Adopt Resolution 13-05-080 accepting Plans and Specifications and authorizing Advertisement for Bids for COR TWO (Sunwood Retail) Stage 1 Improvements

The COR TWO (Sunwood Retail) Stage 1 (common) improvements project area is bounded by Armstrong Boulevard to the west, Sunwood Drive to the east and north, and the initial COR development to the south.  The Stage 1 improvements include minor site grading and construction of private bituminous access drives and utility trunk and service lines to serve the three platted commercial parcels.  On-site stormwater treatment improvements, both temporary and permanent, are also proposed.

On October 16, 2012, the HRA approved a work order with Landform Professional Services, LLC to prepare plans and specifications for the COR TWO Stage 1 improvements.  While the plans and specifications for the Stage 1 improvements are not yet complete, city staff did recently receive and review the draft plans and have submitted initial review comments to Landform to be addressed.  As of May 9th, city staff had not yet received the revised plans or a draft of the project specifications for review and approval.  Once final plans and specifications are received, staff will promptly review them to ensure all plan review comments have been addressed to staff’s satisfaction, and that the project specifications are accurate and complete.

As was discussed during the April 9th HRA regular meeting, one of the three platted parcels includes the proposed McDonald’s USA, LLC development in the northwest corner of the project site.  McDonald’s recently informed the city that they wish to develop the site this summer, with the intent of opening for business this fall.  The HRA is therefore being asked to accept the plans and specifications and to authorize advertisement for bids prior to receipt of final plans and specifications in order to accommodate McDonald’s desired development schedule.  Staff then anticipates requesting acceptance of the bids and award of a contract for the COR TWO Stage 1 improvements at the HRA’s June 11th regular meeting.  Substantial completion of the project is anticipated to occur on or before August 2nd, with final completion on or before September 13th.  McDonald’s development team previously indicated they are generally agreeable to these milestones.

As noted earlier, the plans include both temporary (two ponds) and permanent (below ground storage chamber) stormwater treatment improvements.  One of the items the HRA is being asked to consider is whether to approve construction of the temporary or the permanent stormwater improvements at this time.  The cost to construct the temporary at-grade ponding improvements is significantly less than the estimated cost for the permanent ponding improvements, which includes $39,000 for an underground storage structure.  The temporary improvements could be constructed at this time then, once a development proposal is received for the south parcel and/or the Sophia Ramsey site, the permanent stormwater treatment improvements could be constructed at a later date with little sunk cost.  On a related note, the plans call for the landscaped area around the east temporary stormwater pond, located on the Sophia Ramsey parcel between the initial COR development access drive and Sunwood Drive, to be irrigated using a temporary connection to the city’s irrigation service line running along the west side of Sunwood Drive.

Alternatives

Alternative #1 - Accept plans and sepcifications and authorize advertisement for bids. Based on the existing real estate contract, this is Staff's preferred option. The improvements need to be constructed (with the potential for some parallel construction) before McDonald's will close on the parcel. In order to meet the timelines specified in the contract, it is important to start the official process.

Alternative #2 - Do not advertise for bids. This is not Staff's recommended alternative. Per the real estate contract, McDonald's possesses a right to cure provision. Essentially, if the HRA does move forward with the improvement, McDonald's could choose to still proceed to closing, hold land sale proceeds in escrow (at 1.5 times the cost of completing the improvements), and could choose to complete the improvements using said escrow funds. In addition, the real estate contract does specify that the HRA shall construct the improvements. Staff advises the HRA, after discussion with legal counsel, that Alternative #1 provides the HRA the most security and control over the installation of the improvements.

Staff recommends that the HRA adopt Resolution 13-05-080 accepting plans and specifications and authorizing advertisement for bids for the COR TWO (Sunwood Retail) Stage 1 improvements.  Staff also recommends approving bidding the construction of the temporary stormwater improvements at this time as this will significantly reduce initial construction costs while allowing for greater flexibility for future site development proposals.
Note:   The project is not authorized for construction with the action this evening.  Bids will need to come back for Council approval at a future meeting.

The latest known estimated construction cost for the improvements is $327,467.73 which included 10% contingency and 20% indirect costs.  However, staff believes the actual construction costs will be significantly less than this since city staff will provide construction staking to reduce indirect costs, and since the estimated cost above includes $5,645 for clearing vegetation from the site, on which there is none, plus another $39,000 for the permanent underground stormwater storage chamber.  Therefore, assuming that the temporary stormwater ponding is constructed and that no significant changes to final plans are needed, the actual construction costs should be less than $300,000.  Staff will be able to provide more accurate estimated construction costs at the time bids are brought back for consideration of awarding a contract.

Ultimately, the funding for the Stage 1 (common) improvements will be the land sale proceeds from the sale of property to McDonald's USA, LLC; however, the project will require an interim funding source. Per the Real Estate Contract with McDonald's USA, LLC, the HRA must begin construction on the improvements prior to closing with McDonald's. Therefore, an interim funding source is required. The interim funding source is proposed to be The COR Revolving Fund. Based on this interim loan, the interim funding will experience a negative interest.  The HRA can then pay itself back through additional land sales of the two remaining COR TWO parcels, with the intent being to split the construction costs for the Stage 1 improvements between the three parcels on a pro-rata basis, which McDonalds has previously consented to.

Motion to adopt HRA resolution 13-05-080 accepting plans and specifications and authorizing bids for COR TWO (Sunwood Retail) Stage 1 improvements.