Special Project Oversight Committee (SPOC) Report #1

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~ Berrey was requested to modify his originai proposal by a special review committee when it was determined ta~c exempt financing could be used. By August of 1996, a preliminary financial analysis indicated the county would need to finance $14 million in order to acquire ownership of 72,000 sf of office space. The rental rate, paid by county departments, to cover operations & ma.intenance (O&M) and debt service, ranged between $1.20 and $1.40/sf. In December of 1996, Mr. Berrey produced the first financial analysis (proforma) based on a conceptual design and cost estimates from the contractor. The total project cost was estimated at $30 million. The county would own 72,000 sf at an estimated cost of $12.8 million. The proforma estimated a rental rate of $1.17/sf. However, Mr. Bertey cautioned the county to maintain a budget estimate based on $1.30-1.35/sf. A$3.6 million underground parking structure was included in the cost estimate containing 335 stalls. The ne~rt significant change in the project scope occurred in February of 1997. Mr. Berrey was developing 60,000 sf of office space which the county would lease or purchase for future e~cpansion. Our financial advisors suggested that the county build the expansion space and lease it to the private market. Mr. Berrey's proforma estimated the cost of this additional office space at $5.3 million. However, later cost estimates increased the cost of the expansion space to $13 million. As construction costs were refined the total cost of the projected had escalated to $37 million. The county's share of the project was now estimated at $25 million. During the months of May and June, the county asked our independent financial advisors to prepare new proformas. These analysis' gave us the first indication that the origiuaal budget goals were unrealistic. The analysis also indicated that the parking structure was oversized and was an economic drai.n on the project. The parking issue was d,ifficult to address because private business concerns and the city parking boazd encouraged us to build as much parking as possible. Revenues necessary to support the project were over- inflated and the overall unit cost of the building was still too high. In addition, independent reports from the Salem business community raised concerns that the county could not, and should not, support the risk associated with overbuilding and leasing excessive expansion space. On July 31 1997, with the concurrence of our new developers (Melvin Mark Co.) the county stopped the design process and directed the development team to study new down-sized options for our consideration. The architects were asked to consider a smaller (one-level) parking structure, reduce the size of the office building from 180,000 gsf to 150,000 gsf and separate the public and private portions of the development for easier and more fle~cible financing options.