City Hall Consolidation Study

June , 2007

City of Tulsa

Team Composition - IntroductionsTeam Member Role

City of Tulsa Participants: Mayor Kathy TaylorDon Himelfarb (Team Leader)Peter Boylan (Special Advisor), Mike Kier, Ben Stout, Charles Hardt, Sheryl Lovelady, Ken Hill, Ellen Hinchee, Tom West, Mark Hogan, Kevin Shoemaker, Grant Easterling

Staubach Team LeaderContract SupportBusiness Case Development / Financial Analysis3rd Party Leasing Support

MATRIX Space Needs AnalysisTechnical Building Review/Due DiligenceSpace Programming/Consolidation Study

McAfee & Taft Contract NegotiationsLegal Due Diligence

Walker Parking Parking Needs AnalysisMarket Supply/Demand Study

theGreen Team Green Building/Sustainability AnalysisLEED Certification

ERA Economic Impact StudyHighest & Best Use (Disposition Sites)

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Goals of Study

Evaluate City’s existing occupancy strategy, costs, and efficiency If viable, Reduce the cost of real estate to enable funding of other programs Determine alternative methods of improving the delivery of city services via realignment and consolidation into single facility. Prepare cost/benefit analysis of different scenarios

• Stay put in multiple locations (Status Quo)• Build to suit• Market Alternatives (for sale, or lease)

Capture the development potential and revenue of surplus real estate of the city including river front and current city hall location next to renovated convention center.

City negotiated option to purchase One Technology Center, parking garage, Furniture fixtures and equipment contingent upon City’s findings during due diligence period

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Anticipated Ancillary Benefits

Avoid costly capital expenditures in aging/obsolete buildings (>$24 million); Only $12 million funded to date

Reduce the long term energy needs of the City (~30%) Enhance constituent experience by creation of “One Stop”

for City services in one convenient location. Improve downtown real estate market – will reduce

vacancy by absorbing OTC and replacing city hall with hotel.

Facilitate sale of City Hall and other sites for higher and better use (convention hotel) and placed on tax roles

Generate revenue through limited 3rd party leasing of space until complimentary City & Government agencies need space downstream.

Improve productivity, communications and efficiency through consolidation

Enhance image that fosters new business/economic development

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Desired Operating Outcomes

Reduce City Operating Expenses & Improve Citizen Experience More efficient use of space (~ 20% reduction) Increased use of technology (consolidate 8+ data centers) Financial Benefits (reduced annual operating costs) Green building – Consume 30% less energy Eliminate environmental / air quality concerns of existing

buildings Upgraded Working Environment (improved morale and

employee recruitment opportunities) Unlock potential of underperforming City owned real estate

assets

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Results of Study – Demand Analysis

Interviewed 14 City departments, 103 business units Reduced Net Useable Square Feet

Existing = 275,000 USF Consolidated = 227,000 USF*

Opportunity to reduce space by ~ 20% Consolidate 7+ different locations into one

*To accommodate future growth of 78 workstations and additional conference room space, the City will occupy 276,854 usable square feet, 331,724 rentable square feet. The 3rd party tenants, Level 3 and Deloitte will occupy 187,000 rentable square feet. The 8th floor is vacant at 40,726 usable square feet and 48,156 rentable square feet. The remaining space is occupied by WHBC in 26,954 usable square feet and 29,660 rentable square feet. The 10th floor is shared conference room space at 13,898 usable square feet and 16,483 rentable square feet. Total usable square feet in the building is 536,677 and rentable square feet is 626,802.

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Total Project Cost – Acquisition OTC

Summary of Acquisition Costs

Includes:

Purchase Price of Building

Due Diligence Support

Relocation Costs Physical Relocation New Construction and Furniture Reconfiguration Mothball Existing Buildings (City Hall, Center Office Building, Francis Campbell)

Control Equipment - Parking Garage Information / Technology Security

3rd Party Tenants (Cost of Leasing)

Other Capitalized Costs Duplicate Occupancy Costs During Transition Financing & Legal Fees Green Building Initiative

Total $ 67.1 Million

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1. Initially, 187,000 rentable square feet of existing tenants will renew and extend current leases

2. New tenant(s) will be identified for 8th floor(Numerous complimentary prospective government

tenants have been identified, contacted and expressed interest)

3. There is no benefit given to this analysis due to the sale of vacated properties or tax revenue generated by economic development as a result of this transaction

(sales tax, hotel tax, etc.)

