PISMO BEACH COUNCIL AGENDA REPORT
Agenda Item #12.B
SUBJECT/TITLE:
PUBLIC SAFETY FACILITY PROJECT UPDATE
RECOMMENDATION:
Receive an update for the Public Safety Facility Project.
BACKGROUND:
The City Council set a goal to have a modern Public Safety Facility to replace the current Fire Station on Bello Street, Station 64, and to expand the Police Station to meet the modern needs for the City’s public safety professionals. The proposed project seeks to achieve multiple goals, including honoring the site’s history by incorporating the façade of the City’s original elementary school into the new design, reducing fire response time by more than one minute, and modernizing the Police Station to meet the current and future needs of the facility.
To deliver the project in an expeditious manner, staff proposed the use of Design-Build procurement, as allowable under California Public Contract Code Section 22160. The Design-Build method of delivery allows for using “best value” procurement to reduce project costs, expedited project completion, and design features that are not achievable through the traditional design-bid-build method. “Best value” means a value determined by evaluation of objective criteria that relate to price, features, functions, life-cycle costs, experience, and past performance. A “best value” determination may involve the selection of the lowest-cost proposal meeting the interests of the local agency and meeting the objectives of the project, selection of the best proposal for a stipulated sum established by the City, or a tradeoff between price and other specified factors.
On December 2, 2022, the City released the Request for Proposals and the Design-Build Entity (DBE) teams from F&H/LDA and Swinerton/Ten Over submitted complete and comprehensive submittals on March 2, 2023. Following the submittal, the City’s evaluation committee met to review both proposals. The evaluation committee is comprised of the following staff: Assistant City Manager, Police Chief, Fire Chief, Community Development Director, Public Works Director, Building Official, and Senior Engineer.
Additionally, the City Council provided staff with input on the public presentation portion, at a special workshop held on March 29, 2023. The following table outlines the ranking for the two proposals.
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Table 1. Ranking of Design-Build Entity Submittals
Final
Rank Cost*
F&H/LDA 1 $44,796,000
Swinerton/Ten Over 2 $52,778,566
*Includes Base Project Price, FFE, and new Fire Apparatus cost
Based on the prescribed scoring criteria in the RFP packet, and based on Council input of selecting the firm with the best value, the City began preliminary negotiations with F&H/LDA based on the needs of the City and ability to finance the project.
Value Engineering
Staff identified three areas that could result in cost savings through the value engineering process: the foundation, façade, and electrical elements. The City completed a preliminary geotechnical report to provide the baseline conditions for the site. To evaluate other foundation options or construction methods, staff has determined that the best way to move forward would be to conduct a supplemental geotechnical report with boring samples, which would then form the basis for modified submittals. The City agreed to have the DBE firm proceed with the supplemental geotechnical report as the potential savings could be upward of $500,000. The cost of the work would be included in the final negotiated contract. In the event that the City does not move forward, the City will reimburse the costs to the DBE and take ownership of the documents for its future use.
The City Council provided input on options for the façade of the building. Staff met with the DBE firm to identify options for the City Council. This will include a thin brick veneer, as well as an option to preserve the brick from the facility to be reused as a veneer, but not be a structural component of the project. Cost estimates for these options are forthcoming.
The third area for cost savings is the various electrical components of the project. This includes the size of generator units, the areas of the building that are covered by the generator during outages, and the systems included in the overall capacity. Additionally, staff and the DBE team worked together to find value engineering in the low voltage side which includes camera system, wiring, and redundancy.
The DBE team and the City are continuing to have discussions to find additional cost saving opportunities.
Project Cost Savings Beyond Value Engineering
The current project and program allow for approximately 5% increase in staff spaces for future growth of the department through the City’s projected build out in the General Plan.
Based on the experience of Vanir Construction Management, the City’s owner representative, other projects of similar nature allow between 20-30% growth over the 50-
12.B-2Council Agenda 5-2-2023
year lifespan of the facilities. However, the current program is an increase over the current building, and staff believes it meets the needs of the community for the next 50 to 75 years. Staff believes that it is prudent to provide the City Council with information on how additional square footage cuts impact on the project cost. In staff’s professional opinion, the project as currently designed is adequate for growth. If the Council wants to make cuts to reach a lower targeted cost, it will impact operational flow of the facility and may impact the useful life of the building and necessitate future additions or modifications to the project.
Since value engineering of the building system has already occurred, the next way to cut costs is to cut square footage. To accurately forecast the amount of square footage that must be cut, an estimator must use a deductive unit cost that is less than the bid price.
