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HomeMy WebLinkAbout10/07/2003, BUS 1 - ADJUSTMENT TO THE FIXED PRICE FOR THE 919 PALM STREET PROPERTY-PROJECT NO. 90323 council I c j acEnaa nEpout CITY OF SAN LUIS . OBISPO FROM: Michael D.McCluskey,Public Works Director Prepared By: David Elliott,Administrative Services Manager ,}�L SUBJECT: ADJUSTMENT TO THE FIXED PRICE FOR THE 919 PALM STREET PROPERTY—PROJECT NO. 90323 CAO RECOMMENDATIONS: 1. Approve changes that will increase the final fixed price for the 919 Palm Street building from $10,641,715 to $12,169,947 in order to proceed with construction and acquisition 2. Because of technological obsolescence of an EIR mitigation measure and the environmental benefits of an added project element, adopt a resolution approving an addendum to the final EIR to provide for elimination of the requirement to install two charging stations for battery- powered vehicles 3. Appropriate from bond issue proceeds an additional $1,524,189 to the Parking Fund portion of the 919 Palm Street project.budget 4. Appropriate from bond issue proceeds an additional $816,100 to the General Fund portion of the 919 Palm Street project budget REPORT IN BRIEF The City and Court Street Partners LLC (the Copelands) have entered into a complex series of agreements that obligate the City to buy from the Copelands a completed parking garage with ground-floor office space at 919 Palm Street. When they were executed, the agreements specified an initial fixed price for the building that was subject to future adjustment based on the costs of a) keeping construction bid prices current b) incorporating regulatory changes imposed during development review and c) adding changes requested by the City as future owner of the building. Change to the Fixed Price. The initial fixed price was established at $10,614,715 in February 2003, before any of the anticipated adjustments. Adjustments have increased the final fixed price by 14.7 percent to $12,169,947. $533,569 (5.0 percent) of this increase can be attributed to keeping construction prices current, $494,438 (4.7 percent) to regulatory changes imposed during development review, and $527,225 (5.0 percent) to changes requested by the City as future owner. Effect on the Project Budget. The existing project budget was based on a conceptual price estimate of $9,917,800 prepared in December 2001, before the project was actually designed and then reviewed through the regulatory process. Increasing the final fixed price will require increasing the overall project budget by 17.7 percent from$13,241,168 to $15,581,457. The Parking Fund portion of the project budget will increase by $1,524,189, and the General Fund portion will increase by $816,100. Because this project will be debt-financed, the source for this additional money will be bond issue proceeds. An increase of 17.7 percent between conceptual design cost estimates and 1 - 1 Adjustment to the Fixed Price for the 919 Palm Street Property Page 2 final cost estimates is well within typical deviations for a project of this magnitude,which can range up to plus or minus 30 percent. Effect on Annual .Costs. Higher debt service costs will cause net annual costs associated with this project to increase by $79,100 for the Parking Fund and $33,300 for the General Fund. The total net annual cost will be $682,400 for the Parking Fund.and$270,700 for the General Fund. DISCUSSION In February 2003 the City and Court Street Partners LLC (the Copelands) entered into a Real Property Exchange Agreement and approved the form of a Payment Agreement that will facilitate the exchange of properties owned in the downtown by the City and the Copelands. Specifically, the City will sell to the Copelands the Court Street Parking Lot,where the Copelands will develop a major new retail complex. The Copelands will in turn sell to the City the 919 Palm Street property (located at the corner of Palm and Morro Streets) with a completed parking garage, including ground-floor office space. In December 2001 the price that the City would pay for the 919 Palm Street property was estimated (but not officially established) at $9,917,800, and the current project budget (see pages E-9 through E-13 of the Approved 2002-03 Budget) was based on that amount. The February 2003 agreements officially established an initial fixed price of $10,641,715 (based primarily on bids received from subcontractors in November 2001) and also acknowledged and provided for potential adjustments to arrive at a final fixed price. These adjustments were intended to cover anticipated changes to the fixed price caused by three factors: 1. The cost of keeping construction bid prices current 2. The cost of required regulatory changes 3. The cost of requested changes by the City as owner As expected, these three factors have driven the final fixed amount upward. Cost