AGENDA #11

 

MEMORANDUM

 

TO:                  Mayor and Town Council

 

FROM:            W. Calvin Horton, Town Manager

 

SUBJECT:       Update on Town Operations Center

 

DATE:             October 27, 2004

 

 

This report provides the Council with updated information concerning the status of the Town Operations Center project.  Our consultants, Corley, Redfoot, Zack will provide additional information about the site design and project status in a companion presentation tonight.

 

Our efforts over the past two and a half months have been directed to reviewing and revising the design of the project in the face of increasing cost estimates.  Our goal has been to keep the project within the budget approved by the Council in November 2003.  We believe we have been able to meet that goal while preserving the Council’s core values for the project of Sustainable Development, Environmental Sensitivity and Fiscal Prudence.

 

BACKGROUND

 

The Public Works and Transportation Departments are located on the Horace Williams Tract, on land leased from the University of North Carolina.  The lease expires on December 31, 2006, and will not be renewed.

 

In December 2002, the Council approved a contract with Corley, Redfoot, Zack for the development of a site analysis, needs assessment, concept plan and preliminary cost projection. 

 

On June 9, 2003, the Council agreed to finance this project through the use of Certificates of Participation. 

 

On October 27, 2003, the Council approved a concept plan and preliminary budget for the project. On November 24, 2003, the Council approved a budget ordinance for both the Transportation and Public Works components of the project.

 

On April 14, 2004, the Council approved a Special Use Permit for the Operations Center.

 

The project’s designers and Town staff have been working on developing the project’s design since the Council approved the concept plan.  The staff has also been working on identifying sources of funds for various components of the project, including funding from the State and Federal agencies that participate in Transit funding.

 

During this process, we have been guided by the values of sustainable development, environmental sensitivity and fiscal prudence.

 

DISCUSSION

 

As part of the process of developing the project design, the designers have provided periodic cost estimates based on the different stages of design completion.  The first was a preliminary cost estimate based on the concept plan.  This estimate provided the basis for the preliminary budget that the Council adopted in October 2003. Attachment 1 shows the breakdown of the preliminary budget.  The component total costs were estimated to be:

 

Public Works/Housing                       Transit                        Total

 

$24,391,000                                        $18,535,527                $42,926,527

 

In August, CRZ had the detailed designs reviewed by an independent cost estimator, who reported that due to significant increases in the cost of construction materials, the new design estimates were:

 

Public Works/Housing                       Transit                        Total

 

$27,164,788                                        $19,445,376                $46,610,164

 

The difference is $3,683,637.

 

The largest increases in this estimate were due to increases in the cost of metals and paving materials. Gypsum products (wallboard, drywall) and wood products have also greatly increased.  The materials increases individually range from about 10% to as much as over 40% for particular materials.  Because we are planning on metal buildings, the cost of metals is significant; because of the large amount of paved parking for vehicle storage, the cost of paving materials is significant. 

 

In addition to the revised design estimate, there are other costs that were not included in the preliminary budget estimate, such as financing costs, communications systems and connections, project management and contingency legal fees.  There is also the cost of the land purchased for the Transit facility, for which reimbursement is possible.  These cost elements were not part of the architects’ design project and related budget, and were intended to be considered after more detailed design estimates were available.

 

Town staff and Corley, Redfoot, Zack began to review the project to clarify the cost estimates, to review specifications for the project elements and to identify areas of possible adjustment to the building program.  We also conducted a “peer review” of the Transit facility, which involves a review of the design by transit professionals from the region.  We also have pursued a value engineering study, which is still underway.  Our goal in these review processes has been to preserve the functionality of the project while staying within the approved budget and adhering to the values of sustainable development, environmental sensitivity and fiscal prudence.  We believe the changes we have identified would meet those objectives.

 

Changes to Project

 

The changes we have identified range from across the board reductions in building systems (modifications to plumbing, electrical, mechanical) to eliminating one building in the Public Works area by consolidation of space in another.  The major changes include the following, with savings noted:

 

Public Works/Housing Maintenance

 

• Combine Housing Maintenance/Building Maintenance building with the Field Operations building ($673,000)

 

• Redesign chassis wash area in Fleet Maintenance building ($170,000).  This change involved moving the chassis wash area outside the building and reducing the floor space as a result.

 

• Eliminate 2 fuel islands ($137,000).  We believe we can handle fuel demands by including all fuels at fewer islands and reserving space for possible additions in the future.

 

• Eliminate some covered vehicle parking ($122,000).  This will require parking more equipment outside and some reconfiguration of parking, but will not impair operations.

 

• Amend roof design on out buildings ($175,000). This change will substitute conventional roof designs for the originally planned sloped metal roofs on several buildings.

 

• Reduce floor plan for Field Operations building ($165,000).  This change involved the elimination of work bay areas and reduction in office sizes as well as several other minor changes.

 

• 5% reduction in buildings systems designs ($224,000).  These changes are “across the board” reductions in the budget for electrical, mechanical and plumbing systems.

 

• Amend site design to eliminate some paving and change pavement design ($84,000).  We changed the pavement cross section to substitute more of a less expensive stone base for an asphalt base.

 

The proposed reductions total $2,316,000, for a net Public Works/Housing cost of $24,848,788.

