TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: Brian Ambrose, Community Services Director
PREPARED BY: Brian Crawford, Senior Program Manager - Parks & Recreation
SUBJECT:
title
Murrieta Library Expansion Design and Budget
end
RECOMMENDATION
recommendation
Approve moving forward to the next phase of project design for design Option B;
Approve the recommended project financing strategy, including use of an inter-fund loan;
Authorize the City Manager to approve a change order for $222,700 to SVA Architects, Inc., Purchase Order No. P03681, for the next phase of design services;
Approve a purchase order for $475,000 to RWBID Construction Management, LLC, for project and construction management services; and
Authorize the $500,000 Fiscal Year 2024/25 Capital Improvement Budget for the children's library expansion (CIP 21027) to be eligible for use effectively immediately.
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PRIOR ACTION/VOTE
On June 6, 2023, the City Council approved and authorized the City Manager to execute an Agreement with SVA Architects, Inc., for architectural design services for the Murrieta Public Library Expansion Project in the amount of $302,300 (Vote: 4-0-1).
CITY COUNCIL GOAL
Coordinate and deliver responsive, effective community services.
BACKGROUND
The current Murrieta Public Library facility was constructed in 2007. It was envisioned to be a "first phase," with room for expansion based on future needs, though at the time, no precise plans for that expansion were developed. In 2023, the City was awarded a grant from the State of California to fund the expansion of the children's library.
In June 2023, the City Council approved an agreement with SVA Architects (SVA) to provide design services for the children's library expansion (Project), which will be the ultimate buildout of the Murrieta Public Library. Since then, staff has worked with SVA to arrive at preliminary design options that conform to a Project budget.
In July and August 2023, SVA facilitated three Project visioning workshops, which included a variety of stakeholders, including participants from the Friends of the Library, the Library Commission, local parents who often participate in children's programming, and City staff from various departments. SVA conducted a needs and available space assessment and provided workshop attendees with different design options. In September, SVA presented a conceptual design for a 6,500 square foot (SF) building footprint and an expanded outdoor area that would also be available for activity programming with a rough project estimate of $7-8 million. At that point, the City had not clearly defined a budget for the Project. The only funding identified and allocated to the Project was a grant from the California State Library for $1,505,625, with a required 50% matching contribution from the City of $752,813, for a total of $2,258,438.
Staff met with the Executive Team to review the conceptual plan and estimated project budget. After carefully considering available funding, project goals, and other City capital project needs, staff worked with SVA to reduce the building footprint to a point that would result in an estimated budget of $6-6.5 million. SVA reduced the conceptual plan footprint to about 5,000 SF. The design includes a large multipurpose room that can be divided into two rooms, with separate entries, to serve as story time rooms; a central open space for book stacks; a family restroom; and space for library staff work spaces, as well as remodeling of the existing children's library to create a cohesive space.
Based on the reduced building footprint, the estimated budget of $6-6.5 million dollars was presented to the City Council at the January 2024 Council Goal-Setting Workshop. The City Council confirmed during that meeting that the Project was a high priority.
City staff instructed SVA to proceed with schematic design and preparation of a detailed construction cost estimate by professional cost estimators with access to an extensive database of recent construction pricing. Unfortunately, construction costs exceeded the initial estimate due to construction market volatility and other factors. Staff consulted with SVA and calculated several options to determine how much of the building footprint would need to be reduced to fit the Project within the budget. The following table details those calculations.
|
Option |
Building Size |
Exterior Construction |
Construction Cost* |
Soft Costs |
All-In Project Cost |
|
A1 |
5,000 SF |
Full Design |
$7,310,112 |
$2,549,468 |
$9,859,580 |
|
A2 |
5,000 SF |
Minimal |
$6,213,622 |
$2,230,055 |
$8,443,677 |
|
B |
4,500 SF |
Minimal |
$5,136,820 |
$1,916,378 |
$7,053,198 |
|
C |
4,200 SF |
Minimal |
$4,716,864 |
$1,794,043 |
$6,510,907 |
*Construction cost estimates listed above include: 1) an annual escalator of 8% in anticipation that construction costs may rise between now and when bids are received in February 2025, and 2) a 15% contingency for unforeseen circumstances/conditions, which is consistent with industry standard.
