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HomeMy WebLinkAboutStaff Report 349-05On February 14,2005 Mayor Burch and Council Members Beecham and Cordell presented 'a colleagues memo (see Attachment A) to the City Council that suggested that significant savings from the previously approved plan to reconstruct the current police wing of the Civic Center could be achieved by re-looking at the City-owned parking lots on California Avenue that were considered in the 1999 site options study. The colleagues memo pointed out that the savings would result from eliminating the need to provide temporary facilities during construction and additional costs of leasing off-site property and evidence storage space; that building a new building would likely be 25% less expensive to build than retrofitting the current building; and finally that an additional $5 million might be needed to pay the University Avenue Parking District for the new square footage created and to replace existing parking associated with the police wing. The City Council directed staff to bring back more information on the California Avenue site including: • Comparison of the pros and cons of the California Avenue site compared to the Civic Center site, including temporary and ongoing costs. • Analysis of issues raised by California Avenue merchants regarding surface parking and disruption to businesses during construction. On May 9, 2005 Mayor Burch and Council Members Beecham and Cordell presented a second colleagues memo (see Attachment B) to the City Council that informed the Council that the California Avenue Area Development Association (CAADA) continues its strong opposition to the location of a police building on California Avenue and that a local developer had come forward with a proposal for locating the police building in Downtown Palo Alto. The developer has offered to build the police building to City requirements at a significant cost savings to the City, and to sell the land and building to the City. A 60,000 square foot building could be constructed, allowing the Police Department to meet its actual space needs, thereby saving the additional cost needed to lease additional warehouse space for property and evidence storage. This option also would eliminate the need to relocate the Police Department during construction, and avoid the cost of constructing a temporary communications center and relocating emergency dispatch twice. Based on this second colleagues memo, the City Council directed staff to take the following steps in the development of the police building project: • Temporarily halt staff work on the renovation and expansion of th~ existing police building and on the California Avenue alternative. • Evaluate the plan for the construction of the new police building at the proposed Downtown site. • Evaluate parking options for the new police building and the adjacent commercial property, including utilization of the City-owned parking lot behind the Post Office; and • Return before Council vacation in August 2005 with a feasibility analysis of this option with recommendation(s), which will include a funding plan. • City Auditor to review this project and provide comments and,her assessment to the Council. CMR:349:05 Page 2 of 8 In comparing the developer's proposal to the City's previous plan to renovate and expand the existing police building staff inflated the previous renovation and expansion project cost to 2005 dollars with that correction, the developer estimates that the cost of developing an equivalently sized police building at the proposed downtown location would save the City $5 to $10 million over the cost of renovation and expansion of the current police building. Staff has not negotiated with the developer. The project cost may decrease or increase dependent on the ultimate project configuration and terms and conditions of any agreements. The square footage of the new police building would be up to 60,000 square feet and would include space for property and evidence storage and additional circulation space not accommodated in the renovation and expansion project. Due to the cost savings identified by this comparison a "tum-key" approach' for the police building appears to be worth further evaluation. Relocation and Leased Space Costs The renovation and expansion of the Civic Center police wing would be extensive and would include removing the council chambers roof and' enlarging the structure's columns in the civic center parking garage in order to meet "essential service" standards (ensuring an operational facility during and after a significant earthquake). The costs to temporarily relocate the entire Police Department, Emergency Operations Center and Communications Center for three years would be almost $6.0 million. In addition the City Council would need to relocate into another City facility during construction. Also, because the renovation and expansion project is not large enough to include property and evidence storage, a 5000 space foot warehouse space would need to be leased at an additional cost of over $3.5 million. If a new police building were to be located at another site, the existing police building space totaling 25,000 sf could be occupied by other City departments such as the Utilities Engineering Division, currently located at Elwell Court and the City'S Development Center currently located on Hamilton Avenue. The savings the City would realize from eliminating these leases is estimated at $466,000 per year. Also, moving Utilities Engineering back to City Hall w01fld create an additional ongoing General Fund rental revenue stream. Parking and Land The proposed development at the downtown site on Gilman Street would require additional parking spaces to be replaced and relocated to the parking lot behind the Post Office. The developer's proposal includes building a four level parking structure on this lot with 234 