of Keeping Construction Bid Prices Current The initial fixed price of $10,641,715 was based partially on bid prices secured from subcontractors in November 2001. The Real Property Exchange Agreement provided for adjustments to the fixed price after solicitation of rebids.. Recently received rebids resulted in some item prices increasing, others decreasing, and still others remaining the same. Overall, though, rebidding caused the initial fixed price to increase by $533,569 — or 5.0 percent over 23 months. Most of the added cost is the result of higher concrete prices. Nonetheless, because seven concrete bids were received and six were deemed responsive, the City can be confident that the bid process has yielded the best concrete price available at this time. As provided for in the Real Property Exchange Agreement, the City Engineer reviewed the appropriateness of the bid items and the reasonableness of the item prices. He is satisfied with the results of the rebidding process. ^ r Adjustment to the Fused Price for the 919 Palm Street Property Page 3 Cost of Imposed Regulatory Changes Meeting EIR Requirements for Dual-Pane Windows (+$22,515) and Charging Stations (+$14,080, but recommended at $0). In order to mitigate the effects of this development, the environmental impact report (EIR) required dual-pane windows in the office space and two 220- volt charging stations for battery-powered vehicles on the lower level parking floor. These features were not considered in calculating the initial fixed price because they did not come to the building shell architect's attention until the project had been submitted for plancheck. The estimated additional cost for the dual-pane windows is $22,515. The estimated cost of the charging stations is $14,080. (All costs shown in this report for regulatory and requested changes include agreed-on markups of 20 percent for indirect costs and 8 percent for profit.) Since the EIR was prepared, manufacturers and government agencies have begun emphasizing hybrid technology instead of battery power for general-purpose vehicles like sedans and small pickup trucks. Hybrid vehicles use both conventional power and self-recharging battery power to achieve the best balance of economy, range, and low emissions. Consequently, battery- powered vehicles that use 220-volt chargers will no longer be available and will soon disappear from city streets. For this reason, the EIR requirement to install chargers should be eliminated. (It should be noted that adding a geothermal heat source to the HVAC system on this project—as discussed below — will result in significantly lower resource use and emissions, probably far more than was originally envisioned with installation of the charging stations.) The final EIR for this project was approved by Council Resolution No. 9367. In order to modify the final EIR, the project proponent (the City) must be amenable to the change, the modification must be minor in nature, and there cannot be new significant environmental effects. To implement this minor modification the Council must adopt the attached resolution approving an addendum to the final EIR. Installing and Relocating PG&E Transformers (+$116.954). There is an underground PG&E transformer on-site that must be moved because it now sits where foundation footings will be located. Also, a new transformer must be installed in the library driveway near Palm Street in order to route electricity to the planned electrical service entrance. The need for this work did not become obvious until after the project had been submitted for plancheck. The estimated cost for this additional work is $116,954, including portions of the costs for shoring, erosion control, and backfilling that were itemized separately in the revised construction cost detail. Relocating Storm Drains (+$129,958). The original plan called for stormwater collected on-site to be conveyed through a labyrinthine system of pumps, uphill pipe runs, and existing under- sidewalk drains and open gutters. This design was unacceptable to the City because it was needlessly complicated and would have been a continual maintenance headache. The design that was accepted in plancheck includes an all-new underground storm drain that will run under the pedestrian plaza from Palm Street down to Morro Street, then down Morro Street to the recently reconstructed storm drain in Monterey Street. The estimated additional cost of this storm drain is $129,958, including portions of the costs for sawcutting, demolition, shoring, erosion control, backfilling, and patching that were itemized separately in the revised construction cost detail. �� V Adjustment to the Fixed Price for the 919 Palm Street Property Page 4 Rerouting Wire Utilities (+$90,775). The original plan assumed that all wire utilities would enter the building through the electrical service