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City Council Report

 

City Council Meeting: January 27, 2015

Agenda Item: 8-D  

To:               Mayor and City Council 

From:           Martin Pastucha, Director of Public Works

                    Gigi Decavalles-Hughes, Director of Finance

Subject:        Feasibility analysis and Design-Build Agreement for the City Services Building Project

 

Recommended Action

Staff recommends that the City Council:

1.     Review and comment on the feasibility analysis, concept design and financial options for the City Services Building project.

2.     Authorize the City Manager to negotiate a Guaranteed Maximum Price (GMP) with design-build contractor Hathaway Dinwiddie Construction Company, a California-based company, for design services (including schematic, design development and construction documents), for the proposed City Services Building.

Executive Summary

On April 4, 2014 Council authorized staff to negotiate and execute a professional services agreement with Hathaway Dinwiddie Construction Company for the feasibility analysis, concept design and cost estimates for the City Services Building. Staff recommends that Council review and comment on the feasibility analysis and financial options and authorize staff to enter into negotiations for a Guaranteed Maximum Price (GMP) for a design-build agreement to initiate the design phase of the project. Staff would return to Council for approval of the GMP for the design phase.

 

Background

City Hall was constructed in 1938 when the city population was 53,500. The approximately 60,000 square foot building was designed to consolidate staff offices, services and activities of three separate municipal structures including: City Hall, a fire station and police station/jail. 

 

Santa Monica’s population has grown to 92,400 and City services and staffing levels have evolved and increased to serve the needs of an active community and commercial hub. In addition to the 243 staff located in the historic City Hall building, approximately 200 city employees are housed in leased spaces throughout Santa Monica at a cost of almost $2 million per year. Current lease agreements stipulate increases as high as 5 percent annually, based on the consumer price index (CPI). Given the strengthening economy and real estate recovery, these increases could be much higher once leases expire and must be renegotiated with lease and utilities payments expected to increase to $2.4 million by 2020.

 

On July 24, 2001, Council awarded a contract to Sares Regis Group of Northern California to conduct a feasibility study to determine the City’s space requirements, assess department locations and adjacencies, prepare seismic upgrade and rehabilitation options for City Hall and explore options for a new City Services Building.

The feasibility study was completed in April 2002, with the following recommendations:

·       Construction of a new City Services Building spanning Main Street on a site northwest of City Hall with 111,245 square feet of office space and 147,170 square feet of below-grade parking for 300 spaces.

·       Reorganization/rehabilitation of City Hall, including interior, exterior and grounds.

·       Demolition of the Police Annex building, located in the City Hall courtyard.

Illustration from Sares Regis Group of Northern California Feasibility Study 2002

 

The July 2002 estimated cost for all of the recommended improvements was over $70 million.

 

 On June 28, 2005, Council adopted an update to the 1993 Civic Center Specific Plan (CCSP).  The 1993 and 2005 updated CCSP recommended that:

·       A City Services Building be built on the “North Slope” between City Hall’s north parking lot and the I-10 Freeway.

·       The historic City Hall be seismically upgraded, restored and enhanced (completed).

·       Construction of a new Public Safety Facility (completed).

·       The Police Annex building located in the City Hall courtyard be demolished (completed).

·       A new Civic Center Parking Structure/Garage be constructed (completed).

Illustration from Civic Center Specific Plan 2005

 

On January 9, 2007, in an effort to expedite the consolidation of City Hall staff, Council was presented with a report to select Natoma Architects, Inc. to prepare initial design for a proposed “Temporary Office Building” east of City Hall until a permanent space could be identified.  The proposed “Temporary Office Building” was envisioned to be two or three floors to house a one-stop public permit counter, including planning, building and safety, public works, parking and finance operations.  The existing public counter space on the first floor of City Hall would be transformed into office space. Upon further review of the cost benefit of this “Temporary Office Building,” Council did not consider this plan and directed staff to look at other alternatives.

                  Illustration from Stanley Saitowitz / Natoma Architects, Inc.

 

On October 13, 2007, staff presented a City office space needs analysis to Council at a special meeting, which included five alternatives: Council expressed a preference for the option of an enhanced Civic Center. With this approach the city would construct or purchase and rehabilitate a 90,000 square foot building and would also offer art galleries and community meeting space.

