Are Cost Projections From the EDC Credible? An AIA 10 Presidents White Paper

Read the opinion of 10 past and current presidents of AIA Dallas in this white paper.

EDC projections for city government to remain at City Hall have put the 20-year price tag for that at $1 billion. The report has many problems, including an apparent bias toward relocation.

Recent projections by the EDC (Economic Development Corporation) have stated that it will cost the city around $1 billion to stay at City Hall over the next 20 years. Furthermore, this problematic number has been inaccurately reported in the media as “the cost to repair City Hall (paraphrased)”. Of the $1 billion, only $329 million is actually allocated to “repairs” of City Hall. That said, even this lower number is highly problem

atic, which we will discuss more in a moment. There are numerous issues with which the EDC projections can be legitimately challenged, but let’s consider just a few of those now.

THE EDC REPORT IS FULL OF FAULTY ASSUMPTIONS: EXAMPLE

One example is this — a claim is made in the EDC report that renovating Dallas City Hall would require the entire staff and leadership to entirely relocate for a period of five years, leasing and fitting out temporary space elsewhere, at a cost of $113 - 195 million.

In fact, Dallas has already shown that its own major and complex facilities can be modernized while they remain in service. For example, Love Field was renovated and expanded while the airport stayed open and serving passengers every day.

The same is true of City Hall itself. Over the years roof replacement, 911/311 and Fire Dispatch upgrades, the Traffic Management Center and EOC buildouts, expansion joint and waterproofing repairs, ADA work, interior reconfigurations, and elevator modernization were all completed while the building remained occupied and functioning.

Relocation is simply not necessary. For City Hall, as with other similar projects, a typical solution would be a phased construction approach, determined in partnership with a selected contractor after detailed programming, design and planning. If 20% of staff (a few departments) were relocated to existing city-owned space (such as the library) for the duration of the project, “swing” space would be created to enable other staff to temporarily relocate within City Hall as construction proceeds. The phased renovation of public areas of the building would overlap with the phased renovation of the workspace and repairs to the garage and building systems, etc. With this very common, proven approach, the overall renovation schedule could be accomplished in about 3 years, once begun.

FAULTY ASSUMPTION: EXAMPLE 2

The EDC reports incorrectly attribute many other non-repair costs to remaining at City Hall. Unstated in the EDC reports is the fact that these costs will be incurred by ANY relocation scenario — lease or purchase — at a magnitude comparable to remaining at City Hall. These include:

Interiors (presumably interior improvements) ..................$54-107 million

Furniture, Fixtures and Equipment .....................................$20-45 million

Technology — Cables, Networks, AV, etc. .........................$15-31 million

Soft Costs and Moving ............................................................$20 million (not actually required for a renovation)

Operating Expenses (20-year)..............................................$277 million

Project Cost and Change Contingency..............................$23-28 million

TOTAL ..........................................................................$409-508 million

At the risk of repetition, these costs are not uniquely related to a scenario of remaining at a renewed City Hall. They apply to ALL scenarios.

FAULTY ASSUMPTION: EXAMPLE 3

The EDC report also includes an Interest Expense (20-Year) line item of $299M-360M, based on the costs of financing their iffy cost projections. What is not mentioned by EDC is that any alternative scenario involving new construction will incur interest costs as well, nor what those interest costs may be.

Let’s examine the cost of leasing space elsewhere for 20 years. Using the EDC’s cost for a 5- year lease ($100M – 112M for the lease + $13M-73M for fit-out) and assuming 5% escalation, the cost of a 20-year lease would $612M – 743M.

And, of course, those lease payments will carry on after 20 years, essentially forever.

It should also not be overlooked that the current plan is to relocate emergency services from City Hall to a purpose-built building elsewhere, at an unaccounted-for cost of $200-250M.

SO, USING JUST THREE EXAMPLES, IT IS CLEAR THAT WELL OVER 2/3 OF THE EDC $1 BILLION PRICE TAG IS BASED ON FAULTY ASSUMPTIONS, INCORRECTLY ALLOCATED TO THE “REPAIRS” OF CITY HALL.

NOW, LET’S LOOK AT THOSE REPAIR COSTS.

