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PORT OF SEATTLE MEMORANDUM COMMISSION AGENDA Item No. 6f ACTION ITEM Date of Meeting June 5, 2012 DATE: May 30, 2012 TO: Tay Yoshitani, Chief Executive Officer FROM: Darlene Robertson, Director, Harbor Services, Real Estate Division Melinda Miller, Director, Portfolio Management, Real Estate Division SUBJECT: Fishermen's Terminal Net Shed Buildings Code Compliance Improvements for Project Design and Permitting (CIP #800045) Amount of This Request: $650,000 Source of Funds: Tax Levy Preliminary Estimated Total Project Cost: $4,700,000 seven (7) buildings to $6,000,000 nine (9) buildings for recommended Option 3. ACTION REQUESTED: Request Commission authorization for the Chief Executive Officer to proceed with design, permitting, and project management for recommended Option 3 for the Fishermen's Terminal (FT) Net Sheds Buildings Code Compliance Improvements in the amount of $650,000. Staff will return to Commission at the end of 2012 with additional design and cost information including construction details. The preliminary estimated total project cost is $4,700,000 for 7 net shed buildings to $6,000,000 for all nine net shed buildings per the recommended storage Option #3. SYNOPSIS: Fishermen's Terminal is the homeport of the North Alaska Fishing Fleet, the hub of the maritime industry on the Lake Washington Ship Canal and a small but significant economic engine for Puget Sound. In 2007, John Martin Associates estimated that there were 3,500 jobs tied to FT. Jobs associated with FT generated $356,000,000 in wages and salaries. Local business received $180,000,000 in revenue from purchases by the FT fishing fleet, not including the landed value of the fish catch. State and local governments received $44,000,000 of tax revenue generated by the activity at FT. COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer May 30, 2012 Page 2 of 11 The FT 25-Year Plan and Century Agenda: The net shed code compliance project has been moving forward in concert with the FT 25-year planning process. The planning effort included: looking at how the Port can continue to support the North Pacific fishing fleet; analyzing the adequacy of all existing assets; and creating a framework for considering new upland development opportunities that could contribute to the Port's long-term goal of self-sustainability of FT. Unlike the discretionary decision-making for new development, the Net Shed Buildings Code Compliance Improvements project involves an SFD-mandated deadline for adopting and executing a compliance action plan. Further details are discussed below. Maintaining FT as a welcoming, safe and user-friendly facility helps to ensure the viability of the fishing industry in the Seattle area. The FT net shed building improvements supports the Port's goal of ensuring the ongoing vitality of FT while providing necessary services to fishermen. In April 2009, the Seattle Fire Department (SFD) inspected the net sheds and cited the Port for various fire and building code violations. Since that time the Port, SFD and the Department of Planning & Development (DPD) have worked closely together to address the code compliance and safety issues. We are now at a point when a decision must be made on which of the improvement options will be selected to address the SFD mandated requirement that the buildings be brought up to code. We must show progress toward bringing the net shed buildings into compliance with the code. The fate of the net shed buildings has been discussed with the Commission for a number of years. F unds for the code improvements have been in the Real Estate capital plan since 2009, and the evolving plans have been reviewed with the Commission annually. For example, in March 2009, staff briefed the Commission at the Working Waterfront Commission meeting in Ballard on the existing storage conditions in the net sheds. The SFD Fire Marshall provided a brief testimony. SFD and DPD and Port staff have been working for some time to interpret the codes and develop compliant options. Specific options were identified in 2011, which the SFD and DPD agreed are code compliant, and they were presented to the Commission on December 6, 2011, including staff's recommendation of Option 3. The only other financially feasible option is Option 1. The other two options (2 and 4) are not feasible given the high costs of the required improvements. Today we are requesting authorization to proceed with design of Option 3 as it most closely matches the fishermen's current use of the net lockers, provides the greatest guaranteed amount of gross storage among the four options, is the most realistic for both the Port and the tenants to comply with and does not require the Port to be the enforcement agency. Option 3 is the only option that does not require tenants and staff to differentiate between different classes of stored commodities. We will engage SFD and DPD in the design. As mentioned, staff will return to Commission at the end of the year with additional information on design, scope of work, costs and request funding for construction. COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer May 30, 2012 Page 3 of 11 BACKGROUND: FT Net Sheds and the 25-Year Plan: As shared at the December 6, 2011Commission briefing, one of the guidelines in the 25-year plan is that the Port would continue to provide critical inside net shed locker storage in support of the commercial fishing fleets. Given that, the planning effort has included a comprehensive analysis of the existing nine net shed buildings. It was determined that all nine net shed