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sr-061081-7p Rh1M: r City Council Meeting 6-20-81 °~ Santa Monica, California SUPPLEMENTAL STAFF REPORT TO: Mayor and City Council FROM: City Attorney SUBJECT: Claim for Vested Rights from Emergency Building Moratorium, Claim Number M-017, by Welton Becket Associates and Becket Investment Corporation for Vested Right to Construct 3-Story Office Structures located at Colorado Avenue Between Cloverfield Boulevard and 26th Street At its meeting on June 2, 1981, the City Council referred to a hearing examiner the question of whether or not claimants have a vested right to proceed with excavation. A copy of the hearing examiner's report is attached. Claimants direct expenditures for the excavation work performed subsequent to the issuance of the excavation permit and prior to the adoption of the Emergency Building Moratorium total. $40,367. Claimants have stated that other costs are related to the excavation work. First, they point to easement and land rental costs of $79,731. However, since payments were made prior to issuance of the excavation permit, they cannot be considered to be in reliance on the permit. Second, claimants point to $7,500 payment made to the general contractor relating to excavation. This amount is appropriately considered in determining a vested right. Finally, claimaints point to $9,553 for soils engineer and $176,414 as an allocated portion of the architectural and consulting fees. Pursuant to Sect-ion 5 of the Emergency. Building Moratorium, these .expenses cannot be considered in granting a vested right. Claimants' actual expenditures of $47,867 can be viewed as insubstantial when compared with the total excavation contract of $2,000,000. On the other hand, a court might conclude that the actual expenditures standing alone are substantial. Claimants have argued that their excavation contract will expire on June 15, 1981, and that any new contract will result in added excavation costs of approximately $2,000,000. Although this additional expense cannot be viewed as a liability, it is obviously a factor that would be weighed by any court reviewing the matter. In the present case, it is respectfully recommended that the claim for vested right be denied. However, recognizing that a court could perceive the matter differently and recognizing the special nature of the excavation contract secured by claimaints, it is respectfully recommended that claimants be granted a hardship exemption to proceed with excavation only. 2 STAFF REPORT T0: Mayor and City Council FROM: Raymond F. Correio, Hearing Examiner SUBJECT: Supplemental Report, Claim for Vested Right/ Hardship Exemption M-017, Colorado Place (Colorado Avenue between Cloverfield Boulevard and 26th Street); Claimant, Welton Becket Associates/ Becket Investment Corporation BACKGROUND On June 5, 1931, a hearing was held at the City Attorney's Office. The purpose of the hearing was to enable a hearing examiner to prepare a report for the Mayor and City Council on the vested right/hardship exemption claim of Welton Becket Associates and Becket Investment Corporation. N. David O'Malley, Kent Blerselis, claimant's representatives and their attorneys Richard F. Davis and Peter D. Kelly appeared at the hearing. The sole issue discussed at the hearing related to the activities of claimant with respect to excavation at the project site. EVCAVATION At the outset of the hearing, claimant's president, N. David O'^ialley, made a brief presentation designed to give an overview of the project in general followed by specific reference to facts related to excavation activities. i•1r. O'i~ialley stated that claimant received a building permit from the City to proceed with excavation at the project site. The permit application for the excavation of trash fill and copy of the permit granted by the City are set forth as Exhibits "H" and "I" in the list of exhibits accorzpanying claimant's application for vested rights exemption. Mr. O'Malley emphasized that the present project site was formerly a refuse fill site. Due to the particular problems attributable to its former use, there is no safe way to build on the site without extensive and costly excavation work (Exhibit 16). Claimant has been involved in development work on the project for eighteen (18) months an3 claimant's representative stated that the City has been involved in the review process for the same time period. i1r. O'Malley stated that the City knew claimant's schedule of development and construction. If claimant is unable to continue with the excavation on schedule, occupancy and tenant commitment deadlines cannot be met and there will be the resultant loss of income. Claimant has been informed by their general contractor, Tishman Construction Corporation, that the subcontractor responsible for excavation will only hold the present contract price for excavation until June 15, 1981. DISCUSSION Claimant's tentative schedule of construction (original application, Exhibit "H") lists January 1981 as the date when excavation was to .have commenced. However, actual excavation work did not being until April 17, 1981. Claimant's general contractor, Tishman Construction Corpor- ation, contracted with K-West Engineering and Grading, .Inc., for the excavation and grading work on the property (original applica- tion, Exhibit 16). The contract price is $1,910,000. However, this original contract price was increased to $2,000,000 due to the City's requirement of additional parking necessitating construction of a third level parking garage. -2- Excavation work had becun prior to the moratorium imposed bV City O?°dinance No. 1205. The specific nature of the work completed to date involved trash removal, concrete removal, dirt export, and move-ins (Exhibit 9). The value of the work completed is $38,367 plus $2,000 in additional equipment mobilization costs (Exhibits 9 and 10). Claimant has held back approximately 100 of the value of the work completed and has- paid a total of $34,530 (Exhibit 10). These costs are properly characterized as actual or direct excavation costs. However, claimant's represen- tatives contend that other substantial costs should also be denominated as "excavation costs," since they bear a direct relationship to excavation activity. In order to begin excavation, it was necessary for claimant to obtain an easement across property owned by Varadyne Industries, Inc., and Guidance Technology, Inc. Claimant has expended $65,750 for easement costs to date (Exhibits 1 and 2). Claimant's represen- tatives estimated that their obligations for easements will total $200,000. Rental costs paid to Monica Properties, Inc., for an industrial building (rental paid in lieu of necessity of obtaining easement) to date, including claimant's portion of property taxes total $13,981 (Exhibits 3 through 8). Claimant's representatives indicated that they also considered the following costs to be related to excavation; (1) $9,553 for soils engineer, (2) $7,500 which represents 10% of the total of $75,000 paid to the general contractor to date, and (3) 20a of the architectural and consulting fee of $882,072 which involved structural engineering ($176,414) with 1/3 of the structural engineering cost attributable to foundation and soils ($58,222). -3- A su_*nmary of direct and related expenditures for excavation alleged by claimant are as follo~-:s: Actual Excavation Expenditures Easement and Land Rental Costs Necessary to Begin Excavation Soils Engineer Estimated Portion of Payments D4ade to General Contractor Related to Excavation Estimated Portion of Architectural and Consulting Fees (structural engineering, foundation and soils) TOTAL $ 34,530 79,731 9,553 7,500 176,414 $ 307,728 Claimant's representatives concluded their presentation by emphasing that in the event of a delay in excavation beyond June 15, 1981, costs would increase tremendously. They referred to correspondence from their general contractor in which reference is made to an estimated additional cost of approximately $500,000 (Exhibit 12). In the event any delay in excavation may result in the loss of the present excavating and grading subcontractor, claimant's representatives point out that the two closest bids submitted by other subcontractors are both over one million dollars {$1,000,000) in excess of the present contractual price for excavation and grading (Exhibit 13). If the City Council denies claimant's vested rights claim, 'it is also asserted by A1r. Davis, one of claimant's attorneys, that considerable cost would be involved in filling in the excavation and returning it to a state ac