The “cost estimates” prepared by the EDC team of consultants appear to be based on an assumption that Dallas City Hall is a troubled building, and that only massive repairs and interventions could save it. In fact, the reality is that Dallas City Hall is a high-functioning building, in spite of years of underfunded maintenance, and poorly planned, spot renovations and short-term “fixes”. Beyond this apparent bias, the EDC cost estimates are troubling for a number of reasons, including a consistent over-reliance on age as a proxy for failure. Throughout the consultant report, the phrase “beyond typical service life” is used as a blunt instrument to justify full system replacement, even where their own narrative rates condition as fair or good and describes problems as localized. That approach treats age alone as failure, instead of asking what is actually required to keep a high-functioning civic building operating safely and efficiently.

Other specific concerns include:

• failure to consider previous reports and analyses of City Hall condition

• lack of publicly shared back-up or detail for their cost estimates

• minimal on-site analysis of hidden conditions, leading to worst-case assumptions not based on facts.

To cite only a couple of specific line items, involving the two largest costs in the estimates…

STRUCTURAL & SITE ELEMENTS - $61.5 MILLION

One of the findings of the EDC consultant teams, as stated in their report, is this:

“No evidence of widespread structural instability was observed at the time of assessment.”

However, the cost assigned to “Parking garage structural repairs” is $61.5 million, with no further explanation or back-up. This is mystifying, to say the least, considering that only isolated repairs are identified and most of those are for non-structural items, such as site paving.

CORE BUILDING SYSTEMS - 211.4 MILLION

It has already been decided by the City Council’s Finance Committee that emergency services should be relocated from City Hall to new facilities elsewhere. These facilities are anticipated to cost $200-250 million, due to the critical demands of the functions within, including highly redundant and complex communications, power and mechanical systems, and hardened storm resistant structure. However, the electrical and mechanical costs cited in the EDC reports appear to incorrectly assume that emergency services will remain in the basement of City Hall, along with their related specialized building systems.

The EDC report also ignores the potential impact of historic tax credits. If Dallas City Hall pursued landmark designation, the City could access state historic tax credits of up to 25% of eligible repair costs, and potentially another 20% in federal credits. Applied to the $329 million currently labeled as “repairs,” that represents tens of millions of dollars in potential offsets that are simply not accounted for in the EDC projections.

GIVEN THESE STARTLING PROBLEMS WITH THE COST ESTIMATES, IT IS DIFFICULT TO GIVE THEM SERIOUS CREDENCE AT THIS POINT.

IN SUM, THE EDC HAS SPENT THREE MONTHS ASKING THE WRONG QUESTION.

Their report is based on problematic cost estimates and only one ill-conceived strategy to continue occupying City Hall. The study revealed a pre-existing bias that City Hall is broken, and it is time to abandon the building.

A better strategy would have been to answer a different question.

Our existing City Hall is a significant real estate asset owned free-and-clear by City of Dallas taxpayers. The taxpayers should know what it will cost to optimize the existing City Hall through phased improvements utilizing existing city-owned real estate to provide interim space during those improvements. The assumption that phased improvements are inherently bad options needs to be challenged.

Great cities are rich, diverse places with civic meaning. Reducing the Dallas City Hall decision to poorly assembled financial criteria is one dimensional and disregards how great cities prosper.

THE EDC REPORT HAS SIGNIFICANT, MATERIAL PROBLEMS. UNTIL THESE ARE ADDRESSED, IT IS PREMATURE TO RELY ON THIS REPORT, MUCH LESS MAKE ANY DECISIONS BASED UPON IT.

This analysis was prepared by the Ten Presidents, an informal collaboration of Dallas architects, each a Fellow of the AIA and former President of an AIA component. All are also highly experienced current or former principals of top-tier, highly respected Dallas architecture firms, responsible for the planning, design, and renovation of millions of square feet of commercial and civic space. For reasons of financial, heritage, cultural and environmental responsibility, all are opposed to abandonment of Dallas City Hall.

The Ten Presidents (yes, there are now more than ten of us) are:

Larry Good, FAIA 1986 AIA Dallas President

Duncan Fulton, FAIA 1992 AIA Dallas President

Marcel Quimby, FAIA 1995 AIA Dallas President

Dennis Stacy, FAIA 1996 AIA Dallas President

Robert Meckfessel, FAIA 2000 AIA Dallas President

Myriam Camargo, FAIA 2001 AIA Dallas President

Ted Kollaja, FAIA 2003 AIA Dallas President

Craig Raynolds, FAIA 2004 AIA Dallas President + 2012 TxA President

Jeff Potter, FAIA 2004 TxA President + 2012 AIA National President

Tipton Housewright, FAIA 2005 AIA Dallas President

Betsy del Monte, FAIA 2007 AIA Dallas President

Lisa Lamkin, FAIA 2014 AIA Dallas President