Mike Wolanin | The Republic An interior view of the former Sears building recently owned and occupied by Cummins in Columbus, Ind., Friday, May 24, 2024. The City of Columbus recently purchased the building from Cummins.
Columbus City Council members gave initial approval to appropriate more than $300,000 to pay for “unanticipated expenses” incurred after the city’s redevelopment commission took ownership of the former Sears Building last summer.
Redevelopment is asking for an additional appropriation of $324,925 out of its own “Fund 4451,” also known as the Redevelopment District General Fund. Its required that redevelopment receive consent from the council because the appropriation is beyond what the department initially budgeted for 2025.
The expenses were in part a result of a facility leak that happened in the fall, not covered by insurance because the building is vacant, and due to property taxes owed on the building that city officials thought would be waived.
During a tense meeting on Tuesday night, the appropriation was given unanimous approval, although council members were steadfast in the view that they wished for the formerly Cummins-owned building to leave ownership of the city sooner rather than later once a new use is found for it, based upon the Downtown Columbus 2030 plan, expected to be wrapped up by the end of next month. Some members asking for assurances that city-owned properties be put back on the market by set dates.
The Columbus Redevelopment Commission currently owns more than 10 downtown properties including the parking lot at Second and Franklin streets, former location of the probation center at Third and Franklin streets, three behind city hall on Water Street and others, whose uses will be informed by the downtown plan.
The appropriation on first reading was approved 8-0, and will need to be passed a second time during the next council meeting on May 20 to be finalized. Councilor Jerone Wood, D-District 3, was absent from Tuesday’s meeting.
The Columbus Redevelopment Commission on March 18, 2024 entered into a purchase agreement with Cummins to acquire the 91,380-square-foot property at 323 Brown St., including the adjoining parking lot, for just over $4.2 million.
City officials said at the time that they intend to move quickly and not possess the building for long, and that the building’s ultimate use is contingent on what comes out of the new downtown strategic plan. City officials were interested in the property because it is centrally located and offers the chance to extend the city’s entertainment corridor along Fourth Street.
Redevelopment has money in its general fund to pay for the additional expenses. According to financials provided to The Republic, the fund, which receives revenue through interest income on tax-increment-financing (TIF) funds and rental income from YES! Cinema, will end the year with about $2.7 million, even with the additional appropriation.
The former Sears Building had been vacant since the pandemic struck, with no Cummins employees working there since October of 2022.
Redevelopment’s purchase of the property was backed by Columbus City Council members during a spirited meeting on May 21 — required because it was a city expenditure greater than $500,000 — but not without a fair amount of discussion from a couple of members and local entrepreneurs who attended the meeting—and last night’s meeting as well— who said they had their own plans for the property, which Cummins chose to sell to the city. The expenditure was approved 5-2, with council members Chris Bartels, R-District 1, and Jay Foyst, R-District 6, voting against.
Several administration officials on Tuesday took turns taking responsibility for oversights that happened during the process of acquiring the property— from not budgeting in the property taxes now payable into previous requests, and not securing flood insurance— with Mayor Mary Ferdon defending her staff and asking that skeptical council members trust that her administration is doing the right thing for the future of the city in purchasing downtown properties in hopes of encouraging cohesive development.
The full breakdown of the appropriation request is as follows:
- Flood remediation ($87,027.19)
- Insurance deductible hold ($25,000)
- 2024 Property taxes payable in 2025 ($116,169.30)
- Repair contingency ($25,000)
- Facilities maintenance expenses ($71,728.51)
“The intent all along of owning the Sears property has been to await the results of the Columbus Downtown 2030 Plan before redeveloping the site. This requires maintaining the 90,000+ square foot building in the interim as we excitedly await direction for its use,” Director of Redevelopment Heather Pope said in a memo to council members on April 24. “Although original maintenance expenses were calculated based on utilities expenditures provided by Cummins, additional unanticipated expenses have been incurred — leading to an immediate need for additional appropriation.”
After the water leak at the former Sears Building in October, the city paid Columbus-based water damage restoration company ServPro $87,027.19 for remediation services in January.
Mike Richardson, the city’s director of security and risk, said the flood event was not covered, in part because the building was sitting vacant. Pope told council members that their insurance company not covering a flood event was a revelation to her in the fall and that it was not asked about during the process of closing on the building.
“We are working with insurance to settle the claim for reimbursement; however, the $25,000 deductible is a sunk cost. We expeditiously paid the referenced ServPro invoice after submitting it to our insurance company. Due to the insurance claim being denied, we were forced to pay the claim or risk a lien on the property,” Pope said in the memo.
Pope told The Republic one of the plastic lines in the facility had sprung a leak and Eric Frey, executive director of administration, told council members it was due to a valve-pressure issue. The city’s Department of Public Works had been acting as the facilities manager of the property.
Richardson said he got two quotes to cover the property for flooding in the future at $40,000 and $60,000 per year with a deductible of $250,000.
Half-jokingly earlier in the meeting, and more seriously later on, Councilor Elaine Hilber, D-District 3, asked if it would be possible to have just one city employee in the building in hopes of more easily obtaining flood insurance because it would then technically not be vacant. But for that to be the case, the building would have to be at least 70% occupied, meaning a very large office for that one person.
“Is there anyway we can put an employee, a tenant, in the building so that we are covered by insurance? And then maybe we might feel comfortable with the appropriation if we know the building is covered until it’s sold,” Hilber said, trying to reach what she called a compromise.
Bartels, who had been against the city acquiring the property from the beginning, questioned whether the city was doing their due diligence.