 

On July 8, 2008, Council endorsed the short term strategies identified in a February 11, 2008, Information Item. Strategies included reducing leases and moving staff closer to City Hall, developing office space in the former jail and on Fourth Street within the Civic Center Parking Structure.

 

On September 16, 2008, Council approved a contract with Gensler Architects, Inc. to complete a space needs analysis for City administrative space as an update to the April 2002 Sares Regis Group of Northern California’s feasibility study.  The completed analysis report recommended the implementation of:

·       A “one stop shop” model for public counter functions.

·       Optimize the effective use of the historic City Hall building.

 

·       Implement specific departmental office space designs to support and enhance the variety of work processes required within the City’s administrative functions.

·       Construct an administrative services building on the City Hall campus

 

On March 27, 2012, Council authorized staff to seek proposals for initial design and cost estimates for a City Services Building located on the site just east of City Hall.

 

Civic Center Specific Plan: North Slope Site

The “North Slope” site identified in the Civic Center Specific Plan has certain difficulties due to freeway adjacency and non-contiguity with City Hall. Additionally, a report submitted and reviewed on September 20, 2011, by the Landmarks Commission characterized the “North Slope” site as “original terraces and retaining walls” circa 1956 which are character defining features of the City Hall landscape.  For these reasons, staff is no longer considering use of the “North Slope” site.

 

Proposed Alternative Location: East of City Hall Site

Staff studied the site immediately east of City Hall as a potential alternative location for a City Services Building.  A new building could be constructed parallel to Avenida Mazatlán and to the Public Safety Facility across the rear of City Hall enclosing the City Hall courtyard. This is a variation of the 2007 proposal by Natoma Architects to add a temporary office building. This location could accommodate 40,000 square feet of office space on three levels with optimal adjacency to City Hall. Limiting the size and height would aid compliance with the National Register of Historic Places/Secretary of the Interior Standards.  This new building would provide sufficient space to accommodate off-site staff requiring City Hall adjacency currently located in leased spaces.

 

Advantages of utilizing this proposed site:

·       Furthers the efficiency and functionality of a City Hall campus byr centralizing of municipal activities utilized by the public.

·       Increased employee productivity due to centralized municipal staffing and eliminating travel time from various offsite locations.

·       Could be incorporated with a detailed City Hall Master Plan, to ensure that phased improvements meet the long term goal of a functional and restored historic City Hall.

·       Provides the opportunity to include the recommended “One Stop Shop” (a localized first floor public counter area and central cashier for financial transactions).

·       Would minimally disrupt the historic City Hall massing and front façade.

·       Would be able to relocate off-site staff, currently in lease spaces, back to City Hall including Finance, the Office of Sustainability and the Environment, Housing and Economic Development, Civil Engineering, Architecture Services and Cultural Affairs, increasing efficiencies conducting City business by eliminating travel time.

Challenges of utilizing this proposed site:

·       Delicacy of designing and constructing an addition, particularly immediately adjacent to historic City Hall, will require using The Secretary of the Interior's Standards and Guidelines for Preservation Planning.

·       Sensitivity to the light and views of Public Safety Facility and City Hall inhabitants.

·       Necessity of careful planning of both the proposed new structure and historic City Hall structure with respect to locations of underground utilities and obstructions, including possible expensive relocations.

·       Future expansion of City Hall and the new building may be limited.

 

None of the listed challenges are insurmountable. This proposed site has the strongest functional relationship to City Hall while still creating minimal impact to the Civic Center. Additionally, the City currently spends approximately $2 million per fiscal year to lease space to accommodate City staff. It is anticipated that lease and utility savings of approximately $2 million per year would be redirected to fund a portion of the debt service for the financing of this construction. The remaining payment of debt service would come from the General Fund.

 

On October 8, 2013, staff issued an Information Item detailing the proposed design build delivery method for the design and construction of the City Services Building. This approach offers phased implementation, starting with a feasibility analysis, concept design and cost estimation.

