On December 19, 2006, the Richmond City Council set into motion the largest public works project in Richmond history, a $104.9 million makeover of the Civic Center.

 

In what is being called Phase 1A, the City Council authorized a fee of $10.4 million to be paid to Richmond Civic Center Partners, LLC, for design of the project, and they also authorized execution of a lease with Dicon Fiberoptics for a temporary police station in Marina Bay at an estimated cost of over $10 million over the minimum five years the Police Department is expected to occupy it.

 

The project is so expensive that it will suck up the entire bonding capacity for the City of Richmond for years to come, eliminating any opportunity in the foreseeable future to address other municipal needs, such as the worst streets in the Bay Area.

 

The City Council received the paperwork, consisting of hundreds of pages of staff reports and draft agreements, on December 15 and was expected to review it and approve it four days later, which is what happened. I was the only councilmember to vote “no.”

 

It’s not that I am not thrilled at the onset of the long awaited City Hall rehabilitation. I am as excited as anyone. I just had a lot of concerns about the initial expenditure of some $20 million and the contract on which it is based.

 

City staff doesn’t take kindly to City Council members questioning their judgment, nor do City Council members provide much encouragement for their colleagues to second guess an infallible staff, so my concerns fell on deaf ears. Except the ears of developer Harley Searce of Alliance Property Group, Inc., who proceeded to make an emotional protest and publicly attack me for daring to publicly question the wisdom of the contract under consideration.

 

The Civic Center project includes the following; however, the new Hall of Justice is being postponed indefinitely.

 

Remodel City Hall	26,500,000
Remodel Hall of Justice	17,975,000
New Hall of Justice (Design Only)	33,058,000
Remodel Auditorium	9,911,000
Remodel Civic Center Plaza	6,966,000
Remodel Art Center	500,000
FF & E	10,000,000
TOTAL	$104,910,000

 

Hall of Justice

 

The $10 million decision to evacuate the Hall of Justice was made on flimsy, incomplete and questionable information developed through a haphazard evaluation by City staff. For a more detailed analysis, click here. A new Hall of Justice is not part of the current plan, so Richmond’s Police Station may be permanently relocated to Marina Bay. The rehabilitated Hall of Justice is expected to house the Redevelopment Agency, Employment and Training and the Senior Center, all of which already have space in an existing building.

 

Cutting out the Fat

 

When Richmond City staff took the first steps toward remaking the Civic Center, they envisioned a multi-phase, multi-use project that would have to be undertaken by a large and diverse development organization because the City was broke and its bond rating was in the toilet. An RFP was circulated that included the admonition “…some form of bond financing and/or sale lease back with ultimate ownership of the City facilities returning to the City will be the best way to proceed…” 

 

What staff was looking for was not just an architect to design it and a contractor to build it; they wanted a full fledged developer. Richmond Civic Center Partners LLC (RCCP) responded to the City of Richmond’s Request for Proposals (RFP) and was selected on June 7, 2005.  RCCP’s RFP response did in fact set forth bond financing to be based on the City of Richmond paying a lease rate to retire the bonds. 

 

However, the fortunes of the City rapidly improved, and the City of Richmond did not permit RCCP to manage the financing and bond process, but rather performed this role and function themselves.

 

What the City did do was allow RCCP to front the entire cost of programming and schematic design of the project. Why this was done this way is unclear, but apparently the city used over $1.5 million of cash from Alliance Property Group, Inc. and Wasatch Advantage Group, LLC to pay for everything from legal counsel, environmental consultants, engineers, to architects.

 

With the City now prepared to pay cash for the project and with no imminent associated development in the plans, there would seem to be no need for a pair of high-powered development firms to remain on the payroll. However, that’s exactly what seems to be happening. Take a look at the organization chart. Alliance Property Group, Inc. and Wasatch Advantage Group, LLC are displayed prominently, taking up two thirds of the page and listing a total of 13 presumably key players. Next most prominent, with two boxes, is the attorney for the LLC, Genser & Watkins. Finally, at the bottom of the page, with two boxes, is the contractor, Charles Pankow Builders, Ltd., the people who are going to actually build it. The people who are going to spend most of the $10.4 million designing the project did not even warrant an appearance. In fact, Nadel Architects are mentioned only once in the entire contract.

 

The question is, why is this called a development contract with two development firms prominently integrated when all we need is an architect and a contractor? It looks like fat to me with two many layers of unnecessary bureaucracy.

 

Harley Searce replies:

 

There are no unnecessary layers of bureaucracy in the RCCP organization and we have not added any undue expense to the project.   The level of supervision/structure is appropriate for such an important multi-phased, multi-faceted development undertaking. The developer fees of RCCP are not based on our organizational structure.  Our fees have been reduced significantly below the return we received for a recent similar $41 million transaction with the County of Los Angeles.  Moreover, our fees are well within the fees recognized in the standard course of industry by such organizations such as Keyser Marston Associates, a well known financial advisor to many public entities, including the City of Richmond.

 

Missing Documents

 

There are several documents either included in the contract or referenced that are either missing or have never been provided to the City Council. This includes Exhibits H and C. Exhibit E is not complete. How does the city Council know what they are signing if it’s not all here?

 

Fee Basis

 

There is no information provided about how the fee was calculated or how it is broken down between services already provided and services yet to be provided. Harley Searce notes: “All design fees have been broken down by project component and submitted and reviewed by Mack 5 who is the City’s construction manager on this project.” That’s great, but what about sharing this with the City Council? Also, the fee looks high to me, but without any information on how it was compiled, who knows?

