Transcript Slide 1

City Hall Consolidation Study
City of Tulsa
June , 2007
1
Team Composition - Introductions
Team Member
Role
City of Tulsa
Participants:
Mayor Kathy Taylor
Don Himelfarb (Team Leader)
Peter Boylan (Special Advisor), Mike Kier, Ben Stout, Charles Hardt,
Sheryl Lovelady, Ken Hill, Ellen Hinchee, Tom West, Mark Hogan, Kevin
Shoemaker, Grant Easterling
Staubach
Team Leader
Contract Support
Business Case Development / Financial Analysis
3rd Party Leasing Support
MATRIX
Space Needs Analysis
Technical Building Review/Due Diligence
Space Programming/Consolidation Study
McAfee & Taft
Contract Negotiations
Legal Due Diligence
Walker Parking
Parking Needs Analysis
Market Supply/Demand Study
theGreen Team
Green Building/Sustainability Analysis
LEED Certification
ERA
Economic Impact Study
Highest & Best Use (Disposition Sites)
2
Goals of Study
 Evaluate City’s existing occupancy strategy, costs, and efficiency
 If viable, Reduce the cost of real estate to enable funding of other
programs
 Determine alternative methods of improving the delivery of city
services via realignment and consolidation into single facility.
 Prepare cost/benefit analysis of different scenarios
• Stay put in multiple locations (Status Quo)
• Build to suit
• Market Alternatives (for sale, or lease)
 Capture the development potential and revenue of surplus real estate
of the city including river front and current city hall location next to
renovated convention center.
City negotiated option to purchase One Technology Center, parking garage,
Furniture fixtures and equipment contingent upon City’s findings during due
diligence period
3
Anticipated Ancillary Benefits
 Avoid costly capital expenditures in aging/obsolete
buildings (>$24 million); Only $12 million funded to date
 Reduce the long term energy needs of the City (~30%)
 Enhance constituent experience by creation of “One Stop”
for City services in one convenient location.
 Improve downtown real estate market – will reduce
vacancy by absorbing OTC and replacing city hall with
hotel.
 Facilitate sale of City Hall and other sites for higher and
better use (convention hotel) and placed on tax roles
 Generate revenue through limited 3rd party leasing of
space until complimentary City & Government agencies
need space downstream.
 Improve productivity, communications and efficiency
through consolidation
 Enhance image that fosters new business/economic
development
4
Desired Operating Outcomes
Reduce City Operating Expenses & Improve Citizen Experience

More efficient use of space (~ 20% reduction)

Increased use of technology (consolidate 8+ data centers)

Financial Benefits (reduced annual operating costs)

Green building – Consume 30% less energy

Eliminate environmental / air quality concerns of existing
buildings

Upgraded Working Environment (improved morale and employee
recruitment opportunities)

Unlock potential of underperforming City owned real estate
assets
5
Results of Study – Demand Analysis

Interviewed 14 City departments, 103 business units

Reduced Net Useable Square Feet

Existing = 275,000 USF

Consolidated = 227,000 USF*

Opportunity to reduce space by ~ 20%

Consolidate 7+ different locations into one
*To accommodate future growth of 78 workstations and additional conference room
space, the City will occupy 276,854 usable square feet, 331,724 rentable square feet.
The 3rd party tenants, Level 3 and Deloitte will occupy 187,000 rentable square feet.
The 8th floor is vacant at 40,726 usable square feet and 48,156 rentable square feet.
The remaining space is occupied by WHBC in 26,954 usable square feet and 29,660
rentable square feet. The 10th floor is shared conference room space at 13,898 usable
square feet and 16,483 rentable square feet. Total usable square feet in the building is
536,677 and rentable square feet is 626,802.
6
Total Project Cost – Acquisition OTC
Summary of Acquisition Costs
Includes:
Purchase Price of Building
Due Diligence Support
Relocation Costs
Physical Relocation
New Construction and Furniture Reconfiguration
Mothball Existing Buildings (City Hall, Center Office Building, Francis Campbell)
Control Equipment - Parking Garage
Information / Technology
Security
3rd Party Tenants (Cost of Leasing)
Other Capitalized Costs
Duplicate Occupancy Costs During Transition
Financing & Legal Fees
Green Building Initiative
Total
$ 67.1 Million
7
Important Considerations/Assumptions
1.
Initially, 187,000 rentable square feet of existing tenants will renew and
extend current leases
2.
New tenant(s) will be identified for 8th floor
(Numerous complimentary prospective government
tenants have been identified, contacted and expressed
interest)
3.
There is no benefit given to this analysis due to the sale of vacated
properties or tax revenue generated by economic development as a
result of this transaction
(sales tax, hotel tax, etc.)
Result: No tax increase required to facilitate transaction
8
Occupancy Cost Over 10 years
Relative Cost Chart
$12,000,000
$10,000,000
Annual Expenditure
$8,000,000
Includes $12 million funded and $12
million unfunded deferred maintenance
$6,000,000
$4,000,000
$2,000,000
$1
2
3
4
5
6
7
8
9
Year
New Construction 340 K SF
OTC
New Lease
Existing w/$24 MM Def Maint
10
9
Present Value Savings – 10 Year Horizon
Difference between $26.0 million and
$41.2 million ($15.2 million) is
savings to City over first 10 years
Present Value Analysis - 10 year Horizon
$80,000,000
$70,000,000
$60,000,000
$50,000,000
$40,000,000
$70,366,825
$30,000,000
$41,269,122
$20,000,000
$45,126,563
$26,047,199
$10,000,000
$0
OTC
Existing w/$24 MM Def
Maint
New Lease
New Construction
10
Due Diligence Review - Technical