For example, if 20% of the space is cut, the size of the mechanical or plumbing units cannot be reduced by the corresponding percentage, plus redesign fees must be accounted for, escalation for the delays in redesign, and noting that spaces that are cut are likely to not be the most expensive (kitchens, dispatch, electrical rooms, etc.).
Therefore, a lower average cost per square-foot for further reduction would be approximately $800 per square foot. For illustrative purposes, a reduction of an additional $4.8 million would necessitate cuts of approximately 6,000 square feet.
Additionally, an extensive amount of work product was put into the location and adjacency of the current configuration, which if modified may lead to inefficiency in workflow. Any square footage changes and impacts would need to be worked through with the DBE team, but there is a risk that the changes would require additional redesign time beyond the 90 days that the proposals are good for, as outlined in the RFP document. This could result in the DBE team increasing costs, thereby negating some cost savings.
Alternative Options
Staff continues to work on the City Council’s direction to negotiate the price of the project down. There are various options available to the City Council aside from the current project proposal. The following options are not intended to be limiting; however it should be noted that staff does not feel that there is a no-build option in its normal sense due to the need to meet housing requirements for fire personnel, current building infrastructure needs, and the need to address response times:
Direct staff to cut square footage of the project.
Do not move forward with the current proposals.
Provide staff direction to repackage the project.
Build a new apparatus bay only.
Building a new two-story fire station and acquire additional property.
Should the City Council not move forward with the current proposal, there could be significant delays in redesigning the project scope, evaluating alternatives, potentially losing qualified bidders, and the need to make interim investments.
Fire personnel are currently occupying a residential home at 900 Bello Street, which was anticipated to be leased through the end of construction. The property owners were
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amenable to extending the lease. A longer-term lease or potential property acquisition would need to be explored.
A potential new apparatus bay could be constructed on the City-owned parcel at 940 Bello Street; however it would need to be a back-in type apparatus bay, which is not optimal, but is the current configuration at the station. Staff would likely recommend a two-story station with an apparatus bay below and living space above.
If the current Police Station is going to remain in largely its current configuration and use, the City would need to move forward with building system improvements, including a new roof, replacement of heating and air conditioning system, as well as locker room improvements, which is estimated to be several million dollars.
Timing
Staff has put together a timeline for construction based on past direction by the City Council, however the timing of the project is at the discretion of the City Council. There are many other components of the project that are pending a decision on the Public Safety Facility. For example, the Police Substation, improvements to 330 Main Street, temporary relocation of dispatch to City Hall, improvements to the Veterans’ Hall, releasing RFPs for IT relocation services, plan check, special inspections, as well as utility coordination.
Many of these projects are anticipated work plans that have been coordinated along parallel paths, but some have been paused until direction on the Public Safety Facility is provided.
At this City Council Meeting, staff will review all of the elements within the staff report and provide updated status on negotiations.
Recommendation and Next Steps
Staff recommends that the City Council receive an update on the Public Safety Facility Project.
FISCAL IMPACT:
The fiscal impact of the recommended action could result in a significant one-time and ongoing cost to the City for the design and construction of the Public Safety Facility project. In anticipation of the proposed cost, staff put together a rough funding plan to support this cost. The following tables illustrate the:
estimated project cost of $53,000,000 (assuming a negotiated $43,250,000 amount plus $9,750,000 of soft costs)
current available funding sources for pay-as-you-go (PAYG) or cash-funded remaining amount that is financed.
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If the amount financed is $46,315,000, then the estimated debt service could be approximately $3,058,500 starting in FY 2026. The total cumulative debt service would be $105,948,602 and the interest alone would be $59,633,602 over 30 years. There are several ways to structure the debt service, but for illustrative purposes, staff used 30-year level debt service payments.
Comparing the estimated debt service payments to projected Transient Occupancy Tax (TOT) revenues for the additional 1% that has been proposed to be allocated to support the annual debt service payments, there is a projected shortfall of approximately $1.55 million in FY 2026, but as TOT is projected to grow by 2% per year, so that as TOT increases, the annual shortfall decreases. However, throughout the majority of the 30- year term, the shortfall would need to be addressed. Staff proposes three items to help offset the debt service costs as illustrated below, including additional overhead recovery from other funds based on the updated most recently Cost Allocation Plan, reducing the General Fund general contingency budget by 1% to have a 2% general contingency budget, and finally, reducing the Next Level services budget by $150,000 from the currently budgeted $400,000. The following table illustrates snapshots for four timeframes during the 30-year borrowing to reflect the debt service surplus or shortfall.
