Subject: TUERS-CAPITOL GOLF COURSE-ADDITIONAL
PROJECT COSTS
It is recommended that the City Council:
A. Adopt the following Appropriation Ordinance amendments in the General Fund:
1. Increase the Tuers-Capital Golf Course project appropriation by $2,967,000.
2. Reduce the Future Capital Projects Reserve by $2,967,000.
B. Approve an increase in the construction project contingency by $676,000, from $875,000 to $1,551,000.
C. Adopt a resolution authorizing the City Manager to negotiate and execute an amendment to the Grow-in Agreement with San Jose Golf, LLC, a California limited liability company, modifying the term of grow-in of the Tuers-Capitol Golf Course to commence on May 1, 2001, extending the agreement term for an additional eight (8) months to terminate on March 1, 2002, and increasing total compensation to an amount not to exceed $2,513,000.
D. Adopt a resolution authorizing the City Manager to negotiate and execute an amendment to the Operations and Maintenance Agreement with San Jose Golf, LLC regarding Rancho del Pueblo Golf Course to allow the Class A Golf Course Superintendent for the Tuers-Capitol Golf Course to also oversee maintenance of Rancho del Pueblo plus other related changes.
BACKGROUND
On August 8, 2000, City Council awarded a contract for the construction of an 18-hole golf course on a 180-acre site located northwest of the intersection of Tuers Road with Capitol Expressway. When completed, the facility will be an 18-hole, executive (par 68) golf course with a two-story, lighted driving range, clubhouse, cart barn, maintenance facility and parking.
The construction project is currently approximately 60 percent complete. Turf seeding of the site began on May 9, 2001. The turf development period, called “grow –in”, is expected to take ten months from the date the final turf element of the course is turned over to the prospective operator.
Since the beginning of construction of the golf course, several issues including, but not limited to mitigations, relocations and utilities have surfaced requiring additional effort on City staff’s part to bring them to a resolution. As a result, it has now been determined that actual costs to complete the project will be higher than the budgeted amount requiring Council approval of additional funding.
A. Summary of Additional Project Costs
Additional
project costs have been identified totaling $2,967,000 (see Attachment).
Funding is being requested for this project to cover additional construction
costs, construction management and consultant expense, PG&E expenses,
habitat mitigation costs and trail paving costs, additional grow-in costs,
additional FF&E and inventory costs, and initial facility operations.
The
$2,967,000 is comprised of the following additional project costs:
Additional Construction Costs $ 552,000
Department of Toxics Substances Control Voluntary Cleanup
Agreement 50,000
Additional Design and Construction Management Expenses (DPW) 120,000
Additional Costs for PG&E 180,000
Additional Consultant Fees 275,000
Regional Trail Paving 300,000
Additional Habitat Mitigation Installation 165,000
Consulting Biologist 70,000
Additional Grow-in 828,000
Additional FF&E 175,000
Additional Inventory (Golf Shop and Concessions) 47,000
Working Capital (for facility operations) 75,000
Pre-Opening (one month’s operations/maintenance funding
prior to opening facility to public) 171,000
Grand Opening Event 25,000
Liquor License 60,000
Site Security 50,000
Mitigation Area Maintenance (for 10 years) 0 *
Sub-total $3,143,000
Deduction for project’s remaining budget (as of 5/14/01) ( 176,000)
Total $2,967,000
*The amount for mitigation
area maintenance for the next ten-year period will be unknown until a consulting
biologist is retained and develops the maintenance standards for the mitigation
areas.
The project costs indicated
above are estimates based on an evaluation of the project related to
construction and operations impacts. The project was originally designed
concurrent with the preparation of the environmental document. Therefore,
consistent with the City’s construction estimating policy, the project cost
estimate were less precise than the current estimates as all of the potential
project delay and additional costs could not be anticipated. Since these new
estimates are expected to have a higher level of precision than early project
estimates, they have a relatively small level of expected variance.
At the time of contract award, a construction contingency was approved for $475,000. In March, the City Council approved a contract change order (No. 3) related to the relocation of the Wildlife Center of Silicon Valley and increased the overall project construction contingency to $875,000.
