PURPOSE

The purpose of this staff report is to request Council�s:

1. Approval of the Plans and Specifications for Bid Schedule 1153

2. Approval of the Construction Agreement between the City of Burbank and Summit Builder�s for Bid Schedule 1153

3. Authorization to advance $1,400,000 in General Funds at terms and conditions prescribed by City Council

BACKGROUND

The DeBell Golf Course, driving range, and clubhouse represents an important and long standing recreational amenity that continues to be enjoyed and extensively used by the community.  The City of Burbank is proud of this recreational asset but like most facilities that are extensively used, the time inevitably comes when assets need to be substantially refurbished or replaced.  The existing clubhouse is 37 years old, was capitalized as of fiscal year end June 30, 1972 for a cost of $223,986, and had a 20-year economic life for accounting purposes.

The existing DeBell Clubhouse was dedicated in April 1970 and is far beyond the twilight of its economic life.  The clubhouse is functionally obsolete by today�s clubhouse operational and functional standards.  The clubhouse does not meet current Americans with Disabilities Act (ADA) standards for accessibility or structural integrity for earthquake standards, does not have a fire suppression system other than fire extinguishers and an ANSI system for its kitchen equipment, and is not energy efficient. 

In addition, the existing surface parking lot is in poor condition and does not meet current municipal code standards.  Recommended Project changes will improve safety, circulation, and lighting, and enhance current landscaping, and will provide important storm water run-off mitigation measures in conformance with Burbank Municipal Code requirements and Regional Water Quality Control Board requirements.

The decision to replace the existing clubhouse and surface parking lot with new facilities was made prior to June 2002.  This decision has been re-affirmed several times since then given the facility�s continued declining condition.

The following list of key events summarizes the activities that have culminated in staff�s current recommendation that Council approve the Project as presented.

• Public outreach efforts presented several conceptual clubhouse program alternatives for consideration in August 2004 and May 2005.

• A final public outreach effort held December 2005 resulted with near unanimous acceptance of a conceptual program for a new clubhouse and parking facilities. This program was reviewed, evaluated, and generally accepted by the Oversight Committee in January 2006.

• On March 7, 2006, Council accepted an $8.0M Schematic Design Program and directed staff to proceed with the Design Development Phase.

• On July 25, 2006, Council accepted the $8.0M Design Development Phase Program and directed staff to proceed with the Construction Documents Phase.

• Building and Safety Department plan check approval was secured on February 26, 2007.

• General Contractor Bid Proposals were received on April 10, 2007.

• April and May 2007 � Staff evaluated General Contractor bids and completed additional background investigation work. The Oversight Committee met twice to review results and develop Council recommendations.

ANALYSIS

DeBell Clubhouse Replacement Program

The final design program for the DeBell Clubhouse Replacement Project (hereinafter the �Project�) comprises a new two-story, 13,760 square foot clubhouse, new surface parking facility for 79 vehicles, ADA accessibility from the new parking facility across Walnut Avenue, a four way stop at the Walnut Avenue and DeBell Drive intersection, and street and drainage reconstruction along the western most portion of DeBell Drive.  The final program presented in this report varies only slightly from the program presented to Council on July 25, 2006 with the exception of the increase of nine (9) additional parking spaces at the surface parking lot.  The current parking facility has 85 spaces (some of which are sub-standard); the proposed plan calls for 79 spaces, including six (6) ADA spaces and one (1) van accessible space.    

Exhibit A identifies the overall site plan and landscape overlay plan.  Exhibit B delineates the lower and upper clubhouse floor plans.  Exhibit C portrays exterior clubhouse elevations and the architectural style.  Exhibit D is a section view of the landscape buffer between the clubhouse west wall and Walnut Avenue.  

The clubhouse interior program comprises 12,870 of interior useable space and generally includes:

i.                    Clubhouse � Upper Level (5,356 s.f. � Useable)

• Bar & Grille � Combined seating  for 72 diners and 11 bar stools

• Community Room with a 40 seat theater style capacity (the Community Room opens to the Bar & Grille to increase dining capacity by another 24 to 28 seats)

• Separate Men�s and Women�s Restrooms with Lounge Area

• Kitchen and Administrative Support Offices

• Circulation including Exterior Stairs and Passenger Elevator

ii.                  Clubhouse � Lower Level (7,514 s.f. - Useable)

• Pro Shop � Starter Area, Office, and Storage/Work Room         

• Cart Storage, Ramp, and Maintenance Support Areas for 82 Golf Carts (89 spaces if carts are parked in the main aisle)

• Circulation, Storage, Elevator, Stairwells, and Service Yard

iii.                Exterior Patio and Terrace Area (1,195 s.f.)

