Central Office Consolidation – Q&A Update

Site G, Carroll Creek Linear Park

Corner of West South and East Streets in Downtown Frederick, Maryland

Q. What is the status of the school system’s new central office building?

A. In February 2005, the County Commissioners gave their support to the project and agreed to offset the cost with the sale of existing FCPS-occupied buildings. Negotiations and a contract of sale for purchase of the land—Site G along Carroll Creek in downtown Frederick—are complete with the City of Frederick. In September 2007, after a competitive bid process, the Board of Education approved a design-build contract with Warner Construction Company. Then in November, the Board entered into a 25-year lease purchase agreement with SunTrust Leasing Corporation.

Q. What’s it going to cost?

A. The total project cost is based on bids received last year. The initial cost of construction will be offset by the sale of existing buildings owned by the FCPS. The initial cost of the building, including land, design, construction and outfitting, is $16.7 million.

Selling 7630 Hayward Road (sale value estimated at $4.45 million) and 115 East Church Street (now estimated at $2.6 million) and other BOE properties (now estimated at $1.6 million) brings the net total project cost in at $8.1 million. Lease payments on the new facility are scheduled to begin in Fiscal Year 2010.

The estimated net annual expenditure from the FCPS operating budget will be about $472,000.

Q. How will the school system pay for the building?

A. Funding will come from the operating budget and will not compete with capital budget funding for new schools and school renovations. This is an important distinction. While initial costs and annual loan payments would impact the operating budget, it would be fiscally irresponsible for the Board of Education to look solely at short-term costs without considering long-term benefits and savings. The new building is being publicly financed through a long-term lease purchase. Under this agreement, the cost will be spread out over 25 years at 4.6% debt service. The BOE will own the building at the end of the lease.

Our goal is a well-built, functional, structure that is a good value for the dollar and will last for many years in the future. We intend its price tag to illustrate that we are good stewards of taxpayer dollars.

Q: Why does the school system need to consolidate its central offices?

A: For a growing school system, it is not cost efficient for central office staff to work from six buildings several miles apart, in outmoded space that requires ever-increasing maintenance and upgrades. Operational savings from consolidating staff in one facility will be about $216,000 a year. Consolidating operations in a single, modern structure will:

· Improve communication and collaboration among staff

· Give the public centrally located and handicapped access to services

· Reduce utility, maintenance and security costs

· Eliminate cost inefficiencies, such as mileage and courier costs and time lost commuting between buildings

· Provide a work environment with adequate ventilation, proper lighting and current technologies

· Provide much-needed space for the operations side of our growing school district

· Save on maintenance expenses associated with upkeep of aging buildings.

The BOE cannot avoid spending money on central office workspace. The wisest investment is a new facility. FCPS is not alone in the need to expand and improve office facilities to better accommodate staff, keep pace with new technologies and maintain efficient work places. For example, the County Government recently renovated a former downtown bank to accommodate its permitting and treasurer’s offices; a 30,000 square foot addition to that building is in the County’s Capital Improvement Plan (CIP) for FY 2012. The $5.7 million interior fit-out phase of the County Courthouse expansion is also in progress. A 36,000 square foot addition to the Health Department building and a new $18 million office building on the Montevue Lane campus are also programmed. Similarly, the City government has office construction projects in its CIP.

Q. Shouldn’t working conditions for teachers be your top priority?

A. The BOE wants to provide a comfortable, highly functional work environment for ALL employees. We can’t neglect one part of our school system and expect the rest to operate efficiently. With more than 5,000 employees, FCPS is the county’s single largest employer. The performance of staff members who work in centrally based, non-instructional functions is integral to our ability to operate cost-effectively, deliver quality service in our schools and compete for topnotch people in a highly competitive market. The new facility will house about 266 clerks, accountants, secretaries, technicians, curriculum specialists, teacher recruiters and trainers, administrators, and other central office personnel.

Q: What are the next steps?

A: With the Commissioners, the BOE must now coordinate the logistics of selling existing FCPS-occupied buildings. With the City of Frederick, they must coordinate details associated with employees’ use of the 600-vehicle parking deck the City is building next to the new central office building. In spring 2008, the architect will present the building plans and rendering to the Carroll Creek Commission for review and approval, after which the architect will finalize the design. Construction will begin shortly thereafter and should be complete by summer 2010.

FCPS CENTRAL OFFICE OPTIONS

	Site G New Construction 90,000 Square feet	7630 Hayward Rd Renovation & Addition 90,000 Square feet
Architect and Eng Fees	$950,000	$950,000
Testing, Permits and Other Fees	$520,000	$520,000
Construction
- Building and fit out	$11,830,000	$10,987,200
Project Contingency	$600,000	$600,000
Furniture and Equipment	$900,000	$900,000
Land Costs	$500,000	$0
Subtotal Total Design Build Cost	$15,300,000	$13,957,200
Capitalized Interest and Issuance Costs	$1,400,000	$1,400,000
Total Project Cost	$16,700,000	$15,357,200
Sale of Existing Assets
- 7630 Hayward Road (Frederick)	-$4,450,000	$0
- 115 East Church Street (Frederick)	-$2,600,000	-$2,600,000
- 7516 Hayward Road (Frederick)	-$950,000	-$950,000
- 103 Prospect Street (Middletown)	-$675,000	-$675,000
Subtotal Sale of Surplus Property	-$8,675,000	-$4,225,000
Net Total Project Cost	$8,025,000	$11,132,200
Annual Financing Costs
- 25 Years @ 4.62%	$580,000	$760,045
Annual Operational Savings* (-)	-$216,000	-$216,000
Annual Rental Income (-)	$0	$0
Annual Parking Deck Fees (+)	$108,000	$0
Net Annual BOE Costs	$472,000	$544,045

2-11-08