Table Of ContentCity of Palo Alto
(ID # 7032)
City Council Staff Report
Report Type: Action Items Meeting Date: 6/20/2016
Summary Title: Approval of Contract and Budget Amendment for Golf Course
Reconfiguration Project
Title: Approval of one Contract and two Contract Amendments: (1)
Construction Contract with Wadsworth Golf Construction Company in the
Amount of $11,964,620 for the Palo Alto Municipal Golf Course
Reconfiguration Project, CIP PG-13003; (2) Deductive Change Order Number
1 With Wadsworth Golf Construction Company in the Amount of $1,191,800,
Reflecting Cost Savings; and (3) Amendment Number 2 to Contract
C13148028 with Golf Group, Ltd. in the Amount of $125,720 for Construction
Support and Environmental Mitigation Monitoring Services; Discussion and
Direction to Staff Regarding Updated Pro-Forma and Financing Options;
Adoption of Resolution Declaring Intention to Reimburse Expenditures From
the Proceeds of Tax-Exempt Obligations (e.g. Certificates of Participation) for
a Not-To-Exceed Par Amount of $10.5 Million To Fund a Portion of the Cost of
the Palo Alto Municipal Golf Course Reconfiguration Project; and Approval of
a Budget Amendment in the General Capital Improvement Fund
From: City Manager
Lead Department: Public Works
Recommendation
Staff recommends that Council:
1. Approve, and authorize the City Manager or his designee to execute, the
attached contract with Wadsworth Golf Construction Company
(Attachment A) in the amount of $11,964,620 for the Palo Alto Municipal
Golf Course Reconfiguration Project, Capital Improvement Program Project
PG-13003; and
2. Approve, and authorize the City Manager or his designee to execute, the
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attached deductive Change Order No. One to the contract with Wadsworth
Golf Construction Company (Attachment B) in the amount of $1,191,800 to
reflect negotiated cost savings measures to be incorporated into the
project; and
3. Authorize the City Manager or his designee to negotiate and execute one or
more additional change orders to the contract with Wadsworth Golf
Construction Company for related, additional but unforeseen, work which
may develop during the project, the total value of which shall not exceed
$1,077,282; and
4. Approve, and authorize the City Manager or his designee to execute,
Amendment No. Two to Contract No. C13148028 with Golf Group, Ltd.
(Attachment C) in the amount of $125,720 for construction support and
environmental mitigation monitoring services for the Palo Alto Municipal
Golf Course Reconfiguration Project (PG-13003). The amendment includes
$52,395 for basic services and $73,325 for additional services. The revised
total contract amount is not to exceed $1,127,751, including $831,995 for
basic services and $295,756 for additional services; and
5. Adopt the attached Resolution declaring intention to reimburse
expenditures from the proceeds of tax-exempt obligations (e.g. Certificates
of Participation) for not-to-exceed par amount of $10,500,000 to fund a
portion of the cost of the Palo Alto Municipal Golf Course Reconfiguration
Project (Attachment D); and
6. Amend the Fiscal Year 2017 Budget Appropriation Ordinance for the
General Capital Improvement Fund by either:
OPTION 1
a. Increasing the estimate for Other Revenue from financing proceeds
in the amount of $2,017,616;
b. Increasing the Capital Improvement Program appropriation for the
Golf Reconfiguration & Baylands Athletic Center Improvements
Project PG-13003 by $2,252,248; and
c. Decreasing the Capital Infrastructure Reserve by $234,632.
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OR OPTION 2
a. Increasing the estimate for Other Revenue from financing proceeds
in the amount of $3,218,955;
b. Increasing the Capital Improvement Program appropriation for the
Golf Reconfiguration & Baylands Athletic Center Improvements
Project PG-13003 by $2,252,248; and
c. Increasing the Capital Infrastructure Reserve by $966,707.
Background
On October 15, 2012, Council awarded a contract to Golf Group, Ltd. (aka Forrest
Richardson & Associates) to design a reconfigured Municipal Golf Course, prepare
final bid documents (plans, specifications, and cost estimate) for the
reconfiguration project, and prepare an Environmental Impact Report (EIR) for
the proposed Golf Course modifications based on a conceptual layout plan
approved by Council in July 2012. In accordance with the adopted renovation
plan, Forrest Richardson prepared construction documents based on a design
concept that will reconfigure the Golf Course to conform to its Baylands setting
and rebrand the facility as the Baylands Golf Links at Palo Alto. The Golf Course
Reconfiguration Project plan modifies all 18 holes of the Golf Course, a portion of
the driving range and practice facility, and replaces an outlying restroom facility,
while retaining a regulation golf course with a par of 71. The reconfigured Golf
Course will incorporate or modify existing low-lying areas into the Golf Course,
reduce the area of managed irrigated turf, and introduce areas of native grassland
and wetland habitat.
