Detroit Public Schools Property Transaction: New Center Complex

1. Detroit Public Schools Property Transaction: New Center Complex
Objective: Consolidate Detroit Public Schools’ Central Office and Information
Technology staffs into a cost-effective, efficient, safe working environment while
simultaneously ensuring adequate parking for employees and convenient access to
parents and guardians of DPS students, many of whom rely on public transportation.
Rationale: The former School Center Building (Maccabees Building) and adjacent Marie
Donnelson Building, which previously housed DPS administration, were in severe
disrepair because of deferred maintenance.
• Repairs to address significant safety/code issues; malfunctioning elevators;
crumbling exterior stonework; roof, window, mechanical and PA system repairs
were estimated to be at least $11 million.
• Even if these repairs had been made, operational expenses were an estimated
$3.5 to 4million per year.
• Furthermore, the district was partially subsidizing parking to the tune of $360,000
per year because there were only 105 DPS parking spaces vs. the needed 700.
• An attempt was made to provide parking for all staff at a new parking garage
through a partnership with DIA, Science Center and others and would have cost
DPS approx. $11.3 million. DIA backed out of the arrangement and they owned
the land for this proposed garage.
Course of Action: The properties that best met the district’s various needs were located
in the New Center Area of Detroit. Aside from downtown, this is the most accessible
location for all Detroiters.
• DPS purchased a five-floor condominium in the Fisher Building and 720 parking
spots worth $13 million for a total of $24.1 million. Because of existing long-term
leases on some of those floors, transitions space was provided in the Kahn and
other New Center buildings until those leases expired.
• Five DPS properties were sold to Wayne State University for a total of $9.12
million and approx. $7.8 million was available to partially offset the cost of
consolidating DPS central office and IT staff in the New Center Complex.
• DPS staff relocated in 2002 to the New Center Complex (Fisher, Albert Kahn and
New Center).
• The consolidation and move reduced the space requirement by approx. 51,762
square feet, or 16 percent.
• The sale of the School Center Building and purchase of the Fisher Building office
condominium were disclosed to the DPS Reform Board Chairman, the sitting
governor and the state treasurer in 2002, a year before the sale closed.
• Miller Canfield began legal work on the transaction in January 2002, more than a
year before the sale closed in February 2003.
• All Capital Improvement Program expenditures – including the Fisher
condominium purchase – were approved by the state treasurer and
independently audited annually by the accounting firm of Plante and Moran.

2. Cost Savings/Return on Investment: The purchase of the five-floor condominium at
the Fisher Building will provide $13.8 million of operating savings to DPS in the first 10
years vs. remaining in the School Center Building and purchasing an additional 600
parking spots, making the necessary repairs and paying for operations costs. The entire
Fisher Condo transaction has a payback of about six years and with all lease
considered a payback of about ten years.
• The costs for both capital and operations associated with staying in the
Maccabees Building would have been $57 million over 10 years compared to
$55.3 million over 10 years for the Fisher space, which includes 720 parking
spaces and no charge for common area maintenance, security, heat, and
maintenance/repair costs. (See Item A)
• At 65 percent efficiency, the DPS purchase, including common space and after
subtracting $13 million for 720 parking spaces, equals $52 per square foot, not
the $182 per square foot that the current emergency financial manager has
publicly stated. Furthermore, the figure of $52 per square foot is not adjusted for
the fact that there is no charge for security, heat, and maintenance.
• Currently, total operating costs after the move to the New Center Complex,
including all leases, is about $1.7 million per year plus electricity. In 2013, the net
annual operating savings from consolidating and downsizing the DPS
headquarters will be about $3.2 million per year…inperpetuity.
• The current $1.7 million annual lease cost for all space in the New Center area
represents 0.14 percent of DPS’ 2008-2009 fiscal year expenditures.
Item A: DPS Headquarters Relocation: 10-Year Comparative Analysis
New Center Complex Relocation
Cost of five-floor Fisher condominium with 720 parking spots: $24.1M
Build out: $17M
Electric: $3M
Leases, including parking deck and Welcome Center $19M
Offset for sale of School Center Building (Maccabees and other properties): $7.8M
Total cost first 10 years: $55.3M
Remain at School Center Building
Repair and renovation of Maccabees and Marie Donnelson buildings: $11M to $14 M
Operating costs: $3.5M to $4.0 M per year
Parking (600 additional spots near DIA or other facility): $11.3M
Total cost first 10 years: $57.3M
Notes:
• Fees and costs for a site to conduct professional development not included in
figures for remaining at School Center Building but would be necessary
• Analysis mixes capital and operating dollars
###