12-21-1993 - Status Report on Options for Rehabilitation of City-Owned Building at 811 S. Sunset Ave.City of West Covina
Memorandum
To City Manager and -City Council
AGENDA
FROM Steven W. Wylie, Assistant City Manager
ITEM NO. K- 2
SUBJECT. STATUS REPORT ON OPTIONS FOR DATE 12/21/93
REHABILITATION OF CITY -OWNED
BUILDING AT 811 S..SUNSET AVE.
SUMMARY: On September" 21 and October '5,. the City Council and.
Redevelopment Agency Board conducted a joint public hearing for the
..purpose of considering the adoption of findings and resolutions to
-permit the Redevelopment Agency to fund seismic rehabilitation and
minor improvements to the City -owned building at 811 S. Sunset. At
the,October 5 meeting the Council directed the staff to further
develop options for rehabilitating the structure and building a new.
structure'. This report will update the -City Council on the status
of these options.
BACXGROUND
• At. the joint public.hearing,
the" City Council to consider:
staff presented several options for
1 Seismic rehabilitation with minor, tenant improvements, plus.
parkincx lot and sianage improvements. Estimated cost: $205,000._
This option was to be funded by Redevelopment Agency funds.which
were included in the-1993 refunding bonds, and repaid to the City
over fourteen years by an increase in, the Chamber of Commerce's
monthly lease,payments.
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Estimated cost: $375.000. Thisoptionwas .:proposed. daze to the .
concerns about investing as much as. $200,000" to rehabilitate the
existing structure.. As discussed, at the October 5 meeting,
California Redevelopment Law would not permit. the, use. of Agency
funds to newly construct.a new building.for an individual tenant
This..problem led to,. the development :of, a third option:.
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adding additional public meeting space Estimated cost: $569,000.
This option.provided greater substantiation for the use of Agency
funds, since .the single tenant problem- was mitigated by the
.addition of more.public space. The'most severe problem with this
option is that the addition of public meeting space requires the
addition of` a significant number of parking spaces.
4` Rental of commercial office space and development of the site
.at 811 S. Sunset with other economically'desirable uses. This
option carries with it an estimated annual cost to the Chamber of
$57,660 No calculations -can reliably be made for the reuse value
of the site, since no prospective user has,been identified.
UPDATE
At the"October 5 meeting, the City Council discussed these options
and directed the staff to.refine them.. In the intervening weeks,
staff has discussed'the new construction options with Don Iler, the
architect. retained. by. the City to design Fire Station No. 2, as
well as construction estimators. We have also gone forward with
the engineering studies necessary to refine- the seismic
rehabilitation cost estimates. Provided below is. an update on the
seismic rehab option and a discussion of potential next steps in
' • the new construction alternative.
1. Seismic Rehabilitation. Engineering estimates have now been
completed on the extent of seismic strengthening which would be
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needed to bring the existing building up to current standards. The
estimated costs are as follows:
Asbestos removal: $ 10,000 •
Seismic work: 100,000
ADA compliance, misc.: 15,000
Subtotal $125,000
Add minor tenant improvements $ 25,000
Add parking and signage impr. 35,000
Total $185,000.
This estimate is a net reduction of $20,000 from the staff's prior
estimate of this alternative.
2 New Construction (replacement) of the existing building. Staff
has met with architects, cost estimators, and a building contractor
to better determine what an office facility for the Chamber of
Commerce will cost.. Based upon space requirements furnished by, the
Chamber of Commerce staff, a building area of 3,460 square feet
"would be required. This is significantly smaller than the current
building size. This reduction is achieved.by economiesgainedby a
design which makes the best use of space, without the wasted space
and thick (1311) walls which the current facility exhibits. Based
upon a.wood framed,.tile roofed 3,460 s.f. building, the cost per
square foot .will be approximately $80.per square foot.. This. would.
include window, treatments,. carpet andcertain other tenant.
improvements needed. to have the building in "move -in" condition.
The revised estimate is as follows:
Asbestos removal: $ 10,000
Demolition: 25,000
Design/inspection 30,000
New construction (3,460 s.f.) 276,800
Parking lot and signage impr. 35,000
Total $376, 800'
This estimate is almost identical to the original estimate.
However, it does not include any allowance for new furniture and
office equipment, which a new building would likely merit.
The caveat to keep in mind here, once again, is that the use of
Redevelopment Agency funds as originally proposed would not be
permitted for.this kind of project. Other funding sources would
have to be identified.
3 New construction of a larger facility with additional public.
meeting siace. This option, as described in earlier staff reports,
would require the establishment of significantly more parking
spaces than..the current site can accommodate. Staff has discussed
this, .option with our .consulting architect, who has offered to
prepare a master plan for the corner of Sunset Avenue and Cameron
Avenue. Such a study would likely include the location of the new
facility on several alternative footprints, as well as a
reconfiguration of other adjacent facilities, including a -portion
of the lot around Fire Station No. 1 and the vehicle equipment
maintenance facility in the City Yard, all in an effort to create
the parking needed by a facility of this size. The cost to perform
such a study has been quoted at $7,000.
