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Council Meeting Minutes May 24, 1994 Page 10 Council Business. continued Benke confirmed that it is staffs intention to not compete in the A or B category, but to establish a net profit. Fulton said the Council needs to determine whether they anticipate a need for the additional space. If the third floor is constructed at a later date, it would cost about $1,430,00 or 30% more than at the present time. This increase is due primarily to removing the old roof, the addition, and tenant relocation. It has been determined that a one year delay in construction would cost about $200,000. The current construction cost, which is increasing incrementally, would actually be less than the incremental cost in deferring the decision to construct the third floor. He questioned the possibility that beneficial programs, which the City could capitalized on, may be discovered after the third floor is completed. Benke asked if the third floor could be constructed as a shell and then reserve the interior work until a tenant is found. Doc Peterson, Construction Manager, noted that the $830,000 amount includes the shell, sprinkler system and windows, and confirmed that the interior work could be held until a tenant is found. Carlson noted the need to locate an available tenant and allow for time to negotiate an agreement. Fulton noted that the Towle study found that larger office spaces are fewer in availability, and a third floor could accommodate larger tenants. Locke confirmed that the Ralph Reeder Center has about 20,000 sq. ft. Samuelson asked if the completion of the interior work was preformed later, would it create inconveniences to the first and second floor tenants. Peterson feels the interior work could be performed without much interruption. Benke noted that if the third floor was constructed at a later date, the second floor tenants would be inconvenienced at a greater level. Peterson agreed with Benke. Fulton stated that from a conservative estimate, the third floor's leasing revenues would assist in paying those costs associated with the construction of the first and second floors. He feels this is a great opportunity for the City to cover the property tax levy portion required to build the first and second floors. Benke noted that the conservative figures state that by the end of 1996 the third floor would generate a net profit when full leasing is retained. Fulton confirmed that the calculations assume a 50% occupancy in 1995 and a higher occupancy rate in 1996. Benke noted that the third floor provides the opportunity to help reduce the levy. Council Business I Potential Constructio of Third Floor for the Family Service Center Report 94-131 I I