AGENDA #6

 

MEMORANDUM

 

TO:               Mayor and Town Council

 

FROM:         W. Calvin Horton, Town Manager

 

SUBJECT:    Consideration of Proceeding with Drafting Request for Qualifications and Request for Proposals Documents for Parking Lot 5 and the Wallace Parking Deck Sites

 

DATE:          November 8, 2004

 

 

The attached Resolution would authorize the Town’s consultant, Stainback Public/Private Real Estate, to draft a Request for Qualifications/Request for Proposals document for potential use in seeking proposals from developers. We believe that the materials would be ready for the Council’s consideration on December 6, 2004.

 

BACKGROUND

 

The Downtown Small Area Plan adopted in 2000 identifies key “opportunity areas” for development downtown, including Town Parking Lot #2 at East Rosemary and South Columbia Streets, and Town Parking Lot #5, bound by West Franklin, Church and West Rosemary Streets.

 

Since November 2003, the Council and the Council Committee on Lots 2 and 5 have been working on a process to potentially develop the two Town-owned sites as well as the Wallace Parking Deck and the adjacent property at Henderson and Rosemary Streets, and the RBC-Centura bank property at South Columbia and East Franklin Streets. The Council added the Wallace deck sites and the option of pursuing the RBC site to the project in the conceptual master plans and building program adopted in June 2004.

 

The Town’s consultant, John Stainback of Stainback Public/Private Real Estate, has developed a financial feasibility analysis with input from the Council, the Council Committee and the public. The Council held public forums on the draft report on September 13, and 27, 2004.

 

On October 27, 2004, the Council held a forum to receive public comment on the project, including whether to proceed to the developer solicitation phase, the next step in the project timetable. The Chapel Hill-Carrboro Chamber of Commerce, the Downtown Commission and the Chapel Hill Downtown Economic Development Corporation submitted written comments (please see Attachment 1). Several citizens spoke as well.

 

Please see Attachment 2 for background history of the project to date.

 

KEY ISSUES

 

Below are key issues that were raised at the October 27 public forum and the Council Committee on Lots 2 and 5 meeting prior to the forum.

 

1.      How will impacts on existing businesses during construction be mitigated?

 

Comment: The Request for Proposals, should the project reach that stage, will require the response from developers to include a plan to mitigate the impact of construction. Some elements of this plan could include replacing parking lost during construction, abating noise and dust, planning for the staging of construction equipment, and minimizing physical hazards.

 

2.      What effect will higher parking construction costs and rock excavation at Lot 5 have on the financial feasibility model?

 

Comment: The finance model as of October 27, assumed that the construction cost of underground parking to be about $19,000 per space, based on cost estimates provided to Mr. Stainback by McDonald-York, a Raleigh contracting company. However, this estimate may be too low. Based on cost figures provided by the University of North Carolina, the cost of building the parking could be substantially higher than $19,000 per space. In addition, rock excavation could add as much as $2 million to the development cost if blasting is required.

 

Stainback Public/Private Real Estate has revised the financial analysis to determine the effect of higher parking costs on the Lot #5 project, assuming per-space costs of $25,000, $30,000 and $35,000. Mr. Stainback believes $25,000 per space is a reasonable figure to use in the financial model.

 

The financial model (Tab #2 in the notebook, Attachment 5) assumes a per-space cost of $24,400 for construction of the underground parking at Lot 5. The Financial Sensitivity Analysis (Tab #3) examines the effect of increasing the per-space cost to $27,900, $31,300 and $34,800. Mr. Stainback said that using the current assumptions, Lot #5 remains financially feasible at $31,300 per space but not at $34,700. However, the total cost of the underground garage could be lowered by eliminating some or all of the 102 spaces that would be set aside for residential storage, according to the consultant.

 

Stainback Public/Private Real Estate, using an estimate from Clark Construction, estimates that the blasting and removal of rock to a depth of three parking levels at Lot 5 could cost between $1,400,000 and $2,100,000. Based on the size of the proposed deck, 539 spaces, the per-space cost of excavation would range between $2,600 and $3,900.

 

3.      How will the results of the structural engineering analysis at the Wallace Deck affect the project?

 

Comment: The conceptual master plans contemplate adding four stories on top of the deck, and extending the deck to Henderson Street, over which a six-story building would be built. The architect who designed the deck has told Town staff that the structure can handle at least one additional level and possibly two, depending on the results of a structural analysis. Additional levels may require adding additional support, a cost not reflected in the financial analysis. Extending the deck through the alley would require the relocation of major utility lines. (There also are issues with providing services to the Franklin Street businesses, including deliveries and trash and recycling collection, during construction.)

 

Stainback Public/Private Real Estate has requested a fee proposal from an engineering firm to complete a structural analysis and will provide an additional report on November 8th to the Council Committee.