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Staff has stopped short of commissioning this study. At first,
this option was suggested primarily as a means to enable the Agency
to participate directly in the project. At that time, the project •
estimate was $569,000,, which will certainly increase with
additional costs for parking. A $700,000 project cost is not
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unlikely. Under any scenario, it' will be the most costly
construction alternative available, and there has been no
demonstration. of need for the additional public meeting space.
Moreover if such a need were established, there is no compelling
reason to locate this space on such a constrained site. If needed,
it would"be more advantageous to locate such a facility on property
with greater access to parking."_ Consequently, staff has not taken,
this alternative further.
.Under these circumstances, it is staf.f's opinion that the decision
to rehabilitate or replace the building should be based primarily
upon the economics, and. practicality of the project, rather than the..
constraints of the funding source..; In"this. light, we believe the
third option makes little economic or practical.sense, as compared
to the first two options.
FINANCIAL=CONSIDERATIONS
Option 1: Rehabilitation
At present, the Chamber of Commerce has a lease which requires
monthly payments of $1,50'0. This lease extends to. February 1,
1996.. If the rehabilitation alternative. were to be considered, the
Chamber's existing lease should, continue,, and,perhaps- be extended.
under similar terms;:with: an additional component to,, finance- :the,
rehabilitation activities. our "prior -.discussions with..the Chamber
have been to: extend this lease for a twenty,year term, •which
represents' a reasonable expectation for -the renovated building to
be used for this, purpose. Under, thin scenario,.the`ChamberIs lease
rate would increase from the current'$11500 to .$2,825 per -month.
Option 2 New Construction
if ;it.s-,'determined'
that a new,`constructon project is -warranted,.
the use.of general:funds-or some other -.non -restricted capital fund
would have to be considered. The City Council could consider an
advance of general ;funds against.future Business Improvement Tax
collections. Alternatively, the;City Council could.consider an.
appropriation from.the `Capital, Projects Fund, which has sufficient
"uncommittedrevenue to fund this project. Lastly, the Council
could consider an. advance repayment by the Redevelopment Agency of
accrued.. interest on the City's loan- to the Agency. This would
avoid the necessity of.direct involvement by the Agency.
The new construction option would carry with it a new lease for the
premises.- Since the current building -.would be demolished, a new
lease would be desirable: It is"suggested that a. twenty-five year
lease be considered: To, recover. the.City,'s investment over that
period, a monthly'Iease rate of $2;430'would be required. It is
acknowledged' that. this is a� lesser rate than -,the proposed
rehabilitation rate,.' and in no� way approaches: market rate rents.
It only -recovers the City's investment.in a.new.building, and does
so over a relatively lengthy term.
Option 3: New Construction No Negative -Impact on General Fund
The .current $1, 500 monthly lease payments to the City are a revenue
source to: the General Fund.- This lease extends to February 1996.
At 6%,.,the-present value of this lease is approximately $34,000.
If the, new construction option were chosen, this monthly revenue
stream would be lost, and would.be replaced by a new lease amount
based upon the value of the City's new investment in the facility
• ($377, 000) . In order for the General Fund to be made whole,. it
would be financially appropriate to advance prepay the net present
value of the current lease, by adding $34,000 to the cost of'the
project; and folding it into the.new.lease rate.
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If this route were taken, and if the project costs were recovered
over a twenty-five year term, the monthly lease payment would be
$2,650, ascompared to the current.$1,500.
COMMENTS AND CONCLUSIONS
The foregoing represents the best cost estimates available for
these competing alternatives. Of course, many variations. could be
developed -to recover the City's investment over time.
At this point, some perspectives may be offered as to the options
described. First, from a purely economic point of view, and from
the."landlord's" perspective, the rehabilitation option has clear
advantages.. It is significantly less expensive than the new
construction option, and the likely return on the City's investment
is just as good, and probably better, than the new construction
alternatives proposed. It would bring the building -up to seismic
safety standards, and render the building useful for several more
years.
On the other hand, this project.'may not be characterized in purely.
economic terms. The structure does in fact suffer from age and
exhibits deficiencies in terms of space utilization. It.;does not
comply with current ADA standards. The seismicrehabilitation
option. includes $10,000 to.comply with-ADA.and.do some minor work
on: plumbing,-. and electrical systems... bring the: bu-ld ng up to
code,.: and as' proposed, would. provide some- other..minor improvements
to make the interior of the. facility look better.. At bottom,,
however; , the building would'. essentially= look and. be- the same. as it
is today. If it is desirable to provide a long-term. (permanent).
home for the Chamber of Commerce, or a successor tenant, the new.
construction option may make more sense.
CITY. COUNCIL.DIRECTION
At. this point, staff suggests that the. City Counci.l.. consider this.
information, and provide direction.as to the desired alternatives..
Upon. receipt of direction, staff will bring back the necessary
actions at future meetings, whether in furtherance of the
rehabilitation or new -construction options. These. -future actions
would include the necessary- appropriations, development..of plans
and specifications, a new.lease., and so forth.
RECOMMENDATION
It is recommended that the City Council consider these alternatives::.
and provide. direction to~ staff for -future actions..
Steven W. Wyli
Assistant City Manager
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