ADMINISTRATIVE REPORT
MEETING DATE: August 26, 2026 AGENDA CATEGORY: DEFFERRED BUSINESS TO: Honorable Mayor and City Council
FROM: Christian Clegg, City Manager
DATE: August 26, 2026
SUBJECT: Adopt a resolution approving an interfund loan in an amount not to exceed $12,100,000 and appropriate funding to complete the acquisition of 1430 and 1440 Truxtun Avenue pursuant to Council-approved purchase agreement.
1. Adopt resolution to approve the interfund loan of $12,100,000 to complete the acquisition of the property and all tenant improvements.
2. Appropriate and transfer $2,075,000 from the Capital Facility Reserve Fund to the Capital Outlay Fund for the payment to complete the acquisition of the property.
3. Appropriate the loaned funds of $12,100,000 to the Capital Outlay Fund to expend on the purchase.
RECOMMENDATION:
Staff recommends Council adopt resolution approve the appropriations
BACKGROUND:
Consistent with City Council direction to achieve ongoing operational savings, staff identified during budget preparation for the current fiscal year that the ongoing payments for Police Department leased office space presented an opportuni ty for cost efficiencies. Staff had been searching for more than two years for alternative office spaces that would represent lower long -term operating and maintenance costs. Prior Council directions included searching for office space to return Police Department staff to the downtown core. In late 2025 staff identified a downtown office building that would not only meet our current space needs but also create the capacity for future office space as the City organization grows along with the growth of the community. The identified property had additional advantages of a parking garage and existing tenants that generate revenue in the interim years to offset our operating and purchase costs. This transaction creates in the long term $1 million annual savings in the Police Department budget and acquiring a future asset for the City.
On March 11, 2026, City Council approved a lease and option to purchase the real property located at 1430 and 1440 Truxtun Avenue (the “Property”). The Property consists of a 10-story office building with approximately 127,504 square feet with a parking garage located on 2.3 acres of land on a prime corner in downtown Bakersfield near City Hall.
Council approved and allowed for the due diligence period to begin in March and conclude in Mid-July.
The due diligence was to help staff understand the building condition prior to moving forward with the purchase. Staff conducted the due diligence consistent with Council direction to contract with a variety of vendors to perform multiple inspections. During the inspections and due diligence period there were no issues discovered that suggest the City should not move forward with the purchase of the building. The due diligence was valuable in documenting some expected operating issues that will need to be addressed through regular maintenance schedul es over the next 5 to 10 years. Staff were able to leverage due diligence information to ensure two maintenance issues were addressed prior to purchase of the building and to obtain a purchase credit of $250,000 to address building maintenance needs during our first year of ownership.
Staff have negotiated final purchase terms that are consistent with Council direction and authorization within the original lease and purchase agreement from March 2026. As outlined below in the Fiscal Impact section, staff is seeking Council approval of an allocation from the Capital Facility Reserve and an interfund loan from the Equipment Fund to complete the transaction.
FISCAL IMPACT:
The total fiscal impact for the acquisition of the property and tenant improvements to move police department staff into the building is $14.6 million. As outlined in the table below, the final reduced cost to acquire the building is $13.35 million. Planned tenant improvements total $1.1 million.
Staff are recommending Council approval of an interfund loan from the Equipment Fund in the amount of $12,100,000 as the primary funding source for this transaction. The Equipment Fund has sufficient fund balance for this interfund loan. The Interfund Loan Agreemen t outlines a 12 -year loan repayment schedule at 2.5% interest. The loan agreement is consistent with the Council Interfund Loan Policy. The Annual Debt Service is approximately $1,100,000. Staff targeted this debt service amount because it is 1) consistent with the lease payment amount the Police Department would be expending in future years for leased office space and 2) consistent with the operating revenues and expenses for the acquired building.
Instead of making annual lease payments for office space , the annual debt service will pay toward acquisition of an important long-term asset for the City. In addition, overall costs are reduced because of the lease revenues from other tenants in Property.
In addition to the interfund loan, staff recommend allocating funds from the Capital Facilities Reserve.
Included in the original lease and purchase agreement, the City Council approved a deposit in the amount of $425,000 from the Capital Facility Reserve fund which will be applied to the purchase price of the Property. Staff are recommending an additional allocation of $2,075,000 from the Capital Facility Reserve to complete the acquisition of the property and complete tenant improvements. Staff also recommend payback into the Capital Facilities Reserve of the $2.5 million within a minimum of five years. Staff anticipate recommending allocations to the Capital Facilities Reserve from one -time funding sources at mid-year and during the annual budget process.
COUNCIL GOAL:
Safety and Resilience
Innovative and Efficient City Government
Reliable Infrastructure
ATTACHMENTS:
Resolution
Expense Amount
Property Acquisition $13,350,000
Due Diligence $120,000
Close Costs $30,000
Tenant Improvements $1,100,000
Total $14,600,000
Source Amount
Interfund Loan $12,100,000
Capital Facilities Reserve – Deposit $425,000
Capital Facilities Reserve $2,075,000
Total $14,600,000