 

4.      How will public art be included in the project?

 

Comment: On October 27, the Council Committee on Lots 2 and 5 agreed that including public art should be required of developers proposing to develop the sites. Stainback Public/Private Real Estate has included public art in the financial model, assuming that 1 percent of the development budget would be for public art.

 

Stainback Public/Private Real Estate has adjusted the development budgets in the finance model to include money for public art, calculated based on 1 percent of the total construction costs associated with the public and private portions of each project. The public art fund totals are in the model as follows: Lot 5, $278,000; Lot 2, $111,000; Wallace Deck, $146,000.

 

The Council Committee is to discuss public art further at its November 8 meeting. A memorandum for this Committee meeting from Janet Kagan, a member of the Chapel Hill Public Arts Committee, is included as Attachment 3.

 

5.      Why is office space not included in the conceptual  master plans?

 

Comment: The project does not include space for offices. The market demand study conducted by Economics Research Associates projects that demand for office space would not be a “major driver” in the development of the sites, concluding that the types of professional service establishments currently occupying downtown office space, other than the University, are unlikely to generate substantial office space demand in future.

The Downtown Commission and the Chapel Hill Chamber of Commerce and others have requested that the Council consider adding office in the project mix. A recent article in the News & Observer suggested that the Chapel Hill office market may be on the rebound.

Another issue to consider is whether the site can handle an additional office component. ERA study concluded that providing parking required for a substantial amount of office space while also replacing the public parking on the sites would be difficult because of physical constraints.

The Request for Proposals could allow developers flexibility to include office space. We are also investigating whether the project space could be designed so that retail or residential space could be converted to office.

 

Stainback Public/Private Real Estate believes it is feasible to convert retail space into office space; however, converting residential space to office space is more problematic as it would require moving walls, rearranging the plumbing, and adding bathrooms. In addition, corridor widths and building materials may be issues depending on the Building Codes. 

 

6.      Are residential units and public space at Lot 5 compatible uses?

 

Comment: The plan for Lot 5 includes upper-floor residential units fronting the public space. The presence of residents would provide “eyes on the park” security, but this could also result in complaints from residents about how the public space is used, such as sounds from outdoor concerts. It is possible that people who buy condominiums at Lot 5 may want to be in an active urban setting and may welcome the activities associated with using the public space.

 

The relationship of the residential units to the public space will need to be considered in the design of the project and management of the outdoor space.

 

7.      When will the Town need a letter of intent from RBC-Centura to participate?

 

Comment: The issue of RBC’s participation in the project will need to be resolved before the issuance of a developer Request for Qualifications because of the question of whether space would be needed at Lot #5 for the bank. If the Council authorizes proceeding to the developer solicitation phase, we recommend that Mr. Stainback be authorized to hire an architecture firm, at a cost not to exceed $1,500, to develop ideas for locating RBC on Lot #5 as approved by the Council Committee on Lots 2 and 5.

 

INFORMATION MEETINGS

 

The Council Committee on Lots 2 and 5 held outreach meetings with downtown neighborhoods, business interests and the University of North Carolina on November 4, and 5, at the Chapel Hill Public Library. A summary of key issues will be submitted at the Council meeting.

 

COUNCIL COMMITTEE RECOMMENDATION ON PROCESS

 

On October 11, 2004, the Council Committee reached consensus on a preferred developer solicitation and selection method. The Committee recommends a two-step process that includes issuing a Request for Qualifications followed by a Request for Proposals from developers, if the Council chooses to proceed. The process involves issuing a Request for Qualifications, then evaluating responses to determine a short-list of 3 to 5 developers. The short-listed developer teams would be asked to respond with detailed technical proposals.

 

According to Mr. Stainback, most public entities use this method which opens the competition to any interested developer. The process requires substantial time to complete, providing significant opportunities for public input. Mr. Stainback said developers prefer this approach because they do not have to cover the cost of preparing a detailed proposal unless they make the short-list and have a reasonable chance of being selected.

 

SCHEDULE

 

A draft revised project schedule is included as Attachment 4. The schedule proposes Council consideration of the Request for Qualifications and Request for Proposals documents on December 6, 2004. Pending Council approval, the Town would issue the Request for Qualifications after the December 6th meeting. Developers would have until January 10, 2005, to submit a response to the Town.

 

On February 14, 2005, the Council would consider a short-list of developers which would be invited to respond to the Request for Proposals; technical proposals would be due by

 

DESIGN GUIDELINES FOR PUBLIC SPACE AT LOT 5

 

The Council Committee at its meeting today is to discuss draft design guidelines for public space at Lot #5 to be included in the initial Request for Proposals document to be submitted for the Council’s consideration on December 6, 2004.

 

PROJECT COSTS

 

The Council has authorized a budget of approximately $254,000 in the project budget for the first three project phases – development of the market demand study, development of master conceptual plans and completion of the financial analysis.