On Tuesday night he asked that solidified dates be provided for when city owned properties would be offloaded—something that was palatable to other members— and asked that the “structure of the CRC (Columbus Redevelopment Commission)” be put on a future council meeting agenda as a discussion item “to discuss how it’s structured, how it implements things, and how council can adjust to protect the future.”
Regarding the property taxes now payable, Pope said redevelopment simply failed to include them in their appropriation request for the 2025 budget and that the matter was an oversight.
Property taxes are generally waived for city-owned properties, but because the state considers ownership as of Jan. 1, 2024— when Cummins still owned the property— property taxes for the full year are required, but would not be next year.
Redevelopment had expected expenses to maintain the building to be at $200,696, including electric, gas and water utilities; service agreements and inspections; and repairs. In actuality, the yearly maintenance expenses landed at $272,424.51.
The council on June 18 of last year appropriated $75,000 in Redevelopment General District funds to pay for maintenance for the remainder of the year just as redevelopment officially took control of the property.
During the first reading of the ordinance to appropriate the funds on June 4, Pope said in response to a question by Hilber that the “maintenance costs” for the building in 2021 were $131,829, $157,954 in 2022 and $136,440 in 2023. Pope told The Republic late last week those figures were just the utilities costs, and did not include things like maintenance and repairs.
Foyst reiterated as he had in the past that he thought the former Sears building should have gone from Cummins to a private entity “but as we sit here today, we have a problem and we have to fix it. We cannot not fix it.”
That sentiment was similarly shared by others, including Council President Frank Miller, R-District 4 who said: “The bottom-line is, we owe the taxes. Whether we like the purchase of the Sears Building, or didn’t like the purchase of the Sears Building, we do owe the taxes.”
“My feedback would be: we’ve had an insurance event, a risk-event, and the easiest way to de-risk the city would be to de-leverage our real estate portfolio,” Councilman Kent Anderson, R-District 5, said. “I think there would be broad agreement across the entire council that the city itself owns too much downtown real estate. And with that, as we can see with this event, it’s carrying too much risk and is also keeping things off the market.”
Anderson went on to “advise the redevelopment commission to start developing now, whatever process you think you’re going to use for the de-leveraging because the plan will be finished in the not-too-distant future.”
Frey said that recommendations for the building’s use will be ready in July and that a request for proposal (RFP) would be sent out before the end of the year to eventually secure the private entity that would develop the property, and get it off city hands.
Mayor Mary Ferdon then went up to the mic and noted that some of the same concerns as last year were being expressed about the city taking ownership of the property.
“I said at the time that we were committed to getting the Sears Building out into the community to the right developer that helps the vision of downtown Columbus and activating (downtown) Columbus. What I think you’re hearing from Eric, Heather and myself is: please trust us. We know that this is not something we’re going to hang onto. We want a developer in there, we want that back on the public tax roll, we want to help activate downtown.”
“I’m asking you to trust us to do the right thing,” the mayor said. “We don’t want to sit on the building anymore than you do.”
Local business owner Kurt Zwanzig spoke against the purchase of the property last year, and came up again during public comment this time around to read a three-minute prepared statement.
“The property ended up in the hands of the city of Columbus and now we’re asking the taxpayers to pay for something that was an oversight,” Zwanzig said, going on to ask the council “to consider whether the redevelopment commission is still serving the interest of Columbus or serving something else entirely?”
“Tonight’s vote is about $324,925, but it’s not really even about the money at this point. It’s about whether you—this council— will continue allowing the city’s government to buy properties that it shouldn’t even own in the first place,” he continued, saying he believed the right thing to do would be to vote no on the appropriation, which would mean a lien would be placed on the Sears Building. “Is this vote in the long-term interest of Columbus? Or is it about protecting someone’s short-term legacy?”
The mayor then went up again, saying that mistakes happen and taking exception to characterizations made by Zwanzig.
“Kurt’s angry because there’s some things that happened with the previous administration and the frustrations that he’s had with the city,” Ferdon said. “I’ve got the best staff ever, and I’m frustrated that you’re treating them as if one mistake that’s made means that the entire project should go down.”
After further back and forth, the discussion returned to council members with Tom Dell, D-at-large, summarizing that “we’re all in this together” and that apologies can be made, but at the end of the day the property taxes are due on the property and the council as a body agreed to purchase the building.
Council member Josh Burnett, R-at-large, thanked administration officials for “taking accountability for things that happened.”
“As you said Mr. Dell, it’s not a you or us— we agreed to it as a majority, so that becomes our liability and also our opportunity,” Burnett said. “I trust the process, we are ‘pot committed’. I also further respect the philosophical differences, whether it’s this project or a strategy overall.”
Hilber agreed that “everyone makes mistakes” but also said that she thought that councilors asking questions does not mean they are disparaging anyone.
“I think we’re just trying to have a conversation and just try to understand,” Hilber said. “Because it is a hard pill to swallow, I think, for some people, especially because it wasn’t a unanimous vote.”
She went onto to say she appreciated the administration’s willingness to own up to mistakes and that she believes they understand “the direction that the council’s wanting to go (in terms of) property ownership.”
“We’re supposed to be working as a team here—to accomplish a common goal—and a good team requires people to ask hard questions, and if we don’t ask those hard questions, we get into situations,” Bartels said shortly after. “That’s what happens in the real world.”
Miller went to Anderson—who attended the meeting virtually— one last time to say if he had anything else to add before members voted. Anderson stayed muted, shook his head no, and gave a thumbs up, providing some laughter and a break in the atmosphere.
Those interested can watch the matter being discussed on the public video stream of the meeting beginning at 34:25 and lasting until about 1:37:19.
