to satisfy the loan on the building and rent payments to the city for the land. At the end of the 15-year term, ownership of the building and land would transfer to Dignity Health.

Dignity Health would provide the city with $1 million for relocation costs. An economic and fiscal benefits analysis indicated Dignity Health would pay the city about $5.9 million over the 15-year-term of the land lease, but Tingle said the figure likely would be closer to $7 million due to favorable interest rates available through the California Statewide Communities Development Authority.

He said the project is consistent with the city’s economic development strategy to diversify its economic base and rely less on retail uses. It also would allow the city to continue its pay-as-you-go policy.

“If Dignity Health doesn’t come, we’re still faced with the dilemma that we need a new city hall,” Tingle said. “We would be hard-pressed to do it without issuing some form of debt.”

The April 30 open house and community meeting will begin at 6 p.m. in the Citrus Heights Community Center, 6300 Fountain Square Drive.

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