Staff requests authorization to increase the project construction contingency by $676,000. This amount combined with the remaining funds in the current budget (176,000) will fully fund additional project construction work as discussed in the attachment, and the paving of the regional trail.
In the original project budget, $360,000 was estimated for a six-month grow-in. Since that time, it has been determined that a ten-month grow-in will be required. The operator has estimated the cost for labor and materials to perform the entire ten-month grow-in at $1,188,000. Additional funding is needed in the amount of $828,000 to fund the entire grow-in period.
The original FF&E funding also provided $1.1 million for equipment acquisition. Additional FF&E funding of $175,000 is requested for the balance of equipment acquisition.
Additionally, staff is proposing to include $50,000 for additional site security during this critical grow-in period.
In summary, the proposed amendment to the Agreement with SJG
would: modify the commencement date to May 1, 2001, extend the term of grow-in
of the course to ten months, increase the total compensation to a total amount
not to exceed $2,513,000 (the total of grow-in, FF&E and site security
funding), and make any changes necessary to
implement the other provisions of this memo approved by City Council.
D. Approval of First Amendment to
Operations and Maintenance Agreement (Rancho del Pueblo)
Currently, the Operations and Maintenance Agreement with San Jose Golf, LLC for the Rancho del Pueblo Golf Course requires the operator to have an on-site Class B Golf Course Superintendent supervised by a Class A Golf Course Superintendent.
During negotiations of the operations and maintenance agreement for the new 18-hole golf course, San Jose Golf proposed that a Class A Golf Course Superintendent be allowed to oversee maintenance of both the 18-hole golf course and 9-hole golf course. This is acceptable as long as the Manager of the 9-hole golf course maintains two (2), full-time Foremen on the maintenance staff.
The
proposed First Amendment would acknowledge the Manager’s Class A Golf Course
Superintendent of the Tuers-Capitol Golf Course would also oversee Rancho del
Pueblo Golf Course maintenance. Additionally, it would require two, full-time
Foremen on the Rancho del Pueblo maintenance staff. The Manager will provide
qualifications for this position classification to be attached to the amendment
as an exhibit.
The
Class A Golf Course Superintendent is expected to spend 35% of the position’s
annual hours overseeing Rancho del Pueblo maintenance.
If
for some reason, negotiations are not concluded successfully with San Jose Golf
for operations and maintenance of the 18-hole golf course, the golf course
superintendent requirement at Rancho del Pueblo would revert to the original
contract language.
Prior to development of the new 18-hole course, Public Outreach occurred through numerous community meetings conducted by Vice Mayor George Shirakawa, in addition to the environmental review and project permitting processes, and the Public Art artist selection process.
This memorandum has been coordinated with the City Manager’s Office, City Manager’s Budget Office, City Attorney’s Office, and Departments of Finance; and Parks, Recreation and Neighborhood Services.
An Appropriation Ordinance amendment is proposed to fund the additional costs from the Future Capital Projects Reserve. No other commitments have been made against this reserve at this time.
SUMMARY
Additional unfunded project costs (construction, grow-in and operations) have been identified totaling $2,967,000 that require funding in order to open the facility to the public. This report provides a description of the reasons for the additional project costs and a recommended funding source.
The Operations and Maintenance Agreement with the operator of the 18-hole golf course will be presented in the Council in fall 2001 for approval.
NANCY JOHNSON
Director, Conventions, Arts and Entertainment
RAJEEV BATRA
Acting Director, Public Works Department
Attachment
ATTACHMENT
Basis for Additional Project Costs
Additional Construction Costs ($552,000)
At
the time of award a construction contingency for this project was established
in the amount of $475,000 or 3.4% of the construction amount. This percentage is exceedingly low for a
project of this size and complexity however, based on the knowledge and history
of the site it was felt to be appropriate. Projected additional construction
costs in the amount of $552,000 are now anticipated.
