VIDEO. From the San Mateo County Pillar Point Harbor District Meeting on 7/15/2020.
Administrative Building Analysis – Build versus Lease
Recommendation: Refer the Administrative Building Analysis to a duly noticed Finance Committee Meeting. The purpose of the meeting is to review the assumptions and calculations and to form a recommendation for the Harbor Commission to consider at a future meeting.
Background:
On May 7, 2019, the Harbor Commission directed the Interim General Manager to enter into negotiations to purchase a lot on Portola Ave in El Granada from Coastside Fire Protection District. On June 5, 2019 the Harbor District purchased the lot for $1,265,681. A Request for Proposals for Design, Engineering, Architecture, Permitting and Construction Support Services was issued and with a proposal deadline of September 27, 2019.
On March 16, 2020 a State of Emergency was announced due to the COVID-19 pandemic. This event has caused a decrease in expected revenue sources and uncertainty in forecasting assumptions. The District forecasts were updated and it is anticipated that future funding for capital improvement projects will decrease.
On May 14, 2020 a Community Forum was held to receive input from the general public on the priority of District projects for recommended inclusion in the Capital Improvement Program. The Administrative Building Project was identified as one of the projects to put on hold until a funding source could be identified.
An analysis of continuing to lease an Administrative Office space versus building on the Portola Ave lot was prepared using the following assumptions over a 30 year period:
1) The Administrative Building Lease will continue to increase by 3% per year.
2) The cost to build a new Administrative Building is $2,180,000.
3) The expected interest on debt issued is 2% and cost of issuing debt is $60,000.
4) The cost of utilities and maintenance on the new Administrative Building is approximately $24,000 per year ($12,000 for utilities and $12,000 for maintenance).
At the end of 30 years the cost analysis is as follows:
For 2020/21 monthly lease payments are $8,500 versus anticipated debt service of $8,058. The debt service amount would increase if the cost to build is higher or the District is unable to secure financing at 2%.
Summary/Recommendation:
Refer the Administrative Building Analysis to a duly noticed Finance Committee Meeting. The purpose of the meeting is to review the assumptions and calculations and to form a recommendation for the Harbor Commission to consider at a future meeting.
ADMINISTRATIVE BUILDING ANALYSIS – BUILD VERSUS LEASE Regular Board Meeting July 15, 2020