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City Hall Consolidation Study

June , 2007. City of Tulsa. City Hall Consolidation Study. 1. Team Composition - Introductions. 2. 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

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City Hall Consolidation Study

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  1. June , 2007 City of Tulsa City Hall Consolidation Study

  2. 1 Team Composition - Introductions

  3. 2 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 thedelivery 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 • MarketAlternatives (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

  4. 3 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

  5. 4 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

  6. 5 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.

  7. 6 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

  8. 7 Important Considerations/Assumptions • Initially, 187,000 rentable square feet of existing tenants will renew and extend current leases • New tenant(s) will be identified for 8th floor (Numerous complimentary prospective government tenants have been identified, contacted and expressed interest) • 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

  9. 8 Occupancy Cost Over 10 years

  10. 9 Present Value Savings – 10 Year Horizon Difference between $26.0 million and $41.2 million ($15.2 million) is savings to City over first 10 years

  11. 10 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

  12. 11 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.

  13. 12 Due Diligence Review – Estimated Tax Impacts 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.

  14. 13 Risks/Issues

  15. 14 Next Steps / Recommendation • Formal presentation to Council – 6/12 • Council votes on project • If approved, Contract is fully executed • Contract is assigned to Tulsa Public Facility Authority • City enters into Lease with Tulsa Public Facility Authority • Legal Due diligence is completed between now and closing • Closing occurs late summer 2007 • Architectural work is initiated after closing • Construction/modification work commences in the fall • Move in begins fall 2007, planned completion Q2 2008

  16. 15 Questions & Answers

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