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Post Office Bldg. Federal Bldg. 350 W. 6th D~~~E ~Yk-~ MEMORANDUM c"" '-:: , , , . August 30, 2005 TO: The Honorable Mayor and City Council Members ('.,r FROM: Michael C. Van Milligen, City Manager SUBJECT: Application to GSA for Federal Building Conveyance The United States General Services Administration (GSA) has decided that they are going to dispose of the Federal Building at 350 West 6th Street in downtown Dubuque. Prior to conducting a public auction, the GSA has offered the building to the City of Dubuque for $1. Should the City acquire the building, it must be maintained to Secretary of the Interior Standards and any income generated from the building must be reinvested in the building.. The City must complete the complicated application process by October 31,2005, or the building will be auctioned. Economic Development Director David Heir has thoroughly researched this opportunity and is recommending that the City acquire the Federal Building. The identified advantages are. · City ownership and control better complies with intent of Federal requirements for historic monument conveyance of the building. · Saves the Dubuque Federal Building from falling into a greater state of disrepair, as has happened with the Clinton Federal Building. · Provides for larger and more functional City Council Chambers, with adjacent cable broadcast control room and conference room space. · Provides meeting space for City Boards and Commissions. · Relocation of the current Council Chambers provides the Library with more space to accommodate their programs. · Investment in the Federal Building would be a better real estate investment than putting additional money into the existing Housing and Community Development Department building to provide much needed space for that department and to make it accessible for persons with disabilities. $510,000 is budgeted in the current fiscal year for an addition to and renovation of the 1805 Central building that has an estimated sale value of $136,000 to $326,000. · Improves parking/safety access for citizens using services of current Housing and CD Department offices. Staff has looked at the availability of parking for tenants of the Federal Building. Currently, the public parking lot at 5th and Bluff has a 40% occupancy level, allowing sufficient capacity for new building occupants. · Location of other social services agencies to the Federal Building would find synergy in co-locating with the Housing and CD Department. The building has an estimated capital improvement need of $1 ,057,400 over the next five years. There are identified funding sources available in excess of this amount to fund these improvements, including using the CIP funds now designated for the Housing and Community Development Department facility, selling the current building used by this department and moving them to the Federal Building, Cable Franchise Fees, Tax Increment Financing, operating income from the building and financial assistance from Dubuque Initiatives. At 90% occupancy, the building will generate an estimated $100,000 in net operating income. I concur with the recommendation and respectfully request Mayor and City Council approval. I ' PIt') 7 / 1 I ,,' I ; ,'l/ ' ,)"Lv U'J (h '/1 Michael C. Van Milligen MCVM/jh Attachment cc: Barry Lindahl, Corporation Counsel Cindy Steinhauser, Assistant City Manager David Heir, Economic Development Director CITY OF DUBUQUE, IOWA MEMORANDUM August 29,2005 TO: Michael Van Milligen, City Manager FROM: David Heiar, Economic Development Director SUBJECT: Application to GSA for Federal Building Conveyance Introduction This memo presents for City Council approval a Resolution authorizing the submission of a formal application to the General Services Administration (GSA) for conveyance of the Federal Building to the City of Dubuque. Background Staff has been working with the GSA for several months to understand the parameters of conveyance and future responsibilities with respect to ownership of the Federal Building under the Historic Monument rules and regulations. GSA has given the City until October 31, 2005 to submit a formal application requesting conveyance. Since last meeting with the City Council regarding this project, staff has toured the property several times and continued discussions with the GSA and the National Park Service regarding the rehabilitation of the building, especially the historic metal windows. We have also met with a metal window expert who expressed the opinion that the windows were readily