 

The Town is reviewing a bill recently submitted by HKS, Inc., for architect fees and costs incurred by the firm during the conceptual master plan phase. HKS’s bill for direct expenses of $24,400 for materials, travel and other expenses is substantially higher than we anticipated. We have asked Stainback Public/Private Real Estate to negotiate with HKS to reduce the bill. In addition, Mr. Stainback has submitted a proposal for adjustments of his fee to date based on additional work. We are negotiating with him and hope to have agreement by the time of the Committee meeting on Monday.

 

We will prepare a cost-to-date summary for the Council and present it on Monday, also.

 

Authorization of the next phase of work, preparation of a draft Request for Qualifications and Request for Proposals, will cost $15,780 based on our contract with Mr. Stainback.

 

NEXT STEPS

 

The results of a structural engineering analysis on the capacity of the Wallace Parking Deck to handle additional development on top will be needed before the issuance of a Request for Qualifications. The Council will need to know whether the conceptual plan for the Wallace deck is financially feasible before including the project in the Request for Qualifications.

 

The question of whether RBC will participate in the project will need to be resolved before the issuance of a developer Request for Qualifications because including the bank would affect the Lot #5 building program. If the Council authorizes development of the Request for Qualifications and Request for Proposals documents, we recommend that Stainback Public/Private Real Estate be authorized to hire an architecture firm, at a cost not to exceed $1,500, to develop concepts for locating a potential bank building on Lot #5 for RBC.

                 

RECOMMENDATION

 

The revised financial analysis by Stainback Public/Private Real Estate indicates that the proposed building program for Lot 5 appears to be financially feasible after factoring in higher costs of underground parking up to $31,000 per space. We believe it would be reasonable to include Lot 5 in a developer solicitation process.

 

Prior to including the Wallace Parking Deck sites in the Request for Qualifications and Request for Proposals phase, a structural engineering analysis is required to determine whether the structure can handle the addition of a four-story residential building on top. The results of the engineering study will help determine whether to seek proposals for developing the Wallace deck, to reduce the scale of the project, or remove the site from the project.

 

We believe it would be reasonable for the Council to authorize proceeding with the development of draft Request for Qualifications and Request for Proposals documents for the Council’s consideration at the December 6, 2004 meeting.

 

ATTACHMENTS

 

1.      Comments Submitted at October 27, 2004 Public Forum on Lots 2 and 5 Project (p. 8).

2.      Project Background (p. 15).

3.      November 1, 2004 Memorandum from Janet Kagan to Council Committee on Lots 2 and 5 (p. 17).

4.      Detailed Schedule Timeline (Potential Revision – 11/8/04) (p. 23).

5.    Cost Estimate and Financial Analysis Notebook, 11/2/04: (separate notebook).

Cover, Table of Contents
Executive Summary
Section 1
Section 2
Section 3
Section 4
Section 5
Section 6
Section 7
Section 8
Section 9
Section 10
 

A RESOLUTION AUTHORIZING PROCEEDING WITH DEVELOPMENT OF A DRAFT REQUEST FOR QUALIFICATIONS/REQUEST FOR PROPOSALS DOCUMENT FOR THE LOTS 2 AND 5 DEVELOPMENT PROJECT (2004-11-08/R-9.1)

 

WHEREAS, on June 14, 2004, the Council adopted a resolution outlining recommended development options to use as a conceptual guide by consultant John Stainback and the Council in determining the financial feasibility of the building program for Town Parking Lots 2 and 5 and the Wallace Parking Deck; and

 

WHEREAS, on June 14, 2004, the Council authorized proceeding with the financial feasibility analysis phase; and

 

WHEREAS, on August 25, 2004, the Council Committee on Lots 2 and 5 received the consultant’s initial report on financial feasibility and discussed potential scenarios for developing the sites; and

 

WHEREAS, on September 13, 2004, the Council Committee and Council reviewed Mr. Stainback’s revised draft financial feasibility report; and

 

WHEREAS, on September 13, 2004, September 27, and October 27, 2004, the Council held public forums on the Financial Feasibility Report and other project-related information, including review by the Downtown Economic Development Commission, the Downtown Commission, the Chamber of Commerce, and the University; and

 

WHEREAS, the Council has solicited additional public comment and review through public information meetings on November 4, and 5, 2004;

 

NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Council authorizes its consultant, Stainback Public/Private Real Estate, Inc. to proceed with the development of draft Request for Qualifications and Request for Proposals documents for Council consideration on December 6, 2004, based on the Final Financial Feasibility Report submitted by Stainback Public/Private Real Estate on October 27, 2004, as modified on November 8, 2004, and on the Council’s building program authorized on June 14, 2004 (Resolution 2004-06-14/R-23a).

 

BE IT FURTHER RESOLVED that the Council authorizes Stainback Public/Private Real Estate to hire an architecture firm, at a cost not to exceed $1,500, to develop concepts for locating a potential bank building on Lot #5 for RBC.

 

This the 8th day of November, 2004.