City Council Meeting - FINAL


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  7.C.       
Meeting Date: 09/15/2020  
From: David Pedersen, Capital Improvements Project Manager

Information
TITLE:
Consideration and Approval of Lease Agreement:  Approval of the Lease with United States General Services Administration (GSA) – United States Geological Survey (USGS) Campus Build to Suit
STAFF RECOMMENDED ACTION:
  1. Approve the lease agreement with United States General Services Administration.
  2. Authorize the City Manager to execute the necessary documents.
Executive Summary:
This lease, between the United States General Services Administration (GSA) and the City of Flagstaff, will include the demolition of two buildings along with the construction of one new building and the replacement of the current warehouse facility. The USGS Flagstaff Science Campus would then consist of four buildings which includes the new office building and the new warehouse. These two new buildings will require a minimum certification from the U.S. Green Building Council’s Leadership in Energy and Environmental Design (USGBC) of “Green Building Rating System” of “LEEDTM Silver for New Construction (NC).”   The term of the lease is 10 years firm with an option for 20 years.
Financial Impact:

During the May 2004 election, voters approved Proposition 101 for the purpose of United States Geological Survey (USGS) Campus Facilities Construction and/or Renovations. The authorized amount was for $61.2M, of which the City has only bonded for $3.37M leaving an available balance of $57.83M. The purpose was to lease facilities to General Services Administration or others with the ability to pledge state shared revenues or other revenues. Debt could be no more than 25 years with a maximum interest rate of 10%.

The City has been negotiating for a new build to suit facility with the GSA since May 2016. The City plans to contribute $3,000,000 from the USGS reserve account and estimate financing $24,815,873 with an estimated interest rate of 3.5%. This would be an estimated 22-year loan with a lease term of 20 years, with 10 years firm. At the end of 10 years, the GSA could vacate with a 90-day notice potentially placing the City at risk for a 12-year period.  

The initial annual lease payment is $1,894,137.78 paid by USGS which will cover the debt service payment and set aside approximately $80,000 per year for insurance and maintenance of the facility.  Annual lease payments will increase based on Consumer Price Index (CPI) as noted in the lease.  

FY2020 budget includes $10,000,000 for the design and construction of this USGS building and the remaining $17,815,873 will be budgeted in future years.

Policy Impact:
No impact.
Connection to PBB Key Community Priorities/Objectives & Regional Plan:
Key Community Priorities
Robust Resilient Economy 
Environmental Stewardship


Regional Plan Goal || Environmental Planning & Conservation
  • Reduce Greenhouse Gas Emissions (E&C.2)
Regional Plan Goal || Energy
  • Increase Energy Efficiency (E.1)
Regional Plan Goal || Community Character
  • Support and promote art, science, and education resources for all to experience
Has There Been Previous Council Decision on This:
Council meeting 5/17/2016 - Council approved Resolution No. 2016-22, received authority to submit a bid response to GSA for the build to suit.
E-session   8/30/2016 - Property Negotiations
E-session 10/04/2016 - Property Negotiations
E-session   5/23/2017 - Property Negotiations
E-session   4/17/2018 - Property Negotiations
E-session 11/26/2019 - Property Negotiations, Council directed City Staff to continue negotiations with the GSA
Options and Alternatives:
  1. Approve the lease with the GSA as recommended. Approval will allow work on the project to move forward.
  2. Reject the lease. This action would delay the project.
    1. If rejection occurs, possible options include:
      1. Increase construction costs or
      2. Suspend or cancel the project
Background/History:

During the May 2004 election the voters approved Proposition 101 for the purpose of US Geological Campus Facilities Construction and/or Renovation. The City has been negotiating for a new built to suit facility with the GSA since May 2016. On 17 April 2018, Council directed City Staff to continue negotiations with the GSA. In October of 2019, the cost of construction had increased to $27,815,873 from our initial May 2016 submittal of $20,821,698.

Key Considerations:

The City has been leasing the City facilities to the USGS since the 1970s. This leasing opportunity would continue this long-term partnership between the City and both the GSA and USGS.  GSA leases approximately 85,000 square feet within four buildings at the USGS campus at 2255 North Gemini Drive.   In 1999, building #6 was constructed to add approximately 25,000 sq. ft. The original buildings, #3, #4 and #5 were constructed in the 1970’s.  Building #3 and #4 are outdated and have been identified as containing contaminated building materials such as asbestos.  These buildings would be demolished to make room for the new buildings #7 and #8. The new construction would consist of a new 35,454 square feet office building (building #7) and 21,788 square feet warehouse (building #8).  Buildings #5 and #6 would remain on the campus.  Buildings #1 and #2 have been demolished.

Community Benefits and Considerations:

The United States Geological Survey (USGS) Flagstaff Science Campus (FSC) houses science centers and research teams of the USGS that have a diverse range of scientific expertise. The Flagstaff Science Campus houses five USGS science centers: Arizona Water Science Center; Geology, Minerals, Energy, and Geophysics Science Center; Astrogeology Science Center; the Western geographic Science Center; and the Southwest Biological Science Center. The expertise of FSC scientists and collaboration opportunities provide the ability to address science issues related to water, ecosystems, climate and land-use change, energy and minerals, environmental health, and planetary exploration and study.

Attachments
Presentation
Context Map
Vicinity Map
Future Buildings Map
Lease Agreement


    

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