repairable. They are cast metal and exhibit surface rusting that could be wire-brushed and repainted. He estimated that less than a dozen would need replacement sash on the lower portion of the window due to deterioration. He will be submitting a ballpark estimated cost to repair the windows along with a proposal for a window-by-window survey and rehab specifications that could then be bid. The City hired Anderson Design in June 2005 to provide an evaluation of the building and estimated costs for needed renovation. Attached is a chart showing anticipated capital costs that the building requires over the next 5 years of $1,057,400. A proposed CIP has also identified possible City sources of revenue to fund the various renovation scenarios. A proforma of projected costs and expenses has been prepared based on renting the building to current tenants, other public agencies and City usage for City Council chambers and the possible relocation of the Housing and Community Development Department. (see attached) Staff has also investigated funding the renovation costs in other ways, including discussions with Dubuque Initiatives, Alliant Energy and a local private developer. We 1 have had discussions with Dubuque Initiatives (01) about their willingness to become partners in the project. As a non-profit, it was determined that the City could enter into a long-term lease with 01 but they could not hold title to the property. Dl has since decided that it is not in their best interest to become the property manager or primary equity investor in this project. They have agreed, however, to restructure City repurchase of the Port of Dubuque properties acquired by Dl on behalf of the City until a later date to make City funds available for Federal Building restoration work, if they are needed. The City has consulted with Alliant Energy to determine if their Performance Edge program might be available to assist with renovation costs. That program basically involves Alliant paying for the renovations upfront with payback over time through the energy savings resulting from the improvements to the building. They provided some good news in that their evaluation did not point out any immediate needs for the HVAC system or lighting in terms of improvements for additional energy efficiency. Therefore, the items that might have been eligible under their program (lights, HVAC and windows) did not constitute a sufficient cost-benefit return to make a Performance Edge-financed renovation project feasible. (see attached) Staff met with John Gronen to discuss the possibilities of a private developer getting involved in and helping to finance the project. The possibility of utilizing historic tax credits was explored. Unfortunately, with historic tax credits, there is a private or non- profit ownership requirement that cannot be overcome with the GSA acquisition requirements. Discussion Having completed the due diligence discussed above, the City must decide if it wants to move ahead with the formal application for conveyance of the property. The actual costs of renovation remain somewhat of a question mark, especially the cost of window replacement. What is known, however, is that the work must meet the Secretary of the Interior's Standards and any income generated by the property must be used for the continued/future maintenance of the property. The preliminary proforma does anticipate some income generation - both to pay back the initial renovation investment and create a sinking fund for future maintenance and repair. While the project is a substantial undertaking, and being a landlord is not usually the City's role, some of the advantages of accepting conveyance would be as follows: · City ownership and control better complies with intent of Federal requirements for historic monument conveyance of the building. · Saves the Dubuque Federal Building from falling into a greater state of disrepair, e.g. Clinton Federal Building. · Provides for more functional City Council Chambers, with adjacent cable broadcast control room and conference room space. . Provides meeting space for City Boards and Commissions. · Relocation of the current Council Chambers provides the Library with more space to accommodate their programs. 