In developing the "all-in" project budget, in addition to actual construction costs, it is also necessary to consider what is known in the construction industry as "soft costs" because they are essential elements of the overall cost of constructing the building. Soft costs include design services, fixtures, furnishings, equipment (including furniture, audio-visual, etc.), project and construction management services, and plan check, permitting, and inspection services.
To reduce the project cost and arrive at the estimate detailed in Option B (shown in Attachment 1, Exhibit B), SVA suggested eliminating the maker space (approximately 300 SF), reducing the children's book stacks space by 200 SF, and replacing the butterfly roof with a more conventional but architecturally appealing flat roof. The butterfly roof would have added an additional $250,000 to the construction budget. SVA believes they can design architectural interest into the interior ceiling of the expansion, which would be less costly.
Additional reductions needed to be made to the size of the building footprint to reduce the total project cost to approximately $6.5 million. SVA has produced exhibits (Attachment 1) showing different options for the building footprint. Exhibit A reflects the 5,000 SF area shown to the City Council on March 19, 2024, during the department updates portion of the regular City Council meeting. Exhibit B, a 4,500 SF layout that may offer the best balance between funding and programming space, shows the reductions suggested by SVA of eliminating the maker space and reducing the children's book stacks area by 200 SF. The significant elements of the floor plan are also rearranged into a more cohesive and slightly less expensive design.
The Option C estimate, reflected in Attachment 1, Exhibit C, displays an additional 300 SF reduction to achieve a 4,200 SF layout by reducing the children's book stacks by 150 SF and the staff office space by 150 SF.
An essential aspect of the library expansion is the exterior space and how it can support additional programming, depending on the design. The full design referenced in Option A1 in the above cost comparison table includes an extensive transformation of the exterior that provides for expanding the boundary walls much closer to the sidewalks to the north, east, and west; a large amount of hardscape for patios and walkways; reading nooks; seating; raised gardening beds; and shading provided a multitude of different varieties of trees and shade sails. The minimal exterior design referenced in Options A2, B, and C will only construct what is required for permitting and will include boundary walls, some trees and turf, and soft-scape plantings.
When construction bid documents are produced, there will be additive bid items that contractors will provide pricing for, and staff can evaluate them to determine if the overall project budget can support constructing those additional items. Staff plans to include the construction of the minimal exterior design in the base bid and then include one or two additional "layers" of exterior improvements as additive bid items, which, if built, would result in the construction of the fully designed exterior.
Fundraising
An essential goal of the Project is to maximize programming space, both interior and exterior, that will effectively serve as the ultimate Library buildout. Private funding could augment grants and City-provided financing, and the two fundraising arms of the Murrieta Library, the Friends of the Murrieta Library and the Murrieta Public Library Foundation, have approached staff expressing a desire to contribute financially. Both organizations have available funds and are willing to turn those over to the City to apply to the Project and have set additional fundraising goals.
Staff is also developing a list of potential Murrieta and area residents who may be interested in donating to this cause. The fundraising goal for the Project is a minimum of $550,000.
Project Financing Strategy
The Library expansion project is proposed to be funded through various revenue sources such as grant funds, already-established development impact fees collected to fund library infrastructure, an internal inter-fund loan, and donations. As stated earlier, the City received a grant from the California State Library of $1,505,625. Under Senate Bill 129, a local match is required for this grant. The City's local fund match for this Project, of $752,813, was funded from Library Development Impact Fees (DIF).
In addition to the grant match component, the Library DIF fund has an available fund balance of approximately $752,469 to commit towards the Project. The committed funds include $302,000 of non-matching funds that were allocated to the Project in Fiscal Year 2022/23.
