HomeMy WebLinkAboutAgenda: Study Session: New City Hall Cost and Financing Update Of ARC
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I p A
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Aar STAFF REPORT
Development Services Department
DATE: May 1, 2012
TO: Mayor and City Council
FROM: Jason Kruckeberg, Assistant City Manager/Development Services Director,,c,y_
Hue Quach, Administrative Services Director
Philip A. Wray, Deputy Director of Development Services/City Engineer
SUBJECT: STUDY SESSION — NEW CITY HALL COST AND FINANCING UPDATE
Recommendation: Provide Direction
SUMMARY
At the City Council Study Session of February 7, 2012, the City Council directed staff to
refine the cost estimate for the new City Hall and bring it back to the Council for further
discussion. Staff retained the services of Steinberg Architects, the architect of record
for the building, to review and update the project based on the latest codes and
conditions. Staff also retained the services of Cumming Construction Management, the
cost estimator, to perform an updated cost estimate.
Steinberg Architects and Cumming have completed their updates and reported their
results to the City. A summary of their findings is provided below. According to the
City's consultants, construction costs are rising monthly so targeting a bid date is critical
to estimating an accurate cost. Based on an estimated bid date of October 2013, the
cost of the project is approximately $13,850,286.
Given that the financial environment has not changed and interest rates remain very
good, the City Council requested further discussion of the potential methods of financing
the project based on the latest information.
BACKGROUND
On March 17, 2009, the City Council approved the design development package for the
new City Hall (40% working drawings) but did not approve moving into the final design
stage due to lack of a reasonable funding source. The project was shelved and the City
Council focused on the rehabilitation of the existing City Hall building (partially due to
Study Session — New City Hall Cost and Financing
May 1, 2012
Page 2
the award of a Stimulus grant for the rehabilitation). It was reasoned that the �r►
rehabilitation of existing City Hall was necessary, as the existing building will be utilized
with or without a new City Hall building. Due to the significantly changed financing
environment of late 2011, the City Council asked staff to re-evaluate the costs of a new
City Hall.
In November 2011, staff asked Cumming to re-evaluate the construction costs based on
the current bidding and construction environment. For the purpose of a comparison, a
new construction start date was assumed at six months from the date of analysis (May
2012). At that time, it was determined that construction costs had increased and
because the new construction date was 30 months later than the previous one, there
would be some inflated costs. However, the price of some materials had dropped.
Cumming felt that the two factors balanced each other out and it was reasonable to
assume that the cost of approximately $12.3 million reported in March of 2009 was still
accurate. However, staff cautioned that this was a quick review intended to give the
City Council a look at where the project stood with the current bidding environment and
that the analysis was three months old. In addition, the City Council acknowledged that
the plans are three years old and there may be changes in utility needs or building
requirements that would need to be reflected in the total cost. Most importantly, the
review did not include a significant escalation factor because of the state of bidding at
the time. The City Council recognized the potential impacts on cost and directed staff to
go back and review the project scope, refine the cost estimate, and bring it back to the
City Council for further discussion. voo
DISCUSSION
Staff retained the services of Steinberg Architects, the architect of record for the
building, to review and update the project scope based on the latest codes and
conditions, and retained Cumming to perform an updated cost estimate. The
consultants have completed their updates and reported their results to the City. Both
Steinberg and Cumming have indicated to the City that the building industry appears to
be on the road to recovery and the bid environment has been less competitive lately,
leading to ascending costs. The changing bidding environment makes it difficult to
predict cost impacts over the next 12 to 18 months as overall cost escalation is a
moving target.
Upon completion of the project scope review, Steinberg determined that there were no
significant design changes due to code changes. However, an assumption regarding
the shared use of the cooling system for other buildings on the City Hall campus may be
incorrect if the existing City Hall buildings are proposed to be fully utilized. The cooling
system for the campus, located in the Police Department Building, may have to be
upsized to meet the demands of all buildings. This could add approximately $300,000
to the estimate. Additionally, materials prices went up by approximately $270,000, with
steel being the largest item affecting that increase. Cumming felt that the 5.5% factor for
Study Session — New City Hall Cost and Financing
May 1, 2012
Page 3
the general conditions/general requirements used in the 2009 estimate was low and
they raised it to 7% in the latest estimate based in their experiences on recent bids.
General conditions/general requirements refer to administration staffing, trailers,
fencing, lighting, and power and security measures. The 1% increase amounts to an
increase of approximately $163,000. Soft costs were increased by approximately
$200,000 to account for adjustments in the owner's contingency, furnishings, and other
administrative costs.
