City Hall faces huge increase in repair costs
Lake Oswego's City Hall has long been in need of extensive repairs, but a recent preliminary estimate has attached a much higher price tag to the project than previous assessments — and that has prompted some city councilors to call for a closer look at whether it would be more cost-effective to simply replace the entire building.
"From what I'm seeing here — and realizing that this is not final — it certainly strikes me as reasonable to find out what it would cost for a brand new building," Councilor Theresa Kohlhoff said last week. "Because otherwise I'm seeing a pig in a poke."
Others, like Councilor Skip O'Neill, said they believe the latest numbers are overstated and that the City should get a second opinion.
"Our goal is not to be building a brand new City Hall," O'Neill said. "If our City Hall was 100 years old and in really bad shape, that would be another story, but that building has quite a few more years of life left in it."
The biggest problem with the current structure on A Avenue is the failing exterior 'skin' of the building, which has been corroded by years of water leaks. City officials hope that a new skin can be designed to match or complement the exterior appearance of a future police station planned for next door, which is why they've sought to combine or at least coordinate the two downtown projects.
Portland architecture firm Mackenzie is handling design duties for the police station, so the company was asked to also develop a cost estimate for renovating City Hall. That initial estimate was presented to the City's Redevelopment Agency (LORA) last week; it pegs the total cost at $11,199,396 — almost double the price tag of a similar assessment conducted two years ago.
"It's looking like there's going to be a difference between what we initially thought back in 2015 and what it would be in 2017," Deputy City Manager Jordan Wheeler said. "But there are some caveats to that. There are a lot of unknowns, so it's (a question of) how much risk do you want to mitigate by budgeting for those unknowns or not?"
For comparison, Mackenzie's report also listed the estimated cost of constructing a brand new replacement building. It came to $14,591,728, prompting questions during the LORA discussion about whether the repairs were really worth the cost — and about the accuracy of Mackenzie's estimates.
"I think all of their figures are pretty high," O'Neill said.
'A lot of unknowns'
City staff stressed that both the repair and replacement numbers are very preliminary. No actual design work has been done for a new building, for example, so the $14.5 million estimate to construct a new City Hall is simply the current average total cost of a new 40,000-square-foot office building in today's market.
"The numbers were Mackenzie's best estimate at this time — rough order-of-magnitude numbers," Wheeler said.
The repair estimate is also subject to change, because Mackenzie's report is a "worst-case scenario" calculation with a large contingency fund built in.
According to a memo authored by City staff that accompanied Mackenzie's report, the building has likely suffered internal damage due to rainwater seeping inside the walls for years. The damage would need to be repaired as part of the renovation project, but the scale of the damage and cost of repair won't become clear until the current walls are stripped away.
If the damage is significant, it could add millions of dollars to the repair costs. The 2015 assessment did not include a contingency fund for the internal damage, which is a big part of why the Mackenzie assessment is higher.
"Once you start pulling off the skin, the extent of the damage and how much repair work will be needed under the surface is a big unknown," Wheeler said. "So at this stage, when you're trying to price projects like that, you like to build in a bigger contingency."
On the other hand, the staff report says, "if we find that there is less damage than anticipated when the building's exterior is opened up, then the contingency wouldn't need to be used."
"That's money not being spent, so it's not a bad thing," Wheeler said. "But for a policymaker trying to make a decision and figure out a budget, it's tough to put a finger on what the actual cost is going to be until we get more information as we progress."
Limited repair options
Before the discussion turned to the cost comparison at last week's meeting, Wheeler briefed the mayor and councilors (who also serve as the LORA board) on another of the report's main findings: The City's options are fairly limited when it comes to the scale of the renovation.
"The news isn't as great as we'd hoped," Wheeler said. "As the building sits now, all we could do is replace (the outer wall) with a lightweight material without having to do costly retrofitting."
The current "skin" of City Hall is an exterior insulation finishing system (EIFS), meaning it's composed of lightweight plaster that doesn't support the structure and is designed simply to insulate the building and keep the weather out. When it comes to water intrusion, it hasn't done a great job.
