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CL-2403 Work Session   Item #: D.       
Meeting Date: 09/15/2020  
Subject:    Review of RFP for Police Station
From: Scott Booth

COUNCIL ACTION
Work Session:     09/15/2020
SUMMARY
The City received three proposals for lease / option to purchase of a building to serve as the new Police Department Headquarters.  The winning bid was able to provide the most cost-effective option that also happens to best meet the needs of the department.  The proposal can be described as follows:

It will be located at the former Dan River Mills executive office building located at 2291 Memorial Drive. There will be a combination of historic restoration of the existing building and new construction.  The total cost is expected to be $17 million, which will be financed.  In order to capture the best price for the City, the following structure is needed:
 
1.  The developer plans to use historic tax credits to lower the cost of the renovation of the existing building. This property will be subdivided from the rest of the property and the plan is to lease that portion for a period of fifteen years with a First Right of Refusal on the property beginning in the eighth year of the lease.  The lease payment for this portion of the project will be $965,091.48 per year.  Due to the requirements of the Federal Historic Tax program, the property has to be owned by the developer for at least five years. 
 
2.  The developer will build an additional building adjacent to the existing building on a separate lot for $8,000,000.  The developer will owner-finance the cost of construction under the following terms: $2.9 million upfront payment toward specific tenant up-fits and $546,885.12 per year for seven years with a $2,798,299.08 balloon payment on the first day of year eight. 

Should the casino referendum pass, the City will use $5,924,000 from the initial $20 million payment from Caesars to pay towards specific tenant up-fits for the new construction and to set aside two years of lease payments.  After the initial two years, the City will use gaming tax revenue proceeds to pay lease/purchase payments.
 
Should the referendum fail, the structure of this agreement will likely change and the City Council would need to determine whether it is willing to raise taxes to cover the cost.
 
BACKGROUND
After years of minor construction efforts to the existing police space and expanding police functions to other parts of the Municipal Building, public library spaces, and the Green Street Recreational building, the need for a new police facility was introduced to City Council during the Fiscal Year 2014 budget process.  A budget placeholder of $16 million was entered for the FY 2019 Budget to construct a new facility or renovate an existing structure to meet the space needs of the Department.  

In 2016, the City funded a city-wide space study that identified a police facility as the number one City space need. In 2018, a second space study was funded to specifically identify and define the space needs of the Police Department.

In 2019, the City enlisted the services of Dewberry Engineering Consultants to identify and evaluate possible sites within the city for a new police facility. Ten sites were identified, evaluated and presented to the City for consideration.

In May 2020, the City issued an RFP inviting qualified developers to respond to a Request for Proposals (RFP) concerning the construction of a new or renovation of an existing structure to lease to the City of Danville, with an option to purchase, to serve as a new Police facility.
 
Three entities responded to the RFP as listed below:
 
Company Company Location Proposed Est. Cost Proposed Site Location
Blair Construction Gretna, VA $17,750,000 Dan River Mills Corporate Building
HBA Architecture & Interior Design, Inc. Virginia Beach, VA $25,000,000 Site not identified
FD Stonewater Arlington, VA $28,149,738 Former Danville Toyota site
 
After careful review of the RFP responses, the Blair Construction bid was selected to begin term negotiations for development and leasing.
RECOMMENDATION
Staff recommends the approval of both agreements under the condition that all obligations outlined in these documents are contingent upon the passage of the casino vote referendum on Tuesday, November 3, 2020.
 

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