TO:                  Mayor and Town Council


FROM:            W. Calvin Horton, Town Manager


SUBJECT:       Preliminary Budget and Concept for Town Operations Center


DATE:             September 8, 2003



The attached resolution would establish a preliminary budget for the Town Operations Center.  The Manager recommends adoption.


The purpose of this memorandum is to help the Council set the lowest budget figure sufficient to meet the Town’s operational needs while still honoring its goals of sustainability, environmental sensitivity and fiscal prudence.


This memorandum discusses potential cost reductions, additional costs, potential revenues and a comparison of the original cost projections provided to the Council in June and the adjusted cost projections we have tonight.





Town Operations Center

Comparison of Cost Estimates in June and September 2003*


                                                                    June 23, 2003             September 8, 2003


Construction                                                   $37,108,674                      $33,217,200

Equipment                                                         4, 665,826                          4,176,100

      Subtotal (a)                                            $41,774,500                      $37,393,300


Off-site (utilities, roads, signals)                           3,224,800                          3,688,800

Demolition                                                             252,880                       ___253,000

      Subtotal (b)                                             $45,252,180                      $41,335,100


10% Design, value engineering, testing                 4,525,218                          4,133,500

      Subtotal (c)                                             $49,777,398                      $45,468,600


1% for Art                                                             497,773                             454,700

      Subtotal (d)                                             $50,275,171                      $45,923,300


Relocation expense                                    200,000                             200,000

Removal underground tanks                                                                 171,400

            Subtotal (e)                                       $50,475,171                      $46,294,700


Sales Tax Refund                                              -1,100,000                          -  998,000

      Subtotal (f)                                              $49,379,295                      $45,296,700


Day Care Facility                                                1,200,000                        1,592,000*


               TOTAL                                          $50,579,295                      $46,888,700


*Please see Attachments 1 and 2 for breakdown of projected costs.




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.


When we began considering what would be necessary to replace the current facilities on the Horace Williams site, we could not define in detail exactly what we needed.  Therefore, we could not provide a project budget estimate.


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.  This process has made it possible to provide preliminary cost projections for budgeting purposes based on the concept plan.


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


On June 9, the Council agreed to finance this project through the use of Certificates of Participation.  Steps will be taken to pursue this financing when the design drawings are closer to being ready for bid.


On June 23, the draft preliminary plan for the new Town Operations Center as well as the preliminary cost projections were presented to the Council.  Since then, we have been working with our consultants to consider the comments made during the public participation phase in June as well as by the Council on June 23, and have been gathering more information pertaining to off-site utilities, demolition of existing facilities, program revisions, phased development, and building system alternatives.




Since June 23, we have reviewed the validity of the cost projections presented then, reviewed the program and the conceptual plan for opportunities to save money, and have made cost projections for the revised conceptual plan.


The more refined the plans are, the more accurate cost projections can be.  Therefore, as long as we have conceptual plans, we will have general, rather than specific, cost projections. The proposal before the Council tonight is to approve a general budget. We would then work with our designers to develop the conceptual plan into a refined design that could be built for the amount budgeted. 


Validity of initial cost projections

To review the validity of the cost figures, Corley Redfoot Zack had a second cost estimation firm look at the concept plans and make their own cost projections, and also had a contractor project costs as if he were preparing a bid.  They found that, although some individual elements and subtotals differed, the bottom lines of all the estimators were consistent.


Cost Reduction Opportunities through Changing the Program

The initial program included offices for the Engineering Department, which is currently housed in Town Hall.  This is one of the larger departments, and it is expected to grow more than most others.  Since December it has been used as a place-holder for space at the Operations Center, partly because of its size.  We have now concluded that the Information Technology Department should move to the Town Operations Center.  While some of the Department’s space in Town Hall would need to be retained to house equipment and personnel serving Town Hall, the core of the department personnel and major equipment would move to Millhouse Road.  This change would result in the reduction in size of  the building originally planned to house the Engineering Department, saving about $315,000.


