Building Needs Assessment Work Group Minutes

September 1, 2022 10 – 12 pm

Present:

Jean Anderson SCLS Consulting Services Coordinator

Corey Baumann SCLS Delivery Services Coordinator

Kerrie Goeden SCLS HR & Finance Coordinator

Gary Poulson SCLS Board Chair

Jesse Stewart SCLS Fleet Manager

Vicki Teal SCLS Technology Services Coordinator

Kristi Williams SCLS Board Trustee (10:10 a.m.)

Martha Van Pelt SCLS Director

Guests:

Susan Feith SCLS Board Trustee (left approximately 11 a.m.)

Devin Flanigan Keller Project Manager

Deb Haeffner SCLS Consultant

Rob Lindstrom Keller Architect (11:15 a.m)

David Haug Lighthouse Realty

Absent:

Nan Brien SCLS Board Trustee

Call to Order by K. Goeden at 10:02 a.m.

Approval of previous meeting minutes: August 18, 2022

a. Motion by J. Stewart to approve the minutes

b. Second by J. Anderson

c. Approved

Reports:

· Walton Commons termination – M. Van Pelt

o Due diligence reports need to be sent to the City of Madison attorney for Walton Commons site – D. Flanigan

§ Board met and approved the signing of the documents to withdraw our offer for Walton Commons.

§ Requested earnest money back, sent to proper people, email back from trust company, check arrived.

· DAT Meeting with the City of Madison – D. Flanigan, K. Goeden, M. Van Pelt

o Parking Requirements – City does not have any minimum parking stall requirements for SE zoning, which is the zoning for the Lakeland property

o Parking Requirements – Easement with Corben. SCLS will need approval from the adjacent property owners to reduce the number of parking stalls for the proposed addition. The Corben group, who is the seller of the Lakeland property, is also the owner of the adjacent properties. So we anticipate no issues with obtaining their approval, as their sale of this property is contingent upon it. Documentation is being drafted by the attorney for them to sign.

o Follow up/items to address in building design

§ Stormwater - redirect

§ Sanitary/sewer – possible relocation

§ DOT easement 35’ from Packers Ave – no private improvements allowed within this easement

§ Developers agreement for sidewalk

§ Future bike path

§ Urban Design Area

o Questions with easements and setbacks, will require us to work with Urban Design commission

o Overall no massive red flags, everyone seemed to be very on board with project, location, layout

o Still have a good relationship with the City of Madison. Glad we still had a project to work on in a different location

o Happy news was with the SE zoning – no minimum parking requirement so they had no qualms about us removing parking stalls. Covenants of that development are what required ground lease holders to have approval from other ground lease holders to remove parking spots. All ground leases owned by Marty Rifkin’s group so seems like that will move forward without issue.

· SCLS 8/25/22 Board Meeting BNAW Discussion – M. Van Pelt, K. Goeden

o Will be putting together a summary for the September board meeting, to facilitate the discussion regarding the purchase of the Lakeland building (KG)

· Lakeland Building Inspection Summary – D. Flanigan

o D. Flanigan: Overall building looks good. Electrical, HVAC, went through the systems. They looked to be in good condition, exterior EIFS will need some maintainenance. Parking lot needs to be seal coated (or more). Some work to relocate the storm water management. Interior looks to be in good working condition. They did not get on the roof as there wasn’t an access hatch to access so will need to get a ladder. D. Flanigan is scheduling an inspection of the roof

o Things to consider needing repair:

§ EIFS (masonry) exterior – D. Flanigan getting a quote

§ Driveway – D. Flanigan getting a quote

§ Could we go back to the seller to negotiate? D. Haug: Need an estimate first. Then determine whether to negotiate with the seller.

§ Transformer move – is that something we could ask for a reduction in cost? D. Haug – probably not as it’s specific to our needs.

Discussion:

· Lakeland University Property

o Budget for internal build out of the existing building and addition of delivery facility

Interior Remodel of Existing Building:

§ D. Flanigan sent an estimate of $800,000 - $900,000 for interior remodel. This is within the $1 million cap required to meet the budget.

§ FFE Costs: Coordinators met to discuss it and look for additional savings.

· Data center – Will remove the generator from the plan for now with a plan to add it in the future. Can use $72,632 of the Technology Contingency fund to pay for the Data Center.