parking spaces. The developer is proposing that approximately 100 of the parking spaces be for private use associated with the 300 Hamilton Building which he owns with the rest for public and secure police parking to replace the spaces in the parking lots impacted by the development. In addition, 71 spaces at the Civic Center garage where police vehicles are currently located would become available for other uses. The City owns a portion of the land under the proposed police building and the developer is proposing to sell the remairIing land to the City as part of the project. These issues will be further evaluated in connection with this proposal and other proposals if Council directs staff to issue SOl's for the project. Planning Issues A police building located at the downtown site would be located on its own parcel and would require a PC (Planned Community) rezoning process to achieve the proposed police building CMR:349:05 Page 4 of8 The SOl will require interested developers to provide proof of relevant experience and qualifications related to construction of a project of this size along with acceptable evidence of ability to deliver title to the site. Developers would be evaluated based on the site proposed for the project and their experience and capacity to provide a "turn-key", move-in condition, police building. Responses to an SOl would then be evaluated based on the following criteria: • Developer has control or ability to. deliver fee-title to land, preferably iii a downtown location • The proposed site would need to accommodate a police building of up to 60,000 square feet • The developer has the ability to construct a building of up to 60,000 sf with associated parking • Developer or developer's team's experience and qualifications building comparably sized projects with "essential" and "green" building elements • Cost of the proposed project • Proposed construction financing terms and willingness to commit to a guaranteed maximum price • Developer's control of needed land for the project and its suitability for a police building • Timeline for proposed construction and police occupancy The City would be under no obligation to enter negotiations with any developer that responds to the SOl Before entering into a "turn-key" agreement with any developer, a number of legal, planning and logistical issues would need to be resolved. RESOURCE IMPACT Staffhas reviewed the proposed project and has developed two potential financing methods. The numbers listed below are preliminary and are subj ect to interest rate and cost changes and other factors. l. Certificates of Participation (COPs): A form of lease revenue bond that permits the investor to participate in a stream of lease payments, installment payments or loan payments relating to the acquisition or construction of specific equipment, land or facilities. COPs have been a very popular financing device in California since Proposition 13, because a COP issuance does not require voter approval. COPs are not viewed legally as IIdebt ll because payment is tied to an annual appropriation by the government body. As a result, COPs are seen by investors as providing weaker security and often carry ratings that are a notch or two below an agency's General Obligation rating. 2. General Obligation Bonds (GO Bonds): A bond secured by a pledge of the issuer's taxing powers (limited or unlimited). More commonly the General Obligation bonds of local governments are paid from ad valorem property taxes and other general revenues. Considered the most secure of all municipal debt. Limited in California by Proposition 13 to debt authorized by a vote of two thirds of voters in the case oflqcal government.s. CMR:349:05 Page 6 of8 The table below contains a comparison of the costs related to issuance of each financing method based on a proposed project cost of $45.0 million including contingencies and a-30 year amortization period. Due to higher issuance and interest expense, COPs require approximately $11.3 million in total debt service than GO Bonds. Annual debt service expense is between $2.7 and $2.9 million. Sources: Bond Proceeds: Par Amount Preimum Uses: Project Fund Capitalized Interest (21 months) Expenses: Cost of Issuance Underwriter's Discount Bond Insurance Reserve Fund Surety Bond Proceeds Par Amount Bond Proceeds Total Interest Net Intere~t Total Debt Service Maximum Annual Debt Service Average Annual Debt Service COPS 49,818,000 1,144 49,819,144 45,000,000 3,690,908 240,000 498,180 284,945. 105,112 49,819,144 49,818,000 49,819,144 43,861,499 44,358,534 93,679,499 3,003,204 2,950,535 GO Bonds 45,168,000 711,884 45,879,884 45,000,000 180,000 451,680 248,204 45,879,884 45,168,000 45,879,884 37,174,697 36,914,493 82,342,697 2,771,085 2,767,822 Difference 4,650,000 (710,740) 3,939,260 3,690,908 60,000 46,500 36,741 105,112 3,939,260 4,650,000 3,939,260 6,686,801 7,444,041 11,336,801 232,119 182,714 Funds are available in the Capital Improvement Project PE-98020 budget to cover the costs associated with the SOl. Funding methods for the proposed construction of the Police Building have not been fully developed, but may require the General Fund to pay the proposed debt service if COPs are issued. Those funds could be generated by new General Fund revenue sources such as a Business License Tax or rents paid by the City's Enterprise Funds for use of CMR.:349:05 Page 7 of8 D.LHE: TO: FROM: Office of the City Clerk MEMORANDUM February 14, 2005 City Council Members ATTACHMENT A ,I'~ayor Burch and Council f\1embers Beecham and Cordell 8 SUBJECT: ANALYSIS OF CALIFORNIA AVENUE SITE AS ALTERNATIVE TO CIVIC CENTER FOR NEW POLICE BUILDING Recently, the City Council directed staff to move forward with conceptual design to reconstruct the current police wing of the Civic Center in order to address serious safety concerns and meet the Police Department's critical space needs. While it is imperative the