New London — The City Council continues to field criticism over a possible consolidation of city offices, even as city officials enter a due diligence phase of lease negotiations with its potential landlord.

Councilors have argued, however, that a vote to allow the city to enter into lease negotiations with Julian Enterprises for space at 6 Shaw’s Cove is a far cry from signing a lease.

Councilor Alma Nartatez, at a recent council meeting, said she looked forward to hearing the Julians explain their side of the story when it comes to reports of litigation involving the company. She said she would be against entering into a lease with “a lousy landlord ... a landlord that has a bad track record.” She was reserving judgment, however.

Council President Don Venditto said the council can simply vote against a lease if concerns remain.

And while some of the criticism comes from downtown building owners arguing against city offices moving away from the city center, some of the arguments are misplaced, Councilor John Satti said.

Satti, who voted against the lease negotiations, said people still seem to be under the impression City Hall would be abandoned by the proposed move.

“There is no plan to move City Hall. The plan is to rehabilitate City Hall,” Satti said.

Seeking a way to avoid future maintenance costs at its inventory of aging properties, the city had issued a request for proposals for modern office space, eventually choosing 6 Shaw’s Cove off Howard Street as the most affordable future home for many of its departments — building, planning and finance, among others.

The cost of the lease is an estimated $19 million over 25 years, a figure that city officials argue would be eclipsed by the yearly maintenance and renovation costs associated with keeping the three buildings.

Old Lyme-based Readco, which has had talks with The Day about redevelopment of its building at 47 Eugene O’Neill Drive, had offered the city the former Citizens Bank building at 63 Eugene O’Neill Drive for an estimated cost of $26 million over 25 years.

Felix Reyes, director of the city’s Office of Development and Planning, said in addition to saving money with the move, the city would be eased of the burden of borrowing money for renovations and able to offer its citizens a more efficient facility, more room to conduct business, ample parking and compliance with the Americans With Disabilities Act.

Few would argue against the fact the city has deferred maintenance on many of its buildings.

Under the plan, the city hopes to eventually sell off the Richard R. Martin Center at 120 Broad St., the finance building at 13-15 Masonic St. and the Stanton Building at 111 Union St., which was vacated in 2015 following the discovery of an 18-foot-long crack in the floor. It since has been repaired and reoccupied. The Recreation Department earlier this year vacated the Martin Center and moved to the Stanton Building.

The idea of renting space is not a new one. Following the emergency move from the Stanton Building, the council authorized a space needs study, authorized bonding $3 million for a renovation of City Hall and considered renting space.

But bids for restoration of City Hall in 2017 came in at $8 million, well above what was anticipated, and for the time being halted restoration plans. The bonded money is expected to be used for future, albeit smaller scale, renovations at City Hall. It remains unclear which offices would remain there.  

Resident John Russell, who argued against the move to Shaw's Cove at a recent council meeting, asked the council to hold a special public hearing to discuss the issue.

“It’s being talked about all over town,” Russell said. “It’s a bad move all the way around.”

Downtown business owner George Waterman has been at the forefront of the criticism of the potential move to Shaw’s Cove and in an editorial published in The Day on April 11, said “they have beheaded the downtown by taking a step to move city offices to Shaw’s Cove.”

Others argue that pulling an estimated 65 city employees to Howard Street would stymie downtown development efforts.

Waterman did not respond to the city’s initial request for proposals for office space but since has offered up space at one of his buildings on State Street. He owns both the Manwaring Building at 225 State St. and Harris Place at 165 State St., which the tax collector’s office said has been referred to the state marshal for nonpayment of taxes.     

Reyes toured Waterman’s Manwaring Building earlier this month. A portion of the building is now occupied by Spark Makerspace.

“During our tour I was able to educate and point out some requirements that would disqualify his property,” Reyes said.

Reyes said there is not enough square footage, parking would have to be privately sourced and there was evidence of flooding in the basement and water damage in other places that signify active leaks. 

“I feel Mr. Waterman is an asset to our city and we are fortunate to have him as part of our community,” Reyes said. “He has no doubt invested a significant amount of money in downtown and especially in the Manwaring Building but there are issues that are hard to overlook.”

