State Auditor Beth Wood expressed a little disbelief as Wilmington city officials explained to Wood and others on a state panel that most of the city's employees are not working remotely.
Her comments were part of a larger discussion about Wilmington's plan for new office space. On Tuesday afternoon in Raleigh before the Local Government Commission (which includes Wood), Wilmington City Manager Tony Caudle and other officials made the case for the city's proposed $68 million purchase
of the 12-story Thermo Fisher Scientific Inc. building and its campus.
Office space issues that have been present for decades, according to Caudle and other Wilmington representatives at the meeting, can be solved in a much cheaper way by buying the campus at 929 N. Front St. The city's financing plan is dependent on LGC approval.
When told the city's space needs have increased, Wood said, "I'm shocked that they didn't go down, given the hybrid work environments now because of COVID. So you're telling me that all your staff is coming in every day?"
To which Caudle replied, "No ma'am, not all of our staff. I'd say in general 90% of our staff is coming in every day."
Use of the hybrid model is dependent on each department and is each department head's responsibility to oversee, Caudle said.
"So you can tell me that if I went there and walked the building, that it would be occupied five days a week?" Wood asked.
Caudle: "Yes, ma'am."
Wood: "How are you able to get everybody to come to work and nobody else can? ... "
Caudle: "I can't tell you the answer to that but our turnover rate is somewhere around 12%."
When the Business Journal asked a remote working-related question in March, city spokesman Dylan Lee answered in an email, "The City of Wilmington is a public-facing organization responsible for providing the community with high quality service. This often requires in-person engagement and interaction with members of the community, which is not typically compatible with remote work.
"The city organization has also placed an emphasis on corporate values of collaboration, inclusion, creativity, and accountability, which thrive in an accessible and interactive work environment. Providing a single point of access and improving operational efficiency are key reasons why the city is exploring the possibility of bringing employees and departments that are currently spread across different facilities throughout the city together under one roof."
Wood's questions were just a few of those posed by the panel. The LGC didn't vote on the matter Tuesday, and as of Wednesday, LGC officials couldn't definitively say whether a vote will occur at its next meeting, June 6. City officials said a closing on the 12.5-acre property, which includes a parking deck and additional land, has to occur by the end of July or the city could lose $800,000 in deposit money.
State Treasurer Dale Folwell, a Republican who is running for governor in 2024 and chairs the LGC, questioned the strength of the downtown Wilmington office space market, citing evidence from the state pension plan's investments.
"We're seeing unbelievable declines in commercial real estate values," Folwell said.
According to local brokers, Wilmington is faring better
than larger markets when it comes to the demand for office space. A CoStar Group report from earlier this year showed the Wilmington area had a 2% office space vacancy rate in 2022 and the first quarter of 2023.
The city has already fielded some interest from businesses who might want to lease the remaining space in the Thermo Fisher building, officials said, as well as interest in the surplus office buildings the city would sell to help pay off the purchase.
In response to a question from an LGC member about public hearings, Caudle said about five people spoke at a public hearing on the matter with three of them opposed because an earlier financing plan had involved a tax increase that the city's staff has now dropped
An appraisal put the value of the property at more than $111 million, according to the city's presentation.
"So this is what you have here before you: You've got a city with a bulletproof balance sheet, triple-A bond rating, over 30% of unassigned fund balance sitting in the bank right now," Wilmington Mayor Bill Saffo told the LGC at the start of the meeting. "You have a city with a generational opportunity of solving its long-term space needs and add 1,000 spaces to our public parking capacity at a fraction of the cost that we would otherwise have to pay."