Consider Change Order #5 - Sunwood Drive (Sunwood Retail Improvements)

At a previous meeting of the HRA, direction was provided to proceed with an alternative development scenario for the Sunwood Retail area. This can be generally described as the HRA taking a role in funding and completing certain hard and soft cost items associated with the improvements necessary to close on pending land sales.

The HRA approved the soft costs associated with this effort, and directed staff and the development team to outline and present the hard costs at a future meeting.

The current contract for the realignment of Sunwood Drive is active, and the contractor is on-site. There are portions of the proposed Sunwood Retail project that will include public sewer and water improvements that are proposed in the project area. The current Sunwood Drive contractor is familiar with the project, and provided stubs for these improvements under the current contract.

The council is allowed, under current bididng laws, to add-on to an existing contract for items less than $100,000.
The proposed work on public watermain, public sanitary sewer, and the common stormwater mains (exclusive of the infiltration facilities) have been presented to the current contractor for pricing as Change Order #5 and that price has been returned under the $100,000 limit.

If approved as a change order, construction of these deep utilities will be able to commence almost immediately, and be available for connection by Lots 4 and 5 as per the HRA agreement with those buyers. Obligations to construct the surface site improvements could then be transferred to the end users and deducted from, or escrowed from, proceeds of closing.

This scenario would allow SuperAmerica to proceed this fall as planned.

 The COR development team recommends the City Council consider the proposed Change Order to the Sunwood Drive project, and based on discussion provide direction as to proceeding with those improvements.

Funding for these improvements could be considered from two sources:
In exchange for the fill materials extracted from HRA property for the Sunwood Drive portion of the city project, the city was to provide and place additional material on the Sunwood Retail area, setting those pads up for future development. As Armstrong Boulevard plans were developed, it was apparent that considerably more fill would be necessary for that portion of the project, and the HRA agreed to allow additional material to be removed form Lake Ramsey for that effort. If the city council decided that the effort outlined in Change Order #5 was roughly equal to
the material provided for Armstrong Boulevard those costs could be used to offset the material costs and reconcile those efforts. When the initial budget was set and approved, the former city engineer erred in the summary of the work and counted the $200,000 effort to fill and grade the Sunwood retail area twice, once in the bid from the contractor, and once again in a separate line item. As a result, the project costs were overstated, and additional funding under the approved budget is available to fund Change Order #5.  The overall budget for the Sunwood project is being reviewed by the Council at work session.

Alternatively, because the items included in Change Order #5 are currently budgeted in the pro-forma for the HRA project, the improvements could be funded with HRA fund balances and refunded with land sale proceeds for the first closing on lots 3-5.  Staff has concerns in regard to over-extending the future land proceeds obligation unless sales proceeds are received prior to construction.

Approve Change Order #5 and direct staff to work with the contractor to make the improvements as outlined.

Direct staff to adjust the project/HRA budgets as necessary, based on council direction.