The project design has been developed to achieve the following objectives:
Create a golf course that provides a more interesting layout for golfers of all
levels, with enhanced wildlife habitat, improved wetland areas, and
reduced usage of water, pesticides, and maintenance labor for turf and
landscaping;
Expand recreation areas to satisfy existing and projected needs;
Integrate the Golf Course into the Baylands design theme;
Mitigate for impacts on the Golf Course resulting from the San Francisquito
Creek Joint Powers Authority’s (JPA) flood control project;
Improve Golf Course playing conditions – turf, drainage, and irrigation; and
Increase rounds of play and expand recreational opportunities.
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On June 17, 2013, Council awarded a contract to Don Tucker & Son for the
importation and stockpiling of soil for use on the Golf Course Reconfiguration
Project. The contractor paid the City for the right to stockpile 365,000 cubic yards
for the Golf Course Project at a soil stockpile site on the west side of the Golf
Course. The soil importation process, which was completed in late summer 2015,
generated $1.2 million that will be used to directly offset the cost of the golf
course construction work.
Implementation of the Golf Course Reconfiguration Project requires the
acquisition of regulatory permits from state and federal resource agencies.
Specifically, the project requires a Section 404 Permit from the U.S. Army Corps of
Engineers (Corps) (which also involves consultation with the U.S. Fish and Wildlife
Service with respect to potential impacts to federally-listed endangered species)
and a Section 401 Water Quality Certification from the San Francisco Bay Regional
Water Quality Control Board (Water Board). Permit applications for the Golf
Course Reconfiguration Project were submitted on December 23, 2013.
In order to increase the chances of retaining a qualifed golf course builder to build
the project, staff implemented a prequalification process for potential bidders
during Fall 2013. Interested contractors submitted information regarding their
company with respect to specific golf course construction experience, audited
financial statements, ability to provide required bonds and insurance, and on-the-
job safety records for staff review. As a primary screening tool, the
prequalification criteria required prospective bidders to hold status as Certified
Golf Course Builders with the Golf Course Builders Association of America.
Contractor submittals were reviewed and scored by staff to identify firms with the
requisite experience, financial strength, safety record, and client relations to meet
or exceed the minimum scoring criteria. As a result of the pre-qualification
process, staff identified four golf course builders who had the exclusive right to
submit a bid for the construction of the Golf Course Reconfiguration Project.
On February 3, 2014, Council granted discretionary approval for the Site and
Design Review application for the Golf Course Reconfiguration Project, certified
the final EIR for the project, and adopted a Park Improvement Ordinance
reflecting the physical changes being made to the dedicated parkland at the Golf
Course.
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On February 24, 2014, a notice inviting formal bids (IFB) for the Golf Course
Reconfiguration Project was posted at City Hall and sent to the pre-qualified golf
course builders. Bids were received from all four pre-qualified contractors on April
15, 2014 and ranged from a low of $8,987,809 to a high of $9,940,488. Council
ultimately was forced to reject all bids because the City was not able to secure the
regulatory permits needed for project construction within the bid period.
Permit acquisition became a much more significant obstacle to progress than staff
or its environmental consultant originally anticipated. The state and federal
permitting processes were slow and cumbersome, and were complicated by the
Golf Course Reconfiguration Project’s location adjacent to and connectivity with
the San Francisquito Creek Joint Powers Authority’s (JPA) Bay-to-Highway 101
Flood Protection Project. Staff received a draft Section 401 Water Quality
Certification from the Water Board for the Project on June 15, 2016, and the draft
Section 404 Permit from the Corps is forthcoming. The two final regulatory
permits are expected to be received no later than June 30, thus providing the Golf
Course Reconfiguration Project with full authorization to proceed. Staff will
provide an update on permit status during its presentation to Council on June 20.
Discussion
Bid Process
On March 1, 2016, staff implemented a second bidder prequalification process in
an attempt to identify additional qualified golf course builders who would be
eligible to submit bids for construction of the Golf Course Reconfiguration Project.
No builders responded to the solicitation, so the original four pre-qualified firms
were still the only ones authorized to submit bids for the project. On April 22,
2016, a notice inviting formal bids (IFB) for the Golf Course Reconfiguration
Project was posted on the City’s project solicitation web portal and sent to the
four pre-qualified golf course builders with a bidding period of 32 days. Bids were
received from three of the pre-qualified contractors on May 24, 2016, as listed on
the Bid Summary (Attachment E).
