After hours of discussion and debate, the Goleta City Council on Tuesday evening voted to deny a proposed City Hall project it had been pursuing for about two years.

The 4-1 vote, with Councilman Eric Onnen dissenting, was made “without prejudice,” meaning the project on the table at Tuesday’s meeting still may be a possibility pending other alternatives the council directed the staff to research. Also included in the decision was direction to enhance the city’s reserve fund for a new City Hall.

The council’s action was another in a series of hesitations motivated by caution over the several million dollars involved in the search for a permanent City Hall. The city pays about $445,000 a year in rent for its digs at 130 Cremona Drive, and the move toward a permanent public facility has been a goal since the adoption of the General Plan in 2006.

However, amid a sluggish economy, a decrease in revenues, an ongoing tax-sharing agreement with the county and uncertainty over future earnings, the council decided not to pull the trigger quite yet on an updated City Hall proposal.

“I have to say with regret that I am unable to support going ahead with this project,” said Councilwoman Margaret Connell, pointing out the loss of vehicle license fees as well as the drop in transient occupancy tax and sales tax revenue.

Onnen attempted to push his colleagues out of what he saw as “a natural pullback.”

“What happens in these times because of these economic challenges is that there is a natural pullback,” he said, calling the hesitation a “fear reflex.”

“What do you do with that reflex? You gather information, you ask questions, you consider scenarios,” Onnen said.

If the economy wasn’t enough, among other things the city has faced in its two-year search for a City Hall has been the lack of available buildings, as well as the quality of the buildings.

“There’s not a lot out there,” City Manager Dan Singer said.

According to consultant Francois DeJohn, the scarcity of buildings that come up for sale made it difficult to find a building of the Class A quality sought by the city. In addition, the city isn’t poised to easily purchase Class B buildings and upgrade them, with competition such as UCSB looking for commercial real estate, too. The best option the city has, DeJohn said, would be to build its own facility.

The proposed City Hall would have been located in what’s called “Building 2” at Cabrillo Business Park (the old Delco property), 6767 Hollister Ave., between Los Carneros and Storke roads. The building is part of a larger complex included in the ongoing development of the South Coast’s largest business park.

At a planned size of two stories and 40,000 square feet, the building would have been nearly double the city’s current needs. But the plan had been to rent out the upper floor to recoup some of the nearly $14.5 million the city projects it would have had to spend to purchase the property and improve the building to make it a public facility.

The purchase agreement included a $4 million upfront deposit to escrow, $2.2 million in property improvements to be made by the city, a $500,000 discount for upfront partial financing and another $550,000 credit if the city had waived development impact fees for the project. The facility would have been paid for with a combination of reserve money, development impact fees and bonds.

Had the council approved the agreement and moved forward with the purchase, the estimated move-in date for the facility would have been in the summer of 2011.

The staff financial analysis says the city would have seen benefits to cash flow almost immediately after moving into the building. By 2040, the city was projected to be ahead by $26 million plus ownership of a 40,000-square-foot building, although, according to Singer, the cumulative cash benefit would not have been evident until about 2030. According to the staff’s worst-case scenario, assuming no renters were found for the second floor, the city still would have been ahead by $10 million by 2040, plus ownership.

Some people still weren’t so sure it was a great deal.

“At a time when employees are being laid off, positions not filled, hours and wages cut, and services, including library hours and park maintenance, drastically cut, it seems inappropriate for the city to spend $14 million on a building, especially one that’s too large and not built to be a City Hall,” Goleta resident Barbara Massey said.

Richard Temple, on the other hand, favored the purchase.

“From the information I’ve seen, this is going to be a very positive move from a fiscal standpoint,” he said, adding that the location was convenient and offered good visibility.

For city staff, it might be something like going back to the drawing board, as they consider alternatives to the proposed project. At least one option the city has is to stay and renegotiate another lease agreement with Bermant Development Co., owner of the Cremona building.

Noozhawk staff writer Sonia Fernandez can be reached at