CITY OFFICE Par>> @/'W/egei NORTH CAROLINA March 24, 2014 By Hand Delivery Mr. Robert C. Stephens, General Counsel Office of the Governor of North Carolina 116 West Jones Street Raleigh, NC 27603 RE: Offer to Purchase 307.95 acre Dorothea Dix Property Dear Mr. Stephens: This letter is to convey the City of Raleigh's offer to purchase the -entire 307.95 acre Dorothea Dix property ("Property") in fee simple from the State of North Carolina subject to the terms and conditions listed below. Based on our meeting on March 10, 2014, our understanding is that the State is open to relocating some or all of DHHS operations off the Dorothea Dix Property while using the renovated offices in the building in the near future. The City's proposal is aimed at facilitating the transition of DHHS operations to another location while providing DHHS with the flexibility of utilizing the building and other buildings on the Property over the next 15 years. The City would entertain discussions regarding the possible sale or lease of the vacant portion of the Morehead School property located to the north of Western Boulevard. Property: The 307.95 acres of land (net of railroad right of way) and existing improvements, known as the Dorothea Dix Hospital Campus, located on the south side of Western Boulevard just east of Centennial Boulevard in Raleigh, North Carolina. Purchase Price: $38,000,000 (per Don Johnsorrs appraisal report). Lease-Back: Upon purchase of the entire Property, the City agrees to lease back a 40.3 acre portion of the Property (previously identified by the parties as the "Retained Premises") to DHHS for $1 a year for 15 years to facilitate the transition of DHHS operations to another location. The Lease-Back Agreement will result in an estimated discounted rental savings of over $6,320,000 (see calculations below). ONE. EXCHANGE PLAZA CITY OF RALEIGH MUNICIPAL I EXCHANGE PLAZA. SUITE 1020 POST BOX 590 RALEIGH 222 WEST HARGETT STREET RALEIGH, NORTH CAROLINA 2760? NORTH CAROLINA 27602-0590 RALEIGH, NORTH CAROLINA 27601 (MAILING ADDRESS) Printed on Recycied Paper' 'Total Value: Clean-Up Costs: $182,000[acre 40.3 acres (proposed rental area) 7,334,600 Annual Rent: $7,334,600 0.085 (per State's appraisal): 623,441 Gross Rental Savings: $623,441 annual rent 15 years $9,351,615 Discount factor for 15 years at 5.35% (per State's appraisal) 10.1383988 Discounted Rental Savings: $623,441 101383988 $6,320,693 The Total Value of this transaction to the State is $44,320,693 ($38,000,000 $6,320,693). The Worthy 8: Wachtel appraisal valued the Property at $300,000 per acre. For reasons we have discussed, we believe that value is incorrect; nevertheless, if the Property were valued at $300,000 per acre, the discounted rental savings to the State would be $10,418,726, which would raise the Total Value of this transaction to $48,418,726 ($38,000,000 $10,418,726). The State will be responsible for all environmental cleanup costs. Effect of Clean--Up Costs on Appraised Value: Assuming that the environmental remediation costs range from as low as $10,993,000 to as high as $22,681,700 (see attached letter from Duncklee 8: Dunharn dated March 24, 2014): The adjusted opinion of value for the State's appraiser would range from as low as $43,318,300 to as high as $55,007,000 ($66,000,000 less remediation costs ranging from as low as $10,993,000 to as high as $22,681,700). The adjusted opinion of value for the City's appraiser would range from as low as $15,318,300 to as high as $27,007,000 ($38,000,000 less remediation costs ranging from as low as $10,993,000 to as high as $22,681,700). Averaging the adjusted opinions of value results in an average of as low as $29,318,300 (average of $15,318,300 and $43,318,300) and an average as high as $41,007,000 (average of $27,007,000 and $5,007,000). The Total Value of the City's offer of $44,320,693 is higher than both the low and high averages of the adjusted opinions of value. The adjusted opinions of value may increase or decrease depending on whether the assumed environmental remediation Financing: costs are shown to be too high or too low based upon further investigation by the parties. The attached letter from Duncklee 8: Dunham includes additional review of the February 26, 2014, asbestos abatement and structural demolition assessment provided by D.H.'Griffin Companies Griffin"), a copy of which is attached to this letter. Under the Standstill Agreement, the City was authorized to hire Duncklee Dunham, through