buildings are serviceable for their current use. Various scenarios were explored from maintaining existing buildings, to replacing buildings with new construction, remodeling interiors, to newly constructed buildings with a second level of other higher revenue generating uses. In each of the cases involving replacement of netted units as new construction, the financial analysis showed that these alternatives were not financially feasible and would not cover capital costs. Staff also identified various conceptual planning scenarios for the landside, several of which call for demolishing two net shed buildings including the three scenarios featured in the December 6, 2011 Commission briefing. This can be done given that approximately 80% of the net sheds are utilized by active commercial fishermen and the other 20% are upland tenants and the general public. As the Commission has not yet made a decision on the FT 25-year plan and potential development scenarios, staffs' recommendation is to phase the compliance building improvements plan such that the four potentially-demolished buildings are the last phase. (The four net sheds are in limbo because some planning scenarios demolish the pair of buildings Net Shed 3 and Net Shed 4, while other scenarios demolish the pair of buildings Net Shed 7 and Net Shed 8). This phasing strategy would allow Commission enough time to make the necessary decisions on the Century Agenda and FT 25-year plan. Staff would begin with the code improvements to the five buildings that would remain in any development scenario. With the potential demolition of two of the net sheds, the proposed net sheds improvements project likely will only involve seven of the existing nine net sheds and the overall project cost would be reduced accordingly. Code compliance improvements to the two net sheds that have been identified as potentially being demolished would be bid as alternate final construction phases in order to allow the FT 25-Year Plan effort the maximum additional time for Commission to decide on a final development scenario. These details would be discussed further with the Commission when staff returns at the end of the year with further design, costs and construction details. Next Steps on the FT 25-Year Plan: Since December, staff has continued to seek input on the 25-year landside planning options from FTAC and other stakeholders. Staff members have also explored whether FT operational changes could contribute to the Port's long-term goal of self-sufficiency of FT, and revised the financial model to extend the cost and revenue projections to a 25-year horizon to match the horizon used in the Century Agenda process. Moving forward, staff members will be refining COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer May 30, 2012 Page 4 of 11 the assumptions in each planning scenario to make the financial model as accurate as possible. Staff will return to Commission by the end of 2012 to discuss the landside planning scenarios. FT Net Sheds Code Compliance: As mentioned, the improvements being requested today are safety and code compliance requirements. The Port received a citation from the SFD in April 2009 identifying code violations in the FT net sheds. Working with the SFD, the DPD, and the Fishermen's Terminal Advisory Committee (FTAC), staff completed a complex evaluation of code compliant options for storage lockers. This included performing a detailed interpretation of the applicable and complex building and fire codes. A number of Port departments, such as Risk Management, Engineering, and Marine Maintenance, were involved in this effort. The Port, with the assistance of a fire protection engineering consultant, produced a fire protection report involving the determination of potential code compliant net locker storage options and a comprehensive evaluation and cost estimation of the options. Four options were identified. Both SFD & DPD concurred that the four determined storage options (identified as Options 1, 2, 3 & 4) were compliant with the code. These options were in turn discussed in detail with FTAC at several meetings and summarized in the December 6, 2011 Commission Meeting. Based on a thorough review, of the options, staff's recommendation is to proceed with Option 3 for the following reasons: It best meets the current storage situation by fishermen considered by SFD to be mixed commodity, high-piled storage; It provides the most realistic required volume of the options and meets other evaluation criteria listed in the Background section below; It does not put the Port in the role of enforcement agency to ensure storage of commodities are in compliance with codes on a perpetual basis Today we are requesting authorization to proceed with design of Option 3 and show progress toward bringing the net shed buildings into compliance with the code. We will engage SFD and DPD in the design. As mentioned, staff will return to Commission at the end of the year with additional information on design, scope of work, costs and request funding for construction. ADDITIONAL BACKGROUND: FT currently has nine net shed structures that vary in age, size, construction, and interior net locker configuration. The majority of these net sheds were originally constructed when cotton fishing nets were the norm and were hung from the ceiling while in storage. As modern nets are made of quick-drying synthetic materials, the current ceiling height is no longer needed for net storage. COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer May 30, 2012 Page 5 of 11 Consequently, over the past 40 years, tenants have constructed