New London — For city officials, a ceiling collapse at the city-owned Richard R. Martin Center last week is just the latest example of long-deferred maintenance and the need to divest aging properties.

The collapse was discovered Monday in a third-floor back office in space leased to Veolia, the water company contracted by the city and the only rent-paying entity left in the building at 120 Broad St. It pays the city $70,000 a year for the space.

The collapse comes even as the city council considers authorizing the city to negotiate an agreement with one of two companies offering office space for city offices and a month after the city moved its Recreation Department offices from the Martin Center to the city-owned Stanton building at 111 Union St.

City Risk Manager Paul Gills said it appears water was leaking into the building from the roof, soaked through a layer of plaster and dropped through the suspended ceiling. The city has made it a priority to find new space for Veolia, Gills said.

The city already was trying to market the Martin Center and was in talks with an unidentified developer when it started mapping a course for the selling off of three of four city-owned buildings housing various city departments.

Rather than dealing with annual maintenance costs and what is projected to be millions of dollars in capital costs to maintain and upgrade the buildings, the city solicited offers from building owners with at least 30,000 square feet of space and offering a 20- to 25-year lease. Part of the plan is to keep and rehabilitate City Hall.

“Looking at a lease would give the city financial stability over the next 25 years with absolute known costs,” Mayor Michael Passero said. “We’re looking to put ourselves in a position to stabilize long-term costs for our offices and improve the quality for our employees. We waited so long to do something, now it’s critical.”

Felix Reyes, director of the city's office of Development and Planning, has led the initiative and recently broke down the two competing bids for the council to consider. The city has asked that the building owner design and build any improvements to meet city requirements, including a vault to house city records in the city clerk’s office.

Julian Enterprises, doing business as 6 Shaw’s Cove LLC, offered the low bid for two floors of its office complex off Howard Street, the former home to the Connecticut Department of Labor American Job Center.

“To reiterate, the Julian companies feel very confident about New London’s revitalization/redevelopment,” Jason Julian said in an email on Friday. “We have made a substantial investment and we are aggressively looking for other opportunities in the market place. We recognize the value of a public/private partnership and the proposed long term lease with the City. We have offered the City a deal that should be great for them and the tax payers financially.”

The out-of-pocket cost of $577,362 per year to start, as calculated by the city, rises each year to an estimated $955,845 by year 25. The total cost over 25 years is more than $19 million. Parking is in an adjacent parking lot, formerly part of Parcel J, that the Julians purchased from the city in 2017 for $280,000. The city had been leasing the parking lot to the previous owner of the building.

Readco’s offer for the 63 Eugene O’Neill Drive location, now the home to a Citizens Bank, would cost $848,375 annually to start, with costs rising to more than $1.2 million in year 25, according to city calculations. Reyes estimates the total cost to the city over 25 years to be about $26 million.

Parking for the city’s estimated 65 employees would be in the city-owned Water Street parking garage, which Reyes said already has spots reserved for employees.

Readco has questioned the veracity of the numbers presented by the Julians and, in a recent letter to Reyes, Jim Sylvia, president of Readco Sylvia Advisors, said he suspects 6 Shaw’s Cove either underestimated or was vague about certain items “which may lead to an inaccurate comparison to our detailed and comprehensive proposal.”

Readco has expressed confidence in the economic upturn in the area and purchased the former Merrill Lynch office building at 92 Eugene O’Neill Drive last year.

“Our location is perfectly situated in the heart of downtown,” Sylvia said in an email on Friday. “The consolidation of the City services here will create a long term, healthy anchor for the central business district. Our iconic building also has excellent access to public transportation and direct access to over 1,000 parking spaces controlled by the City in the Water St. garage. We look forward to continuing the process with the City.”

The total costs to the city are important, but Reyes said the location and quality of space are important factors the council will consider. It’s a modern corporate space versus a historic structure, with pros and cons on each side, he said.

The city spends more than $300,000 annually on operating expenses at four buildings, including City Hall, the Martin Center, Stanton Building and the finance building at 13-15 Masonic St. To bring the buildings to a state where they would be on par with the office space being offered, Reyes estimates the city would need to bond the projects and spend between $17.8 million and $24 million over 25 years.

Councilor John Satti said he had a hard time believing the city would spend $8.2 million to $11.8 million on the Martin Center, especially considering it is for sale. He said he was looking for hard numbers to be able to decide “what is the fiscally responsible thing to do.”

Council President Don Venditto said there are three major factors that will drive the decision on which location will work for the consolidated offices, “ease of access to the building, a cohesive floor plan that integrates all of the City Service Departments seamlessly and cost.”

Venditto said he still is waiting for some final cost analysis from Reyes and Finance Director McBride before the council can make its final decision.

“I believe the council will be in a position on Monday to narrow it down from two bids to one,” Venditto said. “With that said, all we will be doing is allowing for the administration to go into further negotiations with the chosen developer to negotiate a final lease agreement.”

The proposed lease agreement will be submitted to the council before it is finalized, he said.

“The costs of leasing versus correcting decades of deferred maintenance on city-owned buildings is clearly the most cost-effective way for the city to go, so my hope is that this project moves forward as quickly as possible,” Venditto said.

Passero said the budget he presents on Tuesday will be able to absorb any costs associated with the move.

Jason Julian on Friday addressed his company’s unpaid $250,000 tax bill and an ongoing tax appeal in Superior Court.

Public records show the city had imposed a real estate tax lien on the property last year because of more than $100,000 in unpaid taxes from 2016. The balance was paid in January but as of Thursday the company still had an outstanding balance of $251,581.74 associated with its 2017 assessment.

The suit, filed in New London Superior Court against the city and the Board of Assessment Appeals, calls the valuation “grossly excessive, disproportionate and unlawful.” On March 25, the Julians filed a request to amend the complaint and similarly appeal a $5.6 million assessment for the 2018 tax year. The first installment of those taxes is due in July.

“As a Landlord we have a responsibility/obligation to our tenants to maintain the highest level of service while keeping operating expenses/charge backs at a minimum,” Julian said in an email. “As the Landlord, we pay the real estate taxes but the tenants are responsible for reimbursing their proportionate share through the CAM (Common Area Maintenance) charges.”

An attorney from the Julian Enterprises addressed a mechanic’s lien against the property from a contractor, Environmental Control, doing business as Encon. Attorney Thomas Cotter said Encon bid on a project and a contract was never signed with the company.

“This lawsuit is both a nuisance and frivolous. If the case cannot be resolved amicably, we will be filing a counter suit on the Julian Companies’ behalf,” Cotter wrote in a March 25 letter to the city clerk's office.

g.smith@theday.com