A monument to . . . what?

The Merry-Go-Round hopes that, when the new Emergency Operations Center and Fire Station No. 3 finally open in May, about a year behind schedule, the City will offer free guided tours to Alameda residents.

The last we heard, only one full-time employee will be staffing the EOC, but maybe she can spare the time to show the public around so that Alamedans get a look at what the City can buy with approximately $14 million of taxpayer money, an amount three times greater than the EOC and the fire station were supposed to cost.

There are, however, a few minor items left to be taken care of before the complex can open, even for tours.

For one, Council will need to appropriate funds to cover $1,065,692 in remaining construction costs (which represents an $862,860 cost overrun).  In addition, $604,000 worth of furniture and audio-visual, information-technology, and communications equipment ($460,000 more than was budgeted) will have to be installed.  And, finally, the City will have to shell out $217,000 to move the firefighters and their equipment into their new home.

These expenses add up to $1.89 million, which may seem like a lot of money, but not to worry:   With two Council members owing their seats to the Alameda firefighters’ union and its friends in organized labor and another Council member counting on labor support for her mayoral campaign, this shouldn’t pose a problem.  Staff has made it even easier by including – N.B. we didn’t say “burying” – the additional spending on the EOC and fire station among a host of other items in a proposed budget amendment that will be presented to Council Tuesday.

To paraphrase Chairman Mao, the first step in what became a very long – and expensive – march ending in the erection of the edifice at the corner of Buena Vista and Grand took place in February 2012 when the City issued a request for proposals to study the feasibility of building a new fire station to replace the existing Fire Station No. 3.

An architectural firm called BRW Architects, Inc. got the job for $74,700.  Its scope of work soon expanded.

In March 2012, recently appointed City Manager John Russo unveiled a plan to ask voters to adopt a half-cent sales-tax increase that, among other things, would pay for replacing the existing fire station – and for constructing a new state-of-the-art “emergency operations center” on the same site.  During the Council debate, the body’s leading fiscal hawk, Councilman Doug deHaan, protested that this aspect of the proposal was too expensive, since it would cost, he estimated, $4.2 million to replace the fire station and another $1.2 million to build the EOC.  Au contraire, Mr. Russo assured Council, the price tag for a new fire station that incorporated an EOC would be only $4.5 million.  (The same statement later was repeated in the campaign literature).

Council voted to put the sales-tax measure on the ballot, but it didn’t get enough votes to pass.  Nevertheless, staff told BRW to broaden its feasibility study to include a new EOC as well as a new fire station.  In March 2013 BRW submitted a report concluding that the two buildings would cost $5,083,691 to construct.  Throw in contingencies, furniture and equipment, permits, fees, and moving expenses, and the total project cost came to $7,659,904, even more than Mr. deHaan had projected.

The BRW feasibility study never was presented to, or discussed by, Council (at least at any public meeting).   Indeed, even though the voters had rejected the sales-tax measure, Council never publicly weighed the value of replacing the fire station and building a new EOC against other potential uses for City funds, nor did it ever actually vote to move forward with the project.  Instead, the Russo/Gilmore administration simply proceeded as if the electorate had given the go-ahead.

The plans for the EOC went first.  In July 2013, staff proposed re-financing bonds – technically, Certificates of Participation – that had been issued in 2002 to pay for renovations at City Hall.  Of the proceeds, $3 million would be earmarked for building the new EOC.  Council approved.  Next, in October 2013, staff recommended giving BRW, the architectural firm that had done the feasibility study, a no-bid $291,000 contract for the EOC.  Again, Council said OK.

Then came the fire station.  As with the EOC, the first step was to arrange to borrow money.  In March 2014, staff proposed taking an $809,000 “internal loan” from the City’s Equipment Replacement Fund and obtaining $3 million in “external financing,” the source of which later became the California State Infrastructure and Economic Development Bank (“IBank”), to spend on building the new fire station.  Council approved.  Then, in June 2014, staff recommended giving a $431,200 contract for architectural services to – you guessed it – BRW.  Again, Council said OK.

After the Planning Board and Council had signed off on the plans and specifications, it was time to award the construction contracts.  Originally, staff intended to bid the EOC and the fire station separately, but when the submittals for the EOC came in, one of the contractors – Alten Construction – filed a protest.  Staff then decided to reject all of the bids and to ask the contractors to re-submit proposals treating the two buildings as one project.  The winning firm turned out to be . . . Alten Construction, to whom Council gave a $7,960,608 construction contract in May 2015.  A ground-breaking ceremony took place a month later.

Pause for a minute at this point.  By the time ground was broken, the City had spent, or committed to spend, $8,757,508 ($796,900 to the architects and $7,960,608 to the contractor) to build the EOC and fire station.  But the cost analysis doesn’t stop there.  As Councilwoman Marilyn Ezzy Ashcraft twice pointed out to her colleagues, since the City was borrowing money to construct the two new buildings, the total project cost should include financing costs as well as architectural and construction expense.

