DATE: Wednesday, September 10, 1997         TAG: 9709100542

SECTION: FRONT                   PAGE: A1   EDITION: FINAL  

SOURCE: BY TOM HOLDEN, STAFF WRITER 

DATELINE: VIRGINIA BEACH                    LENGTH:  133 lines

CORRECTION/CLARIFICATION: ***************************************************************** A headline on Wednesday's front page said that the Virginia Beach Community Services Board ``asked the city to pay $12 million for a flawed hotel building after only a basic study of costs.'' However, in addition to the hotel, the $12 million included the purchase of two adjoining properties and the cost of renovation. Total cost for facilities and land acquisition was $5.7 million for all three properties. Correction published Thursday, September 11, 1997 on page A2 of THE VIRGINIAN-PILOT. ***************************************************************** BEACH BUY BASED ON ``GUESSTIMATE'' BOARD ASKED THE CITY TO PAY $12 MILLION FOR A FLAWED HOTEL BUILDING AFTER ONLY A BASIC STUDY OF COSTS.

The City Council made a $12 million decision last year to purchase a hotel and adjoining properties based on incomplete information presented by the Community Services Board.

An architect hired by the city seven months earlier to evaluate the site's main property, a Days Inn on Bonney Road, said Tuesday that he performed only a basic review of the building, and that he was never asked to do a more thorough analysis.

The board's executive director, Dennis I. Wool, said that he used the figures, which outlined the costs to renovate the hotel, as part of his argument for why the City Council should fund a consolidation of several Community Service Board properties.

``Basically what we did was spend 24 hours going through a building assessment,'' said John H. Crouse, an architect for CMSS Architects. ``(The board) didn't have us do the second part. That would have been a more complete building evaluation where we look more specifically at the things that are causing problems. That did not occur. They never had us go that second step.

``I asked a couple of times that we do that because at that point our cost estimates were our best guesstimate,'' Crouse said.

It wasn't until June, six months after the council purchased the properties, that another architect, Paul Finch & Associates, concluded that renovating the Days Inn would cost $4.2 million, which was $1.8 million more than predicted by CMSS's cursory review.

Among the things Finch & Associates found that the building needs: a heating and air conditioning system more expensive than planned; more extensive plumbing renovations; structural improvements, including a new roof and reinforced floors; turning lanes on Bonney Road; and possibly a new traffic signal.

The complete project costs projected by the Finch firm showed a bill of $18.9 million, which would include land acquisition, building renovations and related costs.

That figure was high enough to prompt the board to decide Monday that it would be better to demolish the hotel and construct a new building on the site. That would mean a total cost of $17.2 million, including the $12 million already allocated by council.

Wool said the new figure is sound because it's based on new construction costs, which are more easily calculated and controlled than renovation expenses.

The Community Services Board has asked the city to finance the added costs through municipal bonds while the board would dip into a contingency fund set aside for unexpected costs. Issuing the bonds would require City Council approval.

``We used CMSS numbers as a basis for our presentation to council,'' Wool said Tuesday, adding that there were clear business reasons why a more detailed architectural review was not ordered.

When the city buys commercial land, it does so through third parties, keeping its identity secret so as to control the threat of escalating real estate costs, Wool said.

In this case, the talks were handled by the Economic Development Authority. CMSS Architects had been retained by the city only to provide a preliminary assessment of the Days Inn site.

Wool said if he had sought a complete architectural review, he would have had to seek public bids, a move that would have revealed to the sellers who was buying the property. Also, he said, the process can take months.

``We did not want to jeopardize the process,'' he said. ``On that basis we honored what they gave us. We didn't think the cursory evaluation would be so far off from reality as it turned out to be.''

Faced with annual rents that will top $522,000 this year alone, the Community Services Board has spent 15 months exploring ways to consolidate its properties onto one location in a facility and eliminate its renter status. Rental costs are expected to rise to above $700,000 by the year 2000. It currently leases about 40,000 square feet of space in the Pembroke Office Park.

The added costs have angered the City Council, which has demanded precise accounting from other municipal agencies, most notably the School District.

On Monday, the City Council directed City Manager James K. Spore to explain the escalating costs of the project at its Sept. 23 meeting. They have invited Wool.

``Obviously, it is always discouraging when you vote on something that does not turn out to be the price you thought had been guaranteed,'' said Mayor Meyera E. Oberndorf.

``We asked Dennis Wool over and over and over again,'' the mayor said. ``He assured the council that his numbers were correct and true.''

The architect's comments are but one indication that the project was facing problems. Seven months before the City Council approved the $12 million financing package, Crouse had written a letter to the CSB warning of limitations to the site.

In a letter dated May 10, 1996, and addressed to the board's director of finance and administration, Crouse said the Days Inn property was not big enough to house the Community Services Board's various facilities.

In addition, Crouse said that there was not enough space for parking and that the hotel would have to be substantially redesigned to accommodate the board's needs.

``The entire identified 78,000 square feet of community services space will not fit into the existing Days Inn property,'' Crouse wrote. ``However, if Skill Quest or Detox were located at some other facility, then all the other spaces will fit in.''

Skill Quest is a day program for mentally challenged adults, while ``Detox'' is the Recovery Center-Detox program for people afflicted with substance abuse problems. But it was parking, Crouse said at the time, that was the most serious problem.

``There are only 165 parking spaces on the Days Inn property,'' he added. ``It would be necessary to obtain the additional 131 parking spaces either on the adjacent property or the Unclaimed Freight property.''

The project was full of complications almost from the start. As the city negotiated the sale of Days Inn, it also entered into talks with the owners of the Unclaimed Freight Co., whose owners initially did not want to sell their neighboring property. That decision limited CMSS' ability to evaluate the potential costs involved in converting the Unclaimed Freight building, leading to overall incomplete numbers for the conversion. ILLUSTRATION: Color photo

STAFF/File

Six months after the council bought the Days Inn, an architect said

that renovating it would cost $4.2 million - $1.8 million more than

predicted in a cursory review.

Send Suggestions or Comments to webmaster@scholar.lib.vt.edu