Citrus Heights council to act on long-debated city hall, medical office building project

The Citrus Heights City Council this week will consider a $53.2 million city hall and medical office project, one of the community’s most divisive proposals since its incorporation in 1997.

Plans call for relocating Citrus Heights’ City Hall and constructing a three-story Dignity Health medical building on the current civic center site at Greenback Lane and Fountain Square Drive. Citrus Heights officials have touted it as the largest public-private investment in the city’s history, and business leaders have backed the plan as a way to diversify the economy with health care jobs.

But opponents question the need for a new city hall building, the size of the medical office building and potential increases in noise and traffic.

The project has gone through two major modifications in the past 18 months, and a legal threat last summer prompted the city to undertake a more extensive environmental study. But critics say they remain dissatisfied and will push for a compromise when the council takes up the matter Thursday.

Norman Hill, a leader of Preserve Our Civic Center, said the group has proposed that the medical office building be reduced to two stories, its footprint expanded and set back farther from Greenback Lane. He argued that the same square footage and number of parking spaces could be provided while reducing the building’s visual impact on Greenback Lane and neighboring residential areas.

“I think there are a number of vulnerabilities to the EIR,” Hill said of the latest environmental study, adding that the group has not ruled out litigation if a compromise can’t be reached.

Resident Tonya Wagner, a longtime neighborhood activist, said she prefers the current proposal to an earlier one that called for building a new city hall on Antelope Road in a largely residential area. But, she said, “I believe there is still a group interested in leaving city hall on the civic center campus.”

City officials say moving city hall to make way for the medical office building would allow the city to replace several buildings housing city offices with a single building without incurring debt.

In August 2013, Citrus Heights unveiled a plan to fund its new city hall by allowing Dignity Health to construct a 68,727-square-foot medical office building on the northwest corner of Greenback Lane and Fountain Square Drive. Dignity Health officials said they spent eight years seeking property for additional offices. With no room to expand at its Coyle Avenue site in Carmichael, the health-care firm focused its search on the Citrus Heights area.

At the same time. Citrus Heights officials were looking to replace aging city office buildings, which were originally built in 1977 to house a nursery and retail shops. The proposal calls for demolishing all buildings on the current civic center site, except the Police Department offices, and replacing them with a $31.2 million medical office building constructed by Panattoni Development Co.

Under terms of the proposed ground lease, Dignity Health would pay $6.9 million over 15 years, with the option to purchase the property for $1 at the end of that period. That revenue, city officials say, would go toward constructing a new city hall building on a 10.9-acre parcel at Fountain Square Drive and Stock Ranch Road, down the street from the current civic center.

The parcel is owned by Rancho Cordova-based Capital Partners Development Co., which proposes to construct a new 35,000-square-foot, $22 million city hall building. Following execution of a ground lease, the city would make lease payments totaling $7.6 million. Once the building is constructed and occupied, the city would have the option to purchase it from Capital Partners for $14.4 million or make lease payments over a 30-year-term.

The project has drawn support from business groups, including the Citrus Heights Chamber of Commerce and Sunrise MarketPlace business improvement district, which laud it as an opportunity to diversify the city’s economy. The medical offices are expected to provide 170 jobs, increasing the customer base for local retail businesses and possibly drawing medical-related businesses to the community.

Those who object cite various reasons. Some argue that a new city hall is not needed, and that the city should renovate the existing buildings. With its rose garden, they say, the former home of Fountain Square Nursery is a cherished part of the community. Others say a new city hall is needed, but they would prefer to see it built on the current civic center site. They also have issues with the height and placement of the medical office building, and the increased noise and traffic they believe it would generate.

Hill, of Preserve Our Civic Center, said the site now proposed for city hall is better than the Antelope Road site.

“This is a better proposal,” he said. “It would be even better if the two locations were switched,” with city hall remaining on the current civic center site and the medical office building constructed at Fountain Square Drive and Stock Ranch Road.

But city officials say Dignity Health’s lease payments for the Fountain Square site are key to paying for the new city hall without incurring debt. It is unlikely, they say, that any other company would be willing and able to pay $5.3 million above market value to purchase the Fountain Square property and to invest $31.2 million in a building and site improvements. The current city hall complex was appraised at $5.25 million in 2001, but a 2014 appraisal put the as-is market value at $1.62 million, according to the city.

This story was originally published March 24, 2015 at 1:57 PM with the headline "Citrus Heights council to act on long-debated city hall, medical office building project."