The May 2015 staff report for the fire station financing stated that debt service – to be paid out of the General Fund – for the “internal loan” and the IBank loan would amount to about $300,000 per year – a total of $5.3 million over a 20-year period.  In addition, Acting City Manager Liz Warmerdam told us that the portion of the bond refinancing attributable to the EOC was 16% from 2014 through 2025, and 100% thereafter until the 2030 maturity date.  Based on this allocation, annual debt service for the EOC – also to be paid out of the General Fund – would amount to $125,920 from 2014 through 2025, $787,000 from 2026 through 2029, and $395,000 in 2030 – a total of $5,054,040 over 17 years.

Borrowing money to build the EOC and fire station thus added $3,545,040 in financing costs – i.e., total debt service minus repayment of principal – and brought the total project cost to $12,302,548.

That estimate assumed that the work would go smoothly.  It did not.

In September 2015, staff informed Council that when the soils removal contractor tried to dispose of dirt excavated from the site at a landfill, the load had been rejected because the soil contained unacceptable levels of lead.  (The Council discussion contained a fascinating exchange between Councilwoman Ashcraft and Public Works director Bob Haun.  It turned out that the lead had been found just one foot below ground level, and Ms. Ashcraft inquired why the initial studies had failed to discover it.  “Established protocol,” Mr. Haun replied, did not require digging that deep.)

In response, the City gave a $305,698 no-bid contract for removing the hazardous materials to the same contractor who had performed the initial testing.  The job turned out to be even more onerous than the contract contemplated, and staff handed out change orders, later approved by Council, for $18,000 for additional testing and $93,000 for additional soils removal.  Add another $416,698 to the total project cost.

Under the construction contract, the two new buildings were supposed to be finished within 360 days, but June 2016 came and went and the work was still going on.  In October 2016, staff requested that Council extend the term of BRW’s architectural services contracts, which were set to expire.  The staff report stated that the project was “anticipated to be substantially complete by November 30, 2016,” and the “communications infrastructure” for the EOC was scheduled for installation in December.  Neither event happened.

We turn to the staff report prepared for the March 21 Council meeting for the rest of the story.

A notice of completion now is expected to be issued this May, the report states, but “construction costs are higher than anticipated due to state fees for hazardous waste disposal, the number of rain days, and costs related to constructing two highly-specialized buildings in a tight, residential environment with complex utility coordination.”  (We can only wonder why the last factor had not been “anticipated” in the original bid – the design and location of the buildings haven’t changed.)

An exhibit to the report provides the details on these additional costs:

  • $675,624 in change orders requested by the general contractor. (City Manager Jill Keimach referred our request to review the change orders to the Public Works Department, which told us we could pick up hard copies at City Hall West on Monday).
  • $119,064 in “permit fees.”
  • $271,004 in fees and charges paid to the State of California, EBMUD, and PG&E.

Taken together, these items add $1,065,692 to the total project cost.

But we’re not done.

In its feasibility study, BRW had included $149,237 for furniture and IT equipment, and, presumably in reliance on this estimate, staff had budgeted $140,000 for this item.   But now someone apparently has decided that this just won’t cut it.  Back to the staff report:

EOCs are highly specialized communication centers with various, triply redundant technology.  Prior to opening and to ensure this building is best ready for use in an emergency, the EOC requires control station radio equipment, additional wiring, an audio visual system that includes 6 large screen monitors for use in an emergency, 24 laptops, and other technology (e.g., routers, wireless service, etc.).

To meet this goal, the City will need to spend $604,000 on furniture and IT equipment, according to the staff report.  So add that amount to the total project cost.

(We don’t purport to be IT experts, but we can’t resist asking:  Why 24 laptops?  Surely, the one full-time employee stationed at the EOC can use only one laptop at a time.  And if an emergency occurs, can’t the persons invited to the EOC bring their own laptops – or even their tablets or iPads?  And, of course, if – God willing – we’re able to avoid a disaster for a couple of years, we’ll end up with 23 boxes containing outdated technology.)

And, finally, we come to the cost of moving the firefighters to their new home a block away.  The BRW feasibility study estimated that moving expenses would come to only $2,500.  Again, now someone apparently has another idea.  “To open Fire Station 3 for service,” the staff report says, “the existing firefighters and their equipment must be relocated to the new fire station, additional furnishings purchased and installed.”  This task, the report states, will cost $217,000.  (Undoubtedly, Vice Mayor and Teamsters’ union lawyer Malia Vella will insist that only moving companies that use union labor can get the job, but, even so, does the City really need to spend $217,000 on a one-block trip?)