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Bid Name/Number Palo Alto Municipal Golf Course
Reconfiguration Project, Capital
Improvement Program Project
PG- 13003/IFB # 163847
Proposed Length of Project Through September 11, 2017
Number of Bids Issued to Contractors 4 pre-qualified contractors
Total Days to Respond to Bid 32
Pre-Bid Meeting? Yes
Number of Company Attendees at Pre- 4
Bid Meeting
Number of Bids Received 3
Bid Price Range $11,964,920 to $13,374,960
Staff has reviewed all bids submitted and recommends that the bid of
$11,964,620 submitted by Wadsworth Golf Construction Company be accepted
and that Wadsworth Golf Construction Company be declared the lowest
responsible bidder. Staff recommends that the contract scope of work include the
Base Bid only. The low bid is 20% percent above the engineer’s estimate of
$9,964,651. The elevated bid prices are attributable to a number of factors:
(a) the requirement that the contractor pay prevailing labor wages (which
was not in effect during the bid solicitation in 2014);
(b) higher construction material costs; and
(c) a less competitive bidding environment due to the active economy. In
accordance with the provisions of the bid documents, the bids are
valid through August 22, 2016.
Initial Deductive Contract Change Order
As the low bid exceeds the budget established for the Municipal Golf Course
Reconfiguration Project CIP, staff has been meeting with the low bidder to
identify cost-saving changes that can be made to the project design in order to
reduce construction costs without sacrificing project quality or functionality.
Based upon discussions with the golf course architect and the low bidder, staff
has negotiated a deductive change order that will eliminate or modify several
non-essential components of the project without significantly affecting its
functionality. For example, cost savings have been achieved by slight reductions in
earthwork quantities, green and tee sizes, and cart path width, elimination of the
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soil moisture sensors and weather station, and minor modifications to the project
specifications without impacting the overall scope and appeal of the new golf
course. The change order also incorporates cost-saving value engineering ideas
generated by the low bidder including modified fertilizer and soil amendments
and alternative sand specifications that will result in further cost reductions. One
moderately impactful cost savings item included in the proposed change order is
the deferral of a new golf course restroom building. The work to install new
sanitary sewer and electrical connections to the site of the new restroom is
retained in the contract to facilitate the construction of the restroom at a later
date. Inclusion of the restroom building in the proposed construction contract
would increase the contract price by $225,000. An existing, but aged restroom
will no longer be demolished and will be retained for use. The combination of
recommended cost savings measures results in a deductive change order in the
amount of $1,191,800.
Staff recommends that Council approve, and authorize the City Manager or his
designee to execute, the attached deductive Change Order No. One with
Wadsworth Golf Construction Company in the amount of $1,191,800 that will be
applicable concurrently with the construction contract. As modified by Change
Order No. One, the base construction cost is $10,772,820.
In addition, staff requests authority to execute future change orders to the
contract with Wadsworth Golf Construction Company in the amount of
$1,077,282 (which equals 10 percent of the net contract amount following
execution of Change Order No. One) for related, additional but unforeseen work
which may develop during the project. Therefore, the total construction contract
would be $11,850,102.
Amendment No. Two to Golf Course Architect Agreement
During construction of the Golf Course Reconfiguration Project, there will be a
continuing need for the professional services of Golf Course Architect Forrest
Richardson and his environmental sub-consultants. Services include construction
support services such as review of contractor submittals, responses to requests
for information from the construction contractor, construction progress payment
and change order review, and periodic site visits by Forrest Richardson to provide
design guidance, inspect project progress, and ensure conformance with the Golf
Course design aesthetic and functionality. In addition, Dale Siemens, a close
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associate of Forrest Richardson with extensive golf course construction
experience, will be retained as a subcontractor to serve as an on-site project
representative conducting quality control inspections and acting as the liaison
between the contractor, City staff, and the Golf Course architect. The final
component of the construction stage services is monitoring of the environmental
mitigation measures stipulated in the EIR to be implemented during construction
of the project. Monitoring tasks, including contractor training, site surveys and
implementation of measures for the protection of sensitive plants, birds,
wetlands, and cultural and paleontological resources, and other environmental
control measures, will be performed by ICF International or Dr. Jeffrey Froke in
their role as sub-consultants to Forrest Richardson. Some of the construction
stage services described above were incorporated into Amendment No. One to
the professional services agreement with Golf Group, Ltd. (aka Forrest Richardson
& Associates), which was approved in June 2014. Much of the previously
approved construction stage funding included in Amendment No. One was
exhausted during the extensive project permitting process. The attached
Amendment No. Two includes the supplemental funding needed for construction
support services throughout the anticipated project duration.