its subcontractor, Childress Environmental Consultants, inc., to conduct an asbestos survey of the Dix property for an estimated fee of $57,900. The State objected to the $57,900 survey estimate and recommended using a survey estimate from Griffin in the amount of $28,000. The City agreed to utilize D.H. Griffin in lieu of Duncklee 8: Dunham and to pay for half of D.i-i. Griffin"s survey estimate. D.H. Griffin partnered with Childress Environmental Consultants, inc., to perform its assessment. The City questions the comprehensiveness of the D.H. Griffin asbestos abatement estimate. As noted in Duncklee Dunham's review, the D.H. Griffin estimate is limited by the inspection of "visual" suspect areas only, without accounting for asbestos in roofing materials, and without indicating the number of buildings that were not accessed during the on--site testing. The Griffin estimate does not provide an opinion regarding their confidence or certainty in the estimate, nor does it discuss or include background data regarding past abatement costs for similar structures, including the Building. Aside from archival asbestos surveys provided by the State, the City has not received any other information used to derive the D.H. Griffin estimate, including the results of Raymond Childress' sampling activities. The D.H. Griffin estimate does not provide for a contingency, which would be reasonable in light of the quantity, age, and condition of the buildings located on the Dix property. Given the limited breadth of both the DH. Griffin estimate and the data provided to-date, and for the reasons stated above, Duncklee Dunham recommends that a more comprehensive and detailed asbestos removal cost estimate be prepared. For purposes of this negotiation, the City is prepared to rely upon the remediation costs ranges shown above, though it would be open to having Childress Environmental Consultants, Inc., conduct additional testing in line with the testing initially proposed by Duncklee Dunham, through Childress Environmental Consultants, Inc. This transaction is contingent upon the approval of bond financing. Use of Proceeds: The City acknowledges and agrees with the State's decision to use the proceeds from this transaction to support mental illness programs in North Carolina. Non--Waiver: Nothing in this offer shall constitute or be interpreted as a waiver of the City's right to seek enforcement of the Lease Agreement executed by the State and the City on December 28, 2012, and recited in Paragraph A to the standstill Agreement executed by the State and the City on July 9, 2013. We would appreciate a response to this letter by Monday, March 31, 2014, at 12pm. Please forward the State's response, or any questions or comments relating to this letter, directly to my attention. rely, Thomas A. McCormick City Attorney Enclosures I 0 AL DUNCKLEE CARY, NORTH CAROLINA 27.518 OFFICE: (919) 858-9898 VIA EMAIL TO: stenhen.bentlev@raleiahnc.2ov March 24, 2014 Stephen C. Bentley, Superintendent City of Raleigh Parks, Recreation Culturai Resources Department P. O. Box 590 Raleigh, North Carolina 27602-0590 Reference: Additional Review of Environmental Remediation Costs Dorothea Dix Campus Raleigh, North Carolina Dear Mr. Bentley: As requested by the City of Raleigh (City), Duncklee Dunham, PC (Dunekiee Dunham) is pleased to present the results of our additional review of environmental remediation costs for the above-referenced site. The costs provided in this letter supplement those presented in Duneklee Dunham's Remediatirm Cos! dated February 28, 20 I 4. This letter includes a review of the Februar_v 26, 2014 Dorofliea Dix.' Asbestos /lbatemem div Demo/in?nu letter by D. H. Griffin Companies (DHG). This letter also includes information regarding additional cost items A, B. and in our Fcbruar_y 28, 2014 document. The remediation costs in this letter are provided asa range of outcomes pending the results of a toxicological review of site sa1nplingan'd analytical data by the North Carolina Department of Environment and Natural Resources The cost data in this letter may require modification based on the results of the toxicological review. Based on the assumptions made in this letter and the February 28 cost estimates, Duneklee Dunham expects enviroimiental remediation costs ranging from $10,993,000 to $22,63l,?00 as shown below (bolded): 0 Asbestos Abatement Costs 0 The DHG letter estimatestliese costs to be $3,918,700. $3,0l8,000 of this amount is estimated for the l,i9i,588 square feet of demolition space, or approximately $2.50 a square foot. insi.