For City Council Meeting [November 15, 2022]
TO: Honorable City Council
FROM: Marcus Fuller, City Manager
Title
Request that the City Council: (1) Adopt Resolution No. 8010 Approving the Selection of Griffin | Swinerton, LLC, a Delaware Limited Liability Company, as the Development Team to Design-Build-Finance-Operate-Maintain a New Police Station (in Accordance with Government Code Section 5956) Pursuant to Request for Proposals No. 22-062 Related to Development of a New Police Station on the Site of the Existing Police Station Located at 128 N. Willow Avenue and Approving a Pre-Development Agreement; and (2) Authorize the City Manager to Execute All Documents.
POWERPOINT
(ACTION)
Body
BACKGROUND
On April 26, 2022, the City Council adopted Resolution No. 7870 affirming compliance with the State Surplus Land Act related to the development of a new police station utilizing the public private partnership mechanism set forth in Government Code section 5496. A copy of the related staff report is included as Attachment 1.
The Design-Build-Finance-Operate-Maintain process (in accordance with Government Code Section 5956) allows the City to enter into a Public Private Partnership (P3) contract with a team led by development professionals and their general contractor and designers, etc., (a “Developer”) to deliver a project, and incorporate a Ground Lease and Facility Lease to establish a financing mechanism (without debt issuance by the City) to fund the entire cost of designing, building, operating and maintaining the project.
In this delivery method, the Developer itself finances the entire cost of the project by entering into a long-term ground lease over the City’s property, and with the City in return entering into a long-term facility lease with the Developer to pay monthly lease payments that recover the Developer’s costs to complete the project in addition to negotiated overhead and profit margins. At the end of the lease term, the City acquires the new facility for $1.
On April 28, 2022, the City released Request for Proposals #22-062 to Design-Build-Finance-Operate-Maintain a New Police Station, (the “RFP”) for the purpose of identifying a uniquely qualified firm or team of firms as the best means for finding a qualified Development Team to design and development a new police station through this P3 process.
On July 29, 2022, the City received three proposals in response to the RFP:
• CFP3 OmniWest Pinner, a team that includes CFP3, a 501(c)(3) nonprofit; Omni West Group; Pinner Construction Co.; IBI Group, and Collliers Securities, LLC
• Griffin | Swinerton, LLC, a team that includes Griffin | Swinerton; Public Facilities Group (PFG); LPA; Griffin Structures; Swinerton, Kidder Mathews, and McClaren, Wilson & Lawrie, Inc. (MWL)
• Rialto Police Services, LLC, a team that includes Table Rock Capital; Bernards Construction; PBK Architects; Barclays; and Gerald W. Beard Realty
On September 23, 2022, formal interviews were held with the three teams responding to the RFP.
An Evaluation Panel was convened that included Mayor Robertson, Mayor Pro Tem Scott, City Manager Fuller, Police Chief Kling, and Vincent Yzaguirre (Assistant Director of Facilities Management for Riverside County).
Based on the professional proposals submitted and the formal interviews conducted, the Evaluation Panel has recommended the City Council select the Griffin | Swinerton team for this project. A copy of the proposal submitted by Griffin | Swinerton can be found at the following City webpage address:
<https://yourrialto.com/317/City-Managers-Office>
ANALYSIS/DISCUSSION
The Griffin | Swinerton team includes the following key members:
• Griffin | Swinerton as the “Developer” who was formed in 2009 for the specific purpose of undertaking Public Private Partnership (P3) development and financing of public and community serving facilities nationwide. Its two partners are Griffin Structures (founded 1981) and Swinerton Builders (founded 1888). Griffin | Swinerton is a recognized leader in the design, planning, entitlements, financing, and development of social infrastructure and municipal facilities using alternative project delivery methods including P3s, Lease-Leaseback, Design-Build, and Program Management at-Risk. Griffin | Swinerton is a fully integrated, well-established development platform with over $600M of projects (approximately 600,000 SF of essential municipal facilities) structured as P3s underway in California
• Public Facilities Group (PFG) is a leading practitioner of 63-20 Progressive Design-Build (63-20 PDB) and is focused on the successful delivery of public Infrastructure on behalf of our Public Partners. Their professional staff have completed 28 projects with a total development cost of $1.8 billion. Each of these projects have been completed on or ahead-of schedule and on or under budget with a lower cost than their public partners had experienced with other alternative delivery models.
• Griffin Structures, Inc. (GSI), is a diversified Development and Program and Construction Management company serving public and private sectors. More than 90% of our work is performed for public entities. GSI has built in excess of $2B in public sector facilities, the scope of these projects ranging from $1M to greater than $400M.
• LPA was founded in 1965 and has expanded to approximately 400 people with four locations in California and two in Texas. As an integrated design firm, LPA has in-house experts in architecture, engineering, interior design, landscape architecture and master planning to collaborate with clients from start to finish. As one of the country’s only design firms with a dedicated research team, LPA draws on rigorous data and analysis to shape their projects and improve their economic, environmental and social value.