· V. Teal will send out itemized quote for Data Center costs to the group.

· AV Equipment – Can be removed from the building construction budget as it is being purchased out of existing furniture and equipment budget

Previous Design Costs:

· Previous design costs - $432,698 were for the engineering, testing and construction documents for Walton Commons = using general contingency funds for this.

FFE & Other Supplies for the Delivery Addition:

· Delivery addition $3.6 - $3.8 million: Question about fire protection allowance and data center quote. This cost is listed in both quotes. Will clarify.

· Cost estimates include the cost for drafting up the full construction documents for the remodel and addition.

Total Project Budget:

· After many revisions and efforts by the team to reduce the cost of the remodel and new construction, the team has been able to reduce the total projected cost for both remodel and new addition to $6,999,430 - $7,099,430. This final price will also be reduced by $83,000 as SCLS will receive the last 3 months of rent by Lakeland University.

· Additional savings can be found if needed, by removing the tech storage closet, making a slight reduction in square footage for delivery, and using budgeted equipment/furniture funds to cover the AV and Fire Suppression equipment. Projected savings (if needed) for these additional measures is $100,000 - $200,000.

Other Discussion:

· Management meeting yesterday – talked about options. Main question on the table was do we want to move forward with purchasing the building? Consensus on the management team was yes to move forward with the purchasing of the building. If we don’t buy the building, what is the alternative? Rent will continue to increase over time. Removing WLA from our current suite will only remove about $900 per month from our rent – will not help us long term. Removing a suite at the end of the building will require remodeling to accommodate. Which will increase our lease again. Moving to another building will also require remodeling and additional costs. Continuing to rent is a continual bleed for the system. We need a permanent home for the data center, as it serves half of the state’s library systems. Continuing to rent and/or move locations is not a viable option.

· If we purchase Lakeland, did the interior remodel to accommodate HQ, we know that cost will break even about year 10 and then save money. In 19 years we pay it off and have no mortgage payments.

· K. Williams – would like to see the details on budget for Lakeland including documentation on snow removal, heating, maintenance, etc. These costs are included in the 2023 budget that has been provided to the board. K. Goeden will create a separate pro-forma budget to compare costs of renting vs. costs of ownership.

· K. Goeden will be putting together this summary for the board meeting on 9/22/2022

· S. Feith asked about the ground lease and questioned the options to renew. There is a guarantee of 27 years but questions the two renewal options. K. Goeden asked S. Feith’s question specifically to the attorneys who responded that SCLS would be guaranteed the 2 options to extend the primary term of the ground lease. However, K. Goeden will ask the attorney again, including the lease language in question, based on the discussion today to verify that SCLS will have the full remaining 77 years.

· In September, the SCLS Board will need to decide whether to approve the purchase of the Lakeland building. This decision will come before the construction documents can be sent out to bid. We feel confident that the costs for the internal remodel are well within budget. We can control how much or how little of the internal remodel we perform.

· The Lakeland building is a good fit for the HQ operation; a much better fit than our currently leased facility. It will meet our needs operationally, it will save the system financially over time in a significant manner, and it has the space and potential to add on the delivery facility now or in the future. This meets the 3 goals of the BNAW group.

· The consensus of the group is that it is in the best interests of SCLS long term to purchase this building to either house just HQ and/or to add on the delivery operation now or in the future. The alternative is to continue to rent and that will not be a viable option long term for the system, financially or operationally.

· Propose a 2 part approval process. Part 1: approve purchase of the building with internal buildout. Part 2: Send the construction documents out to bid and if the bid comes back within budget, then the board can move approval of the delivery addition at that time. The goal remains staying at the 7 million dollar budget overall.

· Sticking to our tenets of saving money, having a facility that better meets our needs long term, and bring in delivery warehouse to HQ

o Critical controls calendar for Lakeland – Remaining Contingencies

§ ALTA Survey 9/1? $7500

§ Title Insurance and Title Documents

· Take ALTA survey and give to the title company for endorsements to title insurance and title insurance commitment markup (including removing exceptions determined not to apply to the property based on what the survey shows).

