NOVATO

					STAFF REPORT
                                                                                         TH E C ITY O F

MEETING                                                                                  NOVATO
DATE:                  September 14, 2004                                                 C A LIF OR N I A
                                                                                         900 Sherman Avenue
TO:                    City Council                                                       Novato, CA 94945
                                                                                           (415) 897-4311
                                                                                         FAX (415) 897-4354
FROM:                  Dan Keen, City Manager                                            www.ci.novato.ca.us

SUBJECT:               ADDITIONAL PUBLIC INPUT ON BUILDING EVALUATION REPORT
                       AND CITY COUNCIL DECISION TO MOVE CITY HALL EMPLOYEES
                       OUT OF EXISTING OFFICE SPACE


REQUEST

Receive additional presentation of Building Evaluation Report and receive additional public
input on City Council decision to move City Hall employees out of existing office space.

DISCUSSION

At the City Council meeting of January 27, 2004, during discussion of the City Hall renovation
project, the City Council made comments and raised questions about the current condition of the
buildings that comprise the existing City Hall complex. As a result of that discussion, staff sought
proposals from qualified firms to conduct a preliminary inspection and analysis of 900, 901,
905, 908, 917 Sherman Avenue as well as the IT and Reprographics trailers. The Community
Development Director received five proposals and recommended to the Acting City Manager that
the city contract with Weir/Andrewson and Associates (WAA), an architectural and engineering
firm located in San Rafael, to survey the facilities and provide an analysis of the architectural,
structural and electrical deficiencies in each. Subsequent to that initial direction, it was decided
that two additional facilities, 825 DeLong (Silva-Kuser House) and 908 Machin (Community
House) be included in the analysis.

The findings were presented by WAA at the City Council meeting of June 8. At that time, the
Acting City Manager and Community Development Director both expressed the opinion that,
taken in their totality, the fire/life/safety and code compliance issues included in the building
report were sufficient to warrant vacating the buildings. The City Council took an action that
night to direct staff to “begin looking for space to relocate all the employees housed in the
Downtown area except Police”. They also directed that further study be conducted on the
Community House to determine what upgrades would be necessary to continue using the facility.
The motion, made by Councilmember Arnold and seconded by Mayor Pro Tem Meyers, passed
unanimously.




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Preliminary Building Evaluation Report (presented to the City Council June 8, 2004)

The Preliminary Building Evaluation Report prepared by Weir/Andrewson Assoc states in its
Introduction and Summary Conclusions that “All the buildings addressed in this evaluation
were found to be deficient, to greater or lesser degrees, in all the areas addressed:
architectural, structural, and electrical”. It goes on to say that “Structurally, the current use
of these buildings exceeds the loading for which they were originally built” Additionally the
report states that “none of these buildings conforms with the current minimum requirements
for adequate resistance to earthquake loading”. The fire/life/safety and other issues impacting
each individual building will be discussed by WAA in detail at the council meeting.

In addition to the above cited four areas of concern, the report reviews each of the structures for
compliance with the Americans with Disabilities Act (ADA). It states that none of the Sherman
Avenue buildings are ADA compliant with two exceptions: the main floor of the Church building
is accessible (although the rest-rooms are not) and the bungalow at 911 Sherman, which houses
Code Compliance and RDA staff, is accessible six feet into the building. At a recent council
meeting, staff received clear direction to improve disabled access on Grant Avenue by
incorporating disabled parking spaces into the Improvement Project. Presumably, the City
Council will agree that City Hall should provide a similarly accessible environment.

Liability

Recent discussions regarding the conclusions of the report have focused on two, small buildings
in the complex and the trailers. For a number of years staff and visitors alike have observed that
the Sherman Avenue buildings were sub-standard. While some cosmetic changes to the buildings
were made over the last 15 years, no significant structural improvements have taken place.
Now that inspections have been made by a respected engineering firm and a report has been
published, the inadequate condition of the buildings is no longer an issue for conjecture or
speculation. Given this new circumstance, if an injury (or worse) were to befall an employee or
visitor to the buildings, the City Attorney has advised that the City could be liable for monetary
damages far in excess of the lease costs for temporary City facilities.