-xnnm-iss - - H513 Ntll'. I it Rlarasrraazzn Ntnumzti Additional Review of Environmental Remediation Costs Dorothea Dix Campus Raleigh, North Carolina March 24, 2014 Page 2 of 3 The DHG estimate for asbestos abatement appears tobe limited by: I inspection of "visual" suspect areas only (for example, 18 site buildings are listed as having "no visible not accounting for asbestos in roofing materials, and I no indication of the number of buildings they were unable to access. There is no opinion provided by DHG regarding their confidence or certainty in the estimate, nor any discussion of or background data regarding past abatement costs for similar structures. The asbestos costs provided by DHG are estimates with no apparent contingency. Given the age of the structures, the lack of access to some buildings, no roofing costs, and the inability to assess non--visible areas, it is reasonable and prudent to add a multiplier given the magnitude of the project, the number of buildings, and inherent high degree of uncertainty with such a project. Using the estimate of $3,018,000 for abatement prior to structural demolition, spread over approximately 50 non--residential buildings equals $60,000 per structure. Based on our experience, this cost is on the low end ofa range that commonly extends into hundreds of thousands oi' dollars per structure. Based on the _inlortnation available at this time, and our experience, Duneklee Dnnham recommends a multiplier of 23X to 3X be applied to the $3,918,700 estimated, which equals a range of$7,837,400 to $11,756,100. Given the age otthe buildings, and based on our experience, it can be assumed shingled roots on the site buildings may be layered. Assuming 50-75% of the reefs contain asbestos. at an estimated cost foot for removal and disposal, and using an estimate of 640.000 square feet of roof, this results in a cost range of $640,000 to $960,000. Given the scope of the project, the limited breadth of both the estimate and data provided to~date, and the issues raised above, Duneklee Dunham recommends a more comprehensive and detailed asbestos removal cost estimate be prepared. 0 Phase ll Remediation Costs 0 $765,600 for remediation costs under the Browniields Program for Recreational/Park use (see Duneklee Dunham's February 28, 2014, remediation cost estimate). $250,000 to $2,000,000 for future Manufactured Gas Plant (MGP) Waste or Coal Combustion Residue (CCR) waste clean-up-(see additional cost item A from Duneklee DLInl1am's remediation cost estimate). Per cost item in the February 28, 20M, remediation cost estimate, it the DENR Brownticlds Program is utilized, DENR may require capping of areas that have exhibited elevated metals levels in shallow soil. Pending the receipt of DENR's toxicological review of the site data, based on our experience, best and worst case scenarios are estimated as follows: in Additional Review of Enviromnental Remediation Costs Dorothea Dix Campus Raleigh, North Carolina March 24, 2014 Page 3 of 3 I If the toxicological review results in an arsenic remedial goal level of 20 parts per million (ppm), and assuming there are no significant remediation requirements for other contaminants such as hexavalent chromium, then an area of up to 25 acres may require capping. At an estimated cost of $60,000/acre (for geotextile and one foot soil cap), the cost under this scenario is $1,500,000. Unless the DBNR toxicological review is able to set the allowable exposure levels based on background levels, the desired land use, or other means, highly restrictive remedial goal levels for arsenic or other contaminants could result. The worst case scenario would be the capping of the approximately 120 acres of exposed soil surface at the site at $60,000/acre, which is $7,200,000. I it" capping is not applicable, shallow soil removal from non--paved or covered areas to two feet of depth would be at a cost of approximately $360,000/acre. if the site cannot be made safe for the intended end use under the Browntields Program. additional costs, which have not yet been calculated, would be incurred to do so under the DENR Inactive Hazardous Sites Program rules. 