On June 24, 2020, the Mayor and City Commission authorized the issuance of Request for Proposals (RFP) 2020-180-ND for Design/Build Services for the 72nd Street Community Complex. The RFP stipulated a two-phase process. Phase I required the submittal and consideration of the Design/Build firm’s qualifications. Phase II required the submittal and consideration of the Design/Build firm’s Technical Proposal which included each firm’s proposed design, project approach during design and construction, project schedule and the Guaranteed Maximum Price (GMP). On June 26, 2020, the RFP was issued.

On August 10, 2020, the City received seven (7) Phase I proposals. On September 16, 2020, City Commission adopted Resolution No. 2020-31387 shortlisting the following firms to be further considered in Phase II: Kaufman Lynn Construction, Inc, PCL Construction Services, Inc. and The Haskell Company (Haskell). On December 14, 2020, the City received proposals in response to Phase II of the RFP from the three short-listed proposers.

On January 29, 2021, The Evaluation Committee, appointed by the City Manager via LTC # 276- 2020, convened to consider the Phase II technical proposals received. The evaluation process resulted in the ranking of proposers, with their associated GMPs as follows:

1. The Haskell Company - $94,200,025
2. PCL Construction Services, Inc. - $80,202,724
3. Kaufman Lynn Construction, Inc. - $79,976,000

On March 17, 2021, City Commission authorized the Administration to enter negotiations relating to Request for Proposals No. 2020-180-ND with the top ranked proposer The Haskell Company, further, if the Administration is not successful in negotiating an agreement with Haskell, authorizing the Administration to enter into negotiations with PCL Construction Services, Inc., as the second ranked proposer; further, if the Administration is not successful in negotiating an agreement with PCL Construction Services, Inc., authorizing the Administration to enter into negotiations with Kaufman Lynn Construction Inc., as the third ranked proposer; provided, however, that the final negotiated agreement shall be subject to prior approval of the Mayor and City Commission.

In addition, the City Commission also referred the project to the Finance and Economic Resiliency Committee (FERC) to look for options to bond the parking garage or other options to increase the budget.

On April 12, 2021, City staff entered negotiations with Haskell. Several meetings were held to clarify and confirm the program requirements for the facility and refine the proposal. The proposer re-evaluated early design assumptions which increased the project cost and continued to evaluate additional cost savings measures while meeting the minimum requirements of the DCP. The final results of these negotiations were anticipated by the end of June along with an estimate from a third-party cost estimator.

Impact to Project Budget

The current total project budget is $64.4M. This includes an estimated design-build cost of $55M, as well as project soft costs such as FP&L costs, design criteria consultant, permitting fees, testing, Arts in Public Places, GOB oversight, project management and a 10% owner’s contingency. Project soft costs increase as the design-build cost increases. For reference, the following chart outlines total project costs including design-build cost ranges and associated soft costs of approximately 27 percent. Related estimated budget deficits are also quantified.

Potential Funding Options

The current North Shore Branch Library site made up of 5 parcels (3 ocean front and 2 on Collins Avenue) was evaluated and has been appraised to have a value of $75 million less legal, brokerage, and subdivision fees. It is important to note that the City Attorney has opined that the sale of the 3 ocean front lots would be subject to voter referendum. The appraisal for the 2 parcels on Collins Avenue is $10.5 million and their sale would not be subject to voter referendum.

In order to potentially use all or a portion of this value to offset the funding gap in the 72nd Street project, the parcel would need to be sold and leased back from the new property owner until the current library was ready to move into the new 72nd Street complex once it is complete approximately 3 years later. As part of the sale or development agreement, the value of the FAR for the project would be evaluated and may contribute to the value of the property.

The cost negotiations with Haskell are complete and the cost for the parking garage portion of the project was identified for potential bonding or a bank loan, which could help partially close the funding gap for the project related to the parking garage. However, in no case could additional parking funds or parking bond funds be used to offset the non-parking garage portion of the project.