• Terrace (1,140 s.f.) � Elevated outdoor flex space that may accommodate an additional 60 seat dining capacity

• North Patio (855 s.f.) � Partially covered outdoor flex space linked to the Terrace and Community Room

Through several program iterations, reviews, and modifications, by and between project stakeholders, staff is confident that the above program will meet the operational and functional needs for the building�s life expectancy.  In much the same way that the Buena Vista Branch Library has enjoyed success as measured by its users, the public will enjoy the clubhouse setting, its warm and inviting ambience, and its aesthetically pleasing architectural styling. 

Design and Approval Activities

When staff last reported to Council on July 25, 2006, approvals for CEQA, the Parking Determination, and the Traffic and Transportation Committee had not been obtained.   Since then, an exemption through CEQA was issued effective October 5, 2006, the Parking Determination was approved by the Planning Board on October 9, 2006, and the Traffic and Transportation Committee provided approval of the four way stop at the intersection of Walnut Avenue and DeBell Drive on November 9, 2006.

General Contractor Pre-Qualification, Bid Process, and Bid Results

The Project is utilizing the traditional design-bid-build method with the added requirement that all general contractors be pre-qualified prior to bidding.  Since construction activity remains very strong within the region it was important to ensure this Project would be provided as much exposure as possible to maximize interest amongst general contractors and competing projects.

To stimulate general contractor involvement, several firms[1] were contacted based on their specific clubhouse construction experience to inform them of the Project, the requisite pre-qualification process, and the City�s desire that they seriously consider submitting a cost proposal.  In addition, the process for advertising and completion of the pre-qualification process was extended to maximize exposure and interest.  The process included:

• Ongoing contact with contractor service notification providers such as McGraw Hill and Reed Construction Data

• Advertising: December 6, 2006 thru December 20, 2006

• Submittal period for Statement of Qualifications: December 14, 2006 thru January 25, 2007

• Statement of Qualifications evaluation: January 26, 2007 thru February 9, 2007

• Qualified General Contractor notification: February 12, 2007

• Bid Phase Period: February 28, 2007 thru April 10, 2007

Notwithstanding these efforts, only three (3) of the original 13 general contractors that requested pre-qualification bid packages actually submitted a Statement of Qualification and only two (2) were ultimately qualified to submit bid proposals.  Although one general contractor submitted a �no bid� letter stating they were too busy to bid additional projects, several other general contractors that previously expressed interest simply did not follow through.

Douglas E. Barnhart, Inc. (San Diego, CA) and Summit Builders (Lakewood, CA) submitted separate bid proposals on April 10, 2007.  Summit Builders is the apparent low responsible bidder at $6,776,000.  Barnhart�s bid proposal was $7,478,843 for a total cost difference of $702,843 between bids and representing a 10.4% variance. 

Since there were only two (2) qualified bidders and due to the 10.4% spread between the qualified bids, staff considered:

1. Rejecting all bids, re-qualifying bidders, and re-bidding

2. Re-evaluating value management opportunities for potential inclusion

3. Conducting further background investigations on Summit Builders before accepting the bid and recommending the Project move forward

Staff met with the Oversight Committee to carefully consider these options and the unanimous decision was made to proceed with Summit Builders.  This was founded on the following key considerations:

1. There was no guarantee that rejecting all bids, re-qualifying bidders, and re-bidding would result in a sufficient cost savings since the market continues to remain busy and labor and material costs continue to remain high.  In effect, it remains a �contractor�s� market.  

2. Short of reducing the clubhouse size, value management opportunities would only compromise the Project�s long-term quality and intended aesthetics.  The collective potential savings (estimated as a rough order of magnitude of about $125,000) was deemed insufficient to produce a substantial impact and therefore was not pursued further.

3. A combination of items 1 and 2 above was also considered, but once again, no guarantee could be provided.  The possibility of actually paying more for less was considered a potential outcome.