Cost Reduction Opportunities by Using Pre-engineered Buildings

We pursued the question of how much money might be saved by using pre-engineered metal buildings and what other types of costs and benefits there might be.  As with other cost projections, it was difficult to derive estimates of cost savings, because we have only conceptual diagrams and no real plans.  Nevertheless, we concluded several key points:


We believe that the design process is at too early a stage to conclude whether pre-engineered metal buildings would provide a measurable cost savings, given the special accommodations that would be necessary to meet the requirements of the program.  Sales representatives are not able to give specific answers to questions of cost and adaptability without more refined designs than are now available.  We recommend that, as the conceptual diagrams move into the schematic design phase, our designers consult with sales representatives of metal building companies to see how their design could accommodate the standard metal components and vice versa, and what the costs, both monetary and non-monetary, of modifications to the standard elements might be.


Cost Reduction Opportunities through Phasing Development

We recommend reducing initial costs by limiting our planning horizon to 15 years instead of 30 years. We would phase construction so that the facility could accommodate needs projected only through 2021. The site plan and individual building designs would be drawn so as to accommodate as efficiently as possible the expansions that would be needed to meet our requirements for the following 15 years.  While we have done our very best to project our needs both 15 and 30 years after occupancy in 2006, we caution that changing demands for a variety of municipal services, the emergence of new technologies, different environmental safeguards and the like will effect the accuracy of such projections.


By reducing our planning horizon to 15 rather than 30 years and leaving room on the site for expansion when needed later, we can reduce some initial costs.  Parking areas can be graded along with the entire site, but not paved until needed.  Some buildings can be designed to simply have work bays added at one end or the other.  Office buildings cannot be as simply revised, but it is possible to design them to accommodate future expansion.


Savings available now through phasing are limited somewhat by the fact that the June 23 plans had already included the following elements of phasing:


In addition, initial proposals for flex space offices and two maintenance bays for Public Works were deleted during the planning phase.


We propose the following additional reductions in initial construction, with the possibility of future expansions as needed:


·        Delay two maintenance bays in the Transit Maintenance Building                           $466,700

·        Delete a third bay in the Transit Maintenance Building and the equipment

that would allow bus alignments to be accomplished on-site                                    609,200

·        Delay one roofed patio area of Transit Administration/Operations Building                27,200

·        Delete one office in the same building                                                                       10,100

·        Reduce the size of areas for drivers in the Operations Building                                  45,000

·        Delete archives storage room, modify circulation, crew areas, etc. in the

Public Works Operations Building                                                                          858,300

·        Delay two work bays and associated equipment  in the Public Works

Fleet Maintenance Building                                                                                    479,500

·        Delete four offices in the Public Works Building/Housing Maintenance

Building                                                                                                                   70,200

·        Delete one crew room in same building                                                                     83,300

·        Coordinate and reduce size of shop area in same building                                       249,700

·        Delete three offices in Public Works Administration area                                           56,800

·        Adjust Resource Conservation District crossing                                                      111,300

·        Delay canopy-covered Public Works equipment staging area and paving                350,600

·        Delay 18 Public Works support vehicle spaces                                                         36,400

·        Reduce Engineering offices to accommodate Information Technology                      315,200

·        Delay safety training area                                                                                       263,700

·        Reduce size of one shared conference/training area                                                   95,000

·        Reduce size of surplus storage building                                                                   151,000

·        Delete all office furniture from project budget                                                      __179,800



Potential cost savings considered and discarded:

Appendix A describes the measures we considered and concluded that we could not recommend.


Additional Costs


Net Cost Reduction

Another element of net cost is the estimated total of the refund of sales tax paid on materials purchased, a sum in the range of $800,000 to $1,000,000.


In the State of North Carolina, local governments are required to pay sales tax to the State, but are eligible to receive a refund of sales taxes paid.  Sales taxes are included in the contract prices bid by construction contractors, because they must pay sales tax when they acquire materials and equipment needed for the construction.  With each request for payment, a contractor must include a list of each of his payments of sales tax.  This information is later used by the Town in making its annual application for the refund of sales taxes.