Search for Temporary Office Space

Staff proceeded to engage the brokerage services of SRM Associates (Steve Meckfessel,
principal), who surveyed all available commercial office space in Novato. After determining that
there were eight available sites large enough to accommodate all 95 employees, with City
approval, he sent a Request for Proposals to those property owners and received responses from
all of them. After reviewing those proposals and receiving direction from the City Council in
closed session, staff entered into negotiations with the three property owners whose responses
provided the most cost effective solution for the city. The result of those negotiations was the
Letter of Intent sent on August 26 to the landlord and a current leaseholder at 75 Rowland Way.




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Staff continues to negotiate terms of a multi-year lease that will likely result in an average
annualized cost of approximately $450,000 per year.

Alternatives for Relocating Employees

In anticipation of the WAA report, staff initiated discussions regarding the relocation of
City staff.

Three alternatives were considered and analyzed.
1.     Availability of space in other City owned buildings
2.     Modular (temporary) Buildings
3.     Private office space

A review of the size and use of all city owned facilities and determined that there was not enough
space available to house city staff without displacing a significant number of programs and/or
user groups. (Attachment #)

The possibility of relocating to modular buildings was also considered, raising the following
issues/concerns:

a.        Site: Inability to locate a site large enough to accommodate the number and size of
          modular buildings required along with adequate parking space for employees and the
          public.

b.        Cost: Although the base rent for modular buildings would be considerably less than the
          rent for existing office space, were a suitable site to be found, the city would incur the
          additional expense of bringing utilities to the site, designing and constructing tenant
          improvements in the modulars, providing required seismic restraints and insuring
          ADA compliance.

c.        A number of non-economic issues would have to be considered in moving to modular
          buildings which are not an issue for existing office buildings including neighborhood
          opposition to the siting of modular buildings on currently vacant land, environmental
          issues and Fire District requirements.

d.        The current Sherman Ave. parking area was not considered a suitable site for the location
          of modular buildings, as the site is not large enough to accommodate all employees along
          with the parking that is necessary for employees and the public.

Staff then conducted a preliminary review of vacant office space. A complete chronology of all
that activity follows:




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Chronology

February - April 2004
Staff initiated the process of searching for appropriate, temporary city office space, which
included reviewing space suggested by various Council members. Prior to looking at any space,
staff developed a list of items that would need to be considered for any new space. At a closed
session on April 14, 2004, the City Council was informed of this preliminary effort and staff was
directed to continue with the process.

After touring a number of vacant office buildings with a local commercial real estate agent, it
became apparent that the City would need to retain the services of a commercial real estate
broker, in order to locate the most suitable office space and negotiate the terms of a lease.

May 2004
It was determined that retaining an experienced real estate professional without ties to any local
broker would be in the best interests of the City. Staff was introduced to SRM Associates
(Steve Meckfessel, principal) who came highly recommended, not only because of
Mr. Meckfessel’s experience as a commercial real estate agent, but also because of his experience
as a commercial real estate developer, as a commercial property manager, and as an accountant.

June - July 2004
On June 8 the City Council received the Building Evaluation Report and directed that the
approximately 95 employees of the Sherman Avenue complex be relocated.

SRM Associates were hired as the City’s real estate agent for the relocation and Mr. Meckfessel
outlined a search process which his experience indicated would result in the selection of the most
economic solution for the City. The process undertaken was as follows:

1.        SRM Associates reviewed the City’s space needs with staff and Dan Macdonald, who
          because of his previous experience in this area from his architectural work on the City
          Hall project, is familiar with the City’s operations. Using this input and their own
          experience, SRM developed what they believed to be the amount of square footage that
          would meet the City’s minimum space needs.