panel room. During development of the tenant improvements design, the building shell electrical engineer realized that the size and number of communication conduits for the office space would require a separate service entrance to the building along with sizable conduits running across Palm Street from City Hall to the new building. The estimated cost of this additional work is $90,775, including portions of the costs for sawcutting, demolition, backfilling, and patching that were itemized separately in the revised construction cost detail. Although part of this work (the conduits from City Hall) could be considered a change requested by the City as owner, most of this cost would have been incurred regardless of the occupant. Wrapping Structural Columns (+$12,669). During plancheck, it became apparent that the location of structural columns in the building would not allow quite enough traffic maneuvering area to meet City parking and driveway standards. Since the shortfall in area was relatively small and the placement of the columns was dictated somewhat by the site configuration, the City did not impose an expensive structural redesign. Instead, the City required that the columns be wrapped with an energy-absorbing material that will minimize damage to vehicles and columns that may result from a slight increase in minor collisions. The estimated cost of this additional work is$12,669. Installing Hydraulic Bollards (+$121,567). The new building's site plan includes a pedestrian plaza that will start on Palm Street, run along two sides of the building, and end at Morro Street. This plaza will occasionally be used by vehicles to gain access to either a) the area between the Library and the new building or b) the parking areas behind the buildings along Monterey Street. (This is similar to the situation at Mission Plaza, where vehicles sometimes must cross pedestrian areas for deliveries or maintenance.) Because of these potential vehicle/pedestrian conflicts, during plancheck the need for a mechanism to limit vehicle access became apparent. The solution was to incorporate hydraulic bollards at both the Palm Street and Morro Street entrances to the plaza. Hydraulic bollards are cylindrical barriers that can be lowered through a switch (such as a keypad or a proximity card reader)to allow vehicle access. The estimated cost of this installation is$121,567. Cost of Changes Requested by the City as Owner Providing Additional Traffic Control (+$5,332). To ensure adequate information flow between City Hall and the new building, the City requested that communication conduits be placed across Palm Street. Accomplishing this work will require additional traffic control measures at a cost of $5,332. Upgrading_Parking Controls (+$110,072). The original plan included minimal parking control technology, suitable for a bare bones commercial parking operation but not for a City-operated parking garage. In order to be more user-friendly and provide better management information, the City's standard parking controls in place at the Palm Street and Marsh Street Parking Garages are somewhat more sophisticated and include features like proximity card access. For these reasons, the City requested that equivalent parking controls be installed in the new building. The estimated cost for this upgrade is$110,072. 1 , 4 Adjustment to the Fixed Price for the 919 Palm Street Property Page 5 Adding a Geothermal Water Source to the HVAC System (+$411,821). When reviewing the preliminary HVAC design, Public Works noticed that the engineer had specified a zoned water source heat pump system, a design that promised to be somewhat more energy-efficient than a conventional system. At that point the project manager wondered if such a system would be compatible with a geothermal water source. With a water source heat pump, either heat or cold is extracted from water depending on whether there is a heating load or a cooling load for the building. When a geothermal water source is added, the water is circulated through underground pipes and is tempered to a constant year-round temperature, so the heat pumps don't have to work so hard. The result is significant energy savings. The estimated cost of this additional work is $411,821. Although this figure is higher than earlier estimates, the system should pay for itself through energy savings in about 16 years and will make the building much "greener" environmentally than all other planned efforts in that direction combined. Not only will the geothermal system use far less energy than a conventional system, but each year it will also produce about.20,000 pounds less carbon dioxide and about 18,500 pounds less sulfur dioxide. It will also use about 120,000 gallons less water. Next Steps The final fixed price of $12,169,947 will be incorporated into the Payment Agreement. The Payment Agreement