TO: Mayor Cushing / Homer City Council
FROM: Walt Wrede
DATE: September 4, 2004
SUBJECT: Resolution 04-83 Revised Project Costs
The Council is scheduled to consider Resolution 04-83 at its regular meeting on September 13, 2004. This resolution approves the 65% architectural/design drawings and authorizes the administration to proceed with the next steps. This action by the Council is important if we are to stay on the approved construction schedule.
The 65% percent stage is a critical point in the design process because these drawing provide the basics of what the new library is going to look like. This is a very good time to stop the process if the Council has any problems or concerns. Approving the 65% plans is important because it lets the administration know that it is proceeding on the right track and that it is authorized to keep going. It also sends a favorable signal to potential funding organizations that the City is serious about this project, has settled on a basic design, and is moving forward on schedule.
There are several other important points to consider:
· The 65% drawings provide the basic design of the library. This is essentially what the library is going to look like. The 95% drawings will be much more refined, contain much more detail, and more precise cost estimates. These drawings essentially get us much closer to bid ready / construction documents.
· Even if the Council approves the 65% drawings on September 13th, the administration does not intend to issue a Notice to Proceed to the Architect to prepare the 95% drawings until after the election. If the library proposition passes, we will go ahead with the Notice to Proceed. If the proposition fails, we will come back to the Council for further consultation and direction.
· Council approval will be required again at the 100% stage. This is the point when we have final construction / bid ready documents and a final construction cost estimate and budget. The Council will be asked to approve the final budget, and authorize us to put the project out to bid. It is important to note that we cannot take the project to bid unless all funds are identified and secured.
The City recently received revised cost estimates for the library project. These are the first detailed estimates we have received since the initial estimates provided at the 35% stage. Unfortunately, the estimated cost of the project has increased significantly due almost entirely to rapidly escalating building materials and labor costs. Anyone who is in the construction business or is trying to build anything right now is keenly and painfully aware of this trend. The fact that the estimated cost has risen should come as no surprise to anyone.
In short, the cost estimators expect the total cost of the project to increase by 15% and the cost of the building itself to increase by 19%. This translates into an increased cost of approximately $900,000. The Administration, the LAB, and the Friends of the Library have been aware for some time that construction costs were on the rise. They have already taken a number of steps to contain costs including, but not limited to, reducing the usable floor space by about 2,000 square feet, cutting back on some amenities that were not absolutely necessary, reducing some of the LEED efficiencies, and exploring alternative construction/design/build approaches. There is a general consensus at this point that we cannot find additional large cost reductions without seriously compromising the function and quality of the building.
Attached is a revised budget and a revised funding plan. This information is intended to demonstrate that although we are all concerned about rapidly rising costs, we are confident that this hurdle can be overcome. We are taking steps to reduce costs and look for efficiencies and we have a specific plan to secure the funding that will be needed. In addition, it is important to consider that:
· It is normal for project costs to increase as you go from 35% to 65% because the estimates are based upon much more precise information. Further, no one anticipated that construction and labor costs would rise so rapidly. In short, the increased cost estimate is not a result of project mismanagement, increased square footage, new amenities or anything like that. The project has in fact been scaled back.
· It is important that the Council stay on track with the project if we want to have any realistic prospect of building a new library anytime soon. If we stop now, it will jeopardize funding sources and possibly contribute to voter rejection of the ballot proposition. Costs will also continue to rise. We need the Council to stay on track and for the voters to approve the ballot proposition so that we have the tools to secure the additional funding that we need.
· We are not asking the voters for any additional money. The loan authorization on the ballot is still for an amount not to exceed $2.2 million. The new cost estimate could mean that the City might have to actually borrow more of that $2.2 million authorization than it had hoped, however, we will not ask for more than the authorization.
· The vote on the ballot proposition is critical. All of the remaining funding organizations, our legislators, and our Congressional delegation are waiting to see the outcome of this vote. They all want to see how serious and committed the people of Homer are about this project and whether they are willing to put their own money into it. In short, approval of the ballot proposition is critical to enable us to leverage additional funding and cover come increased costs. If this proposition fails, there is essentially no chance that construction will begin on schedule.
RECOMMENDATION: Approve Resolution 04-83 regarding approval of 65% design plans for the new Homer Public Library.