Building and Parking Garage are in good to very good condition
Mechanical System is “State of the Art”
Systems redundancy (Electrical, water, etc.) should assure continued
City operations in emergency
Significant building technology infrastructure will enhance City
operations
Recent Structural Issues



Roof – New replaced to high standard
Curtain wall Failure – Repaired to new design criteria
Purchase Price includes:
High quality systems furniture
 Significant data and audio visual equipment
 Telephone system and instruments

11
Due Diligence Review - Green Building /
Sustainability
One Technology Center is highly efficient building (perhaps most
efficient in City of Tulsa)

State of the art mechanical system reduces energy demands at peak
consumption hours

Utility costs should be 30% less than existing costs on per square foot
basis

Benefits:
Demonstrates that City of Tulsa is leading the way in environmental
responsibility.
Global energy costs will continue to rise. Efficiency of new building will
produce long term savings for taxpayers and mitigate financial
exposure/risk on rising energy costs in future.
12
Due Diligence Review – Estimated Tax Impacts
The projected tax
revenues are not
part of the
financial
calculation to
determine the
savings from
consolidation. Any
contribution from
sales or other
taxes would be in
addition to the
$15.2 10 year
present value
savings.
Sales Tax –
(City Share)
Hotel Tax
Total Annual
City Tax
Benefit
Site
Notes
Property Tax
(City Share)
Hartford
Building
Excellent
development potential
$6,600
$282,200
TBD
$288,800
Public Works
Buildings
23rd & Jackson
Planned Riverfront
Development
$100,300
$4,200,000
TBD
$4,300,300
City Hall
Convention Hotel Site
$51,600
$310,400
$517,400
$879,400
Fire Department
Headquarters
Planned East Village
TBD
TBD
TBD
TBD
Center Office
Building
Has value as shell
office building.
TBD
TBD
TBD
TBD
Parks &
Recreation
Headquarters
Site is located in
middle of park.
Possibly for
restaurant location?
TBD
TBD
TBD
TBD
One
Technology
Center
Elimination of Ad
Valorem Tax
Estimated
2006
($55,748)
TBD
TBD
($55,748)
$102,752
$4,792,600
$517,400
$5,412,752
Total
13
Risks/Issues
Issue
Challenge
Resolution
3rd Party Tenant Leasing
Financial Model assumes
187,000SF of 3rd party tenants
will continue to lease space in
building.
Currently in active negotiations
with existing tenants. Have
identified limited private sector
and complimentary government
and quasi government tenants
for downstream leasing.
Parking
Parking reflects standard urban
parking ratios for building of this
size. Will need additional
parking to accommodate City
needs.
Have identified short and long
term options for employee
parking on surface and
structured lots within 2-3 minute
walking distance of building.
Structural
Roof
Roof leaked due to faulty
installation.
Performed engineering review.
New roof installed 2007.
Warranties will transfer to City.
Structural
Curtain Wall failed June, 2004
Performed engineering review.
All curtain wall panels repaired
in place or reinstalled to code to
re-engineered specifications.
Curtain Wall
14
Next Steps / Recommendation
1. Formal presentation to Council – 6/12
2. Council votes on project
3. If approved, Contract is fully executed
4. Contract is assigned to Tulsa Public Facility Authority
5. City enters into Lease with Tulsa Public Facility Authority
6. Legal Due diligence is completed between now and closing
7. Closing occurs late summer 2007
8. Architectural work is initiated after closing
9. Construction/modification work commences in the fall
10. Move in begins fall 2007, planned completion Q2 2008
15
Questions & Answers