On April 8, 2014, Council authorized the City Manager to negotiate and execute a professional services agreement with Hathaway Dinwiddie Construction Company for the initial concept design, cost estimation services and feasibility analysis for the City Services Building. This agreement is the first of three phases in the design-build process.  The project design and construction phases would follow under a design-build contract subsequent to Council approval for each phase.

 

Discussion

Staff recommends continuation of the City Services Building project with the initiation of a design-build agreement for design. Additionally, staff explored approaches that would make this building the most sustainable City facility yet built. Staff recommends a City Services Building constructed to Living Building Certification (LBC) as the most prudent solution for the long term needs of the city. A building built to LBC standards would cost approximately $8 million more than a LEED Platinum building with composting toilets.  However, the LBD building would increase operational savings through Net Zero Energy and Net Zero Water requirements. The differences between LEED and LBC are described in further detail in Attachment A. Staff would return to Council for approval and authorization of two guaranteed maximum prices: one for the design services this spring and a second guaranteed maximum price for construction in winter 2016.

 

The design-build team led by Hathaway Dinwiddie Construction Company (HDCC) working with Frederick Fisher Partners Architects conducted a feasibility analysis and created a concept design for a state-of-the-art, sustainable, civic office building attached to the east of City Hall. The City Services Building would house the City’s permit center, staff and ancillary spaces currently located in leased offices throughout the city. The feasibility analysis report is included in Attachment B. Employee and customer parking would be located in the Civic Center Parking Structure or on the Civic Auditorium Lot as prescribed in the Civic Center Site Specific Plan (CCSP) and the Environmental Impact Report. This feasibility analysis resulted in a number of findings, a proposed concept design with a corresponding cost estimate for the City Council’s review and input (stressing scale, massing and location).

Feasibility Analysis - City Services Building, Frederick Fisher + Partners, 2014

 

The proposed building would be 50,000 square feet (including a basement) and pursue LBC certification. The feasibility analysis found that a building conforming to these standards could be constructed on this site for a total project cost of $56,385,130.

 

Within this LBC budget of $56,385,130, the proposed structure would be a cutting edge building reflecting the community commitment to sustainability and customer service. The City Services Building would exceed the current sustainability standards and serve as a regional example and a compelling vision for the future of the built environment in California. 

 

The team conducted a cost-benefit analysis of the overall project cost to determine whether a building housing staff in this location could be funded through savings from the elimination of leased spaces. The cost-benefit analysis indicated that savings from future rents would exceed the annual debt service cost of the building starting in FY 2034-35.  There would be a period of approximately 16 years where the General Fund would need to pay the difference between rent and debt service.

 

Concept design and occupancy / programmatic analysis

A concept design of the proposed structure was completed, focused on the determination of the building massing, scale and location on the site. Concept design excludes consideration of the structure façade and appearance (this would be developed as part of the design phase).

 

A three story building on the proposed site could accommodate both a state of the art public permit center and accommodate staff from lease spaces located throughout Santa Monica. The study shows that sufficient space can be constructed in this location to house both a one stop Permit Center and eliminate five City leases totaling approximately 43,500 square feet. Operating groups identified for relocation to the City Services Building include: Housing and Economic Development, Finance and Risk Management, the Office of Sustainability and the Environment, Architecture Services, Civil Engineering and Cultural Affairs. These groups currently occupy leased office space at sites throughout Santa Monica.

 

Co-locating the staff and the permit center would improve the efficiency of the City Hall campus for the public benefit. A second floor south wing internal connection to the City Hall building would be supported to increase staff synergy and enhance the productivity and functionality of the overall City Hall campus.

 

Customer Service

A “One Stop Shop” (public permit services and payment center) would be located on the first floor of the proposed building. Santa Monica permitting and public counter functions are now spread across various locations. The public must visit two to three locations to complete a single business transaction. For example, business licenses are distributed in the first floor leased space at 1717 Fourth Street a few blocks from City Hall.  A number of the permit functions are located in an area of City Hall that is crowded and outdated. The permit counter is inadequate to meet demand and meeting space is at a premium.

 

A new permit center in the City Services Building would improve customer service by co-locating staff members from Planning and Community Development, Public Works and Finance to provide a comprehensive, one-stop shop. A reception and public waiting area would be located adjacent to the counter and project meeting spaces. Business license processing would be served by a central cashier for the collection of fees (including potential collection of utility bills and traffic citations) with increased security in one convenient location.

