5b memo
PORT OF SEATTLE MEMORANDUM COMMISSION AGENDA Item No. 5b ACTION ITEM Date of Meeting January 7, 2014 DATE: December 20, 2013 TO: Tay Yoshitani, Chief Executive Officer FROM: Rod Jackson, Capital Project Manager Kenneth R. Lyles, Sr. Manager, Fishing and Commercial Vessels, Real Estate Rebecca Schwan, Real Estate Manager, Portfolio & Asset Management SUBJECT: Fishermen's Terminal Net Shed #9 Roof Overlay (CIP #C800527) and Fishermen's Terminal C-2 Nordby HVAC and Roof Replacement (CIP #C800344) Fishermen's Fishermen's Terminal C-2 Terminal Net Shed Nordby HVAC and Roof #9 Roof Overlay Replacement Amount of This Request: $171,400 $2,140,600 Source of Funds Tax Levy Tax Levy Estimated Total Project Cost $301,400 $281,000 $2,438,600 $3,030,000 Estimated State and Local Taxes $21,120 $170,880 Estimated Jobs Created 3 30 ACTION REQUESTED Request Commission authorization for the Chief Executive Officer to advertise for construction bids, execute construction contract, and fund the construction phase to complete: (1) the Fishermen's Terminal Net Shed #9 Roof Overlay in an amount not to exceed $171,400 of a total estimated project cost of $301,400; and (2) the Fishermen's TerminalC-2 Nordby HVAC and Roof Replacement Project in an amount not to exceed $2,140,600 for a total estimated project cost of $2,438,000. The total amount requested for both projects is $2,312,000 and the total cost of both projects is $2,740,000. SYNOPSIS Earlier this year, the Port Commission authorized funding for design and permitting of $80,000 for the Fishermen's Terminal Net Shed #9 Project and $223,000 for the Fishermen's Terminal C-2 Nordby HVAC and Roof Replacement (C-2 Nordby) Project in separate actions. As a result of work conducted during the design phases for these projects, staff proposes to combine the construction efforts of the two projects into a single construction contract to achieve cost savings to the Port of approximately $125,000. . With the final designs complete and permits in hand, Commission approval is requested to proceed with the construction phase of the projects. This includes advertising for construction bids, execution of a major construction contract, and all other work necessary to complete the Template revised May 30, 2013. COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer December 20, 2013 Page 2 of 8 projects. The funds requested reflect the information gathered during the final design phase of these projects. BACKGROUND Fishermen's Terminal, located on Salmon Bay, is a regional center for maritimeactivity. It is the homeport of the North Pacific Fishing Fleet and is one of the few working terminals in the United States with public access. Current long term planning assumes that Net Shed #9 and C-2 Nordby will continue to be essential at Fishermen's Terminal. In 2008, the Port initiated a comprehensive Condition Assessment study of all assets at Fishermen's Terminal including the Net Shed #9 and the C-2 Nordby Buildings. The assessment determined that the corrugated roofing system at Net Shed #9 and the built-up roofing system and HVAC at C-2 Nordby were at the end of their service lives. Net Shed #9 was constructed in 1987. T his 12,000 square foot Roof Overlay project involves the membrane overlay installation of roofing PVC to protect the existing steel corrugated roof. This new roofing overlay system will provide a 20-year warranty life. The building is currently 84% occupied. Recent inspections of Net Shed #9 revealed the protective coating on the roofing system had reached the end of its service life. Rusting of varying degrees is clearly visible at gutters and other areas. If left alone, continued corrosion and rust will distress the roofing system, resulting in more costly structural repairs or replacements in the future. The C-2 Nordby building was built in 1954 and covers approximately 23,000 square feet. It has HVAC and roofing that have exceeded design life. Recent inspections of C-2 Nordby revealed the built-up roofing system has failed, allowing major leaks into tenant spaces below. The building is currently 96% occupied. It is being used primarily by businesses associated with the maritime industry. The building houses one of Fishermen's Terminals largest multi-use tenants, Inner Sea Discoveries LLC. They currently lease over 6,000 square feet of office space in the C- 2 Nordby Building, over 4,000 square feet of warehouse and net shed space in other buildings and have moored between seven to eight cruise vessels at Fishermen's Terminal over the past few years. Another tenant in the building is Inland boatmen's Union of the Pacific, who lease 5,000 square feet of office space and have been in the building for fourteen years. Other tenants include marine insurance, maritime law, and Crane & Mitchell CPAs accounting firm, all of whom support the commercial fishing fleet. Current long-term planning assumes that C-2 Nordby will continue to be a core function at Fishermen's Terminal. Inspections also verified the HVAC system is not operating efficiently and must be replaced. It would be less costly to the Port to replace both the HVAC and the roof at the same time. If left alone, leaks will continue and become more costly to repair in the future. This new roofing system will provide a 25-year life and the HVAC system will provide a 20-year warranty life. Maritime office and tenant space is one of the terminal's assets that helps retain maritime and commercial-fishing-related businesses as tenants and is part of the infrastructure that will be required to double the economic value of the fishing and maritime sectors, as envisioned by the Century Agenda. Therefore, approval of this construction-funding request is not expected to COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer December 20, 2013 Page 3 of 8 affect any long-term development plans for the terminal. These projects were included in the 2014 plan of finance. PROJECT JUSTIFICATION AND DETAILS The proposed project would preserve revenues associated with the leased space in these important building assets at Fishermen's Terminal, extend the life of the building structures, and minimize Port liability. Deferring or foregoing this work will result in continued deterioration of Roofing and HVAC system components. Eventually this could also lead to additional failures, detrimental impacts to operations, and the need for more costly replacements. In addition, it could lead to loss of rent and revenues. Proactive asset stewardship is the key to reducing the total cost of ownership to the Port over time. Project Objectives Preserve the structural integrity of the building structure. Preserve future revenues from the building. Complete project on time and within budget. Administer environmentally sustainable practices during construction where practical. Minimize disruptions to facility operations, tenants, and customers. Scope of Work The scope of work for the Net Shed #9 Project will include: Installation of PVC membrane to overlay to the existing steel corrugated roof. A new fall protection system. A new security ladder for access by Port personnel. The project will also use environmentally sustainable components and construction methods. The scope of work for the C-2 Nordby Building HVAC and Roof Replacement Project will include the replacement and installation of: A new energy efficient HVAC system. A new energy-efficient built-up roofing system with additional insulation. New fall protection system and attachments in required areas. A new security ladder for access to the roof by Port personnel. The project will also use environmentally sustainable components and construction methods. Schedule The two projects will be closely coordinated and bid out as one major construction contract. Construction schedule below: COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer December 20, 2013 Page 4 of 8 Commission Approval for Design Net Shed #9 - May 2013 C-2 Nordby - July 2013 Permit/Design Complete December 2013 / January 2014 Commission Approval for Construction January 2014 Advertise for Bids February 2014 Construction May 2014 through October 2014 FINANCIAL IMPLICATIONS Budget/Authorization Summary Net Shed #9 C2 Nordby Total Capital Capital Project Original Budget $0 $0 $0 Previous Authorizations $130,000 $298,000 $428,000 Current request for authorization $171,400 $2,140,600 $2,312,000 Total Authorizations, including this request $301,400 $2,438,600 $2,740,000 Remaining budget to be authorized $0 $0 $0 Total Estimated Project Cost $301,400 $2,438,600 $2,740,000 Project Cost Breakdown: Net Shed #9 Net Shed #9 This Request Total Request Construction $126,235 $221,980 Construction Management $12,323 $21,670 Design $4,778 $24,420 Project Management $5,067 $8,910 Permitting $1,877 $3,300 State & Local Taxes (estimated) $21,120 $21,120 Total $171,400 $301,400 Project Cost Breakdown: C-2 Nordby C-2 Nordby This Request Total Request Construction $1,573,474 $1,796,020 Construction Management $155,706 $175,330 Design $177,360 $197,580 Project Management $50,996 $72,090 Permitting $12,184 $26,700 State & Local Taxes (estimated) $170,880 $170,880 Total $2,140,600 $2,438,600 COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer December 20, 2013 Page 5 of 8 Budget Status and Source of Funds FT Net Shed #9 Roof Overlay Project This project was included in the 2014 Plan of Finance under CIP #C800527, FT Net Shed 9 Roof Replacement for a total cost of $498,000 (including actual spending in 2012 and forecasted spending in 2013). FT C-2 Nordby HVAC and Roof Replacement This project was included in the 2014 Plan of Finance under CIP #C800344, FT C-2 Nordby Roof & HVAC for a total cost of $2,001,000 (including forecasted spending in 2013). The additional $438,000 required to fund this project will come from below budgeted spending on the Net Shed 9 Roof and less spending on CIP C800243 Preliminary Planning. Both projects will be funded by the tax levy. Financial Analysis and Summary CIP Category Renewal/Enhancement Project Type Renewal & Replacement Risk adjusted discount rate NA Key risk factors Actual costs could exceed the current estimates. Future revenues from the buildings could be less than currently expected. Net Shed #9 Roof Project cost for analysis Net Shed #9 Roof $301,400 Business Unit (BU) Harbor Services Group Fishing & Commercial Effect on business performance This project is a renewal and replacement project and, accordingly, this project preserves Net Operating Income (NOI) rather than creates new NOI. Preserves Net Shed 9 Net Operating Income of approximately $92,000 per year excluding major maintenance/compliance expenses.