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HomeMy WebLinkAboutCOD-015-09(IIL • !.( Leadiagthe way REPORT Meeting: Date: CORPORATE SERVICES DEPARTMENT General Purpose and Administration Committee February 23, 2009 Resolution #: (7T ~J ~' Report #: COD-015-09, File #: By-law #: SUBJECT: GARNET B. RICKARD RECREATION COMPLEX LEASE SPACE - COMMUNITY CARE DURHAM Recommendations: It is respectfully recommernded that the General Purpose and Administration Committee recommend to Council the following: 1. THAT Report COD-015-09 be received; 2. THAT Council provide staff direction with respect to the proposal from Community Care Durham to lease the vacant space at the Garnet B. Rickard Recreation Complex; and 3. THAT Community Care Durham and the Clarington Older Adults Board be advised of Council's decision. Submitted by: Reviewed by: _ -wl Marie Marano, H.B.Sc., C.M.O., Franklin Wu, Director of Corporate Services Chief Administrative Officer tn~ Nancy Taylpr, B.B.A., C.A. Director of FinancelTreasurer MMlJBMm CORRPORATION OF THE MUNICIPALITY OF CLARINGTON 40 TEMPERANCE STREET, BOWMANVILLE, ONTARIO L1C 3A6 T(905)623-3379 F (905)623-4169 REPORT NO.: COD-015-09 PAGE2 1. BACKGROUND 1.1 At their meeting of November 10, 2009, Council provided staff with direction to proceed to negotiations with Community Care Durham (CCD) for lease of space required to house Community Care staff and operations currently located at the Clarington Beech Centre. This was in response to a letter from Community Care Durham, dated October 14, 2008, indicating that they were interested in pursuing this approach after determining that the cost to convert the site at GBRRC to house both the Bowmanville office and the Newcastle Adult Day Program in a single facility was cost prohibitive. A copy of the letter is attached as Schedule ,.A„ 1.2 .Discussions began with Community Care Durham in November 2008 and space requirements were determined to be in the area of 2,000 square feet. Once the space requirements were determined Durham Community Care staff went back to their space consultant to determine office layout then to their contractor to establish an estimated to construct the office space required to house staff from their Beech Street Offices. 1.3 By email dated February 4, 2009 Durham Community Care, (Schedule "B° attached) provided notice that they had found the cost to construct the required offices to be prohibitive. They also reiterated that their preference was to relocate both the Bowmanville office and the Newcastle Adult Day Program to the same facility. With this in mind, CCD proposed that they were interested in acquiring the complete GBRRC space of 5,005 square feet at a gross lease of $13.00 per square foot. A gross lease includes all utilities, snow clearing and waste removal. This proposal is contingent on the Municipality constructing the required space, including offices, washrooms, kitchen facility, improved access, additional windows and use of the patio. 1.4 The lease rate did. not speak to the issue of G.S.T. (5%) which is normally extra to the lease rate. In this case with the G.S.T extra it would amount to $0.65 per square foot. If CCD is working on the assumption that the $13.00 rate includes G.S.T. the actual lease rate per square foot would be $12.38 per square foot. 1.5 CCD and the Older Adult Board have been provided a copy of this report at the time of signature to allow representatives to speak to the proposals at GP&A. 2. 2.1 For comparison purposes the following schedule provides a comparison of the proposed lease submitted by Community Care Durham against alternate options together with a breakdown of the original proposal received in response to the RFP issued in 2008. REPORT NO.: COD-015-09 LEASE OPTIONS Direction Re nested: O lion A O lion B Garnet B. Rickard Recreation Complex CCD Staff Proposal Total Space Available - 5005 sq. ft. 2009 Pro osal Lease hold Improvement Costs Municipality Cost -Maximum Approval $600,000.00 $600,000.00 Community Care Durham Cost NIL NIL Utilities Included Extra GST Not specified Extra Annual Revenue Assuming GST Extra or $65,065.00 $100,100.00 Assumin GST Included $61,961.90 Time required too recover municipal investment. Assuming GST Extra or 9.22 yearsl'~ 5.99 years Assumin GST Included 9.68 earsl'~ Actual revenue eamed in 5 years