The last change is the escalation rate. This is the most difficult to predict because it is
based on the bidding environment over the period selected. The bidding environment is
currently going through a change from relatively no escalation over the last three years
to an escalating trend. Allowing enough time for the City to make financing decisions
and secure the funding, complete the plans and bid documents, and bid and award the
project, staff projects a time period of approximately 18 months. The escalation cost is
projected at $673,000 over this time period. Accounting for changes in materials,
escalation, and all other factors, the latest estimate is $13,850,286 (see Exhibit A).
As reported to the City Council in February 2012, financing options are much better
today than they were in 2009 due to better interest rates. When considering financing
options, the Council opined that General Obligation (GO) Bonds would likely be the only
method to move this project forward at this time due to the inability to commit General
Fund dollars for Certificate of Participation (COP) financing. Exhibit B shows the
financial obligation that Arcadia residents would have using GO Bonds. The table
provides a comparison of the costs of a $14 million project using the 2011-2012
Assessed Value and financed with interest rates of 3.5%, 4.0% and 5.0% for a period of
30 years. The annual property tax assessment per $100,000 in assessed value ranges
from $7.16 to $8.57, which translates to an annual property tax assessment of between
$71.65 and $85.68 per year for a home valued at $1 million.
Several pages from the design drawings have been included for review as Exhibit C.
These include elevations and a site plan.
In summary, the new City Hall construction estimate has increased to $13,850,286
based on a construction award date of October 2013. As reported to the City Council in
February 2012, financing options are much better today than they were in 2009 due to
better interest rates. If the project were to be initiated in the next 18 months, it is likely
that interest rates will still be better than they were in 2009 if the project had gone
forward. A bond election with a two-thirds vote in the affirmative would be required in
order to finance the project. An election could be called as a special election or it could
be consolidated with another election such as the upcoming one on November 6, 2012.
Staff will have more information available for the City Council regarding the
requirements and timing for setting an election at the study session.
Study Session — New City Hall Cost and Financing
May 1, 2012
Page 4
vow
RECOMMENDATION
Provide direction.
Approved by:
Dominic Lazzare , ity Manager
Exhibit A: City Hall Cost Summary Comparison
Exhibit B: General Obligation Bond Assumptions and Assessment Projections
Exhibit C: Plans and Drawings for new City Hall (dated March, 2009)
NEW CITY HALL
COST SUMMARY COMPARISON
•rr APRIL 23, 2012
ITEM 02/25/09 11/04/11 4/18/12
Construction Sub-Total $9,062,362 $9,205,755 $9,494,916
General Conditions/Req. $498,430 (5.5%) $552,345 (6%) $664,644 (7%)
Bonds & Insurance $181,248 (2%) $184,116 (2%) $189,898 (2%)
General Contractors Fee $292,261 (3%) $298,266 (3%) $310,484 (3%)
Design/Est. Contingency $501,715 (5%) $512,024 (5%) $532,997 (5%)
Escalation $160,224 (1.5%) $214,480 (2%) $673,184 (6%)
Non-Prevailing Wage ($1,069,624) (-10%) ($1,096,699) (-10%) ($1,186,612) (-10%)
Additional Items 0 0 $300,000 Chiller
Construction Total $9,626,615 $9,870,286 $10,979,511
Soft Costs $2,643,718 $2,648,591 $2,870,775
Total Project Cost $12,270,333 $12,518,877 $13,850,286
General Obligation Bond Assumptions
Bonding Amount
see below
Interest Rate
see below
Annual Cost Annual Property Tax Assessment for Homes
per Valued at
FY Assessed
Valuation
Debt Svc Payment
Est. Total Debt $850K
Service $ 100,000 (Median Price)
(30 vrs)
$1 million
$2 million
Bond Par
Amount
FY 11 -12 (AV)
$ 14,050,000
$ 10,610,331,620
3.500%
$ 760,199
$ 22,805,982 $ 7.16 $ 60.90
$ 71.65
$ 143.29
Bond Par
Amount
FY 11 -12 (AV)
$ 14,050,000
$ 10,610,331,620
4.000%
$ 808,380
$ 24,251,395 $ 7.62 $ 64.76
$ 76.19
$ 152.38
Bond Par
Amount
FY 11 -12 (AV)
$ 14,050,000
$ 10,610,331,620
5.000%
$ 909,130
$ 27,273,913 $ 8.57 $ 72.83
$ 85.68
$ 171.37