While
there are numerous issues to the project, which resulted in additional costs,
there are three major items that resulted in the bulk of these costs. The three
items include changes and delays by PG&E to the installation of electrical
facilities for the course, delays and higher costs associated with the
construction of the bridge crossing Coyote creek, and impacts associated with
the relocation delays of the Wildlife Center of Silicon Valley.
PG&E
delay: Negotiations with this utility company have been difficult and time
consuming. Given the financial difficulties and the loss of experienced
personnel by PG&E obtaining an agreement and scheduling PG&E to
complete their work has taken dramatically longer than originally envisioned.
This delay has resulted in a negative impact to the project schedule and
specifically to the completion of the clubhouse.
Bridge
Crossing: Since the work on the
environmental documents, the Master plan and the construction documents were
processed in parallel, it was assumed that the project would be awarded in June
2000 when the EIR and Master plan were
finally approved. But since there was a legal challenge to the EIR, project
award was delayed until August 2000. This delay in award affected the
installation of the bridge across Coyote Creek. Since the bridge was integral
to other aspects of the construction schedule, broader areas of the project
were impacted.
Relocation
of the Wildlife Center of Silicon Valley: One of seven community groups or
facilities to be relocated from the golf course site this group has been the
most difficult to relocate. Due to
special operational requirements associated with a facility of this nature it
was difficult to identify a suitable relocation site and define a reasonable
scope of work. The relocation was completed on May 23, 2001 and will now allow
the completion of holes 13 and 14.
Department of Toxics Substances Control Voluntary Cleanup
Agreement ($50,000)
This
Agreement would provide for Department of Toxics Substances Control (DTSC)
oversight of City cleanup of lead contaminated soil found on the golf course
site. Obtaining DTSC approval of the City’s proposal to cap the lead
contaminated soil minimizes the risk that DTSC might order the City to do other
future work to address the lead contamination. In order to obtain DTSC
oversight, the City must agree to fund DTSC’s costs. The costs associated with
this agreement are estimated at $50,000.
Additional Design and Construction Management Expenses
(DPW) ($120,000)
Since
the contractor, project management firm and architect will be involved in the
project longer than anticipated, Public Works staff will also be required for a
longer duration to oversee their work and additional funding will be required.
The additional funding requested for Public Works staff costs is 120,000.
Additional Costs for PG&E ($180,000)
The
project budget had an allowance of $110,000 for PG&E for electrical and gas
utility services. The actual fees for
the service agreement with PG&E exceeded this estimate by approximately
$180,000. The agreement was approved and the fees paid on April 20, 2001, in
order to facilitate on-going construction and minimize delays to the
construction project. The additional fees were paid out of other items in the
project budget to facilitate construction.
Additional Consultant Fees ($275,000)
As
noted above, completion of the project construction will take longer than
anticipated. The services of the construction management firm (Heinbuch Golf
Construction), design consultants (JMP Golf Design Group) and environmental
consultant (Denise Duffy & Associates) will still be required through the
completion of the construction work. The environmental consultant is also
providing supplemental services in reviewing the mitigation plans for
consistency with the project Environmental Impact Report (EIR).
Additional
funding for these continued and supplemental services are requested in the
amount of $275,000.
Regional Trail Paving ($300,000)
A
regional trail along Coyote Creek is part of a long-range plan of the City. The
master plan for the golf course identifies the portion of the trail that is
contiguous with the golf course as part of the overall plan for development of
the site. This trail will connect the existing trail terminus at Tuers Road and
Capitol Expressway with Stonegate Park, completing another link in the
long-range plan.
The
golf course construction contract included the grading of the trail only. The
paving of the trail was not included in the bid for the project at the time of
award. It was anticipated that the cost for paving the trail would be
identified from a source other than the bond revenues that pay for the golf
course construction contract.
Completion
of the trail is part of the project as defined in the master plan for the golf
course. The trail will need to be completed consisted with the trail
construction practices for recreational and commuter purposes. A portion of the
trail also is required to support vehicle access to the driving range area for
San Jose Municipal Water to service its wellheads. It is recommended that the
paving be completed before the next winter rains, which may contribute to
erosion of the graded dirt trail. The estimated cost to pave the trail is $
300,000.