4. A further investigation of Summit Builder�s current and local project experience was performed and the outcome was favorable.   Owner input suggested that Summit was capable, knowledgeable, and fair.  Summit is the general contractor for the Burbank Airport Valet Service Center and Parking Lot Improvements where the project is tracking for an on time completion of August 2007.   Further investigation indicated that three (3) or more bids were received by Summit from subcontractors for all primary trades.  This represents favorable competitive bidding for approximately 82% of Summit�s construction bid.[2]

Total Projected Project Cost

The Total Projected Project Cost presented to Council on July 25, 2006 was $8.0M compared to the current $9.4M project cost summarized on the next page, which represents an increase of 17.5%.  Primary causes for this $1.4M increase include:

• $81,103 increase in Professional Services � primarily for Architectural and Engineering, Construction Management, and Temporary Power and Water Consumption

• $755,257 increase above the Engineer�s Estimate for the construction cost

• $107,000 increase for overhead power and underground water and sewer connections for temporary operations

• $170,000 increase in construction contingency since the previous value was too low as a percentage of the estimated construction work

• $220,000 increase in the City�s Project Contingency since the previous value was too low as a percentage of the estimated Project cost

Staff will maintain control of the increased Construction and Project Contingencies to the maximum extent possible and will return any unused funds to the appropriate account(s).

Detailed cost information is provided in the �Total Projected Project Cost � Summary and Detailed Comparisons� included in this report as Exhibit E.  In summary, the cost for each Project Element and its cost as a percentage of the total project cost are shown below. 

                                                                                                Proposed          % of

            Program Element                                                       Cost           Total Cost

1.                  Professional Services                                  -           $ 1,209,610          12.9%

2.                  Construction Costs                                       -           $ 7,540,390          80.2%

3.         Furniture, Fixture & Equipment (FF&E)      -           $    230,000            2.5%

4.         Art in Public Places (AIPP)  [3]                                $      50,000             0.5%

5.         Project Contingency                                     -           $    370,000            3.9%

                                                                                                   -------------        ------------

Total Project Cost -   $ 9,400,000        100.0%

Conditions Impacting the Construction Cost

The focus of our cost discussion is on the Construction Cost since this comprises the largest proportion of the total project costs.  Staff maintains that the combination of changes in scope, receiving only two qualified bids, and required yet reasonable increases to the Construction and Project Contingencies were the primary cause of the increase. 

Changes in Scope � As the process to finalize the project scope evolves from the schematic/programming phase to the final design phase, programming and detail refinements cause the scope to inevitably �creep.�  This affects the bottom line as the scope is solidified to address legitimate long-term program needs.  Some of the following items and their respective estimated cost contributed substantially while others contributed more modestly to the increased construction cost.  The items listed below represent about $676,000 of the $755,257 in added construction expense.

• The final clubhouse program size increased from 12,775 s.f. (Schematic Design Phase � March 2006) to 13,760 s.f. (April 2007), or 985 s.f. based on the inclusion of storage space, single stall handicap restrooms at the ground level, and incremental increases to the mechanical and electrical equipment rooms.  Using an estimated unit cost of $411/s.f. for the clubhouse only, this represents an increase of $405,000, or about 54% of the $755,257 variance.[4]

• Demolition of BWP�s existing transformer building, adjacent storage shed, new underground infrastructure for electrical primary feeds, and required screening of the new transformer vault and pad.  The initial program intent was to use the existing building and infrastructure - $90,000.

• Additional over-excavation, re-compaction, and grading based on soil conditions below existing clubhouse � $85,000.

• Increased structural foundation system (concrete and rebar) - $11,000.

• North Patio � Clubhouse roofline extended over a portion of the North Patio to provide balanced architectural look and weather protection - $12,000.

• New swing gate at surface parking lot entrance - $8,000.

• Replace two (2) existing irrigation controllers due to condition, age, functionality, and expanded irrigation zones � $20,000.

• Additional storm run-off mitigation system along Lockheed View Drive, including related street refurbishment � $45,000.

Limited Number of Bidders - Empirical evidence strongly suggests an inverse relationship between the number of bidders and the average bid cost � typically, the lower the number of bidders, the higher the bids.  Although no specific study is being cited to support this position, discussion with other professionals strongly supports this argument as reasonable.  The DeBell Project had only two (2) qualified bidders and both bidders had knowledge of this fact.  

Construction and Project Contingencies � The Construction Contingency was increased by $170,000 in large part to ensure a reasonable funding level for the construction effort.  Staff maintains that the $345,000 for Construction Contingency (about 5% of the construction bid) is commensurate for a project of this type, including the quality level of the construction documents, and in-place management controls.  The $370,000 Project Contingency was also increased by $220,000 and represents approximately 4.1% of the anticipated Project cost and is a reasonable contingency value for a project of this size and type. 

