HomeMy WebLinkAbout11/16/1993, 7 - Performing Arts Center Funding IIIN^I�III�IIIIIII�I Ilu�ll � r" MEETING DATE:
II U cio san LUIS oBispo 11 -% w1 - 3
COUNCIL AGENDA REPORT ITEM NUMBER:
FROM: John Dunn, City Administative OZirector
i
Prepared by: William C. Statler, Financ "
SUBJECT: PERFORMING ARTS CENTER FUNDING
CAO RECOMMENDATION
Approve a supplemental contribution in the amount of $219,000 (net of interest earnings
during construction) from unappropriated General Fund balances for the performing arts
center in conformance with the City's prior agreement to contribute one-sixth of the costs
for the construction of this project.
DISCUSSION
Construction bids for the performing arts center were opened on September 28, 1993.
Based on a construction budget at that time of$19.975 million versus an acceptable low bid
of$24.6 million, there was an initial funding gap of$4.6 million. By cutting the "deductive
alternates" (approximately $1.1 million) and increasing the State's share of project costs by
increases in the engineering news record construction cost index (approximately $700,000),
this gap has already been reduced by $1.8 million to $2.8 million.
Since the bids were opened, representatives from the three project partners - Cal Poly,
Foundation for the Performing Arts, and the City - have met extensively to identify options
for eliminating this gap. Stated simply, there are only three basic alternatives:
■ Redesign the project to meet the current budget.
■ Raise the additional $2.8 million required to fund the current design and construction
contract.
■ Some combination of the above two options.
After reviewing the redesign/rebid options, it is the unanimous recommendation of the
steering committee - which represents all three partners - that this alternative be avoided
if at all possible for the following reasons:
■ Redesigning the project will require rebidding it, which will delay the project by at
least one year. This delay and the uncertainty that it creates will significantly impact
the Foundation's fund raising efforts, which are critical in financing this project.
■ Under the -terms of its agreement, the project architect (Warnecke/DMJM) is
required to redesign the project at no additional cost. The initial "conceptual"
options submitted by the architect would have major acoustical and aesthetic
ramifications that the steering committee believes would seriously impair the ability
of this structure to function as a quality concert hall.
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���H�� �IVIIIII(Ulhji��d�ll city of San LaIS OBISPO
COUNCIL AGENDA REPORT
■ Even if the facility is redesigned, this does not ensure that it will come in under
budget after it is rebid. At this point, we have a firm bid to construct the facility
based on the current design. One of the steering committee's greatest poncerns is
that after redesigning the project, subsequent bids may still come in over the budget,
in which case we will have a facility that does not meet our needs and expectations
without any resolution to our current financial problem.
Based on a desire to go forward with the project as designed at a known cost, the following
funding strategy has been developed by the steering committee:
Cal Poly
Cal Poly Foundation loan $ 700,000
Reduced CSU construction management
fees and other sources 300.000
$1,000,000
Foundation for the Performing Arts
Construction funds on hand $135,000
Accelerated outstanding pledges 120,000
New gifts 76,000
Loan from Commerce Bank to be repaid from:
Outstanding pledges 450,000
Hartman estate 250,000
Fund raising during the 2-year
construction period 300.000
$1,331,000
City of San Luis Obispo
One-sixth share of project costs $469,000
Total $2.800,00Q
As reflected above, it is recommended that the City continue its commitment to funding
one-sixth of the project costs. In funding our share of total project costs, we believe that it
is appropriate for any interest earnings on the City's funds during construction be counted
as an integral part of our "in-hand" contribution to the project. Under this approach, the
City's additional "out-of-pocket" contribution would be $219,000 assuming a two year
construction period with our funds being applied last at an average annual rate of 4%.
CONCURRENCES
As noted above, this recommendation is supported by the steering committee, which is
composed of representatives from each of the partners (the City's members are Bill
Roalman and John Dunn). However, this funding strategy requires the formal approval of
each partner. The following is a status on formal approvals by the Foundation and Cal Poly.
.A
������►��i�IIIIIIUIp��u►9IUIII City Of San AS OBISPO
Na,i COUNCIL AGENDA REPORT
■ Foundation for the Performing Arts. The Executive Committee has approved this
funding strategy, and the governing board as a whole will meet on November 15 to
formally consider approval of this approach.
■ Cal Poly. This strategy has been approved administratively by Cal Poly but will .
require further approval by the Cal Poly Foundation Board of Directors, Chancellor's
Office, and State Department of Finance.
If a rebidding situation is to be avoided, the construction contract must be awarded by
November 28, 1993. Prior to making any disbursements, City staff will ensure that
appropriate commitments and approvals have been made by the other parties.
Representatives from both Cal Poly and the Foundation will be able to answer any questions
that the Council may have regarding the status of their funding arrangements at that time.
FISCAL IMPACT
As noted above, a minimum additional 'but-of-pocket" contribution of $219,000 will be
required under the recommended funded strategy, which reflects an additional contribution
of $469,000 less projected interest earnings during construction. This will bring the City's
total contribution for the project to $5,061,500, of which $675,700 has already been
expended to-date for study and design.
In addition to estimated interest earnings during construction as noted above, other sources
potentially available to fund this additional contribution include:
■ Unanticipated one-time revenues will be available in 1993-94 because of two actions:
1) State legislation transferred money from a state transportation planning and
development fund to the City in the amount of $126,500, and 2) the City took
advantage of a change in the method of allocating property taxes (Teeter Plan) and
realized a one-tune increase in property tax revenue amounting to $543,000.
I
■ Based on preliminary unaudited financial statements, it appears that General Fund
balances at the end of 1992-93 will be higher than initially projected. At this time,
overall General Fund revenues appear to be on target with 1993-95 Financial Plan
projections, with operating expenditures less than budgeted by about 5%. However,
final balances will not be available until the audit is completed, which is scheduled
for sometime in December of 1993.
Based on these unanticipated, one-time sources, this appropriation can be made and still
retain General Fund balances at policy levels of 20% of operating expenditures.
7.3
►►Hu�NNl�lllllllll�l►I�uil��d�l� City of San LUIS OBISPO
Njj% COUNCIL AGENDA REPORT
SUMMARY
To avoid a project redesign that will significantly impair the functioning of the performing
arts center without any commensurate guarantees that project costs will be less if it is rebid,
it is recommended that Council approve a supplemental contribution that maintains that the
City's traditional commitment to funding one-sixth of the project costs, with the balance to
be funded by the other two partners - Cal Poly and the Foundation.
I
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November 15, 1993
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FROM: John I?unn, Ctty Admamstrattve'® ;,COUNCIL-.-,-
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Si71BJECT:
_RE ' T BUDGET FOR PERFORMING ARTS"CENTEW'"`;
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The INovember 116'Agenda°Report on funding for=the Performing Arts Center statesthat�the
City's total conthbutton,to the project will bd $5;061,500 if tbe funding recommendation is
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CouncilmemberJRgmero requested mformatton on what`the totgl)projecttbudget,wtll beand the:.
sources of funding(Cal Poly, Foundafion,;'andsthe Ctty�) �� '>
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Accordingly,-,the`followmg.is a`summaryaof total�prolect costs by-funding source:', -O
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