** Increases depreciation expense by approximately $15,070 per year based on a 20-year useful life for the roof. IRR/NPV The NPV is the present value of the project cost. Note**: Net Shed 9, including this roof replacement, expected future electrical upgrades and the code compliance project is expected to generate approximately an 8.1% return over the next25 years. COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer December 20, 2013 Page 6 of 8 C-2 Nordby Building Roof and HVAC Project cost for analysis C-2 Nordby Building Roof and HVAC $2,438,600 Business Unit (BU) Real Estate Commercial Properties Effect on business performance This project is a renewal and replacement project and, accordingly, this project preserves Net Operating Income (NOI) rather than creates new NOI. Preserves Fishermen's Terminal Building C-2 Net Operating Income of about $117,000 per year excluding major maintenance and tenant improvement expenses. Increases Depreciation Expense approximately $54,000 per year based on a 25-year useful life for the roof and a 20-year useful life for the HVAC system. IRR/NPV The NPV is the present value of the project cost. Lifecycle Cost and Savings Annual Operating and Maintenance costs for the Net Shed #9 and the C-2 Nordby HVAC and roof are forecasted to decrease because of the installation of the new roofs and the HVAC system. The lifecycle cost analysis for the two systems determined which of the roof overlay and HVAC/roof-replacement system design options were appropriate for the facility. STRATEGIES AND OBJECTIVES This project supports the Port's Century Agenda strategies by aligning with the Port's commitment to be the nation's leading green and energy-efficient port. Upon completion, these Roofing projects will, help double the economic value of the fishing and maritime cluster, and be the greenest and most energy efficient port in North America by: Investing in and preserving valuable Port assets. Maintaining the long-term revenue-generating capabilities of the Net Shed #9 and C-2 Nordby Buildings. Providing fishermen and other moorage customers close proximity to maritime-supported businesses within Net Shed #9 and the C-2 Nordby Buildings. Maintaining the long-term revenue-generating capability of the Net Shed #9 and C-2 Nordby Buildings. Reducing overall energy consumption at the facility by replacing old, outdated equipment with energy-efficient equipment and controls at the C-2 Nordby Building. Fulfilling lease commitments and obligations to the Port's tenants. The mission of Fishermen's Terminal is to operate and maintain facilities and services such as Net Shed #9, which support the North Pacific Fishing Fleet and other maritime industries, while working toward break-even financial performance for the properties as a whole. Dry locker or net shed storage is an important service Fishermen's Terminal provides to our commercial COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer December 20, 2013 Page 7 of 8 fishing customers. These customers rely on covered, enclosed storage facilities for storing weather-sensitive mechanical equipment, gear or other types of property used in the fishing industry and in the sustainability of their respective fishing vessel operations. The majority of the customers who lease space in Net Shed #9 are small, independent fishers. Having their equipment, gear, and commodities close to their vessel is important. TRIPLE BOTTOM LINE Economic Development Preserving existing assets defers high-impact and high-cost asset replacement and reduces environmental impacts while supporting economic vitality by reducing Port costs and generating construction-related jobs. The proposed construction methods will have minimal noise and traffic impact to the surrounding communities. Environmental Responsibility This project will include energy efficient HVAC equipment and roofing materials, recycling of demolished and other sustainable materials, and products relative to indoor environmental quality. Construction implementation will include practices to avoid and minimize potential negative environmental effects. The project has identified construction and maintenance methods, materials, and practices for effective roof overlay including HVAC and roof replacement work while avoiding release of deleterious materials to the environment. Timely asset preservation will extend the service life of the existing infrastructures, as an alternative for avoiding more environmentally disruptive and resource/materials consumptive large-scale structure replacement actions. Community Benefits The project team worked with the Office of Social Responsibility (OSR) in determining opportunities for participation by small businesses on this project as described in small business Resolution No. 3618. Preserving existing assets defers high-impact and high-cost asset replacement and therefore reduces environmental impacts. The proposed construction methods will have minimal noise and traffic impact to the surrounding communities. ALTERNATIVES AND IMPLICATIONS CONSIDERED Alternative 1) Doing nothing increases the maintenance inspections and repair of Net Shed #9 and the C-2 Nordby Built-Up Roofing Systems as they continue to deteriorate and leaks appear on the roofs. Costs are increased for the C-2 Nordby HVAC system as cooling and heating is continually degenerating. This is not the recommended alternative since the roof and HVAC systems are at the end of their service lives. . Alternative 2) Proceed with the construction of the Net Shed #9 Overlay and the construction and replacement of the C-2 Nordby Roof and HVAC systems. This will reduce future risks and consequences to the two buildings and internal appurtenances, including tenant and staff disruptions caused by roof and HVAC system failure. This is the recommended alternative. COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer December 20, 2013 Page 8 of 8 ATTACHMENTS TO THIS REQUEST None. PREVIOUS COMMISSION ACTIONS OR BRIEFINGS February 5, 2013 Staff presented and requested design funds for both the Maritime Industrial Center (MIC) Building A-1 Roof replacement project (CIP #800571) and the Fishermen's Terminal Net Shed #9 (CIP#800527). Commission approved the MIC roofing project but postponed the Fishermen's Terminal Net Shed #9 item. May 14, 2013 Commission approved design funding for the Fishermen's Terminal Net Shed Building #9 Roof Overlay (CIP #800527). July 9, 2013 Commission approved design funding for the Fishermen's Terminal C-2 Nordby HVAC and Roof Replacement (CIP #800344).
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