non-permitted structural modifications, such as lofts and stairways, within many net lockers in order to better utilize their available storage height. The overall quantity and types of items being stored in the net sheds have increased accordingly and have in turn resulted in an existing mixed commodity storage condition that is defined as "high-piled" per the City Fire Code. The condition is subject to greater regulatory restrictions and/or building improvements than are currently in place. Recognizing the need to correct a potentially hazardous storage condition, the Port of Seattle began working with FT tenants in 2006 to address the non-permitted interior structural additions within net lockers as well as storage policy violations. After inspecting the net sheds in April 2009, the SFD cited the Port for various City of Seattle fire and building code violations. Since receiving this citation letter, the Port has worked with the SFD and DPD to develop a viable plan to bring all of the net sheds into compliance with the applicable fire and building codes as quickly as possible. As part of this effort, FT Operations has corrected many of the policy violations by enforcing storage policies, implementing various programs to assist tenants with cleaning out their net lockers and encouraging their participation in a pilot storage program in which the Port has removed tenant constructed lofts and supplied rack shelving units. To date, approximately 100 net lockers have had tenant lofts removed from them prior to and as part of the net locker pilot storage program, and approximately 94 remain to have the loft structures removed. Additionally, the Port procured the services of a fire protection engineering consultant to assist staff in determining and evaluating code compliant net shed storage options. After numerous meetings with SFD, DPD, and FTAC, four separate code compliant net shed storage options were identified as follows. The costs shown below are for nine buildings, however, as mentioned, staff would proceed with seven buildings pending decision by Commission on the FT 25-year planning scenarios. Note: as the buildings were built at different times and have differing configurations, the design requirements will vary by building. In other words the improvements will not be "cookie cutter" so-to-speak. For example, some buildings will not require false ceilings or the same type of sprinkler improvements. Code Compliant Storage Options: Option 1. Non-high-piled Storage, Single Level (illustration provided on attached slides) Preliminary estimated cost: Approximately $2,000,000 Code Requirements: Segregation of commodities by Class I-IV and Group A Plastics Storage height limitation of 6 feet maximum for Group A Plastics commodities Storage height limitation of 12 feet maximum for Class I-IV commodities Maintenance of 2 feet minimum wide aisle between entrance and rear of each net locker storage level as well as between commodity types Potential net locker storage height limit guidance marking and/or signage Master planning within each net shed building to coordinate required commodities separation between adjacent net lockers per code COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer May 30, 2012 Page 6 of 11 Option 2. Nonhigh-piled Storage, Multi-level (illustration attached) Preliminary estimated cost: Approximately $8,700,000 Code Requirements: Installation of independent structural mezzanine level within overall net shed Segregation of Class I-IV and Group A Plastics commodities Storage height limitation of 6 feet maximum for Group A Plastics commodities Storage height limitation of 12 feet maximum for Class I-IV commodities Maintenance of 4 feet minimum separation between commodities underneath and in front of mezzanine level structure Master planning within each net shed building to coordinate required commodities separation between adjacent net lockers Option 3. High-piled, Mixed Commodity Storage, Single Level (illustration attached) Preliminary estimated cost: Approximately $6,000,000 Code Requirements: Installation of 20 feet high false ceiling within net shed Installation of new sprinkler system below false ceiling within net shed Installation of heat and smoke vents in net shed roof Installation of fire alarm system within overall net shed for monitoring of sprinkler systems Storage height limitation of 15 feet maximum for mixed commodities Maintenance of 2 feet minimum wide aisle between entrance and rear of each net locker Potential net locker storage height limit guidance marking and/or signage Option 4. High-piled Storage, Multi-level (illustration attached) Preliminary estimated cost: Approximately $9,700,000 Code Requirements: Installation of independent structural mezzanine level within overall net shed Installation of sprinkler system below mezzanine level structure Installation of heat and smoke vents in overall net shed roof Installation of fire alarm system within overall net shed for monitoring of sprinkler systems Separation and segregation of Class I-IV and Group A Plastics commodities Storage height limitation of 6 feet maximum for Group A Plastics commodities Storage height limitation of 12 feet maximum for Class I-IV commodities Storage height limitation of 12 feet maximum for mixed commodities (under mezzanine) Maintenance of 2 feet minimum wide aisle between entrance and rear of each net locker storage level as well as between commodity types Maintenance of 4 feet minimum separation between commodities underneath and in front of mezzanine level structure Potential net locker storage height limit guidance