§ Phase 1 ESA 9/1? Cost: $3600

· When the property was developed by Marty Rifkin he would have had to perform detailed site inspection and testing to gain Dane County approval. Only engage in phase 2 if something is discovered in phase 1. Do we know whether or not there’s a test well on the landfill across from Pankratz? Looks like a GIS map.

· D. Haug: Yes to the phase 1 ESA and ALTA survey. The phase 1 is a cost efficient way to determine if any potential environmental issues reside on the site. If the phase 1 is clean, there is no need for a more costly phase 2. If the phase 1 discovers an issue, we can discuss that specific issue at that time. The ALTA survey is recommended by the attorney and he has outlined the specific items to be included in the ALTA survey.

· K. Goeden moves we authorize D. Flanigan to perform those two surveys. G. Poulson seconds. Further discussion? Vote: All ayes, K. Williams – abstain, motion passes

o Any other input by the group?

§ VTL – thinks purchasing the Lakeland building is a good idea as SCLS needs a permanent home for the data center. Therefore she supports this plan.

§ MVP – even if we just moved HQ and the data center, we would still be saving money.

§ KW – not comfortable until she sees all the numbers to support that and gets answers to her questions.

§ GP – thinks this is the path forward. Convinced with the numbers that KG provided. Confidence in our staff and what they’re telling us. Truly hope we get delivery together. Good potential at Lakeland. Support taking the next step.

§ KG – wants what’s in the best interests of the system, members, and staff. Understands and acknowledges questions with the ground lease. Will follow up with the attorneys to answer remaining questions/concerns.

o Declaration of Reciprocal Easement – Need written approval from airport tenants to remove parking stalls

· Corben owns all of the properties in the reciprocal easement

· Ed Lawton can prepare a document for Marty Rifkin to sign

§ Financing

· Interest only loan

· Additional $1 million loan

§ Estoppel Letters – Follow up with attorneys

· Letters that state when the leases are ending and assigned to SCLS

§ Proposed Use – Dane County Airport Review and Approval

· Awaiting feedback from Adam Ussher and airport group on site map, elevations and floor plans

§ Insurance Provision

· K. Goeden contacted Hausmann Insurance and verified that we have the appropriate coverages. John Erikson from Hausmann Insurance recommended an update to the lease language to reflect current insurance practices.

§ Approval of Lease Assignment

· Attorney Lawton has the assignment and assumption consent documents from Dane County (this will follow the approvals with Dane County on the building/construction issues they are looking at).

· Attorneys need to discuss lot 46 (right of Lakeland when facing front door) to the north of Lot 3 and verify that there are no outstanding amounts owed/issue or disputes as to the driveway (north access for our site) that Lot 3 and Lot 46 are responsible for (each 50-50).

o Next steps

§ Notify Alder with 30 day notice of application for a conditional use permit

· D. Flanigan – Final comment to address a question on the validity of the final projected cost estimates of $7 million for the remodel and new construction. Keller and the team are very committed to SCLS and making this project work. The initial drawings for Lakeland were closer to $8 million. They have done several rounds of revisions, at an incredible pace, working with BNAW and the SCLS staff to continue to revise these plans, so we are within budget and have plans that meet our needs. The SCLS team then took these final estimates and worked to find additional savings to ensure that we can stay within budget. Thanks to everyone’s hard work, the Lakeland plan is now in budget and feasible!

· Adjourn – K. Williams, second K. Goeden

Remaining List of Options to Consider:

Option D: Purchase office building and continue to lease Delivery

Option E: Keep leasing and walk away (if A-D don’t work)

We have $6 million in financing confirmed.

Applying for additional $1 million loan.

Topics tabled for Upcoming meetings:

· Schedule Admin and Delivery meetings to discuss shared HR and filing spaces

Homework for Next Meeting:

D. Flanigan(?) will schedule a roof inspection and get quotes for driveway and EIFS repairs

K. Goeden and V. Teal will review data center quote and fire protection question

K. Goeden will forward S. Feith’s ground lease question to attorneys and will forward answers received from attorneys. Address SFs concerns about option to extend the lease.

K. Goeden will ask for an outage report for the property from MG&E

Next Meeting:

September 15, 2022 1 – 3 p.m.

Adjournment: 11:35 a.m.

Parking Lot:

· Notify Michelle Drea at the City of Madison Assessor’s office when we purchase a site. mdrea@cityofmadison.com

Members: