Is Mishawaka making the best financial deal in buying Liberty Mutual building?

This article was written by Joe Ditts and originally posted in the South Bend Tribune

MISHAWAKA — The idea of pulling city hall, the police station and utilities offices into one downtown space — the Liberty Mutual Insurance building at Lincoln Way and Main Street — could save the hulking 93,556 square feet of office space from lingering as vacant.

But questions have arisen about how the city will finance the nearly $20 million cost to buy and adapt the structure, including the city’s proposal to use a Mishawaka Utilities bond of $16 million.

The city council will consider the proposed purchase at its meeting at 7 p.m. today at City Hall, 600 E. Third St., but will not vote on it until Aug. 5. After that, the proposed purchase would go to the city’s Redevelopment Commission for final approval on Aug. 19.

Shortly after Liberty Mutual announced in February that it would sell the structure, the company came directly to the city to sell, offering a fix for the city’s overdue space needs.

Documents jam the engineering office in City Hall. The 1950s-era Mishawaka Utilities business office offers no public restrooms, lacks accessibility and has an unusable second floor with 7-foot ceilings and water damage. The police station, finished in December 1995, is running out of room for evidence and needs a new roof.

Bob Kovach, Mishawaka’s Democratic mayor in the 1980s who’d drawn Liberty Mutual’s interest in building there, said he opposes the city’s purchase, wishing instead that more time be taken to market the building for private office space.

“What we need … is quality jobs … jobs that pay good money,” he told the Redevelopment Commission last Monday. “I may one day support this project, but I’m disappointed that we didn’t take a shot at going to the private sector.”

Rick Doolittle disagrees, saying it would be too arduous to market the office space. He was the real estate agent when Liberty Mutual first bought the site and now represents the city in the proposed purchase.

Doolittle, now a principal with NAI Cressy, said he foresees more vacant Class A office space coming onto the local market in the next two years than he’s seen since he began working in local real estate in 1971. He recalls working on a “very very complicated” five-year effort to adapt and find multiple tenants for a 125,000-square-foot building at Day Road and Edison Lakes Parkway after its sole occupant, National Steel, sold it.

John Jessen agrees that it would be costly to reconfigure the interior for several tenants. Likewise, as vice president and head of north-central Indiana brokerage for the Bradley Co., he said the area isn’t seeing enough businesses seeking offices here to fill Liberty Mutual’s space.

It’s rare enough to land a client wanting 10,000 square feet, but 93,556? “That’s huge,” Jessen said.

Liberty Mutual said in February that it was thinning its need for offices by having half of its 470 Mishawaka employees work at home.

City officials readily point out that Mishawaka would lose about $220,000 per year in taxes from the building. They argue that new development around it — including in downtown buildings that the police and utilities would vacate — would yield more than that.

Mishawaka resident Craig Johnson said at Tuesday’s Plan Commission meeting he likes the project but is leery of seeing his property taxes or utility rates climb. City planner Ken Prince responded that the city aimed to avoid such increases when it put together the financing.

The city plans to use tax increment finance dollars to cover the purchase price, $2.35 million, along with architectural fees and related costs, for a total of $4.65 million. To make room for that in the city’s TIF budget, Prince said the city is delaying plans at Beutter Park to build an ice skating ribbon and rink and a cafe/rink rental building by a year, so it wouldn’t be finished until 2023.

But the city proposes using a $16 million Mishawaka Utilities bond to cover the cost of adapting the Liberty Mutual building for the city’s new uses. City officials say the bond would make up 2.3% of the utilities’ major needs across the 15 years that the city would pay off the bond.

City council member Bryan Tanner, D-at large, favors the project but questions whether it’s appropriate to use a Mishawaka Utilities bond to cover renovations for the entire building when the utility would use only a portion of it. He’s reserving judgment until city staff fully explain how those expenses would be shared.

Other News