ITEM TITLE:
Title
Consider approving a resolution that would increase the amount of assistance in Development Financing included in the Redevelopment Agreement between the City of Lawton, the Lawton Economic Development Authority, the Lawton Fort Sill Economic Development Corporation, and Fisher59 Properties, LLC, with said increase to be based on updated cost estimates for Public Improvements associated with the project.
body
INITIATOR: Dewayne Burk, Deputy City Manager
STAFF INFORMATION SOURCE: Dewayne Burk, Deputy City Manager
Richard Rogalski, LEDA Executive Director
BACKGROUND: On April 23, 2024, the Lawton City Council approved a Redevelopment Agreement by and among the City of Lawton, the Lawton Economic Development Authority, the Lawton/Fort Sill Economic Development Corporation, and Fisher59 Properties, LLC, for the development of a 100,000 sf distribution center within the Airport Industrial Park. The agreement provided financial assistance to the Redeveloper via the reimbursement of an amount equal to the actual out-of-pocket costs and expenses (including all hard and soft costs and all bonding costs, including maintenance bonds) incurred by the Redeveloper in connection with the design and construction of the Public Improvements associated with the project. Per the agreement, said reimbursement is referred to as the “Initial Cap” and is limited to $1.6 million. However, the agreement also provided that the Redeveloper could submit an engineer’s detailed cost estimate, or the construction contract with Redeveloper’s contractor, prior to commencing construction of the Public Improvements specifying the costs of the Public Improvements, including without limitation, a contingency and any soft costs. In the event this documentation indicates that the cost of the Public Improvements will exceed the Initial Cap, City staff would, within fourteen (14) days of notification, present the updated cost estimate to City Council for consideration. If City Council approves the updated cost, then the Initial Cap of $1.6 million shall be increased accordingly which would then be referred to as the “Adjusted Cap” and the Adjusted Cap would then be established as the approved amount of assistance in Development Financing for disbursement to the Redeveloper pursuant to the Agreement.
Hence, the Redeveloper has submitted a Cost Estimate for the Public Improvements prepared by Alston Construction, with a cost of $2,559,824. Along with that document, the Redeveloper also submitted an estimate for Engineering, Project Management, and Third-Party Testing costs totaling $132,000, along with Construction Interest in the amount of $121,132, and a 25% Contingency, in the amount of $703,239. With the submission of these cost estimates, the Redeveloper has requested that the Initial Cap be adjusted to reflect the new cost of $3.5 million, becoming the Adjusted Cap, or the maximum amount allowed for reimbursement for the cost of the Public Improvements. The submitted construction plans have been reviewed by staff and significant changes have been agreed to by the engineer. At the time of drafting this agenda item, the revised plans and a revised cost estimate were not complete but are anticipated to be available prior to the City Council Meeting on Tuesday, June 25th. The CEO of Fisher59 urged that this item be placed on the City Council agenda for that date to avoid any further delays in the project. Having reviewed the previous estimate, staff feels that an adjustment to the Cap may be warranted, however, we would not recommend approval of a 25% contingency on an estimate that already seems to be adjusted for the recent spike in construction costs. A resolution has been prepared reflecting an adjusted cap of $2.9 million and is attached for consideration. Staff will provide a revised version of this resolution, as necessary, once the revised Cost Estimate has been prepared.
EXHIBIT: Resolution 24 -
KEY ISSUES: The increase in construction costs was not fully realized by the initial reimbursement cap.
FUNDING SOURCE: 2019 CIP Industrial Development Fund (4400000-54150)
STAFF RECOMMENDED COUNCIL ACTION: Approve Resolution 24- , approving an Adjusted Cap of $2,900,000 as the maximum amount of the reimbursement pursuant to the Redevelopment Agreement by and among the City of Lawton, the Lawton Economic Development Authority, the Lawton/Fort Sill Economic Development Corporation, and Fisher59 Properties, LLC, approved on April 23, 2024.