will then be executed at the time escrow closes on the real properties. The City must also make a final decision on whether to occupy the new office space immediately upon completion of the building or lease this space to a tenant. Administration, Finance, and Public Works are continuing to review this issue, along with the City's financial position as the fiscal year unfolds. Recommendations will be coming to the Council in the next few months. CONCURRENCES Community Development Department concurs with the recommended regulatory changes and with the recommendation to eliminate installation of the charging stations. FISCAL IMPACT Changes to the Fixed Price. The table at the top of the following page summarizes the adjustments to the initial fixed price. Where costs are shared between the Parking Fund and the General Fund, amounts are allocated between the Parking Fund and the General Fund based on the proportionate share of the conceptual price estimate: 71.9 percent for the Parking Fund and 28.1 percent for the General Fund. The final fixed price is 14.7 percent higher than the initial fixed price, which was calculated after the discretionary review process but before final bid price solicitation, final plan check, and final determination of owner desires. Keeping bid prices current resulted in a 5.0 percent increase to the fixed price, regulatory changes in a 4.7 percent increase, and changes requested by the City in a 5.0 percent increase. 1 Adjustment to the Fixed Price for the 919 Palm Street Property Page 6 Parkine Fund General Fund Total Price 7,135,100 9,917,800 Initial Fixed Price(February 2003) $ 7,636,477 $ 29978,238 $ 10,6149715 Cost of Keeping Construction Bid Prices Current 383,636 149,933 533;569 Cost of Imposed Regulatory Changes 310,441 183,997 494,438 Cost of Changes Requested by the City as Owner 115,404 411,821 527;225 Final Effect on the Project Budget. The next table shows a) the total budget required to complete the project and b) the additional amounts needed in the Parking Fund and General Fund to supplement existing appropriations: Paricing Fund General Fund Total Real Property Acquisition $ 843,000 $ 329,500 $ 1,172,500 Initial Fixed Price 7,636,477 2,978,238 $ 10,614,715 Adjustments to Arrive at the Final Fixed Price 809,481 745,751 $ 1,555,232 Parking Space Acquisition 0 145,000 $ 145,000 Construction Inspection 222,468 83,500 $ 305,968 Tenant Improvements at 919 Palm Street 0 760,000 $ 760,000 Interior Reconfiguration at 990 Palm Street 0 350,000 $ 350,000 Environmental Review and Mitigation 65,621 3,924 $ 69;545 Contingencies at 5 Percent of the Final Fixed Price 437,510 170,987 $ 608,497 Total Budget Needed $ 10,014,557 $ 5,566,900 $ 15,581,457 Less Total Current Budget 8 490 368 4.750 800 13 41 168 Additional Budget Needed 1,524,189 816,100 2,340,289 The current project budget is based primarily on the conceptual price estimate, which was in tum based on a preliminary conceptual design from December 2001. The total budget needed is 17.7 percent higher than the current project budget. An increase of 17.7 percent between conceptual design cost estimates and final cost estimates is well within typical deviations for a project of this magnitude, which can range up to plus or minus 30 percent. With the revised project budget at$15,581,457, the next table summarizes funding sources: 1 - lQ Adjustment to the Fixed Price for the 919 Palm Street Property Page 7 Parking Fund General Fund Total Parking In-Lieu Fees:Court Street Project 512,000 512,000 Proceeds from Sale of Court Street Property 1,510,000 452,000 1,962,000 Prior"Pay-As-You-Go"Appropriations 8,968 135,000 143,968 Proceeds from Sale of Bonds 7,983,589 4 979 900 12,963,489 Upon sale of the Court Street Property, 75 percent of the proceeds will go to the Parking Fund and 25 percent to the General Fund, based on the original financing of the site acquisition, along with an adjustment of $38,500 to account for the General Fund's allocation of archeological costs. Effect on Annual Costs. The additional budget needed will come from increasing the bonded indebtedness for the project from $10,623,200 to $12,963,500. For this reason, it is important to know not only the additional one-time cost but the net annual ongoing cost as well. The following table summarizes the ongoing cost and revenue factors that result in the net annual cost for the project, including adjustments associated with the Court Street Parking Lot: Parkine Fund General Fund Total Annual Ongoing Costs/Revenue Losses:. Parking Garage Operations and Maintenance $ 84,200 $ 19,600 $ 103,800 Office Space Maintenance for 919 Palm 0 81,800 81,800 Debt Service on Bond Proceeds 534,000 333,000 867,000 Loss of Meter/Fine Revenue from Court Street Lot 200.400 0 Subtotal Annual Oneoine Costs/Revenue818,600 434,400 1,253,000 Less Annual Ongoing Revenues/Cost