In a recent interview, Waterman said if not his buildings, the city might consider multiple locations in the downtown for its move of offices.

“It seems to me they have it set in their mind they need a single location,” Waterman said. “They don’t need, it seems to me, everything in one building. Some of the uses are so different.”

He called the move out of downtown “a whole transformation of the dynamics of downtown.”

Others have agreed.

Jake Johnson, owner of Jake’s Diner on State Street, told the council he thought the loss of the employees would hurt small business owners. “In my heart, I don’t think it’s a smart idea,” Johnson told the council. 

Reyes said the lease negotiations with the Julians continue and will involve the city and the landlord coming up with a draft written lease document that meets the city’s needs and conditions and which they will feel comfortable bringing to the City Council for its review.

Reyes said part of the negotiations is due diligence “on the landlord entity and any other entities that the principals behind the landlord entity are involved with.”

He said the city’s law director will investigate litigation involving the Julians.

The Julians face litigation on multiple fronts, perhaps the most prominent being an ongoing dispute with the town of Fairfield over management of a landfill there. The town sued Julian for a breach of a three-year contract to reduce and recycle material at the site, claiming $3 million in damages and additionally alleging the Julians allowed soil contaminated with lead and PCBs to be dumped there.

The Julians, in a countersuit, allege the town was responsible for the contamination and has defamed its company.

The town admitted, prior to entering the contract, that it had no knowledge of the pile’s contents, Julian Development LLC attorneys Thomas G. Cotter and Daniel H. Cotter wrote in a statement to The Day. Further, they wrote, the town of Fairfield kept no records of policing of the site in relation to potential contamination.

The Julians claim it was the town that allowed subcontractors at the site after hours and on weekends, bypassing on-site safety protocols.

“Julians Development pioneered an environmentally safe and secure process located at the pile and installed a scale house and weigh station,” attorneys for Julian wrote. “They also secured the property while producing a marketable clean and environmentally safe product which was used by the Town and others. All of this was at no expense to the Town.”

The case remains in court-ordered arbitration.

Fairfield First Selectman Mike Tetreau said he was unable to comment on pending litigation. The Julians remain a landlord to a building that houses school maintenance staff, he said. In respect to that property, Tetreau said, “they’ve been a good landlord.”

Fairfield police Chief Christopher Lyddy alluded to a criminal investigation into the contaminated soil issue but did not confirm validity of published reports indicating the Julians were involved. He said it was the policy of the department not to comment on pending investigations.

Jason Julian, in an interview on Wednesday, said his company is not the subject of any police investigation, a stance backed by his attorneys.

Jason Julian also dismissed a breach of contract lawsuit brought earlier this year by Environmental Control Inc., also known as Encon, a company which claims it furnished heating and air conditioning services and materials at 6 Shaw’s Cove in the amount of $198,436. It is one of two suits filed by Encon against the Julians. The local case remains pending in New London Superior Court.

Jason Julian said court proceedings will make clear that while Encon was the low bidder on a project at Shaw’s Cove, no contract was ever signed. He said work at the time on upgrades such as lighting and mechanicals at the building were contingent on funding from a state clean energy program and Eversource financing.

“They’re suing for labor and materials but nothing was ever installed. There was not a contract,” Julian said.

As part of its proposal to the city, Julian Enterprises submitted letters of reference from a current and former tenant at 6 Shaw’s Cove, the former home to the Department of Labor American Job Center, which occupied about 14,000-square feet of office space.

“While managed by the Julian Family, the DOL found the space to be properly maintained and supported with effective and timely responses to tenant needs,” DOL’s director of facilities operations wrote.

Electric Boat Chief of Finance Tom Cambron wrote in his recommendation that Julian Enterprises is “an outstanding landlord,” and would consider leasing other properties under the Julians' control.

The Julians bought the 88,000-square foot Shaw’s Cove property in a competitive bid process in 2016, when the building was mired in foreclosure litigation. The Julians previously had constructed the Walgreens pharmacy and Dime Bank, both on Bank Street near the site.

Reyes said a timeline for a presentation to the council about lease negotiations is not yet clear.

G.smith@theday.com