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HomeMy WebLinkAboutMINUTES - 10162012 - C.102RECOMMENDATION(S): ACCEPT the following report from the Finance Committee on the status of the Real Estate Asset Management Plan (RAMP) and APPROVE recommended changes to the RAMP Program Objectives outlined in the report. FISCAL IMPACT: There is no fiscal impact with accepting this report. Implementing the recommendations will save money in the long term while providing the same level of service intended by the RAMP program. BACKGROUND: This report provides a status of Real Estate Asset Management Plan (RAMP) activities. The RAMP program, adopted by the Board of Supervisors in August 2009, recommended an annual report on the program with measurable goals as a way to track progress on implementing the RAMP objectives. Some of the objectives were very ambitious. The RAMP program was developed and approved in a time of more robust budgets and included several objectives that make sense to review and APPROVE OTHER RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE Action of Board On: 10/16/2012 APPROVED AS RECOMMENDED OTHER Clerks Notes: VOTE OF SUPERVISORS AYE:John Gioia, District I Supervisor Candace Andersen, District II Supervisor Mary N. Piepho, District III Supervisor Karen Mitchoff, District IV Supervisor ABSENT:Federal D. Glover, District V Supervisor Contact: Mitch Avalon, 925-313-2203 I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown. ATTESTED: October 16, 2012 David Twa, County Administrator and Clerk of the Board of Supervisors By: Carrie Del Bonta, Deputy cc: David Twa, Lisa Driscoll, Julie Bueren, Mitch Avalon, Steve Silveira, Karen Laws, Dick Awenius C.102 To:Board of Supervisors From:Finance Committee Date:October 16, 2012 Contra Costa County Subject:Real Estate Asset Management Plan (RAMP) Status Report and Policy Changes BACKGROUND: (CONT'D) modify to reflect today’s fiscal realities. The County Administrator and Public Works Director have concluded a review of the RAMP objectives and actions and have developed a more realistic approach for some of the more ambitious objectives. As a result, this report includes recommended modifications to some RAMP objectives that are also consistent with the recent Grand Jury report (number 1203) concerning the deferred maintenance of various County owned buildings. The RAMP program approved by the Board of Supervisors in 2009 listed 13 RAMP program objectives. The following is a restatement of the policy objectives, and status update of those objectives along with several recommendations for modifications to certain objectives. When the Board-approved policy is cited, the original language is used in reference to the General Services Department, although the General Services Department has now been merged with Public Works. Objective 1: Real Estate Asset Management Policy. The County real estate portfolio is an asset to be used to maximize long-term public benefit. The General Services Department, in consultation with the County Administrator, should develop a policy to guide implementation of RAMP goals and objectives. Status: A draft policy is currently being written and will be ready for presentation to the Finance Committee in the Fall. Objective 2: Real Estate Inventory. The General Services Department should identify and create a comprehensive database of the County’s real estate assets, including property descriptions and estimated valuations. The inventory should identify whether assets are fully utilized or have expansion, disposition, or revenue potential. Status: The General Services Department’s Real Estate Services division recently merged with the Public Works Department’s Real Property division and are now co-located in the Public Works office building on Glacier Drive in Martinez. The General Services Real Estate database was developed and maintained in a software version that is obsolete and needs to be updated. The estimated completion date for updating the Real Estate database is July 2013. At that time the database will have the functionality outlined in the RAMP objective. Objective 2 refers to estimated valuations of individual properties in the inventory database. One question is whether that valuation information should be updated regularly, or should that information only be updated as needed. The latter is recommended in that it would be too time-consuming and inaccurate to maintain updated information that could be out of date within a few months. Each appraisal can cost several thousand dollars, and it makes more sense to provide an appraisal for the specific property when the need arises. With regard to fully utilizing County assets, the completed Real Estate Inventory will be able to produce the square footage of vacant and occupied County-owned space and the “vacancy rate” of County-owned buildings (habitable space-not storage space). Once completed, the inventory will also note which building or space is habitable and which are non-habitable. For example, storage space is considered non-habitable. There are also two houses on Escobar Street discussed later in this report that are currently non-habitable and it would cost approximately $100,000 to make them habitable. Having a complete list of such properties will help make decisions regarding the investment and/or surplusing of certain assets. Until the inventory is completed, staff can utilize the data for the habitable buildings contained in the FLIP report. Attachment 1 shows the total square footage of these buildings. Attachment 1 also includes a Facility Type Code for each property on the list. Tracking the “vacancy rate” as a measurement tool only makes sense on space that is habitable and leasable, which is office space. It doesn’t make sense to include buildings in the calculation of a vacancy rate that are buildings dedicated to specific county functions like the libraries (Code LB) or detention facilities (Code DF). Attachment 2 shows all the buildings from Attachment 1 that have an office use code (Code OF or OM). The vacancy rate will be tracked for these buildings. To determine the vacancy rate for these buildings will require staff to contact each building occupant and inquire whether their building is fully occupied or partially vacant. Currently Real Estate staff is only aware of vacant space when a department contacts them to work on a relocation or on