For the remaining $3.5 million, staff have been working with Fieldman Rolapp & Associates, the City's financial advisors, on a financing strategy and analysis to fully fund the Library expansion project. The paragraphs below summarize two strategy alternatives for City Council consideration: a Public Sales Lease Revenue Bond or an Internal Inter-fund Loan. The debt service for either option would be repaid from future-collected Library DIF revenue.
Public Sales Lease Revenue Bond
To fund the additional required $3.5 million necessary for the project, staff analyzed the possibility of a Public Sales Lease Revenue Bond. The Bond Public Offering financing analysis required consideration of several factors, such as the current tax-exempt interest rate, bond covenants, debt capacity, and cost of issuance. In order to yield $3.5 million in funding for the project, the principal amount for the bond would need to be $3.61 million. Based on the principal amount of $3,610,000 and a 30-year term, the current bond market offers an interest rate of 4.63%. Additional costs associated with a public sale lease revenue bond are the cost of issuance of $150,000 and an underwriter fee of $54,150. The additional cost is the result of a higher principal amount. The average annual debt service payment would be approximately $218,355, and the total interest expense for the 30-year term would be $2,940,650.
Internal Inter-Fund Loan
Inter-fund loans are a common practice in municipal government. The benefit of the inter-fund loan is that there are no covenants compared to a public offering of a lease revenue bond option. The time and process to establish an inter-fund loan are shorter, simpler, and less complicated. Inter-fund loans provide a cost-effective means of borrowing, and the interest rate is set at a reasonable rate based on the same interest the City would have received if the reserve cash was invested in the City's investment pool. Based on the Library DIF's ongoing annual revenue and the debt repayment feasibility, staff recommends an inter-fund loan for $3.5 million from the Measure "T" fund to the Library DIF fund using sustainability reserves at an interest rate of 1.0% for a 30-year term. The average adjusted annual debt service payment will be approximately $136,515, which includes a balloon payment in the thirtieth year of $322,213. The total interest expense for the 30-year term will be $595,435, which is significantly less than the total interest expense associated with the public sale lease revenue bond option. An advantage of an adjusted annual debt service schedule is the principal paydown option that the City can exercise when the Library DIF revenue source is greater than the minimum annual debt service payment. Likewise, if there are years when the Library DIF revenue is not sufficient to cover the annual debt service payment, the unpaid principal amount will be added to the final balloon payment. The inter-fund loan option has no cost of issuance and underwriter fees. Borrowing internally on future Library DIF revenue to bring the library expansion to fruition is reasonable as this project is considered the final build-out for the library.
If the City Council supports the inter-fund loan approach, then staff will bring a separate agenda report and the inter-fund loan agreement for formal City Council approval in the near future. As stated above, staff will also pursue $550,000 through fundraising to augment City funding towards the Project for Option B, staff's preferred design. The table below summarizes the funding plan for this Project.
Recommended Approach to Proceed
Based on the intended functionality of the space, available funding, and anticipated fundraising, staff recommends proceeding to the next phase of design for Option B. Part of developing the design would include identifying "design alternatives," which would be aspects of the design that could be carved-out to reduce the cost or added-on as “bid deducts” or “add-alternates” if the overall construction cost comes back within budget through the bidding process, which is anticipated for Spring 2025. Staff anticipates that scalability would happen with the scope of the exterior landscaping work.
Path Forward and Next Steps
Time is another critical element of this Project. The grant from the California State Library and the required 50% match from the City must be spent and verified by the end of March 2026. Construction costs will likely continue to increase; therefore, a design and bid package should be completed as soon as possible. Constructability reviews and cost estimate verifications must be done through the design process, and a clearly defined schedule must be strictly adhered to for successful completion of construction on time and budget.
