By Chris Rotolo
MIDDLETOWN – Construction costs for Middletown’s new municipal center project could reach as high as $56.7 million.
But the entire cost to the township will be more than $100 million over 30 years, via an unconventional partnership announced Dec. 6.
“There will be no public borrowing for this project,” Mayor Kevin Settembrino told residents who filled a small conference room for the special public meeting at Middletown’s Town Hall Thursday.
Settembrino described how the township will partner with Brandywine Acquisitions & Development, a subsidiary of thePennsylvania-based Brandywine Financial Services Corporation, a real estate operating company. Brandywine will build the project and collect rent of approximately $3.6 million per year from the township over a 30-year period. Settembrino said the annual lease payments would begin in 2020.
According to Deputy Mayor Anthony P. Fiore, the township considered a more conventional development deal, but analysis from outside consultants showed that issuing bonds for design and construction costs, followed by the employment of organizations to complete the work would have cost approximately 10 percent more and meant incurring debt.
Fiore said approximately $3 million in annual debt service will be expiring by the time the township is due to make its first lease payment in 2020, which will help offset the cost of the 30-year agreement. Fiore said the property will revert back to Middletown at that time.
The $56.7 million construction price tag for the municipal center is considerably more than the $20 million initially estimated when the project at 1 Kings Highway was first discussed in 2013, and again in a September interview with The Two River Times.
“We’ve seen that this day was going to have to come almost a decade ago,” Fiore said of the township’s preparations for this project. “We prepared with our former CFO in a way that would allow debt service to roll off so we could put ourselves in a position, at some point, to remedy our town hall because it is sorely needed. There are inadequacies in space, in the courtroom, in storage, in community space, and that all needs to change as we continue to grow.”
According to Settembrino, in 1960 the township employed 28 police officers and had a population of about 39,000 residents. Fifty-eight years later there are 118 officers and about 68,000 residents. He added that the immense growth essentially forced the hand of the administration and the governing body to take action and pursue a development agreement.
“The question becomes, does the administration take and spend $20 million on an existing facility and not have any growth, or do you look at the ability to consolidate all facilities, get operational efficiencies and doit at a delivery model that isn’t traditional?” said Settembrino, who is also a professional architect in private practice.
“We looked at an option with the least cost impact to residents. Most municipalities don’t have the option of having their town hall on a state highway, or having additional space on site to create additional sites for revenue offsets,” he added, referencing the two pad sites for rent-paying tenants which will also be developed at the site, which borders Route 35.
Those offset sites are a concept the township introduced in September during an interview with The Two River Times, in which Settembrino said the 15,700-square-foot Kings Highway property would be subdivided to include two pad sites, which could be leased to tenants or sold outright.
Eric Moore, president of Brandywine said that over his company’s 35 years of operation they’ve completed more than a thousand of these types of partnerships with municipalities around the country, and the way in which they are able to ensure no public borrowing for construction costs is with the use of the pad sites.
The pad sites would be built along with the proposed 72,000-square-foot town hall structure which has multiple stories that would replace the current municipal offices and police department, as well as the Johnson Gill Annex and Penelope Lane properties. Revenue from the sale or leasing of those pad sites would be shared between Brandywine and the township. The township will also receive the tax revenue from those sites.
“We’ve worked very hard with the township to come up with a plan to offset some of the costs through tenant relationships,” Moore said. “You put placeholders on site, parcels we’re developing at our own cost, but sharing the revenue with the town. That’ll be an offset to building costs for the municipal building.”
Anthony P. Mercantante, township administrator said the pad sites could be used for most retail and commercial properties, but no drive-thru restaurants would be permitted.
Moore said the project would take about 26 months to complete.
A public hearing to approve the project is scheduled for Dec. 17.
This article was first published in the Feb. 28-March. 6, 2019 print edition of The Two River Times.
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