Financial Analysis
In order to help assess the potential financial performance of the Golf Course
during and after construction, staff entered into a contract with the National Golf
Foundation (NGF) in 2012 to provide an independent Return on Investment
analysis on the design options and long-range Golf Course plan. The NGF report
was updated in 2014 to reflect the new project cost information received during
the initial construction bidding process and revised service contracts for golf
course management and maintenance. Once again, staff has retained NGF to
update the pro-forma to reflect updated project costs and current economic
conditions facing the golf course industry. The updated NGF report, pro formas,
and sensitivity analysis (Attachment F) discuss the changes in project cost and the
resulting changes to the projected future operational profit/loss status of the Golf
Course that have occurred since the last Council update in 2014.
NGF’s updated analysis does show a modest net attrition in golf participation
nationwide, but that our regional area remains a strong golfing market with
demographic profiles to support golf including population growth, higher median
income, and higher average age. Despite the closure of some area golf courses
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due to supply and demand equilibrium and the existence of some local golf
courses not able to fully recover overwhelming debt service expenses, NGF
reports Palo Alto’s Option G reconfiguration should result in a desirable course
with regional draw. NGF estimates the new Golf Course will generate sufficient
revenues to cover both operating costs and debt service once the new course has
reestablished itself in the region within one to two years after re-opening.
Although staff concurs with the overall NGF analysis, there are risks and
assumptions which do have the potential to negatively impact the course
financially. The re-opening of the reconfigured golf course and rebranding as
Baylands Golf Links relies heavily on the course being the highest quality public
golf course experience in the region and a local economy that will continue to
support high incomes, corporate presence, and visitation to the area. To
supplement the reconfigured golf course in providing a superior golf experience
resulting in a resurgence of rounds played and revenue, NGF emphasizes pairing
with quality control, effective branding, customer service, and cosmetic
improvements to the course entryway, buildings, and grounds.
Because pro formas are based on some assumptions which we can control, such
as pricing and golf course maintenance, and others we cannot, such as weather
and the economy, staff asked NGF to run several scenarios of sensitivity analysis
representing deviations from a “base” model. The three additional pro forma
scenarios reflect
a) Number of rounds of golf played reduced to moderately lower than
projected performance, continuing a downward trend;
b) Average green fees increasing over current fees by less than half the
15% projected increase in the base model; and
c) Number of rounds of golf played and average green fees both lower, in
combination.
Because of the virtually limitless number of combinations, other variables such as
fixed operating expenses remain the same as in the base scenario.
Table 1 and Table 2 below represent adjusted NGF pro formas for two debt
financing scenarios. The dollar amounts listed in the tables are Net Revenue
(Loss).
Table 1 represents the lowest level of financing and assumes $1.2 million of
project soft costs (design, environmental impact report, and attributed staff
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salaries and benefits) would be funded by the City’s General Capital
Infrastructure Reserve.
Table 2 represents a higher level of financing that is inclusive of these $1.2
million in softs costs, assuming no support from the General Capital
Infrastructure Reserve.
Both tables reflect adjustments to NGF’s pro formas to account for updated
financing and debt service amounts from what was provided to NGF to prepare its
report. Full details of NGF’s pro formas are contained in their report. (Attachment
F)
Pro forma scenario assumptions outlined in Table 1 and Table 2:
Base assumes 71,000 annual Rounds of Golf, Fee increase of 15% from
current fees, and 10% of Revenue set aside for an Operating/Capital
Reserve
Reduced Rounds assumes 61,000 Rounds of Golf instead of 71,000
Reduced Fees assumes only about half of the 15% fee increase
Reduced Rounds and Fees incorporates both of the above
Table 1. Net Revenue (Loss) of Base and Three Pro Forma Scenarios in $000s:
$8,166,053 Financing w/ $495,529 annual Debt Service
FY 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Base ($842) ($733) $94 $406 $390 $374 $367 $370 $372 $374
Reduced
($842) ($1,011) ($261) $0 ($22) ($45) ($60) ($67) ($75) ($84)
Rounds
Reduced
($842) ($837) ($45) $247 $229 $210 $200 $189 $187 $184
Fees
Reduced
Rounds ($842) ($1,100) ($380) ($136) ($160) ($185) ($203) ($214) ($225) ($238)
and Fees
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Description:Construction Company for related, additional but unforeseen, work which may develop during the final bid documents (plans, specifications, and cost estimate) for the reconfiguration project, and . Baylands Golf Links relies heavily on the course being the highest quality public golf course experie
