County approves purchase of former Kmart property
Sutter County supervisors recently approved the $8.24 million purchase of the former Kmart building on Gray Avenue in Yuba City with the intent to consolidate Health and Human Services programs into one location.
The purchase is expected to result in better coordination of services for the public and result in savings for support services such as reception, security and custodial. There is also the option for the county to subdivide some of the property and lease it out for other uses down the road.
“Right now, HHS is delivering services out of 17 different locations. Not only is that inefficient for the county in terms of paying, whether it’s leases or owned buildings that we are having to maintain, it inhibits coordination of services and efficiencies therein, and complicates access for vulnerable populations,” said Sutter County Administrator Steve Smith during Tuesday’s meeting.
The county’s HHS department includes the children’s branch (behavioral health services for children and teens and child welfare services), all of Public Health, and some eligibility and employment services. That represents as many as 300 employees, or about one-third of the county’s workforce, said Leanne Link, assistant county administrator for Sutter County.
“Imagine being a mom with two young children having to go to multiple offices using public transportation,” Link said. “This central Yuba City location is easily accessible by public transportation and is also a walkable distance for a lot of our clients.”
The county has been leasing the property at 850 Gray Avenue since November 2017 for $16,124 per month ($193,500 annually). The county and the building’s owners, G&B Investments, signed a purchase and sale agreement last September, which included a 120day period to complete the county’s due diligence and develop a financing plan for the project, along with a 30-day extension.
The purchase will include three separate parcels (812, 828, 832, 840, 850 and 860 Gray Avenue) including the 13.37-acre site, the 84,179 square feet of vacant space (former Kmart building), leased and vacant commercial space totaling 34,866 square feet, and approximately 875 parking spaces.
“When you look at the numbers, it makes a lot of sense,” said board Vice Chairman Mike Ziegenmeyer. “It’s a huge savings for the county.”
Consolidation of county facilities has been a main priority for the board for several years. Board Chairman Dan Flores said the purchase will do just that, as well as give the county room for growth and the option to sell off or subdivide the property and use the proceeds to offset some of the cost.
“Altogether, it just makes total sense,” Flores said. “I’m just looking forward to moving towards the next steps and I appreciate the work (county staff has) put towards it.”
The board voted unanimously to affirm the purchase during Tuesday’s meeting.
Now that the purchase has been approved, the county plans on focusing on the financing for the property in order to close escrow in mid-may. A debt committee will provide supervisors with a debt financing recommendation likely in March.
From there, supervisors will decide on how to best utilize the 13.37-acre site.
The interior of the building is basically an empty shell that would need to be modified to meet current building code requirements and best fit the needs of HHS. The remodel cost is estimated at $24.5 million to $38.4 million.
Link said the construction market is very expensive right now, and the county will need to rework its design to fit within what HHS programs can afford. Financing the construction will require that the county obtain funding in the municipal bond market.
“Health and Human Services is unlikely to need the entire space, so there may be an option to sell or lease a portion of the land for additional development,”
Link said. “Realistically, we are probably looking at a two to three-year timeline before the site will be ready for HHS use. The board has always seen this as a long-term solution, so we’re committed to doing the project in the right way, even if that takes a little longer.”