Following is the anticipated project timeline with key critical path milestones and target completion dates to keep the Project on schedule:
|
Project Milestone |
Target Completion Date |
|
City Council direction to proceed with the recommended design concept |
June 18, 2024 |
|
Development of construction and bid documents |
July 2024 to February 2025 |
|
Final City Council project design review before the bid process |
February 2025 |
|
Construction bid process |
February to May 2025 |
|
City Council award of construction |
June 2025 |
|
Estimated construction start date |
July 2025 |
|
Grant funds expended on initial construction costs |
March 2026 |
|
Completion of construction |
August 2026 |
On May 7, 2024, the City Council approved on-call agreements with three consultants who have extensive experience performing project and construction management for vertical construction projects (e.g., buildings). Staff solicited proposals from all three, received proposals from two of the firms, and selected RWBID Construction Management, LLC (RWBID) as the consultant for this project. RWBID's proposal for services (Attachment 2) totals $475,000, which is factored into the overall Project budget and is based on the number of hours they believe will be needed through the end of the Project. The number of hours may need to be reevaluated as the Project progresses due to the complexity of construction, as well as additional services the City may request they perform. RWBID has direct experience with library improvements, having completed projects for almost a dozen Los Angeles County Library system libraries. RWBID has generously committed to donating $10,000 to the Murrieta Public Library Foundation towards its efforts to raise funds for the Project.
As the Project moves to the next phase, staff recommends engaging with RWBID to plan a successful completion path. The experience and expertise that RWBID brings to the Project will be critical. The work that RWBID will perform will be divided into two task orders, and the purchase order amount will reflect the cost of each task. The first task RWBID will complete is providing project management services through the final design stage into the bidding process. The second task will be for project and construction management services through the end of the Project.
During the design and development of the construction documents phase, RWBID will be tasked with conducting a detailed comparative analysis of the plans, bid sheets, and special provisions to ensure there are no omissions or inaccuracies that could result in change orders and higher costs during construction. They will also review plan sets to ensure no conflicts between the different building system designs and confirm the overall design is able to be constructed. RWBID will continuously review cost estimates so that anticipated construction costs are within budget and suggest value engineering changes to the design that could result in lower costs. They will also be responsible for developing a detailed, overall project schedule and ensuring adherence to it.
During the bidding and construction phase, RWBID will be accountable for a wide variety of tasks, including reviewing all submittals, construction invoicing, inspection scheduling, records management, labor compliance, responding to contractor requests for information and clarifying design and project instructions, and closing the project out.
Additionally, when SVA, the Project architect, was selected to provide architectural services in June 2023, the budget required for the Project was not fully understood because the City had not conducted a needs assessment nor developed a design for the expansion. Generally, one of the methods used for pricing architectural services is a percentage of actual construction costs. Usually, the percentage will decrease as construction costs increase. The proposal that SVA and other proposers submitted was based on an assumption of funding availability of $2.25 million. A purchase order in the amount of $302,300 was issued to SVA for their initial services.
The estimated construction costs are more precise now that the needs assessment has been completed and a building program has been developed. The City's agreement with SVA includes a fee structure based on the final overall construction costs as shown in the table below:
Currently, the estimated construction cost for Option B is approximately $4,545,000, resulting in a fee of 11%, or $500,000 for architectural services. However, the final price for SVA’s services will need to be reconciled at the end of the Project when the actual construction costs are fully realized, including additive bid items and change orders. At this time, SVA has submitted an amendment proposal (Attachment 3) for a change order to increase the purchase order amount by $222,700, for a total of $525,000, which is factored into the overall Project budget. The additional $25,000 is the estimated cost to rework a portion of the schematic design that has already been done since the building footprint will change due to a reduction in size. Only actual costs for design rework will be billed by SVA.
In conclusion, to successfully move the Library Expansion project forward through the remainder of the design and bidding phases, staff is seeking from the City Council confirmation and direction on the approach to staff’s recommended design Option B, the proposed budget, and funding mechanisms for the project.
FISCAL IMPACT
City Council adopted the Fiscal Year 2024/25 Capital Improvement Budget on June 4, 2024, which will go into effect on July 1, 2024. To maintain momentum with the project timeline, staff asks that the $500,000 Fiscal Year 2024/25 Capital Improvement Budget for the children's library expansion (CIP 21027) be eligible for use effective immediately.
ATTACHMENTS
1. SVA Architects Building Design Options
2. RWBID Project and Construction Management Services Proposal
3. SVA Architects Amendment Proposal