Additional Habitat Mitigation Installation ($165,000)
The
project budget had an allowance of $350,000 for the installation of a habitat
mitigation plan. Plans for the mitigation installation were developed after the
certification of the EIR, approval of the golf course master plan and
construction contract award. The plans are now 95% complete with an estimated
cost for installation of $515,000. Therefore, the additional habitat mitigation
installation costs are $165,000.
Consulting Biologist ($70,000)
As
a requirement of the mitigation area plantings, the City must ensure these
areas are maintained and monitored for a ten-year period. A consulting
biologist will prepare maintenance standards and perform the ten years of
monitoring. The estimated cost for the consulting biologist to perform both is
$70,000.
Additional Grow-in ($828,000)
As
required in the project EIR, a Water Quality and Chemical Application
Management Plan (CHAMP) was developed by Questa Engineering (Questa) to
identify key water quality issues and how they were to be handled during golf
course construction and maintenance.
The
CHAMP sets forth-reasonable standards for a mature golf course, but did not
completely take into account the grow-in phase for the course. According to
estimates, grow-in of the course at the original CHAMP levels could take
approximately 18-24 months. A joint proposal was submitted to the City by Mr.
Terry Buchen, the City’s agronomist overseeing grow-in of the golf course, and
the proposed operator. This proposal was forwarded to Questa. The joint
proposal calls for extending the originally-estimated, six-month grow-in to ten
(10) months provided that certain adjustments are made to the CHAMP’s nutrient
level allowances. The joint proposal
has been approved by Questa.
The
lengthening of the course grow-in adds to its cost. At the time the bond issue
was calculated, the grow-in period was budgeted at $360,000 and anticipated to
take six months. The current budget for
the entire grow-in period (ten months) is estimated at $1,188,000 requiring an
additional $828,000.
Additional FF&E ($175,000)
As part of the project bond issue, $1.1 million was financed for FF&E acquisition.
The current budget for the entire FF&E acquisition is estimated at $1,275,000 requiring an additional $175,000. This $175,000 provides funding for additional maintenance equipment, and other office, café and driving range equipment.
Additional Inventory for Golf Shop and Concessions
($47,000)
Additional
inventory funding for the golf shop and concessions areas is needed to augment
the original funding for inventory of $40,000. This will provide a total of
$87,000 for initial inventory.
Working Capital ($75,000)
Working
capital funding in the amount of $75,000 is needed to provide funding to cover
months during which golf course expenses are greater than revenues. Since the
operator is managing the golf course on behalf of the City, all revenues and
expenses are those of the City. Therefore, there needs to be sufficient funding
to accommodate months (primarily winter) where revenues will be insufficient to
cover operating costs in the initial years.
Pre-Opening ($171,000)
Pre-opening
funding is to provide resources to the operator in the amount of $171,000 for
staff-up and training of the golf shop, food and beverage and administrative
staff, utilities and supplies and materials. It also includes funding for
marketing of the facility.
Grand Opening Event ($25,000)
A
grand opening event is planned for the facility and is an unfunded need. The
requested amount to fund this event is $25,000.
Liquor License ($60,000)
Originally,
only a beer and wine license was anticipated for the food and beverage
operation at the course. However, the operator is being requested to obtain a
liquor license. Funding in the amount of $60,000 is requested for acquisition
of this license.
Site Security ($50,000)
The
golf course site with its significant riparian corridor was undeveloped for a
number of years with easy access by the public. It has been used for informal
recreational activity, getting from one side of the creek to the other,
homeless encampments, illegal dumping, arson and other types of activity.
Site
security funding will provide for continual fence repairs and a security patrol
during the evening and early morning hours, among other measures during the
grow-in period.
Mitigation Area Maintenance
Mitigation
area maintenance costs are unknown at this time. The maintenance standards for
the mitigation areas will be prepared by a consulting biologist retained by the
City to do the long-term monitoring of the site. After preparation of the
maintenance standards, the golf course operator, and other firms if necessary,
will be asked to provide a cost proposal for performing these services.