filling vacated space. The list of buildings to determine the vacancy rate will be refined once all the building occupants are contacted and better building information is available. Recommendation: Complete the Real Estate Inventory to include valuation information in the database only when it is available and track the vacancy rate of habitable County-owned office space. Objective 3: Needs Assessment and Master Planning. The General Services Department should work with County departments, under direction of the County Administrator, to develop master planning documents that depict the potential future growth of programs and/or facility needs throughout different geographic regions and/or functional areas of the County. Those plans have a 15 to 20 year planning horizon and should be updated every 5 years. Status: Real Estate staff currently meet with various departments to discuss and plan those departments’ long and short-term facility needs on a routine and as-needed basis. These departments tend to be the larger departments and heavy users of Real Estate Services, such as the Health Services Department, Employment and Human Services Department, and Sheriff's Office. Departments also conduct strategic planning from time to time to improve efficiencies or to react to a change in program requirements. Real Estate staff should be involved in these efforts if increased space, altered space, or new space is needed to meet their strategic objectives. Real Estate staff should outreach to the departments to determine their strategic space needs, but planning for a 15 to 20 year horizon may be too ambitious for some departments. Recommendation: This objective should be reworded to state, "The Public Works Department, together with the County Administrators Office, should work with County departments to discuss and plan their long and short-term facility needs. The first report of this collaborative effort will be completed in 2013 and updated every 5 years thereafter”. Objective 4: Facilities Condition Assessments. In 2007 the General Services Department completed a comprehensive Facilities Life-cycle Investment Plan (FLIP) assessment of 103 County buildings totaling over 3 million square feet to identify deficiencies in building conditions and systems. The assessment included estimated replacement cost and capital renewal requirements to better plan for necessary facilities improvements and should be updated every 5 years with a 10-year planning horizon. Status: Due to limited funds being appropriated for deferred maintenance over the last several years, several buildings being taken out of County inventory, and several new buildings being added to County inventory, it would be prudent to conduct an updated evaluation of County-owned facilities in 2013. The number of buildings currently tracked in the FLIP report has been reduced to around 90 due to changes in the building inventory. Recommendation: Update the evaluation of County-owned facilities in 2013. Objective 5: Real Estate Management Strategy. Using the Real Property Inventory, Master Plans, and the Facilities Condition Assessments, a real estate management strategy should be developed that integrates information to strategically assess and plan for County facilities needs over time. This strategy initiative includes evaluation of land and building acquisition, leasing, adaptive reuse, and disposition. It should be updated on an annual basis with a planning horizon of 10 to 15 years. Status: Real Estate staff regularly identifies and evaluates opportunities to move County departments from relatively more expensive leased office space to vacant County-owned office space. This is one of the fundamental tenets of the RAMP program. Aside from this ongoing effort, a Real Estate Management Strategy would inform real estate decisions over a 10-15 year planning horizon. Given the current economy and projected economic outlook for the foreseeable future, there is not likely to be much demand for new County office buildings in the short-term. If the County decides to investigate the need for a new government center or other similar initiative, then an overall strategy would make sense at that time. The timing for a Real Estate Management Strategy will not be known until the report outlined in Objective 3 is completed. Recommendation: Defer implementation of this objective until completion of the Needs Assessment and Master Planning Report (Objective 3) in 2013 and review its need at that time, and continue to routinely meet with various departments to determine and plan their real estate needs. Objective 6: Leasing. The General Services Department administers leases where the County acts as either a landlord or a tenant. Revenue leases where the County is a landlord are negotiated and managed to produce the highest return to the County. Acquisition leases where the County is a tenant are negotiated and managed to minimize the County’s costs. RAMP policy and program objectives would include comprehensive review of the County’s leasing portfolio to identify and incorporate best management and strategic practices. Status: Real Estate staff continually strives to incorporate best management and strategic practices to maximize the negotiation of lease terms. One of the primary efforts has been to reduce and stabilize lease costs over the term of each lease. Objective 7: Capital Improvement Plan. The General Services Department should prepare a 5-year Capital Improvement Plan (CIP) that identifies capital improvement needs including the relationship between operations and maintenance costs and investments in capital renewal and replacement. This plan would be updated and approved by the Board of Supervisors on an annual basis with direction from the County Administrator and input from departments as part of the budget development process. Status: The 2007 Facilities Lifecycle Investment Plan (FLIP) report referred to in Objective 4 provided a comprehensive evaluation of the overall condition of County-owned facilities and provided a database of deficiencies that needed to be addressed over a 10-year period. The report identified and prioritized project costs in the categories of modernization, deferred maintenance, and capital renewal needs that should be completed in that 10-year period. The original intent was to engage a consultant to complete a separate Capital Improvement Plan