As part of the current FERC item to lessen the City’s dependence on tourism revenue, the Property Management Department has worked with CBRE to maximize the value of City-owned assets across the real estate portfolio. At the April 30th FERC meeting, Property Management identified 5 vacant parcels, in addition to the North Shore Branch Library site, that could potentially be sold to generate approximately $16.2 million (updated from $10 million following the receipt of all 5 appraisals).

Other potential funding sources include the $1 million set aside from the Ocean Terrace legal settlement for the 72nd Street project, an additional $1.6 million (net of legal fees) from the Ocean Terrace legal settlement that is currently uncommitted, a potential $7.4 million from the proposed Seagull Hotel street vacation, and $1.5 million of savings in the Parks category in the GO Bond program.

On May 21, 2021, the item was heard at the FERC and the direction was to continue to negotiate with the selected bidder, explore value engineering options for the project, obtain an appraisal for the entire North Shore Branch Library site property, including a separate appraisal for the two non-ocean front parcels on Collins Avenue, look at the value of potential FAR on the site, and research potentially bonding the parking portion of the project.

On June 11, 2021, the item was heard at the FERC committee to discuss the impact to the project budget and potential funding options to offset the funding gap.

On June 18, 2021, the item was presented at the FERC Budget Briefing. The Administration discussed potential funding options to help close the anticipated funding gap.

On July 13, 2021, Haskell submitted the revised GMP proposal in the amount of $84,871,516 million (approximately $85 million). This amount assumes the current scope in the Design Criteria Package.

On July 16, 2021, the item was discussed at the FERC Budget Briefing. The preliminary estimated funding shortfall range for this project has been $24.6 to $49.1 million. Since then, the CIP department completed negotiations with Haskell. The all-in cost for the project is $107 million. Which includes the $85 million GMP. The current budget appropriation for this project is $64.4 million. The difference is a funding gap of $42.6 million. This amount can be reduced through the application of the $1 million dedicated allocation to this project from the Ocean Terrace settlement and saving $4.5 million by reducing the 10% contingency to 5%. The difference is the net gap of $37.1 million.

One of the strategies for closing the funding gap is to determine the amount for the parking portion of the project (500 spaces) and use parking bonds to close the gap between the total parking cost and the $10.6 million of parking funds already budgeted in the project. Of the $85 million design/build contract, approximately $30 million of it is parking related. Netting out the $10.6 million, there is potential to issue parking bonds for $19.4 million, which would reduce the funding gap to $17.7 million.

Three different options were presented by the Administration to move the project forward: Option 1 is to continue to pursue an agreement with Haskell, the selected bidder, and identify funding options to close the remaining $17.7 million gap. Option 2 is to terminate negotiations with Haskell and enter into negotiations with the second proposer to develop a design/build contract GMP. Option 3 would be to change the scope in the Design Criteria Package in order to reduce costs to help close the funding gap. Depending on the degree of changes to the scope, it may require a new procurement process.

The Committee discussed the options and recommended to proceed with option 1. In addition the Committee also discussed other options on how to fund the $17.7 million gap including issuing an RFP for the North Shore Library site and listing 4 of the 5 vacant properties identified by Property Management’s asset inventory study.

In order to proceed with Option 1, the Administration recommends identifying the funds to close the $17.7 million gap before awarding any contracts related to the project. Over the next few months, results from the RFP’s for the North Shore Library site and 4 vacant properties should be available to inform this process. Having a clearer idea of the potential funding available would also inform the funding needed for the Byron Carlyle theater, which the FERC recommended to try and identify at the same time as the 72nd Street project.

The Administration recommends proceeding with Option 1 including issuance of parking bonds of approximately $19.4 million and identifying the $17.7 million of remaining funds needed to close the funding gap in the project before awarding any contracts related to the project. If the necessary funds cannot be identified in a timely manner, the Administration recommends Option 2 to terminate the negotiations with Haskell and enter into negotiations with the second proposer to develop a design/build contract GMP.