NIL NIL 10 years GST Extra or $50,750.70iZ~ $401,401.00 10 ears GST Included $19,827.81 cz> Escalation Clause Not included ~ CPI or reasonable inflation rate UTILITY OPTIONS PAGE3 Option 1 Option 2 Staff Pro osal Lease format for the selected Gross Lease including utilities, Net Lease, excluding utilities, lease rate in Option A or B heat/AC, snow clearing, waste heat/AC, excluding GST removal, excludin GST Term -Recommended 10 year, with 10 year option to renew if conditions remain acceptable to the Municipality. Notes (1) This does not consider the cost of utilities or the lost interest on funds used for lease hold improvements (2) Utility casts are not factored into this calculation.. Estimated utility cost per year for the leased area - $16,500.00, based on 2007 calendar year. (3) FOR COMPARISON $15.00 =Annual Revenue $75,075.00, Payback 8 year, GST and Utilities paid by CCD $17.00 =Annual Revenue $85,085.00, Payback 7 years, GST paid by CCD; Net Lease REPORT NO.: COD-015-09 PAGE 4 2.2 Lease Hold Cost /Recovery Now Proposed by CCD at $13.00/sp. ft. Lease Rate: Based on a square footage of 5,005 square feet and the lease rate offered by CCD the annual lease revenue would total $65,065.00 exclusive of 5% G.S.T. paid by CCD. It is estimated that the construction and completion costs per CCD's proposal would be approximately $600,000.00 estimated on Schedule "C"; therefore it would take approximately 9.22 years to recover the casts with no revenue realized until after that time. CCD has also offered a 10 year extension which will provide total revenue of $701,300.00 total revenue over the 20 year proposed life of the lease. These figures are based on the lease rate remaining constant throughout the lease period. If the lease rate proposed is meant to include GST the payback period increases slightly to 9.68 years. If an inflation factor is build into the arrangement, the payback would improve as would the revenue over the lease period. 2.3 The 10 year recovery does not take into account the cost to heat, air condition and light the facility. The estimated annual utilities cost would be $16,500.00, based on average 2007 Rickard Arena costs. When these elements are taken into consideration the payback period of the construction cost increases. 2.4 Please note that this is a very rough estimate and would require confirmation of cost estimates by an architect. This estimate does include architectural services including project management at approximately $85,000.00. 2.5 Initial 2008 Proposal by CCD: In the initial discussions with CCD in 2008 when the Municipality was providing approximately $205,000.00 in leasehold improvements and CCD was covering the office construction estimated at approximately $250,000.00, the pay-back period for municipal investment was estimated to be approximately 3.41 years. 2.6 Given that the current proposal will require the municipality to invest $600,000.00 not contemplated in the budget, the funds will have to be provided from reserve funds. The proposals do not assess the lost opportunity cost (foregone interest) in the amount of approximately $119,400.00 for 5 years (interest rate estimated at 3.98%) or approximately $273,600.00 over 10 years (interest rate estimate - 4.56%), in determining payback and the viability of this proposal. Also, this report does not speak to the matter of potential revenue from tenants who may not require significant leasehold improvements. REPORT NO.: COD-075-09 PAGE 5 2.7 Working on the assumption that a 5 year pay-back which was reasonably close to the municipality's investment contemplated in the 2008 discussions was an acceptable arrangement, the lease rate on the proposed arrangement put forward by CCD would require a lease rate of approximately $20.00 per square foot. 2.8 One of the areas noted in the CCD a-mail of February 4th, Schedule B, is the requirement of the patio with fencing. This requirement has been reviewed with Community Services and this area has been traditionally used by Community Services programming staff and in addition, various groups renting our Multi Purpose area of the facility, especially the many weddings and banquets, where the adjoining patio has served quite useful. Under the circumstances, unless a sharing arrangement could be made, this requirement could not be met. Please note that the total construction cost estimate retains the value of the patio in the event a sharing arrangement can be made otherwise it will be deleted from the construction estimate. 