Board Ponders Purchase of Merrifield Office Building

By Michael Alison Chandler
Washington Post Staff Writer
Thursday, June 19, 2008

Fairfax County school officials are proposing to spend $52 million to buy a 275,000-square-foot office building in the Merrifield area to continue consolidating the headquarters of the region's largest school system.

The proposal, unveiled this week, comes after the Fairfax School Board recently approved one of its leanest budgets in more than a decade.

Some board members say they are sensitive to the potentially awkward timing of the capital expense. Board member Kaye Kory (Mason) said she supports beginning a review of the proposed expenditure but is concerned about the public perception of making such a large purchase at this time.

"We increased class size, we cut summer school, and now we are saying we are buying a new building," Kory said.

The board is expected to vote next month on whether to put a $500,000 refundable deposit on the property and begin a two-month inspection and public review process.

"We realize we have difficult budget circumstances, but we have a compelling business case to make this deal," said Dean Tistadt, chief operating officer for the 165,700-student system .

Officials said the depressed real estate market that is straining local budgets has made it an attractive time to buy. The office building's price tag is about $8 million below what had been thought to be the market value, according to preliminary results from an independent appraisal.

The purchase would complete the school system's plan to consolidate 1,700 employees from 12 board-owned facilities and five leased offices throughout the county.

In December 2004, the county government approved the purchase of a $40 million, 208,000-square-foot office building for the school system at 8115 Gatehouse Rd., near the junction of Route 50 and the Capital Beltway. The building houses about 650 employees once scattered in 12 locations, including Superintendent Jack D. Dale, as well as School Board offices and human resources staff members. Officials also bought a vacant, three-acre parcel next door, intending to construct a similar building in a few years.

But when they learned that Philadelphia-based BPG Properties would be willing to sell a nearby office building, officials began to weigh their options. The total cost to buy, renovate and furnish the 35-year-old building would be $110 million, they estimated. That's at least $22 million less than the projected cost of constructing a smaller building.

The building at 8111 Gatehouse Rd., which is being leased by the American Red Cross until October, would draw in about 1,100 employees scattered in about a dozen facilities throughout the county and would probably be open to the public for some services, including student registration, diagnostic services for children with disabilities and a parent resource center. Under an existing agreement, some of the surplus properties would be transferred to the county in exchange for increased funding for school renovations or construction.

The proposed acquisition would be subject to approval from the Board of Supervisors. It would be financed through a 30-year bond issued by the county's Economic Development Authority, with the first $8 million payment due in 2013, when officials anticipate the economic slump will have passed.

School officials say the purchase and renovation of the building would pay for itself over the 30-year life of the loan and ultimately save $22 million in current dollars, by avoiding costly leases and maintenance and utilities fees for the aging facilities. Savings would also result from the elimination of about 18 positions through attrition in the next few years.

Costs, however, would outweigh savings in the plan's early years.

A similar financing plan was used to purchase the first administrative building. School officials recently reported to county supervisors that, although the school system did recoup its costs, the longer-term savings will be about half of what they had projected originally, $10 million instead of more than $20 million.

© 2008 The Washington Post Company