 

Feasibility Analysis - City Services Building, Frederick Fisher + Partners, 2014

 

Additional benefits would include increased productivity of employees as staff would eliminate the travel time associated with coming to City Hall for meetings and services.  In addition, the central campus atmosphere would provide greater interaction and cooperation among staff.

 

Historic Preservation

The proposed design requires sensitivity in design and historic preservation. The 1939 City Hall Building was designed by prominent Los Angeles architects, Donald B. Parkinson and Joseph M. Estep. An outstanding example of the PWA Moderne/ Streamline Moderne style of architecture, City Hall is eligible for listing in the National Register of Historic Places and is included in the California Register of Historical Resources. The structure was also designated as a Santa Monica Landmark in 1979.

 

The design build team utilized an integrated process to explore the feasibility of utilizing the space behind City Hall by investigating the historic preservation aspects, the existing conditions underground, and the available sustainability opportunities. The team focused on the massing and arrangement of the existing structures and their relationship to the placement, size, scale, and massing of a proposed addition in conformance with the preservation guidelines.

 

The Historic Preservation Report included in Attachment C and developed as part of the feasibility analysis demonstrates an addition to the historic City Hall could maintain the City Hall’s State and Local Landmark status so that the building retains eligibility for listing in the National Register of Historic Places.

 

Once the heights and proximities of City Hall and the Public Safety Facility were established, three approaches were explored in the presentation to landmarks in Attachment D to locate an approximately 45,000 square foot building between the two existing buildings:

1.     Approach one: Incorporates the former equipment bay into the project. This entails a footprint of approximately 6,830 square feet on the remaining site, requiring a five story building in order to accommodate the needed square footage for the addition. Considering the historic preservation of the City Hall, this was considered to be aggressively tall adjacent to the City Hall. Additionally, the floor plate size is not very efficient.

2.     Approach two: Captures the equipment bay into the new facility. This allows for a footprint of approximately 8,750 square feet which becomes a four story building in order to create the needed square footage. This has functional issues as it bifurcates the new building and creates a less efficient structure. 

3.     Approach three: Removes the equipment bay. A footprint of approximately 12,900 square feet becomes a three story building. This scheme is the most efficient of the three, overall being smaller in scale and massing and is the proposed approach.

 

A three story building placed at the rear (secondary) elevation of the building would minimally disrupt the historic City Hall massing and front façade. A subordinate, modern harmonious building in this location can be sensitively designed to be compatible with the historic City Hall. These three options were reviewed with the Landmarks Commission at their December 8, 2014 meeting and they expressed support of proposed approach number three for its size, scale, massing and position  

 

Feasibility Analysis - City Services Building, Frederick Fisher + Partners, 2014

 

Sustainability

The team sought to maximize the sustainability of the City Services Building and examined a number of emerging, high performance technologies and rating systems (including LEED and the Living Building Challenge) to reduce the ecological footprint of the building.

 

Leadership in Energy and Environmental Design (LEED) was developed in 1993 by the U.S. Green Building Council. Most newly constructed municipal buildings in Santa Monica are LEED Gold or Platinum. Parking Structure 6 is LEED Gold, with Pico Library on track to earn LEED Platinum. The Living Building Challenge (LBC), developed by the International Living Future Institute (ILFI) in 2006, is a newer certification program that promotes the most advanced measurement of sustainability in the built environment; exceeding even LEED Platinum standards.

 

The monthly water budget for the City Services Building would be approximately 34,000 gallons. With composting toilets, the monthly water usage drops to 15,000 gallons which could be sourced with a combination of water sources including collected rainwater, grey water from air conditioning condensation, kitchen dishwater and the use of a ground well. Composting toilets on the market have been NSF-41 certified since 1994. NSF certification is an internationally recognized standard for public health protection. These micro-flush toilets use 3 oz. of water along with a foaming biodegradable alcohol to flush waste into a compost area. Additional details regarding composting toilets are included in Attachment F.