City officials wanted to explore the possibility of replacing the skin with a new material, such as brick or HardiePlank lap siding, in order to better match the proposed police station. (The exterior material of the station has not been decided, but City officials say it probably won't be EIFS.) But Mackenzie's assessment found that all of the possible alternatives for City Hall are too heavy for the building's internal framework to support.
"The only way to put heavier materials on the exterior would be pretty extensive changes to the structure of the building," City Manager Scott Lazenby told the council. "So my recommendation is not to do that."
In response to a question from Councilor Joe Buck, Wheeler clarified that EIFS technology has improved in the 30 years since City Hall was built, so a new EIFS system wouldn't face the same water intrusion issues. But in terms of altering the exterior to match the police station, the City would be limited to changing the trim and paint color.
The Mackenzie report also highlighted another limitation that applies to renovation efforts: The City has to be careful to avoid running afoul of modern redevelopment standards. The current City Hall was built in 1986 and is now far below code, and any buildings undergoing major upgrades are required to be brought up to the standards of the Downtown Redevelopment Design District.
Mackenzie's assessment was limited to three primary renovations that can be completed without bringing the building up to code: new skin, a new roof and a list of "voluntary" seismic upgrades such as strapping down the floor paneling.
Those upgrades would still leave the building below modern seismic standards, but any major seismic upgrades to the foundation or skeleton would cause the project scope and cost to snowball.
"If you wanted to modify this building (for seismic), you'd need to bring it up to building code," said Landon Harmon, Mackenzie's lead structural engineer. "And there's a very long list of upgrades we'd need to do for that."
The same goes for the type of structure renovation needed to support a heaver skin than EIFS, which would trigger modern seismic codes and require a full-scale retrofit.
The "bare-bones" wall replacement would also leave out a long list of deferred maintenance issues plaguing the current building, such as an aging HVAC system and problems with the elevators. The combined cost of all the needed maintenance adds up quickly, which is why the staff report asked the council to also consider the option of replacing City Hall entirely.
"It doesn't seem to make sense to gut the building purely for aesthetic reasons," the staff report said. "But there may be other arguments for replacing or extensively rebuilding it, and the City Council should consider them."
Councilor John LaMotte agreed.
"I've been on the horse about this, to just get the right numbers here," he said. "Is this putting lipstick on a pig at the end of the day?"
A replacement would also conform to modern seismic codes, making it safer than the current building would be even with a seismic retrofit. LaMotte pointed out that improved resistance would be helpful for staff who are supporting the city's first responders after an earthquake.
"With the seismic thing, we have a lot of staff people who work here," LaMotte said. "We need to look at the basic life safety, period. We need to be careful about doing the cheap thing and leaving the building not so great for seismic. I think we need to be honest about that."
However, others expressed skepticism about the cost estimates. O'Neill said he thought the $14.5 million estimate for a new building was too optimistic, and the City staff report also suggested that the real cost could be higher.
"There is a good chance that the studies have underestimated the cost of a new building," the staff memo read. "A new building would need a new foundation, structure, plumbing and electrical systems, and an expensive architectural contract. In addition, we would face moving costs, and possibly lease costs for temporary space."
O'Neill later told The Review that, based on his own experience as a homebuilder, he also thought the cost estimate for the renovation was overstated.
"In construction, you can design something that's very expensive," he said, "or you can design something that's not as expensive but accomplishes the same task."
Before considering the decision any further, he said, the City ought to hire a contractor to assess the roof and walls and offer a second opinion about the renovation costs.
In the meantime, the LORA board asked Mackenzie and City staff to map out a more detailed cost breakdown for each of the available options, including limited repairs, larger-scale repairs and a new building. The board is scheduled to hear an updated report and discuss the issue further at its next meeting on March 7.
"We hope to clear some stuff up for them when we come back to them next month," Wheeler said. "I think it was pretty clear that there was interest in having all the options on the table."