for County-owned buildings. Due to budget constraints, it would be more cost-effective to use the FLIP report as a guide for the maintenance of County building assets rather than create a separate Capital Improvement Plan. The FLIP report satisfies the intent of a Capital Improvement Plan except for identifying the operational needs of the departments. This can be done separately at the meetings Real Estate staff has with various departments, during the discussions with departments to develop the Needs Assessment and Master Planning Report (Objective 3), and by responding to requests for planning assistance from individual departments when they have an operational need that requires more space or modified space. A FLIP progress report is presented to the Finance Committee on an annual basis. Recommendation: Utilize the existing FLIP report and FLIP updates, along with collaborative efforts with County departments, to satisfy this objective rather than developing a new CIP. Objective 8: Design and Construction. The General Services Department performs and engages professional consultants to provide architectural and engineering services. Construction documents should be developed based on pre-established building standards and design criteria including space standards, life-cycle cost analysis, and evaluation of maintenance and operational impacts. Status: Public Works staff continues to manage the design and construction of numerous County capital projects in accordance with County and industry standards. Objective 9: Operations and Maintenance. The General Services Department identifies and implements custodial, grounds, and preventive maintenance standards, corrects building deficiencies, and monitors building system performance to extend the useful life of facilities to the extent possible with the County’s budgetary requirements. RAMP will accentuate comprehensive life-cycle cost analysis to guide strategic decisions relative to new construction, capital renewal, and investment. Status: The Facilities Maintenance Division, within the County’s budgetary requirements, continues to identify and implement a preventative maintenance program, correct deficiencies, and monitor building systems performance to extend the life of facilities. When investments are made, maintenance performed, or capital renewal projects planned, life-cycle analysis is performed by reviewing the initial cost, the annual maintenance cost and expected service life. Objective 10: Surplus Real Property. The real property inventory will be used to identify underutilized County-owned properties and to evaluate opportunities for revenue generation (leasing) or declaring property surplus to the needs of the County. Surplus properties would then be eligible for sale through a public auction or negotiated sales process. Status: Real Estate staff regularly review our asset inventory for surplus property opportunities. This will be easier when the Real Estate Inventory database is completed. Objective 11: Financing Capacity Analysis. Assess the overall ability to finance capital projects, including revenue and expenditure projections, fund balances available to pay for facilities maintenance, capital renewal, new construction, and property acquisition. Inherent in this analysis is a comprehensive review of the County’s existing debt service obligations, cash and revenue projections, and its capacity to finance future capital projects. Status: This objective outlines the steps the County goes through in developing the County’s budget every year. The County analyzes and assesses its ability to finance the operational, capital and service needs for all County departments to meet service delivery goals, including the needs of County-owned buildings. The County also reviews the County’s debt service obligations and bonding capacity as part of the annual Debt Report. The Debt Report is developed each year during the budget cycle. Objective 12: Internal Services Fund for Facilities Maintenance. Evaluate the feasibility of developing an Internal Services Fund (ISF) for facilities maintenance to improve planning and paying for deferred maintenance and capital renewal of buildings. An ISF would stabilize funding for building repairs and establish a more equitable and consistent process for maintaining the County’s building assets. Status: The intent of this objective is to fund ongoing maintenance and capital replacement needs for County-owned buildings and to eliminate future deferred maintenance. This objective is still valid, however, the method of implementing it may be different, and an Internal Services Fund may not be the most appropriate mechanism. The Auditor Controller's office is currently canvassing other counties to see how they set aside funds to be used for long-term maintenance costs. The concept is to add a factor to the occupancy costs paid by various departments to occupy County-owned buildings. The revenue raised from the occupancy cost factor would be used to offset the County’s cost to maintain County real estate assets, for servicing current and future debt requirements of those assets, or for other capital facility needs. The revenue from this occupancy cost factor would need to be tracked by building and possibly by funding source. Staff is currently reviewing the mechanics of implementing this concept and will report to the Finance Committee when a proposal is developed. Objective 13: Administration of RAMP Partnerships. Under direction of the County Administrator, the General Services Department should initiate collaborative partnerships with County departments to identify how departments are currently planning for and utilizing real estate assets and to manage department space needs within the framework of RAMP policy, goals, and objectives. Status: As stated above, Real Estate staff continues to meet with various departments to determine their real estate needs, and to maximize opportunities to implement RAMP policies, goals, and objectives. Funds will be set aside in each year's County budget to pay for proactive analysis of vacant County-owned buildings to fill them with departments from leased space to the maximum extent practicable. CONSEQUENCE OF NEGATIVE ACTION: This Report would not be accepted and recommended changes would not be implemented. CHILDREN'S IMPACT STATEMENT: Not applicable. ATTACHMENTS Attachment 1 Attachment 2