Prevailing Market Conditions - The construction industry remains busy with limited labor resources, volatile material costs, and other market conditions that adversely affect market escalation and continue to favor construction service providers.  A June 2006 �Construction Industry Market Report� stated that regional escalation was projected to range from 10% to 15% from July 1, 2006 through June 2007 alone^[5].  The report further stated that the West Coast region as a whole continues to experience very strong construction growth and contractors throughout the region are extremely busy and are very selective in the work they bid.  The fact that at least two (2) potential bidders did not submit a Statement of Qualifications lends support to this perspective.

Value Management Efforts

The goal in providing value management decisions is to ensure that there is a balance between quality, cost, aesthetics, and long term functionality that do not compromise the Project�s design and performance intent.  The Oversight Committee was involved in the value management process and provided the necessary direction to control costs to the extent possible.

Staff performed value management efforts as a means to control construction costs.  However, short of reducing the overall program size which is the most effective approach to reducing construction costs, other measures have varied and limited results.  The prime objective in conducting a Value Management Effort is to effectively control the proposed construction cost by identifying viable scope reductions such as reducing overall program space, intelligently and reasonably selecting materials such as faux stone veneer versus stucco for exterior wall finishes, choosing appropriate material quality levels for floor, ceiling, and wall finishes, and incorporating other cost effective measures such as No Fee Permits.

As mentioned above, the most cost effective control measure is the reduction of program size. To a large extent, this cost control measure was substantially addressed through the efficient design of the clubhouse layout resulting in an 86% building efficiency compared to the 78% efficiency of the existing clubhouse that does not even have an elevator.  This is attributable to the fact that there is no lobby area and minimal circulation for the proposed design � compare 850 s.f. of existing circulation with 460 s.f. for the new clubhouse.

Value management opportunities that were implemented as part of the current design generally included interior and exterior finishes (carpet, exterior terrace floor surface, exterior stone and stucco, wall covering, and ceiling treatments) were selected to strike a balance between long-term durability, quality, and architectural aesthetics. One value management example of an interior finish was the decision to paint the exposed ceiling in the Bar & Grille, and Community Room areas using a drywall finish even though a tongue and groove wood ceiling would have been the superior choice and more commensurate with the architectural style of the clubhouse.  This represented a $30,000 cost reduction.  In addition, a convenient but non-essential access path to the North Patio from Walnut Avenue was eliminated from the Project.  This program element would have added a minimal cost of $60,000 according to Summit�s Bid Alternate pricing.

However, as previously mentioned, the Oversight Committee did not want to further value manage the current design in an effort to reduce the construction cost since further quality and aesthetic design changes collectively provided limited current value at the expense of long-term durability and quality.

SCHEDULE

Based on Council�s authorization to proceed with construction, a Notice to Proceed can be issued in early July 2007 and a projected occupancy date of September 2008.  Although the general contractor is responsible for executing the work according to its own plan, the construction effort may generally be accomplished in three phases.

1. Construction of the new surface parking lot will start first and shall be substantially completed and accepted by the City prior to the clubhouse demolition effort.  This will mitigate operational disruptions by allowing temporary facilities to be first established for the pro shop and the food and beverage concessionaire. 

2. Clubhouse construction efforts will immediately start after the parking lot is substantially complete.

3. Off-site improvements to DeBell Drive and the intersection of Walnut Avenue and DeBell Drive will most likely be accomplished at the end of the Project.

FISCAL IMPACT

The Golf Fund had originally programmed $6.5M for the DeBell Clubhouse Replacement Project.  The Project has $3,177,716 currently appropriated within the Golf Fund, Account Number 495.PR27A. 15022.0000.13635. The Project has expended approximately $691,712 for professional services (7.4% of the proposed $9.4M Total Project Cost) through April 30, 2007.

In addition, Resolution Number 27,189 passed and adopted on March 7, 2006, authorized a $1.5M advance from the General Fund to the Golf Enterprise Fund to be repaid over a ten (10) year period with principal and interest payments commencing in January 2008.  The approved interest rate is the Local Agency Investment Fund rate plus zero percent (0.00%) with an annual average principal and interest payment of approximately $189,568, based on a 4.5% start rate and capped at 6.0%. 

These two funding sources represent the $8.0M Total Projected Project Cost previously accepted by Council as of July 25, 2006 based on completion of the Design Development Phase.  

If Council authorizes the Project to proceed with construction based on staff�s and the Oversight Committee�s recommendation, there will be a $1,400,000 fiscal impact that will require an additional advance from the General Fund as more specifically discussed below.  This authorization will result in a total advance from the General Fund of $2,900,000.  Staff requests that principal and interest payments for the total advance commence in January 2009.