2.        SRM toured all the vacant offices in Novato, regardless of square footage available.

3.        A list of eight suitable office buildings was developed by SRM and these buildings was
          visited by staff in mid June.

4.        An RFP was developed by SRM and after City approval, was sent to the “list of Eight”on
          June 21, with a request that the building owners respond by June 30.




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5.        The eight responses were reviewed by staff and three finalists were selected based on
          economic considerations and location.

6.        The three finalists were informed of their status by SRM and were invited to refine their
          economic proposals. Department heads and selected staff toured these buildings on July
          7 and then met to discuss the strengths and weaknesses of each building. The consensus
          that emerged from this discussion was that 75 Rowland Way has the best location, met
          accessibility needs, appeared suitable regarding space needs and was the most
          economically feasible. A fourth building, that staff had also toured, was added to the
          process in mid July, based on a much improved economic proposal.

7.        In late July, the City Council was updated regarding of the results of the search, including
          negotiations with the finalists. The selection process was narrowed to the top two
          finalists, after location and the results of the “test-fits” were developed by
          Dan Macdonald. These “test-fits” showed that the two were the most economic buildings
          based on square footage required to accommodate the City’s needs and the economic
          packages developed by the buildings’ owners.

August 2004
The owners of the two buildings that remained under consideration for use as the City’s
temporary offices further refined their proposals. One of the sub-leased portions of a building was
at this time under consideration by another tenant and the City Council chose not to pursue this
space any longer. After the City Council reviewed the situation again, a Letter of Intent (LOI)
was sent on August 26 to the owner and current lessee of 75 Rowland Way for portions of that
building

September 2004
Responses to the LOIs from the building owner and lessee were received and counter proposals
have been made.

The proposed leases (lease and sub-lease) will be developed from the LOIs and staff anticipates
requesting that the City Council consider the leases at the September 28 City Council meeting.
The length of both the leases will be from December 1, 2004 to September 28, 2008 (three years
and ten months).

FISCAL IMPACT

The most recent economic proposal for 75 Rowland Way (both the sub-lease and the direct lease)
shows an annual estimated cost of $475,260. The proposed lease includes utilities and janitorial
services.

The adopted General Fund FY 2004/05 budget includes $86,000 per year for rent, utilities and
janitorial services for 850 Grant Ave., where the CIP division is housed. As space for CIP staff




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is included in the City’s overall space requirements, rent etc. would no longer be required for 850
Grant Ave. and that budget allocation could be used toward the new lease cost. The lease for 850
Grant is on a month to month basis and can be terminated with a month’s notice. Additionally
the City spends approximately $50,000 per year for utilities for the Sherman Ave buildings, most
of which could be used for the new lease payment (some utilities would continue to be required
for the vacated buildings). For FY 2004/05 the City will need to find approximately $204,000
for the lease payment (seven month lease minus seventh month savings from lease at 850 Grant
and Sherman Ave. complex utilities).

For FY 2004/05, the lease expense can be funded by the administrative fees received from
the Vintage Oaks and Hamilton bond refinancings ($185,000 and $175,000
respectively = $364,000). These funds can also be used for moving expenses, which are
estimated to be $40,000. As 90% of the anticipated lease will be a sub-lease, which includes
furniture, any additional costs for furniture will be minimal. The balance could be used toward
the FY 2005/06 lease.

In next three fiscal years the City will need to fund approximately $350,000 annually for the
lease. As the economy rebounds and new retail projects are developed in Novato, it is likely that
General Fund revenues will increase. Additionally in two years, the funds that the State of
California is will stop taking the $500,000 per year that it currently takes from the City.

ALTERNATIVES

1.        Provide direction to staff.

RECOMMENDATION

Receive additional presentation and public input.

ATTACHMENTS

1.        Evaluation Results of City Hall Buildings - June 8, 2004
2.        City Buildings - March 30, 2004
3.        Cost and Issue Comparisons - May 5, 2004




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