2 financing of the renovations. Long-term, a CIP is proposed that utilizes the Net Operating Income from the property and excess TIF generated from the Greater Downtown Urban Renewal District. [Note: the property is not currently located in the adjacent urban renewal district and would need to be included.] Recommendation I recommend moving ahead with the formal application for conveyance of the Federal Building. The reduction of anticipated building repairs makes a stronger case for City procurement of this building. In addition, the long-term benefits of investing in such a significant downtown building must be considered. The building will provide much needed public meeting and office space and continue to anchor a key location across from the historic Washington Park public square. While some unknowns remain, staff feels confident that the building can be renovated and maintained as a publicly-owned facility without increased tax askings. If the City, or other local governments or eligible non-profits, do not acquire the Federal Building, the GSA will dispose of the "surplus" property via a competitive sale to the public, generally through a sealed bid or auction. Action Step The action step for the City Council is to approve the attached Resolution and direct staff to prepare the formal application to GSA requesting conveyance of the Federal Building to the City of Dubuque. attachments F:\USERS\Pmyhre\WPDOCS\Federal Build ing\applicationmemo.doc 4 Resolution No. 427-05 RESOLUTION AUTHORIZING APPLlCA liON TO THE GENERAL SERVICES ADMINISTRATION FOR HISTORIC MONUMENT CONVEYANCE OF THE FEDERAL BUILDING TO THE CITY OF DUBUQUE. Whereas, certain real property owned by the United States, located in the County of Dubuque, State of Iowa, has been declared surplus and at the discretion of the Administrator of General Services, may be conveyed for historic monument purposes to a State, political subdivision, instrumentalities thereof, or municipality, under the provisions of Section 203(k)(3) of the Federal Property and Administrative Services Act of 1949, as amended [40 U.S.C. 484(k)(3)], and rules and regulations promulgated pursuant thereto, more particularly described as follows: Federal Building, 350 W. 6th Street, Dubuque, Iowa 1 .09 acres GSA Control Number 7-G-IA-0495-1 Whereas, the City of Dubuque needs and will utilize said property in perpetuity for historic monument purposes as set forth in its application and in accordance with the requirements of said Act and the rules and regulations promulgated thereunder; and Whereas, the City of Dubuque is authorized, willing and able to conduct compatible revenue-producing activities, and that regardless of any revenues derived from such activities, is financially able to utilize said property for historic monument purposes as set forth in its Program of Preservation and Utilization and in accordance with the requirements of said Act and regulations and procedures promulgated thereunder; and Whereas, the City of Dubuque agrees that any income in excess of costs of repair, rehabilitation, restoration and maintenance shall be used by the City of Dubuque only for public historic preservation purposes as enunciated in its Program of Preservation and Utilization; Now, Therefore, Be It Resolved by the City Council of Dubuque, Iowa, that the City of Dubuque shall make application to the Administrator of General Services for and secure the transfer to it of the above-mentioned property for said use upon and subject to such exceptions, reservation, terms, covenants, agreements, conditions, and restrictions as the Secretary of the Interior, and the Administrator of General Services, or their authorized representatives, may require in connection with the disposal of said property under said Act and the rules and regulations issued pursuant thereto; and Be It Further Resolved that the City of Dubuque has legal authority, is willing, and is in a position to assume immediate care and maintenance of the property, and that Michael C. Van Milligen, City Manager, be and he is hereby authorized, for and on behalf of the City of Dubuque to do and perform any and all acts and things which may be necessary to carry out the foregoing resolution, including the preparing, making, and filing of plans, .;,' ~ applications, reports, and other documents; the execution, acceptance, delivery, and recordation of reports, and other documents; the execution, acceptance, delivery, and recordation of agreements, deeds, and other instruments pertaining to the transfer of said property, including the filing of copies of the application and the conveyance documents in the records of the governing body, and the payment of any and all sums necessary on account of the purchase price thereof or fees or costs incurred in connection with the transfer of said property for survey, title searches, recordation of instruments, or other costs identified with the Federal