So, if you’ve been keeping score at home, here’s what we’ve got for total project costs:

Architectural fees $796,900
Construction cost $8,636,232
Hazardous materials costs $481,783
Permits and utility fees $324,983
Furniture and equipment $604,000
Moving expenses $217,000
Subtotal $11,060,898

Almost there.  As Councilwoman Ashcraft pointed out, we can’t forget debt service. As discussed above, the financing costs for the COPs, the “internal loan,” and the IBank loan (computed using the data in prior staff reports) amount to $3,545,040, resulting in a total project cost of $14,605,938.

This week, in response to our request for updated numbers, City Finance Director Elena Adair sent us amortization schedules for the COPs and IBank loan that contain lower debt service totals than the prior staff reports.  (We failed to ask for the amortization schedule for the “internal loan.”)  According to these schedules, the City will pay $864,447 in interest and fees on the IBank loan and $3,380,248 in interest on the COPs, of which, based on the allocation provided by Ms.Warmerdam, $1,315,462 is attributable to the EOC.  These lower financing costs (which do not include the “internal loan”) would bring the total project cost down to $13,240,807.

We realize that, with its attention focused on impeaching the president and stopping the Dakota Access pipeline, Council may have little interest in how the City spends the taxpayers’ money.  But, to put the issue into perspective, consider this:

The usual way to finance affordable-housing projects is to “leverage” an investment by the City and/or the Alameda Housing Authority with other sources of funds such as the sale of tax credits.  For example, the City and the AHA contributed $2,455,593 of the $17.4 million it took to build the Stargell Commons apartment complex.  In exchange, 32 new units of affordable housing became available for Alamedans.

Now imagine what the City could have done with the $14 million it is spending on the EOC and fire station.  Assuming the same ratio between City investment and housing units as Stargell Commons, a $14 million investment by the City would produce 180 new units for lower-income households.

There are some politicians who might see building additional affordable housing as a more beneficial use of taxpayer money than building a state-of-the-art EOC and fire station, even though the new tenants probably can’t be counted on to finance a winning campaign for office.  We don’t know how many of our current Council members would take this view.  Their predecessors surely didn’t espouse it.  And it’s too late for the rest of us to do anything other than to pay the piper.

Sources:

March 21, 2017 staff report & Ex. 3: 2017-03-21 staff report re budget amendments2017-03-21 Ex. 3 to staff report – Emergency Operations Center and Fire Station 3 Cost Recap

BRW contracts: 2013-10-15 staff report re architect for EOC2014-06-03 staff report re architect for FS32016-10-18 staff report re amending architect’s contract

Measure C: 2012-03-07 staff report re Measure C; 2012-03-20_Councilmember_deHaan_SubmittalYes on C argument

EOC borrowing: 2013-07-23 staff report re COPs refinancing

Fire station borrowing: 2014-03-18 staff report re financing FS 3

Construction contract: 2015-05-19 staff report re FS3 construction contract2015-05-19 Ex. 1 to staff report – construction contract

Lead removal: 2015-09-01 staff report re hazmat contract  2015-09-15 staff report re additional spending

 

 

 

 

About Robert Sullwold

Partner, Sullwold & Hughes Specializes in investment litigation
This entry was posted in Budget, City Council, Firefighters and tagged , , , , , , , , , , , , , , , . Bookmark the permalink.

8 Responses to A monument to . . . what?

  1. nyborn2013 says:

    OMG! $13 million?!!! Embarrassing. This b;go needs to be republished in 2018 to help people understand who should be on our council and who should leave.

  2. Alan Pomeroy says:

    This was tough to read. As “45” would say, SAD.

  3. Steve Gerstle says:

    Who will be in the EOC and what will they be doing?
    Who will have the power to command the EOC and what powers will they have?
    How many times has the current EOC been activated and under what circumstances?
    How will the success of the EOC be measured?

  4. carol says:

    I knew it! Nothing more to say at this point other than “I told you so”!!!

  5. Kurt Peterson says:

    Can’t wait to see what $14 million of wasted money can buy the City. The facility better have a wonderful gym for the firefighters (would hate to see them out of shape for those many fires they fight each year). When’s the Open House Tour?

  6. Kevin says:

    Slightly off topic but I wasn’t sure how to submit

    Does anyone know the status of the work that is supposed to occur at Crab Cove?

  7. Steve Gerstle says:

    Perhaps the city council could establish the EOC as a sanctuary location?

  8. MP says:

    We talk about golf here sometimes. Let’s hope the EOC doesn’t turn out like that latest, greatest driver guaranteed to add 10 yard$ that, in the end, teache$ you that the real name of the game is how you swing the club. And that if you get those extra 10 yards, they might be just that much farther into the weeds.

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