striping and/or signage COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer May 30, 2012 Page 7 of 11 Master planning within each net shed building to coordinate required commodities separation between adjacent net lockers A FT fire protection report was submitted to the SFD and DPD in February 2011 for review, and concurrence was requested regarding the code compliance of the four proposed options listed above. After further coordination, in June 2011 , the SFD and DPD concurred that the four identified net shed storage options were compliant with the applicable fire and building codes and could therefore be used as a basis for developing a net shed improvement project design for eventual permit review by the City prior to construction. Staff subsequently evaluated the four identified code compliant storage options using various criteria including, but not limited to: the volume of storage provided and how well it meets the tenants' needs the impacts to tenants and staff in understanding storage/code requirements implementing and enforcing code requirements for each option the cost of the required improvements After consideration of all these factors, Option 3 was determined to be the best all-around and most realistic in meeting the evaluation criteria. All four options were discussed in detail with FTAC; and subsequently recommended by staff to the Commission on December 6, 2011, as part of the FT 25-Year Plan and Net Sheds briefing. Recommendation: Option 3 is being proposed for the following primary reasons: Option 3 is the option that most closely replicates the way the majority of lockers are currently used by commercial fishermen, i.e., a "high-piled", mixed commodities storage condition, within the net sheds and as such, provides a feasible storage volume and best meets tenants' storage needs. Option 3 is the only option that does not require tenants and staff to differentiate between different classes of stored commodities such as Group A Plastics items made from polyethylene, ABS, acrylic, butyl rubber, and PVC (greater than 15% plasticized) versus Groups B and C Plastics items made from silicone rubber, fluoroplastics, melamine, and PVC (less than 15% plasticized) for example, in order to segregate, horizontally separate, and store them under different height limitations according to the code. This avoids a very challenging requirement for tenants and staff as well as the perpetual effort necessary to maintain and enforce long-term storage code compliance in the net lockers. Another alternative for segregation would be to require all plastics to be stored in the marked area at the 6' height and this would reduce the volume available even further than it already will be. COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer May 30, 2012 Page 8 of 11 Option 3 is the only option that does not require an overall storage master plan within each of the 242 net sheds in order to maintain the code required separation between stored commodities in adjacent net lockers. Because of the factors listed above, Option 3 is the most realistic for tenants and staff to achieve, and maintain, long-term storage code compliance within the FT net sheds. PROJECT JUSTIFICATION: The improvements are a safety and code compliance requirement as cited by the SFD. The construction of the proposed FT Net Sheds Code Compliance Improvements project will enable the Port to comply with legal requirements, address potentially unsafe storage conditions, and meet its customers' needs to the best extent possible within the identified storage options. Additionally, continuing the net sheds as a service and viable asset is an essential element in meeting fishing customers' needs, maintaining the fleet at FT and helping to achieve the Port's Century Agenda goal to "double the economic value of the fishing and maritime cluster". PROJECT SCOPE OF WORK AND SCHEDULE: The work to be completed per this requested initial funding is the project design, permitting, construction planning, and the preparation of construction bid documents. Construction Scope of Work for Option 3: The proposed future building improvements will generally consist of the installation of an approximately 20 feet high false ceiling where required (some net sheds' ceilings are already near the necessary 20 feet height) , an associated sprinkler system extension or addition under this ceiling, roof heat/smoke vents, and a fire alarm system for monitoring the sprinkler systems within each net shed. The design work will look at the requirements for each building. As the building configurations are different, the improvements will not be a "cookie cutter" approach. Schedule: The project improvements design and the final construction cost estimates are anticipated to be completed by early 2013. Staff will subsequently return to Commission in early 2013 for construction funding approval. Construction would start in mid-2013 with an anticipated duration of up to 3 years. Once Commission approves the design, the Port will meet with the SFD & DPD regarding the overall final schedule to bring the net sheds into code compliance. COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer May 30, 2012 Page 9 of 11 FINANCIAL IMPLICATIONS: Note: the following information assumes worse case and includes nine buildings. As mentioned, the preliminary cost estimate for seven buildings is approximately $4,700,000. Budget/Authorization Summary: Capital Previous Authorizations for this project $25,000 Current request for capital project authorization $625,000 Total Authorizations, including this request $650,000 Estimated