 

Transit

 

• Revise concrete paving design ($265,000).  This change involved an amended design for the concrete, utilizing a different concrete mix and reducing the amount of reinforcing steel.

 

• Eliminate component re-build area ($386,000).  This change will involve eliminating the space in the maintenance shop area that would have provided for in-house rebuilding of engine and other mechanical components.  These repairs will be contracted.

 

• Reduce amount of equipment ($207,000).  This includes a reduction in storage containers and some support equipment in the shop area.

 

• 5% reduction in buildings systems designs ($155,000). This is an across the board reduction in the budgets for plumbing, mechanical and electrical systems.

 

The proposed reductions total $1,208,000 for a net Transit cost of $18,237,376.

 

We considered many other changes to the site and the buildings and believe that the items we selected represent real cost savings without sacrificing the operating effectiveness of the two areas, or affecting the sustainability and environmental sensitivity features of the development.  We believe that to achieve significantly greater levels of savings in the project would have necessitated such steps as eliminating or reducing daylighting in the buildings, or eliminating porous pavements or modifying the energy efficient mechanical systems.  The sustainable elements cost more to install than more conventional alternatives, but provide environmental and quality of life benefits that we believe are important and that reflect the Council’s values.

 

Other Costs

 

Additional costs for the project were identified that were planned but were not quantified until this phase of project development.  Among these are:

 

• Financing costs ($350,000).  These are costs related to borrowing money for the project.

 

• Project management costs ($135,000).  These costs cover contract assistance and temporary employees (all Town retirees) hired to assist in project administration and inspections.

 

• Telephone system and fiber optic connections ($105,000).  This element will include a telephone system for the entire site and some costs related to providing fiber optic cable connections to the site to ensure optimal voice and data communications.

 

• Land cost for Transit site ($659,000).  This is the cost of the land for the Transit portion of the site.  The number is an estimate, and will be fixed by appraisal and approval of State and Federal regulators.  We will use the cost of the land as part of the local share of the project’s overall budget.

 

• Contingency legal fees ($40,000).  These are fees that could be required if litigation occurs during or after construction.

 

• Additional site-related costs (utility connection related to sewer easement acquisition and supplemental landscaping related to land acquisition for road realignment -- $46,000)

 

These costs total $1,335,000, yielding project totals as follows:

 

Public Works/Housing                                   Transit                        Total

 

$25,264,788                                                    $19,156,376                $44,421,164

 

Revenues and Cost Deductions

 

Our first bid for the preliminary site work on the project yielded significant savings compared to our cost estimate for the work.  The low bid totaled $1,029,083, compared to the engineer’s estimate of $1,639,700.  This results in a budgetary reduction of about $600,000, with Public Works’ savings totaling $309,000 and Transit $301,600.

 

We will also realize savings related to sales tax reimbursements over the life of the project.  Sales taxes are paid by our contractors on all materials purchased for the project.  They submit records of those purchases and the Town obtains reimbursement from the State for the amount paid.  Based on the estimates we have, the savings should total about $540,700 for the Public Works/Housing portion of the project and $402,000 for the Transit portion.

 

In addition to the primary financing of the project through Certificates of Participation, there are revenue sources we hope to utilize to offset some of the costs of the project.  Foremost among these is the identified contributions to the Transit portion of the project.  The Federal Transportation Administration and the North Carolina Department of Transportation are the major contributors, with additional funding obtained by Representative David Price in the current federal budget ($1 million) and contributions from our partners through the capital funding of the Transit system.  In total, we have identified $19,240,195 in reimbursements and grants for the Transit project.

 

We have also acquired a commitment of funding for portions of the road improvements from the North Carolina Department of Transportation for $45,000.  We have requested additional funding for other road improvements, but do not have a reply yet.

 

Finally we have obtained agreement from the federal Department of Housing and Urban Development representative for our housing program that HUD will reimburse the Town for costs associated with the Housing Department portion of the project.  This funding assumes continued federal appropriation of funding for the housing program, and thus includes some uncertainty in the future, but we believe we can count on the commitment made.  This contribution would total $1,238,000.

 

Because the market for construction materials continues to be unusually volatile, we propose budgeting a reserve against possible additional cost increases and construction contingencies, as shown immediately below.  These funds would not be used except as authorized by the Council, and would not be borrowed if not needed.

 

Public Works/Housing                       Transit                        Total

 

$1,223,526                                          $485,861                     $1,709,387

 

We note that all of the construction estimates include a 7% inflation factor and 3% design contingency.

 

Schedule

 

The first phase of work, which includes clearing, grading, sedimentation control and installation of stormwater management devices is underway.  The contract term is 150 days, with the final completion date determined by the effects of weather.  The second contract will be for off-site improvements, including the installation of road improvements and utilities.  That work should begin in the late winter or early spring of next year.  The final contract, which will include the major building and site construction, will be bid next spring with construction starting by early next summer.  We plan to complete the work, including required demolition of the existing site, by December 2006.

 

CONCLUSION

 

We believe that we have identified sufficient reductions in cost and sufficient revenue to be able to proceed with the Town Operations Center as designed while maintaining our core values for the project.  We will not know with certainty, of course, until bids are opened in the spring of next year.

 

ATTACHMENT

 

1. Town Operations Center Preliminary Budget (p. 7).