sr-061081-7p
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City Council Meeting 6-20-81
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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.
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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).
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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