• Swinerton dates to 1888 as a General Contractor, and now has over 3,500 employees. The company still operates under California contractor’s license number 92-the one it obtained in 1927 when the state first began issuing licenses. Many Swinerton built structures now claim a spot on the National Register of Historic Places and other architectural preservation lists.
• Kidder Mathews is privately-held with regional operations in Silicon Valley, the San Francisco Bay Area, greater Los Angeles and San Diego, the Puget Sound Region, Portland, Phoenix and Reno.
• McClaren, Wilson & Lawrie, Inc. (MWL) is a focus area expert in public safety facilities having completed the planning and design of public safety and forensic science facilities since being established in 1995. This exclusive focus has resulted in nearly 450 diverse projects and unparalleled experience in these highly technical facilities throughout the United States and Canada.
The Griffin | Swinerton team recently completed the design-build-finance of the City of Salinas Police Services Headquarters with a total of 70,800 square feet (42,300 square foot headquarters building with 28,500 square foot support building). The City of Salinas used the same progressive Design-Build-Finance-Operate-Maintain (DBFOM) P3 approach as the City of Rialto is pursuing, with an overall development cost of $51 million. Their proposal includes many references of other P3 projects successfully delivered by the Griffin | Swinerton team.
The City of Salinas has provided a reference letter regarding the completion of their Police Services Headquarters, included as Attachment 2.
Site Design Options
The City’s RFP requested that the development teams submit a site plan proposal and conceptual plan and description. The City requested at least one or potentially two alternative layouts. The Griffin | Swinerton collaborated and using available information on the size of the existing Rialto Police Department staffing and forecasts for future staffing at City build-out, developed initial programming recommendations and sizing / layout of new buildings for the site plan.
Four alternatives were provided, and importantly, all of these alternatives allow for continuous operations of the existing police station during construction, avoiding the need to temporarily relocate the police station. However, loss of on-site parking will occur during construction requiring pursuit of alternatives for temporary parking in offsite locations.
The Griffin | Swinerton team recommended to the Evaluation Panel their “Option B” alternative that consists of two new buildings onsite with the operations located at the Police Annex at 429 W. Rialto Ave. remaining as is (not relocated to the new police station). Their initial recommendation is a Police Headquarters Building of 2 stories and 40,000 square feet (developed as an “Essential Facility”) and a 1 story Support Building of 17,000 square feet to include the firing range and other support operations.
A copy of the Option B proposal is included as Attachment 3.
The next step in the process to develop a new police station is to formally select the Griffin | Swinerton team and proceed with the Pre-Development Phase wherein the team will proceed with the architectural and design services to program and design the new police station. It should be emphasized that the programming, site plan and conceptual design for the Option B proposal prepared by Griffin | Swinerton is merely a starting point, and that they will coordinate in detail with the City on the final required programming, final architectural elevations and interior design, and site design elements.
The Pre-Development Phase will end with the final drawings and Guaranteed Maximum Price (GMP) proposal for construction of the new police station. At that time, the City Council can determine to proceed with Phase 2 into construction and negotiate a Development Agreement inclusive of a Ground Lease and Facility Lease to support the financing of the construction cost of the new police station.
A Pre-Development Agreement has been negotiated with the Griffin | Swinerton team and includes all the required services necessary to lead to completion of the final drawings and delivery of the GMP to the City. A schedule of 11 months has been developed for completion of the Pre-Development Phase based on Griffin | Swinerton’s experience on other similar projects. Important terms of this agreement are:
• Phase 1 Pre-Development scope of services includes the following items:
o Needs assessment program
o Pre-Design Services - Basis of Design
o Schematic Design Services
o Entitlement Package
o Environmental Review
o Design Development Services
o Financing / Estimated Costs of O&M
o Deliverables - Design Development set of Plans / Specifications
• Phase 1 Pre-Development budget is $4,227,190 that includes the following line-item budgets:
o Architectural/Engineering services - $1,959,741
o Miscellaneous consultants - $79,315
o Preconstruction services - $300,000
o Legal Services / Insurance / Reimbursables - $149,378
o Developer Overhead - $548,276
o Developer Fee - $790,614
o Developer Contingency - $149,867
o City Contingency - $250,000
• All Phase 1 costs are open-book and billed at actual except for fixed fees for Developer Overhead and Fee; any savings in Phase 1 budget are realized by the City
• City will have 60 days upon submittal of the GMP to determine whether to proceed with construction phase, through negotiation of the Ground Lease / Facility Lease and financing terms of the Development Agreement
• Phase 2 Construction scope of services includes the following items:
o Completion of 100% construction documents
o Competitive bidding of trade contractors
o Construction observations
o Completion of construction
• Phase 2 schedule is anticipated at 24 months
• Phase 1 and 2 work is subject to prevailing wages as a public project
• Phase 2 shall include a Project Labor Agreement (PLA) component whereby the General Contractor to enter into a PLA with the applicable trades union
• Termination for convenience with 30 days’ notice, with City responsible for all incurred costs up to the date of termination
A copy of the Pre-Development Agreement is included as Attachment 4. Required disclosure forms were submitted with their proposal and are included as Attachment 5.