The return of imbedded sales tax from construction contractors amounted to $3,200 in fiscal year 2001 and $7,200 in 2002, amounts too low to be highlighted in any budget discussion.  However, the Town has never contemplated a single construction project of the magnitude of the Town Operations Center.  Therefore, we have estimated the proportion of the total cost that will go toward purchase of materials and equipment and project that the sales tax refund will be in the range of $800,000 - $1,000,000. It would probably be received in the two fiscal years following the completion of construction, or 2007-08 and 2008-09.  


Day Care Facility

The inclusion of a day care facility on Millhouse Road is discussed in an accompanying memorandum.


Over the summer, we have refined the initial cost projection for this facility, using the same allowances as we have for the rest of the project for items such as 10% for design, value engineering, and testing; 10% for contingency; and 1% for art.  The resulting figure is $1,591,941.  However, as noted in the accompanying memorandum on this subject, additional research needs to be conducted before we can have reliable figures for both capital and operating costs.


We recommend that the Council consider the capital and operating costs, demand for services and other policy issues related to a day care facility separately from the costs of the Town Operations Center.  A site for a day care facility is identified at the southern entrance to the Town Operations Center.  It would be possible to consider the projects separately without precluding a decision to include or exclude the facility, or to proceed with construction of the day care facility at the same time as the rest of the project.


Potential Revenues

Because the transit–related facilities are eligible for federal and State funding, we need to separate the costs of these facilities from the rest of the site.  At this stage of planning, we estimate that the cost of all transit-related facilities to be approximately $18,220,000.


If we are able to acquire the maximum amount of grant funding, it would amount to about $16,470,000, or 90% of the costs (minus the sales tax refunds).  We do not know how much of this sum we will actually receive.  It is possible that it may take several years to receive all of the possible grant funding.  If so, timing issues could be accommodated by the use of short-term financing to be paid off by grants as they are received.  If the grants do not materialize, then the short-term financing could become long-term financing.


As of now, we are certain that $1,318,289 for architect and engineering services will be available this fall through the North Carolina Department of Transportation (NCDOT). This is noted in the table below.  We also know that we will receive $135,000 from the NCDOT Small Urban Projects Fund to cover the cost of moving the Millhouse Road railroad crossing and installing a traffic signal at the intersection of Millhouse and Eubanks Roads. (Half of this cost would be assigned to the transit side of the project.)


At this point, we believe that there is a reasonable chance that we will receive about $10,124,000 in State and federal transit funding, as noted in the table below. 


The table reflects funding from the North Carolina Department of Transportation (NCDOT), the Surface Transportation Program Direct Allocation (STP-DA) and the State’s Transportation Improvement Program (TIP).  The table also includes the 10% local match (LM) which would be required, bringing the total of funding expected to $11,248,000.  We assume that the local match would be shared by the three partners in the Chapel Hill Transit System.  We also expect that up to $577,100 already spent on land acquisition for the transit site would be counted as part of our local match.


Potential Funding for the Transportation Operations Facility








NCDOT Statewide earmark








$1,318,289 US 

     164,786 NC

     164,786 LM




$    560,000



$   700,000

$   800,000




$  800,000




$2,160,000 US

     270,000 NC

     270,000 CH


TIP (in

lieu of Homestead Rd.)











$5,520,000 US

     690,000 NC

     690,000 LM







$  8,998,289 US

    1,124,786 NC

    1,124,786 LM


US = federal    NC = State  LM = local match


This funding is spread out over four years. Additional funding could be available for this project for up to five years beyond its completion in 2006-07.


We intend to aggressively pursue funding from the NC Moving Ahead program. If more funding becomes available from that program, then it may be necessary to forego the STP-DA funding in order to meet eligibility requirements for the Moving Ahead moneys.


In addition to the funds noted above, we would anticipate receiving another approximately $1,000,000 annually from the NCDOT Statewide earmark.  Also, the recent designation of Orange County as an air-quality non-attainment area means that the Town is eligible for funding by the Congestion Management Air Quality program.  We are also working with local NCDOT highway officials to explore possibilities for funding portions of the off-site road and signal improvements that will need to be a part of this project.


Potential revenues for costs not related to transit operations include road project funding, including the funded Millhouse Road improvements mentioned above.  In addition, federal funds for public housing may be used for costs related to the Housing Department’s facilities. 