 

Components of the LBC include Net Zero Energy (NZE) and Net Zero Water (NZW). These components would be pursued with a full LBC certification.  Net Zero Energy and Net Zero Water are separate certifications awarded by ILFI. In order to achieve NZE, a building must be designed to create the same amount of energy that it consumes. NZW aims to relieve buildings from dependence on city water with a ‘closed loop’ supply, which will decrease strain on water treatment facilities. A computerized energy model was utilized to determine if it is technically feasible for the three-story proposed concept to achieve a full LBC certification on the site that could be NZE and NZW.

 

The feasibility analysis demonstrated that the proposed City Services Building in this location may technically achieve a full LBC certification that is both NZE and NZW compliant that is comfortable, environmentally friendly and demonstrates sustainable City values in order to serve as a replicable model for the community. An executive summary of the sustainability report is included in Attachment F. These opportunities come at an added cost to the baseline building cost, which may be slightly offset by the cost of energy savings which is discussed in the cost-benefit analysis of the project.

 

Site Preparation

The preparation and construction of the City Services Building presents challenges that impact the project cost including:

·       Rerouting of existing utilities including electrical conduits and a major electrical service closet.

·       Removal and remediation of the subterranean, encapsulated firing range including the concrete perimeter walls (from the former demolished police addition.)

·       Preparation of the south site to accommodate a building entrance in this area.

·       Construction to the rigorous standards of an Essential Services Building to ensure the building would be operable after a seismic event.

 

Feasibility Analysis - City Services Building, Frederick Fisher + Partners, 2014

 

Other Issues

The Feasibility Analysis has identified the following challenges of utilizing this potential site with offered solutions:

·       Existing City Hall Campus inhabitant’s views and light can be both managed and enhanced by the addition. The concept design demonstrates that the existing city offices located in the former jail may retain some of these windows. Some views from the Public Safety Facility will be impacted by the construction of a three story addition, the same height as City Hall.

 

Cost Benefit Analysis

In FY 2014-15, staff anticipates the City will spend approximately $2 million on rental fees for approximately 43,500 square feet of offsite office space for 200 employees. Utilities are an additional cost and are averaging approximately 10% of rental fees at some offsite locations. Should Council direct staff to move forward with the City Services Building, staff anticipates the building could be fully occupied by these employees in FY 2019-20, resulting in an annual, ongoing rental and utilities savings of approximately $2.5 million starting in the first year of operations, assuming a 4% annual increase in rent from the current fiscal year based on current lease terms and anticipated growth in the local real estate market.

 

It is the City’s fiscal policy to consider both pay as you go and debt financing for capital projects, depending on the availability of funds in the former case, or the ability to use annual revenues to fund annual debt service, in the latter case.  Because capital expenditures produce long-term benefits, they can appropriately be funded by debt, which can lead to a more equitable cost burden across generations. Staff recommends funding the City Services Building through a lease revenue bond with a thirty year final maturity. The amount financed may depend on the approach determined by Council but the rates would not vary significantly. Staff has identified $4 million in capital reserves that could be used as an equity contribution that would lower annual debt service costs.

 

To calculate the payback period of this project, staff analyzed financing options for two construction scenarios:

·       Option 1. Living Building Challenge (LBD) certification at an estimated cost of $56,385,130 (resulting in close to zero utility cost).

·       Option 2. LEED Platinum with composting toilets at an estimated cost of $48,218,880.

 

There is a third option to construct a LEED Platinum building with standard low-flush toilets at an estimated cost of $47,535,000. The debt service payments would be negligibly lower than payments outlined for the LEED Platinum building with composting toilets, but the difference would be insignificant with a total project cost difference of less than $1 million.

 

The table below highlights the differences in financing Option 1 and Option 2. Both scenarios assume a $4 million equity contribution and a 4% annual increase in rental costs over a thirty year debt service period. Initially, debt service and other costs related to building ownership would exceed rent and utilities savings. This cost would steadily decrease under either scenario until the rent vs. debt service break-even year, after which point projected rent and utilities savings would exceed debt service payments and result in savings to the City going forward.