remaining budget to be authorized $5,350,000 Total Preliminary Estimated Project Cost $6,000,000 Note: A separate but related expense project to evaluate and identify options to bring the net sheds into code compliance was previously authorized in the amount of $500,000. Of the amount authorized for the expense work, approximately $353,000 has been spent to date. Project Cost Breakdown: This Request Construction $0 Construction Management $0 Design $400,000 Project Management $200,000 Permitting $50,000 State & Local Taxes (estimated) $0 Total $650,000 Budget Status and Source of Funds: The project was included in the 2012 Draft Plan of Finance under Business Plan Prospective CIP #C800045, FT Net Shed Code Compliance Improvements, in the amount of $3,750,000 which assumed seven net shed buildings. Additional amounts needed to fund the overall estimated project cost of $4,700,000 for seven buildings to $6,000,000 for nine buildings are available in the Contingency Renewal and Replacement CIP #C800216. The source of funds will be the tax levy. Financial Compliance Analysis and Summary:CIP Category Project Type Regulatory Risk adjusted 8.0% discount rate COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer May 30, 2012 Page 10 of 11 Key risk Capital costs increase due to unforeseen needs or higher than planned costs. factors Life of assets is less than 25 years. Revenues not met due to changes in competitive forces or a drop in occupancy. Project cost $6,000,000 is utilized for the analysis and is for nine buildings. Preliminary for analysis cost estimate for seven buildings is approximately $4,700,000. Business Unit Harbor Services Group Fishermen's Terminal (BU) Effect on This code compliance project will not generate any incremental revenue. business However, the project is necessary to keep the FT Net Sheds in-service and thus performance will preserve revenues generated for the remaining useful life of the sheds. $000's 2016 2017 2018 2019 2020 2021 Effect on Business Performance following completion of Code Compliance Project NOI 575 586 601 616 631 631 Depreciation (200) (200) (200) (200) (200) (200) NOI After Depreciation: 375 386 401 416 431 431 IRR/NPV Remaining NPV IRR Payback Life of Net (in $000's) (in years) Sheds 25 years ($1,577) 4.0% 17 40 years ($663) 6.3% 17 BUSINESS PLAN OBJECTIVES: This project is aligned with the business plan objectives to maintain safe facilities and assets and provide customers with compelling value. It is needed to continue to provide material, gear and equipment storage as required by commercial fishing tenants at Fishermen's Terminal. It also contributes toward the Century Agenda goal to maintain the fishing fleet at Fishermen's and work toward "doubling the economic value of the fishing and maritime cluster." ALTERNATIVES CONSIDERED AND THEIR IMPLICATIONS: Alternative 1: Do nothing. The improvements to the buildings are a code requirement and therefore, doing nothing is not an option if we are to continue to provide the fishermen with the service. Without completion of this project, the Port will not resolve the existing building and fire code violations, will risk the potential of SFD red tagging the buildings nor will it meet commercial fishing customers' net shed storage needs. For these reasons, Alternative 1 is not recommended. Alternative 2: Complete the required code improvements by implementing storage Option 1, 2 or 4, as shared at the December 6, 2011 Commission briefing. As addressed in the Background section above, these options all require segregation of, and separation between, different classes COMMISSION AGENDA Tay Yoshitani, Chief Executive Officer May 30, 2012 Page 11 of 11 and types of stored commodities by tenants; places the Port in the enforcement role, as well as consequently requiring a master plan for each building in order to maintain the required separation between commodities in adjacent net lockers. As such, they would be challenging at best to achieve and maintain long-term storage code compliance within the net sheds. Therefore, Alternative 2 is not recommended. Alternative 3: Recommended. Complete the required code improvements by implementing Option 3, as shared at the December 6, 2011 Commission briefing. As mentioned above in the Background section, Option 3 best meets the current storage gear utilization by fishermen, requires no segregation of various types of commodities and plastics and does not place the Port in the enforcement role, and does not require a master plan for each building. It provides more volume than the other three options. This is the recommended Alternative. OTHER DOCUMENTS ASSOCIATED WITH THIS REQUEST: April 14, 2009 FT net sheds citation letter from the Seattle Fire Department PowerPoint presentation PREVIOUS COMMISSION ACTIONS OR BRIEFINGS: On March 10, 2009, as part of the Working Waterfront roundtable discussion held at the Nordic Center in Ballard, a briefing was provided to the Commission regarding the need to address the existing net shed storage concerns at Fishermen's Terminal. On April 12, 2011, the Commission authorized increasing the budget of the FT Net Sheds Code Compliance Effort expense project from $300,000 to $500,000. On December 6, 2011, as part of the FT 25-Year Plan and Net Sheds briefing, a summary of four net shed storage code compliance options identified as a result of the FT Net Shed Code Compliance effort, was provided to the Commission along with a recommendation that Option 3 be implemented as a capital improvement project to achieve the required code compliance.
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