Reductions: Parking Garage Revenue $ 130,800 $ - $ 130,800 Reduced O&M Cost for the Court Street Lot 5,400 0 5,400 Lease Revenue from 955 Morro 0 133,200 133,200 Reduced O&M for 955 Morro 0 30.50030.500 Subtotal Annual Ongoine Revenues/Cost163,700900 Net Annual Ongoing Cost $ 682,400 $ 2709700 $ 953,100 Prior Estimated n in 237A00 4 (For consistency, this table assumes that the City, rather than a lease tenant, will occupy the office space, although leasing out this space is being investigated. On the other hand, even if this space is leased-out initially, because the long-term goal is for the City to occupy the space, this assumption is an appropriate basis for analyzing annual costs over the next 30 years.) As shown in this table, the increase in the fixed price will cause net annual costs to increase by $112,400 overall, with an increase for the Parking Fund of$79,100 and $33,300 for the General l- � Adjustment to the Fixed Price for the 919 Palm Street Property Page S Fund. If the office space is leased out, there will likely be a net annual savings for the General Fund. ATTACHMENT: Attachment 1 —Resolution, including Exhibit A (addendum to EIR) I:\_Council Agenda Reports\2003 agenda reports\Administrative Services (Elliott)\90323 Fixed Price Adjustment for 919 Palm v9.doc I r� Attachment 1 RESOLUTION NO. (2003 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO APPROVING AN ADDENDUM TO THE FINAL ENVIRONMENTAL IMPACT REPORT (EIR)FOR THE COPELANDS PROJECT LOCATED AT 919 PALM STREET (APPLICATION#ER 193-01) WHEREAS, by its Resolution No. 9367 (2002 Series) the City Council certified the final EIR for the Copelands Project located at 999 Monterey Street (Application #ER 192-01) and 919 Palm Street(Application#ER 193-01); and WHEREAS, the City Council adopted a Statement of Overriding Considerations for the impact area of Air Quality when certifying the final EIR;.and WHEREAS, notwithstanding the Statement of Overriding Considerations, the final EIR contained a mitigation measure to provide infrastructure to accommodate electrical vehicle recharging capabilities; and WHEREAS, automobile manufacturers and government agencies have begun emphasizing hybrid technology instead of battery power, thereby eliminating the need for recharging stations; and WHEREAS, staff has recommended elimination of the mitigation measure to provide recharging stations; and WHEREAS, a replacement mitigation measure is proposed that will mitigate air quality impacts to an equal or greater degree; and WHEREAS, this proposed minor modification to the final EIR has been evaluated in accordance with the California Environmental Quality Act and the City's Environmental Guidelines. BE IT RESOLVED by the City Council and the City of San Luis Obispo as follows: SECTION 1. Determination on Addendum to Final EIR. The City Council hereby approves the Addendum to the Final Environmental Impact Report for the Copelands Project, as set forth in Exhibit A, attached hereto and incorporated by reference. The Addendum provides for a minor technical change or addition in that it substitutes a replacement mitigation measure for one being eliminated. SECTION 2. Addendum Findings. Based upon all the evidence, the Council makes the following findings in approving the Addendum: 1. The Final EIR was prepared in compliance with the California Environmental Quality Act (CEQA) and was considered by the City prior to any approvals of the project. 2. The Council adopted a Statement of Overriding Considerations with regard to Air n Resolution No. (2003 Series) Attachment 1 Page 2 Quality when it certified the Final EIR. 3. Notwithstanding the Statement of Overriding Considerations with regard to Air Quality, the Council approved mitigation measure AQ-6 requiring incorporation into the infrastructure of the project electrical vehicle recharging capabilities. 4. Hybrid vehicles are rendering electric vehicles obsolete, thereby greatly reducing the need for recharging facilities of the type contemplated by mitigation measure AQ-6. 5. A replacement mitigation measure AQ-6, providing for a HVAC system utilizing a geothermal heat source, is imposed that reduces air quality impacts to an equal or greater degree through a reduction in area-wide emissions associated with energy production. 