Additional Clubhouse Financing - Financial Services staff worked with Park, Recreation, and Community Services staff and the Golf Pro to compile data in an effort to forecast Golf Fund financial activity and cash flows on a ten, fifteen, and twenty year horizon.  Numerous cash flow scenarios (in $500,000 increments) were generated that incorporated total project costs ranging from $6.5M to $9.5M.  This information, including the cash flow parameters and assumptions listed below, is summarized in Exhibit F and provided herein.

Parameters and assumptions built into the cash flow scenarios include:

• Golf Fund maintains compliance with adopted financial policies

• Working capital maintained at 60 days

• Driving range capital reserve maintained at 5.0%

• $500,000 capital funding reserve maintained for course improvements and repairs

• $150,000 available for non-clubhouse capital funding per year

• Projected level of play decreased approximately 20% during construction period and restored to a slightly reduced level post construction.  Although other golf enterprises report that course play actually increases after a new clubhouse has been completed, staff is taking a more conservative position.  The level of play is projected to increase at an annual rate of 6% the year after the new clubhouse has been completed and will continue at this rate until the level of play stabilizes between 75,000 and 80,000 rounds per year.

• New clubhouse assigned a 30 year life and depreciated over that period, one-half year for 2008/09

• Assumes a Green Fee rate increase of 9.0% in FY 2008/09 to maintain a minimum of $300,000 un-restricted cash balance and $200,000 operating surplus.  However, rates will be set to sufficiently cover all costs.  The projected 9.0% Green Fee rate increase planned for FY 2008/09 will add another $1.13 to $2.70 per person per round (or about another $74,000 to $124,000 in additional annual revenues).  This rate increase will, in effect, substantially pay for the debt service on the combined $2.9M capital infusion.

With all financing scenarios built around the parameters and assumptions listed above, the Golf Fund can internally fund a capital project up to $6.5M without any external funding.  Project costs above $6.5M require supplemental capital.

The Project now has a total cost of $9.4M and will require an additional capital infusion of $1.4M.  To address this need, staff proposes to have the General Fund advance the cash shortfall as needed to be repaid at the Local Agency Investment Fund (LAIF) rate plus a specified margin to be approved by Council.  This provides flexible low cost capital for the Golf Fund and increased returns to the General Fund.  After discussing this proposal with the City Treasurer and in an effort to maintain conservative projections, staff evaluated scenarios at an assumed LAIF rate of +0.5% margin,  starting at 5.0%, increasing 0.5% each year, and capping at 6.5%, as well as the LAIF rate + 1.0% starting at 5.5%, and also capping at 6.5%.  In addition to each of these rate scenarios, staff further evaluated the Golf Fund paying the advance back over a ten, fifteen, and twenty year term. 

Based on discussions with the Oversight Committee, staff recommends revising the former resolution from March 2006 that advanced $1.5M from the General Fund to the Golf Fund adding an additional $1.4M for a total advance of $2.9M. The terms of the advance will be LAIF starting at 5.0% and capped at 6.5% over a twenty (20) year term.  This action will result in a projected Golf Fund average annual repayment of $281,095 and will require a Green Fee rate increase of 9.0% in FY 2008/09.[6]

Finally, the Project has appropriated $3,177,716 as of the date of this staff report.  Staff recommends that Council appropriate an additional $6,222,284 for a total of $9,400,000.

RECOMMENDATION

Staff recommends that the Council approve the following Resolutions:

1. A Resolution to approve the Plans and Specifications for Bid Schedule 1153

2. A Resolution to approve the Construction Agreement between the City of Burbank and Summit Builders, and

3. Revise Resolution No. 27,189 advancing an additional $1,400,000 in General Fund capital advance for a total advance of $2,900,000 at terms and conditions prescribed by City Council.

4. Amend the 2006-07 Budget by appropriating an additional $6,222,284 to Project No. 13635 in the Golf Fund (495).

DEBELL CLUBHOUSE REPLACEMENT PROJECT

LIST OF EXHIBITS

A.           Site Plan and Landscape Plan

B.        Clubhouse Lower & Upper Floor Plans

C.        Clubhouse Building Elevations

D.                Landscape Section at Clubhouse West Elevation along Walnut Avenue

E.                 Total Projected Project Cost - Summary and Detail Comparisons

F.                 Clubhouse Project Financing � 10, 15, and 20 Year Cash Flow Summary