Result: No tax increase required to facilitate transaction

Important Considerations/Assumptions

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Occupancy Cost Over 10 years

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Relative Cost Chart

$-

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

1 2 3 4 5 6 7 8 9 10

Year

An

nu

al E

xpen

dit

ure

New Construction 340 K SF OTC New Lease Existing w/$24 MM Def Maint

Includes $12 million funded and $12 million unfunded deferred maintenance

Present Value Savings – 10 Year Horizon

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$26,047,199

$41,269,122 $45,126,563

$70,366,825

$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

OTC Existing w/$24 MM DefMaint

New Lease New Construction

Present Value Analysis - 10 year HorizonDifference between $26.0 million and $41.2 million ($15.2 million) is savings to City over first 10 years

Due Diligence Review - Technical

Building and Parking Garage are in good to very good condition Mechanical System is “State of the Art” Systems redundancy (Electrical, water, etc.) should assure continued City operations in emergency Significant building technology infrastructure will enhance City operations Recent Structural Issues

Roof – New replaced to high standard Curtain wall Failure – Repaired to new design criteria

Purchase Price includes: High quality systems furniture Significant data and audio visual equipment Telephone system and instruments

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Due Diligence Review - Green Building / Sustainability

One Technology Center is highly efficient building (perhaps most efficient in City of Tulsa) State of the art mechanical system reduces energy demands at peak consumption hours Utility costs should be 30% less than existing costs on per square foot basis

Benefits:

Demonstrates that City of Tulsa is leading the way in environmental responsibility.

Global energy costs will continue to rise. Efficiency of new building will produce long term savings for taxpayers and mitigate financial exposure/risk on rising energy costs in future.

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Due Diligence Review – Estimated Tax Impacts

Site NotesProperty Tax (City Share)

Sales Tax – (City Share) Hotel Tax

Total Annual City Tax Benefit

Hartford Building

Excellent development potential $6,600 $282,200 TBD $288,800

Public Works Buildings23rd & Jackson

Planned Riverfront Development $100,300 $4,200,000 TBD $4,300,300

City Hall Convention Hotel Site $51,600 $310,400 $517,400 $879,400

Fire Department Headquarters Planned East Village  TBD  TBD  TBD  TBD 

Center Office Building

Has value as shell office building. TBD  TBD  TBD  TBD 

Parks & Recreation Headquarters

Site is located in middle of park. Possibly for restaurant location? TBD  TBD  TBD  TBD 

One Technology Center

Elimination of Ad Valorem Tax

Estimated 2006($55,748) TBD TBD ($55,748)

Total   $102,752 $4,792,600 $517,400 $5,412,752

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The projected tax revenues are not part of the financial calculation to determine the savings from consolidation. Any contribution from sales or other taxes would be in addition to the $15.2 10 year present value savings.

Risks/Issues

Issue Challenge Resolution3rd Party Tenant Leasing Financial Model assumes

187,000SF of 3rd party tenants will continue to lease space in building.

Currently in active negotiations with existing tenants. Have identified limited private sector and complimentary government and quasi government tenants for downstream leasing.

Parking Parking reflects standard urban parking ratios for building of this size. Will need additional parking to accommodate City needs.

Have identified short and long term options for employee parking on surface and structured lots within 2-3 minute walking distance of building.

StructuralRoof

Roof leaked due to faulty installation.

Performed engineering review. New roof installed 2007. Warranties will transfer to City.

StructuralCurtain Wall

Curtain Wall failed June, 2004

Performed engineering review. All curtain wall panels repaired in place or reinstalled to code to re-engineered specifications.

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Next Steps / Recommendation

1. Formal presentation to Council – 6/122. Council votes on project3. If approved, Contract is fully executed4. Contract is assigned to Tulsa Public Facility Authority5. City enters into Lease with Tulsa Public Facility Authority6. Legal Due diligence is completed between now and closing7. Closing occurs late summer 20078. Architectural work is initiated after closing9. Construction/modification work commences in the fall10.Move in begins fall 2007, planned completion Q2 2008

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Questions & Answers

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