3. FINANCIAL IMPLICATIONS 3.1 It is recommended that should Council approve moving ahead with construction, an upset limit be established at $600,000.00. The funds are recommended to be funded from the General Municipal Purpose Reserve Fund. 3.2 Council is facing a complex issue of accommodating the spatial requirements of the Older Adults Association which is a municipal mandate. At the same time it may be advisable to consider the potential ramifications for the request from CCD to set a precedent for other non- municipal agencies who may wish to seek accommodations at a reasonable rate with no investment from the requesting agency. 4. CONCLUSON 4.1 After reviewing the proposal from CCD it is expected that costs to complete the renovations will be high and the requirement to provide a reasonable payback would make the lease rate at $20.00 unmanageable for CCD. 4.2 Under the circumstances staff request direction. Alternatively, Council may wish to provide staff with direction to cease discussions with CCD and issue a new RFP for the lease of the space to one or more proponents (The municipality has been approached by at least three firms/individuals interested in leasing space at the GBRRC since the original RFP). REPORT NO.: COD-075-09 PAGE 6 4.3 In either option staff would provide a report and recommendation on the results of the construction tender options and a final lease for the GBRRC space, or the RFP process.. 4.4 Community Care Dufiam is currently an over-holding tenant at the Beech Street location as their lease expired October 31, 2008. Staff will be providing a subsequent report on this matter once this report is dealt with and staff has direction. 4.5 This report has been reviewed for recommendation by the Purchasing Manager and the appropriate department and circulated as follows: Concurrence: Director of Community Services ®Community Care Durham Clarington COPE Mental Health Program Indivklual Suppod Group Suppod Education Home Support Program Meals on Wheels Transportation Accessible Van Friendly Visiting Fool Care Clinics Luncheon Out Telephone Reassurance Home Maintenance Home Help Respite Program Adult Day Programs In-Home Respite Offices Serving Ajax-Pickering Brock Clarington Oshawa Scugog Uxbridge wnimy Charitable Reg.# 1 L888 9955 RROOOL Volunteer and become an everyday hero A United Way Member Agency October 14, 2008 Mr. Jerry Barber The Corporation of the Municipality of Clarington Manager Purchasing Office 40 Temperance Street Bowmanville, ON L1C 3A6 Deaz Jerry: SCHEDULE "A" 26 Beech Avenue Bowmanville, ON LiC 3A2 COPE Mental Health Program Te1:905-623-4123 • Fax:905-623-2604 Home Support Program Te1:905-623-2261 . Fax:905-623-2604 Respite Program Adult Day Program Tel:1-888-255-6680. Fax:905-837-6768 www. communitycaredurham.on.ca Re: Lease Agreement between Community Care Durham and the Municipality of Clarington for office space at 26 Beech Avenue Further to recent correspondence with the Municipality of Clarington and the determination that there are currently no suitable locations in the Clarington azea in which to expand our programs, Community Care Durham (CCD) is requesting a lease renewal for office space at 26 Beech Avenue. As you are aware we aze also seeking additional space at the Beech Centre. On June 5, 2008, Community Care Durham submitted a proposal to the Municipality of Clarington to lease 5005 squaze feet of space at the Garnet B. Rickard Recreation Complex. This new space would have allowed Community Care Durham to operate all of their Clarington community support services from the one location, including the Adult Day Program. Due to the present dysfunctional layout for office space at the Rickard Centre, and based on feasibility drawings and an estimate from a contractor, it was deemed that the cost to improve this space would be far too substantial for Community Dare Durham to absorb. However, should the Municipality undertake to renovate this space for office use (including windows) CCD would be agreeable to relocate their Home Support and COPE programs presently serviced from the Beech Avenue location. Converting this space to office use would also allow for a variety of other office tenants to share in this space, including perhaps a meeting room that could be rented. Helping people Live at home SCHEDULE "A" Mr. Jeny Barber Municipality of Clarington October 14, 2008 Page 2 Community Care Durham's references will attest to our stability, long term tenancy and timely monthly payments. Thank you for your assistance in this matter. Sincerely, ~~ .