surplus property acquisition. Passed, approved and adopted this 6th day of September 2005. ~ Ter ance M. Duggan Mayor Attest: Jeanne F. Schneider City Clerk STATE OF IOWA ) ) SS COUNTY OF DUBUQUE ) On this (p dv day of ~h1t>r ~ 2005, before me, the undersigned, a Notary Public in and for the State of Iowa, personally appeared Terrance M. Duggan and Jeanne F. Schneider to me personally known, who being duly sworn, did say that they are the Mayor and City Clerk, respectively, of the City of Dubuque, Iowa, a Municipal Corporation, created and existing under the laws of the State of Iowa, and that the seal affixed to the foregoing instrument is the seal of said Municipal Corporation, and that said instrument was signed and sealed on behalf of said Municipal Corporation by authority and resolution of its City Council and said Mayor and City Clerk acknowledged said instrument to be the free act and deed of said Municipal Corporation by it and by them voluntarily execute . ~" L. SUSAN M. WINTER f ' ..~ COMMISSION NO.183274 . . MY COMMISSION EXPIRES IO~ 2/f4/08 F:\USERS\Pmyhre\WPDOCS\F edera I Build ing\appres. doc FEDERAL BUILDING Renovation cost Estimates 8/15/2005 Total per FY 06 & FY 07 FY08-lO Beyond FY 1 ()** Anderson Report Site Access 7,500 3,000 10,500 Footings & Foundation 49,500 49,500 Exterior Walls 35,000 35,000 Doors & Hardware 49,000 49,000 Windows 495,000 495,000 Flooring * 130,900 Ceilings 1 ,700 7,900 9,600 Exit/Egress 5,600 5.600 ADA Requirements 15,000 16,000 10,000 41,000 Plumbing 11 ,200 27,000 38.200 HVAC 1 ,590,000 1,590.000 8ectrical 32.000 8,000 192.000 232.000 Hazardous Materials 425,000 425,000 Courtroom Conversion 150,500 8,000 158,500 Alternate for Steel Windows 952.500 952.500 Totals $ 743.700.00 $ 132.300.00 $ 3.215.400.00 $ 4.222.300.00 * 130,900 of tenant improvements (flooring) are needed ** 1,782,000 was identified in the Anderson report as a future expense for HV AC replacement and lighting as a replacement for efficiency. A review by Alliant Energy asserts that there are not maintenance improvements needed at this time, and the lighting is currently efficient. FEDERAL BUILDING 8/15/05 Anticipated Capital Expenditures FY 06 and 07 FY 08 thru 10 $ 743,700 $ 132,300 10% Architect & Engineering 5% Contingency Furnishings for Housing Dept. $ 131,400 $ 50,000 $1 ,057,400 Potential Capital Revenue Sources to Finance Building Improvements $ 510,000 Use current CIP allocated for an addition and renovation to Housing and Community Development Building at 1805 Central Avenue. $ 300,000 Sell building at 1805 Central Avenue and relocate department to Federal Building (need approximately 6000 sq. ft.) $ 50,000 Use Cable Franchise fees to cover A V and broadcast-related expenses. $ 250,000 Net operating income from the Federal Building (FY 08-10) $1, 110,000 other available revenue sources if needed 1. TIF- portions of the Federal Building will be taxable (estimated to generate about $60,000 per year) 2. Loan from Dubuque Initiatives (up to $1,500,000) 3. Excess TIF from Greater Downtown Urban Renewal District (City increasing TIF asking from 75% to 100% to help pay for parking improvements. However, anticipate about $177,000 per year that is not committed to any project) Proposed 9-Year CIP for Federal Building Improvements with project starting FY07 (July 1, 2006): Amount Source FY06 $ 510,000 Reallocate current Housing & CD Dept. CIP $ 510,000 (this money available before anticipated start date) FY07 $ 50,000 Cable Franchise Fees (AV and broadcast-related costs) $ 400,000 TIF Grant proceeds + $ 960,000 (Sufficient to complete "immediate" renovations and be ready to lease up January 1,2007) FY08 $ 300,000 Proceeds from sale of 1805 Central $1,500,000 Reallocated from FY08 $2 million CIP that was scheduled to repurchase Port property from Dubuque Initiatives ++ $ 50,000 NOI from Federal Building (first % year of full occupancy) $2,810,000 FY09 $ 100,000 NOI from Federal Building $ 200,000 Excess Greater Downtown 100% TIF $3,110,000 FY10 $ 100,000 NOI from Federal Building $ 200,000 Excess Greater Downtown 100% TIF $3,410,000. ... "E~PE:gTE[)"C}~rITA'EXPENDI1\IRE:SCOI\iIl~~~a;D FY11 $ 100,000 NOI from Federal Building $ 200,000 Excess Greater Downtown 100% TIF $3,710,000 FY12 $ 100,000 NOI from Federal Building $ 200,000 Excess Greater Downtown 100% TIF $4,010,000 FY13 $ 100,000 NOI from Federal Building $ 200.000 Excess Greater Downtown 100% TIF $4,310,000 FY14 $ 100,000 NOI from Federal Building $ 200,000 Excess Greater Downtown 100% TIF $4,610,000 ."V\{(')~$"CASE'~)C~t=>ITAL.