Estimated Project Cost
Soft Costs
Contingency 5,000,000$
Permitting Connection Fees 1,500,000
Construction Management 1,000,000
Hazmat/Survey/Abatement 250,000
Plan Check 250,000
Inspection/Special Inspection 1,000,000
Total Soft Costs 9,750,000$
Construction Cost 43,250,000
Total Estimated Project cost 53,000,000$
Funding Sources
Pay-As-You-Go (PAYG) cash
Set-Aside TOT 1% in FY 2023 to FY 2025 4,435,000$
General Fund Reserve 2,000,000
Development Impact Fees 250,000
Subtotal Pay-As-You-Go (PAYG) cash 6,685,000$
Remaining financing 46,315,000
Total Funding Sources 53,000,000$
Financing
Total Financed 46,315,000$ 30-year level debt
FY 2026 FY 2036 FY 2046 FY 2053
Annual Debt Service, begins FY 2026 3,058,500 3,058,500 3,058,500 3,058,500 Total cumulative debt service $105,948,602
Interest $59,633,602
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Options to Close the Projected Ongoing Shortfall
In order to close this gap, one or more of the following items could occur:
construction costs could need to be further reduced, possibly with a reduction in scope;
City could, within legal requirements, allow other funding sources to be used to support additional PAYG (reducing the financed portion) and debt service cost allocating more General Fund costs to a different funding source. This could occur by amending the Municipal Code or taking other Council action if needed; City could reduce spending in other areas, avoiding reduction in revenues (reduced services could lead to reduced visitors, which could impact TOT, sales tax, and other fees for services). While this is an option, this is not recommended by the staff, as it would reduce current services for residents and visitors.
One Example of Other Sources: Using Parking Enterprise Funds to Close the Shortfall One example of a funding source that has a large fund balance that could be used is the Parking Enterprise Fund. A portion, or $4 million, of this fund’s available net position (fund balance), which is projected to be $9 million at the end of FY 2025, could be used to increase the PAYG portion and decrease the financed cost to $42,315,000. In addition, the Parking Enterprise Fund could be used to support ongoing debt service costs, shifting at least $600,000 in the early part of the financing to close the shortfall. This shifting of costs could be reduced over time as TOT increases, down to $300,000 by FY 2036, and then down to $0 by FY 2046. This option could allow for a financially feasible way to support the Public Safety Facility based on the current estimated cost of $53 million, including soft costs.
Debt Service Payments FY 2026 FY 2036 FY 2046 FY 2053
Annual Debt Service, begins FY 2026 3,058,500$ 3,058,500$ 3,058,500$ 3,058,500$ TOT 1%1,507,977 1,838,215 2,240,774 2,573,945 Financing less TOT (Shortfall)(1,550,523) (1,220,285) (817,726) (484,555) Overhead recovery from other funds beginning
FY25 259,000 284,900 313,390 344,729 General Fund Contingency 2%300,000 300,000 300,000 300,000 Next Level Services Fund 150,000 150,000 150,000 150,000 709,000 734,900 763,390 794,729 Remaining Debt Service Surplus/(Shortfall) (841,523)$ (485,385)$ (54,336)$ 310,174$
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As a reminder, this funding plan is a rough estimate based on projected debt service costs and a ballpark estimate of the construction costs. In the event that the Council decides to move forward with this project, a more formal funding plan would be developed with updated debt service payments, TOT projections, and other available funds.
ALTERNATIVES:
1. Do not approve preliminary selection of a design-build entity as proposed; provide staff with direction on how to proceed.
2. Request more information from staff.
ATTACHMENTS:
None
Submitted by: Meeting Date: May 2, 2023
Jorge Garcia, Assistant City Manager
City Manager Approval:
Funding Sources
Pay-As-You-Go (PAYG) cash
Set-Aside TOT 1% in FY 2023 to FY 2025 4,435,000$
General Fund Reserve 2,000,000
Parking Enterprise Fund 4,000,000
Development Impact Fees 250,000
Subtotal Pay-As-You-Go (PAYG) cash 10,685,000
Remaining financing 42,315,000
Total Funding Sources 53,000,000$
Debt Service Payments FY 2026 FY 2036 FY 2046 FY 2053
Annual Debt Service, begins FY 2026 2,844,352$ 2,844,352$ 2,844,352$ 2,844,352$ TOT 1%1,507,977 1,838,215 2,240,774 2,573,945 Financing less TOT (Shortfall)(1,336,375) (1,006,137) (603,578) (270,407) Overhead recovery from other funds be 259,000 284,900 313,390 344,729 General Fund Contingency 2%300,000 300,000 300,000 300,000 Next Level Services Fund 150,000 150,000 150,000 150,000 Shift costs to Parking Enterprise Fund 600,000 300,000 - - 1,309,000 1,034,900 763,390 794,729
Remaining Debt Service
Surplus/(Shortfall)(27,375)$ 28,763$ 159,812$ 524,322$
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