 

Guaranteed Maximum Price

 

Although neither the City of Richmond nor any of its staff has any experience with design-build as a project delivery system, this was chosen as the basis for the contract. One of the advantages of design-build is to have a guaranteed maximum price; however, there is none in this contract. A primer on design-build notes, “Possibly the greatest advantage offered by the Design/Build process to many Owners is that at some point early in the design process, the Owner negotiates a guaranteed maximum price for the finished project.” There is no guaranteed maximum price in this contract.

 

Although the following budget figures are included, the only constraint on the design-build team to meet these budgets is in Exhibit I: “Developer will design a project that it believes can be constructed within the estimated budget at the project schedule dates shown in Exhibit B.” Also, in 2.02.e.ii, there is a statement,  “Such cost estimates shall be updated as required to account for material changes in design or other changes in order to confirm that the Work can be completed within the owner’s budget of $78,164,879 (This excludes the new (Tajma) Hall of Justice). There are no consequences for failing to deliver the project within budget, and the only consequences for failing to deliver it within schedule are liquidated damages of $500/day for the City Hall and $500/day for the Hall of Justice Remodel. This doesn’t seem realistic for $78,164,879 of construction.

 

Harley Searce responded: “Regarding Phase 1B (construction), our goal was to guarantee a price much earlier in the design process, but due to the changes in scope requested by the City, that was not possible.  We shall deliver a fixed price for Phase 1B prior to the completion of design.”

 

Competitive Bidding

 

Page 19, Section 4.02, states “Developer shall select Sub-Contractors, other than C. Overaa & Co., through a competitive bidding process. However, Exhibit A lists five principle sub-contractors already chosen: mechanical, electrical, plumbing, fire sprinkler and elevator, which together, represent a substantial proportion of the construction cost. Where is the price competition?

 

Harley Searce explained the inclusion of Overaa: “Overaa is serving as a subcontractor to Pankow on the City Hall and site work.  They are assisting with the local hiring ordinances and subcontractor market experience.  Pankow Builders is the sole General Contractor on the job.  Overaa brings substantial specialized expertise to the project in seismic retrofit and hazmat abatement, as well as construction of parking structures for that future phase.  Of course, it’s to everyone’s benefit that Overaa is also local. These subcontractors were selected following a competitive bid process where multiple subcontractors in each trade submitted proposals based on design criteria developed by independent design consultants.  This pricing was submitted and reviewed by Mack 5.”

 

The question is, how could this be competitively bid before the design, which is the subject of the contract Phase 1A, is complete?

 

From the West County Times:

 

Civic Center Plaza overhaul wins funding from council
Group OKs plan to move police department to temporary quarters
By John Geluardi
CONTRA COSTA TIMES

Posted on Thu, Dec. 21, 2006

RICHMOND - After years of planning and financial setbacks, the Richmond City Council on Tuesday approved a $98 million plan to revitalize the city's historic Civic Center Plaza.

The project will include the renovation and seismic upgrading of City Hall, the Hall of Justice Building and remodeling of the Richmond Memorial Auditorium. The renovated buildings will contain new public art; and the spacious plaza will be redesigned into a welcoming open space suitable for public events.

A Jan. 5 groundbreaking will officially kick off the Civic Center renovation, which has become the symbolic centerpiece of the city's financial comeback after a crippling $35 million budget crisis in 2004.

"This is the moment that the community, the council and I have anxiously awaited," Mayor Irma Anderson said. "If you think of the city as a body, the Civic Center is the heart. The groundbreaking represents a commitment to renew the heart of Richmond. I'm excited to participate in this historic moment."

The renovation is expected to be completed in March 2009. City offices have been in a leased building on Marina Way South since 2003, when City Hall was determined to be seismically unsafe. The lease has cost taxpayers an average of $1 million a year.

The City Hall building will be renovated and ready to occupy by the time the lease expires, Redevelopment Director Steve Duran said.

"It's very doable," he said. "We should be all snug in City Hall by March 2009."

Project funding will come from at least three sources: $20 million from capital improvements funds, $69 million through tax-exempt bonding and incidental costs of about $10 million from the general fund. The annual debt service will cost about $1.8 million.

The bond financing will stretch to the maximum the city's ability to borrow money for capital improvements.

The Civic Center long has been a source of civic pride. It was written up in numerous magazines as cutting-edge public architecture in 1949, when it was built. The complex was designed by well-known San Francisco architects Milton and Timothy Pflueger. The Pflueger brothers also designed the Castro Theater in San Francisco and the Paramount Theatre in Oakland.

Also on Tuesday, the council approved a $9.5 million plan to move the police department into a temporary, 50,000-square-foot office and warehouse space until a new public safety building is built. The department is expected to be in the space, on Regatta Boulevard, for five to eight years. The Hall of Justice, where the police department is currently housed, has major problems with water intrusion and mold infestation.

The public safety building and a 700-car parking structure, estimated to cost $65 million, are part of the second phase of the Civic Center renovation. The city has not begun to draw design plans for the new building, and it is uncertain where the funding will come from, Finance Director Jim Goins said.

Police Chief Chris Magnus said he is glad police employees are moving into a safe environment.

"This is a good short-term alternative," he said. "The building has space for temporary jail cells and evidence storage. It's not perfect, but it's a workable short-term arrangement."

The department will begin the move immediately, though it will take several months to complete.

Councilman Tom Butt was the lone "no" vote against the plan. He criticized the contract with developer Alliance Property Group as poorly worded and short on cost protections for the city.

"This contract is layered with organizations that have no clear role," Butt said. "The project team is bloated, and we're paying for people who don't need to be there."

Harley Searcy, Alliance Property Group CEO, took exception to Butt's comments.

"Wow, I really had to bite my tongue," he told the council. "Your people cut our fees way down from what we normally get. They hammered me so hard, my wife didn't want to see me."

Contact John Geluardi at 510-262-2787 or at jgeluardi@cctimes.com.