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SR-9A (31) PCD SF PC f \plan\admln\ccreport\pohce97 wpd COUNCIL MEETING February 11,1997 9A " FEB 1 11997 Santa Montca. California TO City Council FROM City Staff SUBJECT Recommendation to Approve a FundIng Approach to Construct the Public Safety FacIlity and Proceed with Planning and DesIgn for BUilding INTRODUCTION This staff report responds to the City CounCil's direction to present funding alternatives for construction of the Public Safety FacIlity The report summarizes the design progress to date, what steps remain to be completed, and the public process for approval of the desIgn for the faCIlity Two funding options are presented for CounCil consideration Staff recommends that the CounCil proceed With the planning and construction of the faCIlity uSing a combination of one-time City funds and lease-revenue bonds BACKGROUND In August, 1995 the City hired Dworsky Associates to prepare a schematiC design, conduct technical studies, and prepare a detailed total construction cost estimate for a new PubliC Safety FaCIlity Preliminary floor plans and a detailed cost estimate for the bUIlding were presented to the CounCil In June, 1996, and the CounCil placed a $29 5 mIllion bond measure on the November 1996 ballot 1 9A FEB t t 1197 The bond measure received 625% of the vote, but did not reach the required 2/3 vote necessary for approval of a general obligation bond measure At the Council meeting on January 21,1997, Council discussed the budget pnontles for FY 1997/98 and ranked as their top pnonty completing the construction of the Public Safety BUilding Council requested that staff return as qUIckly as possible with funding alternatives for construction of the faCility The City has been working on the schematic design for the faCility since Fall, 1995 What remaIns to be completed In the schematic design phase of the project IS the fInal extenor design of the bUilding, finalIzing the floor plans and size, completion of the EnVironmental Impact Report (EIR) and approvals by the City, Coastal Commission, Caltrans, and Los Angeles County where appropriate DUring the schematic deSign phase, the project Will be subject to a development review permit like any other project of this magnitude In the City, including environmental review ThIs process WIll Include opportunIty for publIC comment on both the deSIgn of the faCIlity and the Issues raised In the EIR The approval process Will consist of public heanngs before the Planning Commission, City Council If the project IS appealed, and review and approval of the deSign by the Architectural ReView Board (ARB) If the CounCil authOrizes staff to proceed With the project, It IS projected that the proposed final floor plans, Size, and extenor deSign of the bUilding can be completed by Spring, 2 1997 Public heanngs will begin In the late summer following the public comment penod on the EIR and be completed by Fall, 1997 Coastal Commission approval must occur after all City approvals have been granted Design development would then commence upon approval by the Planning Commission In the Summer, 1997, With design development and construction documents completed by the end of 1998 The first part of construction could begin early In 1999, with project completion and move-In expected approximately two years later In early 2001 PROJECT COSTS As outlmed In prevIous staff reports, a cost analYSIS for the project was prepared by Dworsky ASSOCiates, the JCM Group, and Iskander ASSOCiates, and Included all construction costs, deSign fees, and fixtures and furniture costs The estimated constructlon cost for the bUIlding alone IS $22 8 million In addItion to the bUilding, there are other project cost components for the proJect, including $12 12 million for construction of subterranean parking and OlympiC Drive, storm drain reconstruction, relocation of utilities, site Improvements, construction contingencies, and cost escalation Additionally, $5 6 million IS needed for deSign, construction management and direct owner costs Therefore, the total project cost IS approximately $40 52 million 3 The estImated cost for equipping the facIlities IS $326 million The City has set aSIde $1 5 million towards that cost, and expects the remainder to be covered by interest earnings from reserves for the project FUNDING NEEDS The City has Identified four sources of funds that could be used to pay for a portion of the project OlympiC Dnve costs can be funded by Proposition C transportatIon funds reducing the project costs by $258 million The City has set aSide over the past three years savings totaling $161 million to be used to reduce the project budget In addition, the City antICipates that one time funds totaling $38 million will be available due to revenue realization beyond anginal projections In FY 96/97 These funds, If realized, can be applied to the cost of the project Finally, since FY 1983/84, the City has held In trust for pOSSible transportation and/or other general City needs General Fund mOnies returned from the Transportation Fund These funds and subsequent Interest earnIngs total $6 4 million The use of thiS money IS contingent upon confirmation by the City Attorney's office that no restrictions eXIst on Its use Depending upon the outcome of the CIty Attorney's OpiniOn, there Will be a range of $11 64 to $18 04 million unfunded FUNDING ALTERNATIVES Staff has evaluated two alternatives to fund the remaining $11 64 to $18 04 mIllion shortfall to construct the public safety faCility a no debt optIon (pay-as-you-go), and Issuance of City lease-revenue bonds A range of costs and construction timing IS proVided 4 depending upon the availability of the trust fund mOnies No Debt The no debt alternative would reqUIre the Council to set aSide at least $2 3 million per year for the next 5 to 8 years depending upon the availability of the trust fund monies This would require dedication of all revenues that exceed the amount required to maintain current service levels and/or reduction of current service levels DUring that period there could be no program or service enhancements Responding to new service needs would require re-allocatlon of currently committed funds With resulting elimination or reduction of eXisting services This option also restncts the ability of the City to meet unexpected needs, redUCing financial flexibility This restrlctlon combined With the finanCing challenges established by Proposition 218 may adversely Impact the City's Aaa bond rating, escalating the Interest costs for future bond Issues The cost for construction of the bUilding has been projected assuming construction starting at the beglnnrng of 1999 Under thIs finanCing approach, construction would not begin until 2003 or 2006, With occupancy In 2005 or 2008 This delay In construction could result In additional costs of $88 to $14 9 million (a 4% per year Increase In project costs) The cost Increase would likely be off-set by Interest earned on the revenue reserved for constructlon 5 Lease Revenue Bonds The second alternatIve would finance the remaIning $11 64 to $18 04 million shortfall with City lease-revenue bonds The total cost of the bonds plus Interest over twenty years would be approximately $21 20 to $3270 million and the annual debt service would be approximately $1 2 to $1 9 million It IS anticipated that the debt servIce could be financed from future revenue growth Without adversely Impacting current service levels while preserving the City's financial flexibility and ability to respond to new service needs This alternative IS preferable because It allows the construction to commence four to seven years earlier The CounCil can approve the Issuance of lease revenue bonds Without voter approval BUDGET/FINANCIAL IMPACT There are no Immediate budget/financial Impacts from adopting the staff recommendation In the staff report, With each of the scenarios outlined above detaIling the potential long- term budget Impact RECOMMENDATION Of the two scenanos presented, staff recommends the lease-revenue bond alternative because It allows the project to move ahead Immediately WIthout endangenng the City's fInancial fleXibilIty or postponIng consideration of finanCing other City project pnontles 6 It IS recommended that the Council direct staff to use the lease revenue bonds approach to finance construction of the facility as outlined above and proceed with the public process, planning and design of the public safety facIlity through the preparation of construction documents Prepared by Mike DennIs, Director of Finance Suzanne Fnck, Director of Planning and Community Development Paul Casey, Assistant to the Director for peD 7