0 The Phase ll remediation costs estimated above will require updating once the results oi' the DENR toxicological review are available. Dunhain recommends follovving up with DENR as soon as iiossible to get an update on the status of the toxicological review. We appreciate the opportunity to be of service to the City of Raleigh. Please call either of the unciersigned at (9l9) 858-9898. or email Dave Duneklee at if you have any questions or need additional information. Sincerely, Dunckiee Dunham, P.C. Daphne M. Jones, P.G., R.S.M. Senior Geologist David L. Duncklee, P.G., R.S.M. Senior Hydrogeologist/President City ot\Dorethea Dix\20l 4i 1- Post Phase Iilcorrespondenee - Reports - Mtgs\20l4-03-21 Rev of Remed Cost - l40?2.docx DUNCKLIEE. K: H. GRIFFINCOMPANIES February 26, 2014 Jay W. Smith O'B1'ien/Atkins Associates, PA JSmith@obrienatkins.con1 Subject: Dorothea Diic.' Asbestos Abatement Structural Demolition Assessment Dear Mr. Smith: D.H. Griffin Companies is pleased to present this assessment for asbestos abatement and structural demolition for the referenced project. We, along with Dorothea Dix representatives, were on site analyzing structures and sampling materials January 22"" through February - Asbestos Abatement North 'Carolina Accredited Asbestos Inspectors were provided in order to pertorm a limited non--des11'uctive survey. DH. Griffin Companies partnered with Childress Environmental to pextform this assessment. Their services were utilized because of their experience and background with this facility. The following inspectors evaluated and surveyed this project: - Raymond Childress Childress Environmental Consultant, Inc. NC Inspector 10675 - James London D.H. Griffin Companies NC Inspector #11343 Prior to commencing any Work, we obtained historic documentation from the Facility Maintenance Department. This information was sent to the NE. Department of Administration (Attn: Bill Peaslee) on February 12, 2014, We utilized this documentation to facilitate the analysis process. The following team members reviewed and analyzed these documents: - Anselmo Salas WI DH. Griffin Companies - Joe Horton D.H. Grifin Companies Due to most of the buildings being occupied, a nomdestructive sampling method was used. Roof materials were not sampled to avoid any termination of existing warranties. All accessible buildings were analyzed and all visible suspect materials were sampled. Examples of sampled materials include: - Floor Tile Mastic - Ceiling Tiles - Sheetrock, Joint Compound, and Plaster - Pipe Insulation - - i - Mastic Compound used to adhere ceiling/wall tiles - Windovs Caulking Glazing 1 421 Raleigh View NC 27510 phone [tax 919.772;4311 Structural Demolition . As samples were being collected, a separate team analyzed the buildings to determine the extentof demolition requirements (materials, construction type, salvage value, eto.). During this analysis, we also verified the square footages outlined on the 2007 State Government Facilities Master Plan provided by Based on our findings, there is approximately 1,191,588 square feet of structural demolition and 8,700 linear feet of underground tunnel removal. Estimate Breakdorm Asbestos Abatement for Misc. Structures 14 -- 16 Months $3 01 700.00 Asbestos Abatement for Tunnels $900 .00 Structural Demolition I0 -- 12 Months $5 000.00 Demolition of Tunnels $4 000.00 Total Lum Sum i"'15 - 20 700.00 Grifin Companies can offer turnkey services for the referenced proj ect. Based on our experience,'tve can limit the overall schedule by performing abatement and demolition services concurrently. Furthermore, with the estimate above, our project team can achieve a minimum of 38% MWBE participation. Based on the early design stage of this project, consideration for the following items were not included in this estimate: - Erosion Control Plan and Implementation - Tree Protection - Backfilling Building Footprints - Final Grading - - Removal of underground utilities outside the building footprints - Freon Removal A -- Street and Curb Removal 5 - Water and-Power for Abatement Phase. We anticipated using onsite water and power for abatement work. -Attachments - Attachment A -- Building Breakout - Attachment -- Master Plan Site Maps We appreciate this opportunity and loolt forward to learning more about ttxis project. Itthere are any questions regarding this refined estimate, please do not hesitate to contact me at (919) 397-1515. - Sincerely, Adam .7. Garrett Division Manager 421 Raleigh View Rd., Raleigh. NC 27610 [phone 919.772.4711 fax 919.772.4311 I . . .. .. . Zm3m 2:339. _ummn1_Eo: . 9.00. . . .55 Enmm Um:3n_ >zum_aoz whom- .3 >03 58.3% Eumm nnms: man Eumm _on3..mn_ 5 rm: 9.. . 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