Council move Jorward expeditiously on a police building, we feel the need to re-examine our earlier decision in light of several ' factors. A site on California Avenue, currently City-owned parking lots, was considered in the 1999 site options study. Council did not direct staff to pursue this site because of opposition from some California Avenue area merchants and nearby residents. This site, however, has the potential to serve the Police Department and community more fully, as well as eliminate the need to spend as. much as $5-6 million of taxpayer dollars on temporary relocation and additional costs associated with the disruption of City operations and temporary lea~e expense. The first issue to consider is the expense and disruption of having to rebuild on the present site. Expanding the police facility at its current location would mean that police operations would have to be relocated during construction for as much as two years. This would mean finding a facility to relocate to, either by finding a place to put down portables, or leasing office space. With either alternative, modifications associated with prisoner and evidence security would have to be completed, as well as the need to purchase and install all the equipment for a new 911 dispatch center. These temporary relocation costs would be one-time and would have no permanent benefit for the City. A second issue is the adequacy of allowable space at the current site. In order to fit the facility on this current site without going underground or going up more than an additional story, the Police Department would have to reduce its space requirements to 50,000 square feet. Besides eliminating a community room, training room and other areas, this plan does not allow space for an onsite property/evidence warehouse, requiring ongoing lease expense of approximately $110,000 per year. Building a new building to the required essential facilities standards would be significantly less expensive (as much as 25 percent less) than retrofitting the· current building. Additionally, almost $5 million will be required to be paid to the University Ave·nue Parking District for the new square footage created and for replacement of current parking. For these reasons, we believe the Council would. be well served to look one more time at the California Avenue site before moving ahead on this very large project. In addition to avoiding significant costs, the site would be more centrally located to serve the eritire community. We would like to solicit our colleagues' support in directing staff to bring back more information on the California Avenue site. That information should include: • Comparison of the pros and cons. of the California Avenue Site, compared to the Civic Center Site, including temporary and ongoing costs. • Analysis of issues raised by· California Avenue merchants regarding surface parking and disruption to businesses during construCtion. ATTACHMENT B MEMORANDUM 7 TO: City Council Members FROM: Mayor Burch, Council Members Beecham and Cordell DATE: May 9,2005 SUBJECT: New Police Building The Couricil supported our recommendation on February 14,2005 to direct staff to bring . . . . back more information on the potential of locating the new Police Building on an existing City owned parking lot near California Avenue, and also to explore the possibility of a shared project with the County on County-owned land. However, the California Avenue Area Development Association (CAADA) continues in its strong opposition to the location of a Police Building on California Avenue due to concerns about loss of surface parking as well as disruption to businesses during construction. Staff has not been able to mitigate CAADA's concerns through the exploration of striping or relocation of existing parking. Staff followed up on the Council's direction to pursue the possibility of a joint project with Santa Clara County on County-owned land, and found the County has no interest in such a project at this time. In the weeks after our February 14 meeting, a local developer with a strong reputation has come forward with a proposal for another location for our Police Building. The potential site is located across Bryant Street from City Hall on several land parcels owned by the developer and the City (see map attached). This site has several advantages over both the California Avenue site and the previously-considered plan to renovate and expand the e)rjsting Police Builrl;ng. The developer has offered to build ,the Police Building to City specifications at a'significant cost savings to the City, and then to sell the land and the building to the City. A 60,00b square foot building could be constructed, thus allowing the Police Department to meet its actual space needs, saving $1 million/year otherwise needed to lease additional warehouse sp~ce for property and evidence storage. This option also would eliminate the, need to relocate the Police Department temporarily during construction, and would avoid the cost of construCting a temporary communications, center and relocating emergency dispatch twice. We now solicit our colleagues' support for'directing staff to take the following steps in' the development of the Police Building project: • Temporarily halt staff work on the renovation and expansion of the existing Police Building and on the California Avenue alternative; • Evaluate the pl~Tl for the construction of the new poli'ce building at the proposed Downtown site; , • Evaluate parking options for the new police building and the adjacent commercial property, including utilization of the City-owned parking lot behind the Post Office; and • Return to Council before Council vacation in August 2005, with a feasibility analysis of this option and which rec'OIl1.J.ilendation(s), which will include a funding plan~ (Note: staff has preliminarily indicated that it is possible for them to meet this schedule.)"