~pg",Il}I"~R~$'~~IIB~.lm + Will require some capitalized costs for principal and interest until taxes begin 9-30-07. ++ New $1,750,000 CIP needed for FY09-FY12 repayments to Dubuque Initiatives. FY08 payment currently budgeted at $1,987,250 will be reduced to $500,000. Payments beginning in FY09 will be funded by DRA Distributions. TIF or UDAG. Depending on revenues, some other projects might need to be delayed to provide this $1,750,000. The $1.2 million AY McDonald UDAG repayment will help. NOI = Net Operating Income (the positive cashflow from rental income after operating expenses are paid) Federal Building Proforma 8/10/05 Rental income estimated to be: @ $2.50 per sf 8,913 sf @ $10.00 per sf 14,773 sf @ $8.00 per sf 12,375 sf @ $7.00 per sf 10,293 sf Annual Rental Income PLUS $2.75/sf Triple Net on all 46,354 sf Total Income Basement 1 st Floor 2nd Floor 3rd Floor Operating costs estimated to be: Cleaning (2002 numbers inflated) Utilities (2002 numbers inflated) Mechanical/Maintenance (2002 numbers inflated) Taxes Insurance Management (10-13%) Reserve for Replacement (5-10%) Vacancy (10%) Total Operating Costs $ 22,283 147,730 99,000 72,051 $341,064 127.473 $468,537 $70,000 56,000 85,000 60,000 6,000 o o 34,106 $311,106 Net Operating Income (wlTriple Net) $157,431 w/o CC and Housina sf rents 22,283 147,730 71,000 ( - 3500 sf City Council) 30,051 ( - 6000 sf Housina) $271,064 127.473 $398,537 70,000 56,000 85,000 54,000 6,000 o * 0- 27 ,106 $298,106 $100,431 * Management by private firm would be between 10-13% of annual rental income ($44,338 @ 13% if entire building is leased). The City would manage with other public facilities. - Reserve for replacement would typically be 5-10% ($34,106 @ 10%) but GSAlNational Park Service require that any net operating income go back into the building. rage 1 OI 1 David Heiar From: Cindy Lenz [CindyLenz@alliantenergy.com] Sent: Thursday, August 11, 20054:33 PM To: dheiar@cityofdubuque.org Subject: Federal Building Dave, Attached is the report from Mark Dunne, Alliant Energy Technical Support, for the Post Office in Dubuque. As we have discussed briefly, the facility is in good condition and with some minor modifications could be an awesome facility. It is a very breif synopsis of our findings, if you need something more detailed, please let me know and we will be happy to provide. I have asked Sue Heeren to try and find out when these improvements were made and she promises me that she'll try to find out next week. The only indication that I saw in the building was an "Energy Star" plaque in the lobby with the year-2000. I will let you know asap. I'm sorry that we won't be a partner in this project, but the good news is that the mechanicals and lighting are already very energy efficient. Thanks Cindy Have a great day! Cindy Lenz Strategic Account Manager Dubuque Operations Center 8000 Chavenelle Road Dubuque, IA 52002-9670 Phone: 563.587.4550 Cell: 319.551.1127 Fax: 563.587.4567 Q /1 ') /'"Joo" ~J AlllANT . ENERGY. AIliant Energy Corporation AIliant Tower 200 1 II Street SE PO Box 351 Cedar Rapids, IA 5241HKl351 Office: 319-786-4411 www.alliantenergy.com August 11, 2005 Mr. David Heiar Economic Development Director City of Dubuque 50 West 13th Street Dubuque,IA 52001-4864 RE: 1934 Federal Building (Post Office) Dear Dave: We appreciated the opportunity to visit the Federal Building in Dubuque. Sue Heeren with GSA was a good host and very helpful during our tour. One of our priorities at Alliant Energy is to get to know our customers and their operations so we can provide Total Energy Services that will help you capitalize on Alliant Energy expertise. Our goal during this visit was to identify items that could lower your utility bills without compromising your services. Revising operating schedules or replacing inefficient equipment can do this. During the energy audit walk-through, it was observed that the lighting has been updated to efficient T8 lamps with electronic ballasts. The exit lights have also been retrofitted to the LED units. When observing the HVAC units and controls, they appear to be original equipment but in working condition and working efficiently. The boiler units have been retrofitted recently with efficient units and have a staging strategy in place. In closing, with the retrofitting of equipment that has been done in recent years this facility appears to be in good condition mechanically and while there are some items in which could be improved upon with updated strategies and technologies; they may not be cost effective. Sincerely, Mark Dunne Technical Support Project Manager 319-753-5718 A