Based on work this summer, we now are able to present better and more detailed cost projections. We have identified additional areas of cost. We also have determined ways to reduce the total initial capital costs of the project, resulting in a net decrease of about 8.27%, and a 7.2% decrease if the day care center is included in both sides of the equation.


We believe that it has been valuable to assess our needs for 15 years as well as for 30 years, so that we can propose phasing capital investment to accommodate Town operations for the shorter period, while still preparing for efficient expansions necessary to accommodate needs at a later date.


We also note that some costs are not yet available, even as general estimates.  As we are able to provide more information on the cost of fiber optic cable and if or when we see the need for significant revisions in today’s information, we will report to the Council.


It is important that there be a budget, even a preliminary one, established for the Town Operations Center project.  It is the largest construction project that the Town has ever contemplated, accommodating the two largest departments with the two largest fleets of vehicles and equipment.  Accommodating its price will be a consideration in Town budgeting and financial planning for at least twenty years. 


The budget need not be final until the construction bids and financing bids have been opened, negotiations completed and the contracts approved by the Council.  However, adoption of a resolution now would indicate the Council’s wishes regarding the budget and design issues such as phased construction.  It would be possible to make amendments during the design process as more information becomes available.


A budget decision tonight will also provide guidance as the designers move from a conceptual plan to design drawings.  An application for a Special Use Permit will be submitted later this calendar year, and it is important for meeting our 2006 deadline that that application reflects, at the start, the Council’s wishes.




We recommend adoption of the following resolution, amended as the Council wishes, which would establish a preliminary budget for the Town Operations Center. 




1.      Appendix A – Potential Cost Savings Considered and Discarded (p. 12).

2.      Preliminary Cost Projections Day Care Facility (p. 13).

3.      Town Operations Center Project Costs (p. 14).




WHEREAS, the Town must relocate its two largest departments, Public Works and Transportation, by December 31, 2006; and


WHEREAS, the Town of Chapel Hill has acquired an 88-acre site for a Town Operations Center on Millhouse Road; and


WHEREAS, a needs assessment, site analysis, and preliminary concept plan have been developed; and


WHEREAS, the Council considered on June 23, 2003, the preliminary concept plan and the initial cost projections; and


WHEREAS, the Council considered on this date potential cost reductions, additional identified costs and potential revenues;


NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that a preliminary budget for the Town Operations Center of $45,300,000 is hereby adopted, with the expectation that approximately $18,300,000 would be used for Transit-related needs and that approximately $27,000,000 would be used for Public Works-related needs.


BE IT FURTHER RESOLVED that Town Manager is requested to report to the Council as more complete and detailed cost projections are available.


This the 8th day of September, 2003.




Appendix A

Potential Cost Savings Considered and Discarded







August 29, 2003



Town of Chapel Hill, Project #0226










6,500 SF @ $150/SF

$  975,000

Site Cost

6,500 SF @ $18.50/SF



6,500 SF @ $8.00/SF


Playground Equipment

Lump Sum


Water and Sewer

Lump Sum





Contingency (10%)






Inflation (6%)






Soft Costs (10%)






Artwork (1%):










Town Operations Center Project Costs


                                                                          Transit–related          Public Works-related


Construction                                                         $12,788,100                      $20,429,100

Equipment                                                                1,828,200                          2,347,900

      Subtotal (a)                                                  $14,616,300                      $22,777,000


Off-site (utilities, roads, signals)                                 1,844,400                          1,844,400

Demolition                                                                   126,500                             126,500

      Subtotal (b)                                                   $16,587,200                      $24,747,900


10% Design, value engineering, testing                       1,658,700                          2,474,800

      Subtotal (c)                                                   $18,245,900                      $27,222,700


1% for Art                                                                   182,500                             272,200

      Subtotal (d)                                                   $18,428,400                      $27,494,900


Relocation expense                                                      100,000                             100,000

Removal underground tanks                                           96,000                               75,400

      Subtotal (e)                                                   $18,624,400                      $27,670,300


Sales Tax Refund                                                     -  406,600                         -   591,400

      TOTAL                                                         $18,217,800                      $27,078,900