~ ~~ Barbara Morcott Director, Administration & Finance cc: Mayor Jim Abernethy, Municipality of Clarington Frank Wu, Municipality of Clarington Brent Farr, Community Care Durham Sally Barrie, Community Care Durham Page 1 of 2 SCHEDULE "B" Barber, Jerry From: Brent Farr [bfarr@communitycaredurham.on.caj Sent: Wednesday, February 04, 2009 10:35 AM To: Barber, Jerry Cc: MayorsExternalMailGroup Subject: Garnet B. Rickard Recreation Complex Hi Jerry, In follow up to your email and telephone call to Barb Morcott last week, this will set out Community Care Durham's position regarding our potential move to the Garnet B. Rickard Recreation Complex. Subject to the satisfaction of the challenges presented in this correspondence, Community Care Durham would be prepared to offer the Municipality of Clazington a ten year lease, with a ten year option to renew, on the 5,100 square feet of space in the Rickard Complex to move both our Home Support and COPE office (currently located in the Beech Centre) and ow Adult Day Program (currently located in Newcastle). Rye would be prepared to offer $13.00 per square foot on a gross lease basis. As a result of an expansion of the existing space for these programs and an increase in lease rate compazed to the Beech Centre, Community Care Durham would incur an additional $22,000 per yeaz in rent costs based on this $13.00 per square foot. Due to our organizational needs and new integration initiatives by the Central East Local Health Integration Network (our primary fonder), it is considered prudent that we collocate the Home Support, COPE, and Adult Day Program together. In order for this move to be viable for Community Care Durham, we aze in a financial position to only invest funds in our own interior furnishings and equipment. Therefore, the challenges we face in order to make this new space in the Rickard Complex "office appropriate" are: . Ample exterior windows (as feasible) . Two private accessible washrooms in designated Adult Day Program . Kitchenette with sink in designated Home Support /COPE area . Roughed-in plumbing for a full kitchen in the Adult Day Program • Approximately six completed offices in designated azeas . Tile or carpet floor coverings in designated areas • Drop T-bar ceiling . Patio with fencing . Sprinkler system as required by code on finished space . Soundproofing in areas where required (e.g. between gym and Community Care) I recommend that we attend a meeting with the Mayor and the appropriate Municipal department heads as soon as possible to move this opportunity forward as it has been some time since we commenced negotiations. Thank you, Brent Farr 2/13/2009 Page 2 of 2 SCHEDULE "B" Brent Farr Executive Director Community Care Durham 419 King Street West, Unit 605 Oshawa, Ontario L1J 2K5 Email: bfarro~communitycaredurham.on.ca Tel: 905-404-2224 ext. 25 Web Site: www.communitycared.u..rham.on.ca Supporting Peop/e, Strengthening Community Confidential: This email and any attachments transmitted with it are confidential and intended solely for the use of the individual or entity to which they are addressed. If you have received this email in error please notify the sender and delete the a-mail immediately. 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Version: 7.5.552 /Virus Database: 270.10.17/1934 -Release Date: 2/4/2009 8:24 AM 2/13/2009 SCHEDULE"C" ESTIMATED CONSTRUCTION ELEMENTS AND COST Estimated Cost of Construction elements Fire Rating $30,000.00 Addition of windows on south facing wall and east facing wall $35,000.00 Plumbing for Washrooms & Kitchen $40,000.00 Flooring $25,000.00 Ceiling $60,000.00 Offices, kitchenette and washrooms $250,000.00 Patio $25,000.00 New entrance from exterior of Building $25,000.00 Contingency $25,000.00 Design and inspection $85,000.00 Total Capital Cost (maximum limit of approval for project) $600,000.00" " Estimates have been confirmed with an architect as being reasonable.