 

During the initial years when debt service payments will exceed anticipated rent and utilities savings, funds would need to be diverted from the Capital Improvement Program (CIP) budget to accommodate the net cost of debt service.  Current financial forecasts assume an annual amount from the General Fund for the CIP budget of $21 million annually, and available funds would be reduced by the amounts listed below. The CIP budget contributions would decline over time until the rent vs. debt service break-even point, at which point the projected cost savings achieved by not renting would be sufficient to cover the debt service payments. The table below shows the projected reductions to the CIP budget in year 1, 5, 10, and 15 of building operations.

 

Option 1

Living Building Challenge

Option 2

LEED Platinum

Average annual debt service payment

$4.2 million

$3.5 million

Rent vs. debt service breakeven year

FY 2034-2035

FY 2031-32

CIP budget contribution in year 1

$2.0 million

$1.4 million

CIP budget contribution in year 5

$1.6 million

$1.0 million

CIP budget contribution in year 10

$1.0 million

$0.5 million

CIP budget contribution in year 15

$0.3 million (stops in yr 16)

N/A (stops in yr 14)

 

Recommendation

Staff recommends development of a 50,000 square foot City Services Building as outlined in scenario 1 with LBC rating. Achieving the LBC certification would be a long-term investment in the City’s wellbeing. This project is representative of the community values to build sustainable structures and minimize the impact on energy and water resources. It would also serve as a sustainable regional model for future development. This would require the dedication of approximately $2 million reduction in the amount available CIP projects beginning in FY 2019-20, which would then be reduced annually based on the difference between rental/utilities savings and annual debt service.

 

Feasibility Analysis - City Services Building, Frederick Fisher + Partners, 2014

 

Next Steps

Dependent upon Council action and approval of the recommended action, staff anticipates the following project timelines:

·       Return to Council for authorization of a Guaranteed Maximum Price for design – Spring 2015

·       Schematic design – Spring 2015 through Summer 2015

·       Design development– Summer 2015 through Spring 2016

·       Complete construction documentation phases – Spring through Fall 2016

·       Return to Council for authorization of a Guaranteed Maximum Price for construction and to issue lease revenue bonds – Winter 2016

·       Start of construction / site preparation – Spring 2017

·       Complete construction – Summer 2019

 

Additionally, upon Council approval of the recommended action, staff would return to Council to amend the Civic Center Specific Plan to allow for the use of the proposed site.

 

Alternatives to Staff Recommended Options

Council could direct staff to pursue a City Services Building but with fewer sustainability features including:

·       LEED Platinum certification with composting toilets for a savings of approximately $8.16 million in construction costs compared to LBC certification

·       LEED Platinum certification with standard low-flow toilets for a savings of approximately $8.85 million in construction costs compared to LBC certification

 

Council could decline to pursue construction of a City Services Building and direct staff to continue to lease necessary office space.

 

Financial Impacts & Budget Actions

There is no immediate financial impact or budget action necessary as a result of recommended action. If Council authorizes staff to negotiate a Guaranteed Maximum Price (GMP) for a design-build contract with Hathaway Dinwiddie Construction Company, staff would return to Council for approval of the negotiated GMP for design and would recommend budget actions at that time. Staff would also return to Council with debt service financing plans at a later date.

 

The debt service for the LBC building would be approximately $4.2 million per year.  Assuming a $4 million equity contribution and a 4% annual increase in rental costs over a thirty year horizon of debt service, this project would generate lease savings that, along with utility savings, would eventually exceed the cost of annual debt service in FY 2034-35.  Initially, debt service and other costs related to building ownership would exceed savings by approximately $2 million a year.  This cost would steadily decrease until FY 2034-35.  Funds would need to be diverted from available General Fund CIP allocation annually during this time to accommodate the net cost of debt service. 

 

Prepared by:     Miriam Mulder, City Architect

                         Homa Mojtabai, Senior Administrative Analyst

                         Brooke Sween-McGloin, CIP Project Manager

 

Approved:

 

Forwarded to Council:

 

 

 

 

 

 

Martin Pastucha

Director of Public Works

 

Rod Gould

City Manager

 

 

 

Approved:

 

 

 

 

Gigi Decavalles-Hughes

Director of Finance

 

 

Attachments:

A – LEED and LBC Background Information

B – Feasibility Analysis

C – Historic Preservation Report

D – Landmarks Presentation

E – Composting Toilets

F – Executive summary of the sustainability report