ENVIRONMENTAL IMPACT
The proposed actions do not constitute a “project” as defined by the California Environmental Quality Act (CEQA). Pursuant to Section 15378(b), a project does not include organizational or administrative activities of governments that will not result in direct or indirect physical changes in the environment. However, prior to commencing construction of a new Police Station, the City will complete all necessary reviews pursuant to CEQA.
GENERAL PLAN CONSISTENCY
This action is consistent with Guiding Principle 3A of the General Plan:
Our City government will lead by example, and will operate in an open, transparent, and responsive manner that meets the needs of the citizens and is a good place to do business.
LEGAL REVIEW
The City Attorney reviewed and recommended approval of this staff report, resolution and agreement.
FINANCIAL IMPACT
Operating Budget Impact
Operating costs associated with a new police station will increase. In the DBFOM process, the City has the option to include operational costs in the long-term facility lease through reimbursements to the developer for these costs. These costs will be negotiated through the development process leading to the Facility Lease agreement presented to City Council for approval.
Capital Improvement Budget Impact
The City Council previously appropriated $10,500,000 towards development of a new police station. It is recommended that the City Council fund Phase 1 (Pre-Development) on pay-go basis using the funds previously appropriated, rather than seek reimbursement and finance the cost as part of Phase 2 (Construction). Sufficient funds are budgeted and available in Capital Fund, Account No. 300-500-6150-3001 for the Phase 1 costs of the Pre-Development Agreement at $4,227,190.
In its proposal, Griffin | Swinerton provided initial cost estimates for the various options, as shown below.
The initial cost estimate for Option B (Phase 2) is Soft Costs of $10,839,209 and Construction Costs of $53,166,269 for a total cost of $64,005,478. Griffin | Swinerton’s team includes Public Facilities Group (PFG) who will coordinate the P3 Project Financing for Phase 2. A not-for-profit Special Purpose Entity (SPE) will be created specific to this P3 Project. The City will enter into a Ground Lease and Facility Lease with the SPE to allow the Griffin | Swinerton team to design, finance, and build the new police station and then lease it back to the City (a “leaseback” Facility Lease) while acting as long-term steward of the public facilities.
The City Council will have the discretion to include the elements of operation and maintenance (O&M) contracts furnished by the SPE while the City operates as tenant of the police station. The City’s lease rate under the Facility Lease is an “at-cost” payment equal to the debt service plus O&M costs of the new Police Station. The Griffin | Swinerton team makes no profit or “spread” between the lease payment and the facility costs (i.e. debt service, O&M costs, etc.), and instead is paid a flat fixed-fee for professional services as part of the total project costs budget.
Griffin | Swinerton’s proposal included a preliminary rough order of magnitude estimate of the City’s lease rate under the Facility Lease of approximately $6.1 million per year (including debt service at $4.74 million plus O&M costs at $1.36 million).
The SPE will issue tax-exempt bonds (either 63-20 or 501(c)(3) bonds) for 100% of the costs of the project. In all of Griffin | Swinerton’s and PFG’s project portfolio, the privately issued tax-exempt bonds were rated and priced on par or better (i.e. the same or lower “spreads”) with other municipally-led lease revenue bond financings. The P3 bond financing can be repaid or refinanced at any time by the City at no additional cost, or at the end of the lease term when the financing is fully repaid and ownership of the facilities revert to the City at no additional cost.
The term 63-20 refers to the 20th IRS revenue ruling in 1963. The revenue ruling gives a not-for-profit organization the ability to issue tax-exempt bonds (i.e., bonds the interest on which is not subject to federal or local income tax) to finance exempt facilities. The revenue ruling was further clarified in Revenue Procedure 82-26. The model has been successfully used across the United States for funding P3 projects and is often referred to 63-20 P3 Financing.
RECOMMENDATION
Staff recommends that the City Council:
(1) Adopt the Resolution Approving the Selection of Griffin | Swinerton, LLC, a Delaware Limited Liability Company, as the Development Team to Design-Build-Finance-Operate-Maintain a New Police Station (in Accordance with Government Code Section 5956) Pursuant to Request for Proposals No. 22-062 Related to Development of a New Police Station on the Site of the Existing Police Station Located at 128 N. Willow Avenue and Approving a Pre-Development Agreement; and
(2) Authorize the City Manager to Execute All Documents