6. None of the findings for preparation of a subsequent EIR, in accordance with CEQA Guidelines section 15162 (a)can be made in this instance because: a) There is not substantial evidence in the record that substantial changes are proposed in the project that will require major revisions of the Final EIR due to the involvement of new significant.environmental effects or a substantial increase in the severity of previously identified significant effects; b) There is not substantial evidence in the record that substantial changes have occurred with respect to the circumstances under which the project is to be undertaken which will require major revisions of the Final EIR due to the involvement of new significant environmental effects or a substantial increase in the severity of previously identified significant effects; c) There is not substantial evidence in the record that new information of substantial importance, which was not known and could not have been known with exercise of reasonable diligence at the time the Draft EIR was certified as complete shows: 1) the project will have one or more significant effects not discussed in Draft EIR; 2) significant effects.previously examined will be substantially more severe than shown in the Draft EIR 3) mitigation measures or alternatives previously found not to be feasible would in fact be feasible, and would substantially reduce one or more significant effects of the project; and 4) mitigation measures or alternatives which are considerable different from those analyzed in the Draft EIR would substantially reduce one or more significant effects on the environment, but the project proponents decline to adopt them. 7. The City and Copelands (project proponents) have agreed to adopt and implement replacement mitigation measure AQ-6. 8. An addendum to the Final EIR is an appropriate mechanism in this instance involving a minor correction and provision of a replacement mitigation measure. Recirculation of the 1 - 10 i Resolution No. (2003 Series) Attachment 1 Page 3 Final EIR and/or a public hearing on the addendum is not required under CEQA Guideline 15164 and is not necessary under these circumstances. On motion of seconded by and on the following roll call vote: AYES: NOES: ABSENT: the foregoing resolution was passed and adopted this day of 2003. David F. Romero,Mayor ATTEST: Lee Price,City Clerk APPROVED AS TO FORM: J&aah1f6n P.Lowell, City Attorney Exhibit A Addendum to the Final Environmental Impact Report for the Copelands Project ER 192/193-01 Following Certification of the Final Environmental Impact Report (FEIR) for the Copelands Project (City File No. ER 192/193-01 - SCH # 2002031058) and prior to construction of the approved project, the City has identified the need for a technical change to project mitigation measures. Specifically Mitigation Measure AQ-6 states: AQ-6 As included in the Project Description, the parking structure at Palm/Morro site shall incorporate infrastructure to accommodate both inductive and conductive electrical vehicle recharging capabilities. Since Certification of the FEIR by the City Council on September 17, 2002 (Resolution No 9367 —2002 Series), manufactures and government agencies have begun emphasizing hybrid technology instead of battery power for general-purpose vehicles like sedans and small pickup trucks. Hybrid vehicles use both conventional power and self-recharging battery power to achieve the best balance of economy, range, and low emissions. Consequently, battery powered vehicles that use 220-volt charges will no longer be available and will soon disappear from City streets. For this reason, mitigation measure AQ-6 should be eliminated. Despite the fact that the Council adopted a Statement of Overriding Considerations for the impact area of Air Quality when certifying the project EIR, it is the City's desire to mitigate air quality impacts to the maximum extent possible. The City therefore has identified a replacement mitigation measure that will mitigate air quality impacts to an equal or greater degree through a reduction in area-wide emissions associated with energy production. The replacement Mitigation Measure AQ-6 is as follows: AQ-6 Rev. The HVAC system for the Palm/Morro office building shall utilize a geothermal heat source. With a water source heat pump, cooling or heating water is circulated through underground pipes and is tempered to a constant year-round temperature resulting in energy savings to the HVAC system. It is anticipated that using a geothermal heat source will result in significant energy savings to the proposed building. In doing so, it will result in an annual reduction of approximately 20,000 pounds of carbon dioxide, 18,500 pounds of sulfur dioxide, and 120,000 gallons of water used. The City of San Luis Obispo has determined that this addendum to the FEIR for the Copelands Project (ER 192/193-01) is necessary to document "minor technical changes or additions" that have occurred in the project description since the EIR was Certified. The changes to the project, including the above referenced replacement mitigation 1 I Exhibit A measure are minor and do not rise to the level of changes requiring the preparation of a subsequent EIR or supplement to the EIR in accordance with Section 15162 of the California Administrative Code. This addendum shall be acted on by the City Council as required by law and incorporated into the FEIR as an attachment.