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Megan Apostol

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Municipalities and P3: Diving Into the Innovative Economy

Municipalities and P3: Diving Into the Innovative Economy 1045 592 DMR Architects

By Charles H. Sarlo, Esq.

Municipalities have the ability to be innovative and creative in addressing their infrastructure capital needs as a result of the newly enacted Public Private Partnership Law (PPP or P3), which became effective February 10 (L.2018, c.90, s.1; N.J.S.A. 40A:11 -52, et seq.). In order to ensure that a municipality’s economic decisions are financially prudent, the P3 law has built-in safeguards in the form of competitive solicitation, transparency in the form of public hearings, and checks and balances in the form of the State Treasurer making specific findings in connection with the approval of PPP projects.

The simplest definition of a Public Private Partnership is a contractual arrangement between a public entity and a private entity that allows for greater private sector participation in the delivery and financing of capital projects with the objective of shifting risk to the private sector. The P3 law allows for a design-build-finance-operate-maintain methodology to deliver capital projects and is an alternative project delivery method to the traditional procurement pursuant to the Local Public Contracts Law (LPCL), which is recognized as a design-bid-build approach.

Broad applicability

The P3’s statutory applicability in New Jersey is broad, as it allows the P3 project delivery model to be used for any building, local or county road, vertical structure, or facility constructed or acquired by a local government unit (defined to not only be municipalities, but also other public entities that are subject to the LPCL or Local Redevelopment and Housing Law) to operate local government functions, including any infrastructure or facility used or to be used by the public or in support of a public purpose or activity.

Today, the private sector’s innovative intellect and financial vigor can craft and implement proposed solutions to a municipality’s infrastructure needs. The theme of private sector innovative intellect is front and center in New Jersey’s P3 law, which allows the private sector to submit an unsolicited proposal in the form of a “project playbook” that includes certain statutory requirements.

Should the municipality elect to proceed, it must seek competitive proposals via a public procurement process that must also meet the minimum statutory requirements that that satisfy the same basic purpose and need of the unsolicited proposal. In the alternative, the municipality can issue a public procurement request-for-qualifications. Upon a determination of the qualified respondents, based, in part, on minimum standards to be promulgated by the State Treasurer, the municipality is required to issue a request for proposals.

Regardless of whether the unsolicited proposal or the solicited proposal pathway is applied, the municipality would rank the proposals received in order of preference based, in part, on minimum standards to be promulgated by the State Treasurer. Thereafter, the municipality is required to make specific determinations of the top-ranked proposals and hold a public hearing at which the specific findings must be made in order to find that the project is in the best interest of the public.

Subsequent to the public hearing, the municipality is required to submit a P3 application to the State Treasurer for review and approval. The statute requires the submission of specific items, including: full description of the proposed P3 agreement, a full description of the project, description of any agreement for the lease of a revenue-producing facility related to the project, the estimated costs and financial documentation for the project showing the underlying financial models and assumptions that determined the estimated costs, timetable for project completion, evidence of the public benefit in advancing the project as a P3, and the municipality’s findings during it’s proposal review and the public hearing.

For municipal projects, the State Treasurer, in consultation with the New Jersey Economic Development Authority (NJEDA) and the Department of Community Affairs (DCA), is statutorily charged with approving P3 applications. In order to validate that the proposed P3 project is in the best interest of the public, the State Treasurer must make specific findings for a P3 project approval.

If the P3 project is approved, the municipality can then enter into a P3 agreement with the private sector, which needs to include certain provisions, such as a completion date guarantee, liquidated damages, maximum rate of return to private entity, and a provision for the distribution of excess earnings to the local government or the private party for debt reduction, a project labor agreement, performance and payment bonds, prevailing wage, and the establishment of a construction account with a third-party financial institution to act as a collateral agent.

As with any newly enacted law, one can certainly anticipate litigation involving the P3 law in which a party seeks to clarify the intent of certain provisions, reconcile inconsistencies or challenge the law’s applicability.

Understandably, the initial inquiry by a public official will invariably be “Why?”

Why chose to undertake a capital infrastructure project on a path that appears to be complex, burdensome, and untested–while it may also be assumed to be more costly and potentially fraught with a litigation challenge–rather than the time-tested procurement under the Local Publics Contract Law. For each initial negative reaction, P3 advocates and P3 case studies can illustrate a positive counter. Generally, it has been proven that there is a role for the private sector to foster solutions for public sector challenges. A well-designed P3 is intended to be performance-based and outcome-focused with a risk-sharing approach where asset performance is optimized for the long term.

Qualifying considerations

Notwithstanding that some who have had firsthand experience undertaking a capital project under the LPCL would certainly express concerns that they experienced regarding project cost overruns, claims, and missed project completion dates, it should be recognized that the P3 law should not be considered a blanket replacement to capital project procurement under the LPCL, as not every project is appropriate for a P3 arrangement.

National P3 players will advise that a project cost of $50 million is the minimum project threshold for a P3 project. The New Jersey P3 law prohibits the bundling of projects (i.e., two or more projects considered as one for a P3 arrangement). However, there are many infrastructure needs of municipalities and other local government units with project costs less than $50 million.

Notwithstanding this industry threshold, it is fully expected and anticipated that the New Jersey local know-how of the private sector will adeptly be able propose P3 arrangements to the public sector pursuant to the P3 law, for many of a municipality’s capital infrastructure projects regardless of project size. The public sector should embrace the imagination of the private sector as related to its capital infrastructure needs and base its procurement decisions on sound economic analysis, which supports beneficial fiscal and social impacts as required by the P3 law.

The dawn of Public-Private-Partnerships in New Jersey is now. As may be applicable, it would certainly be prudent for public officials, who are charged with balancing the needs for public funds while developing, upgrading or replacing public infrastructure, to certainly consider the Public-Private-Partnership business model as an alternative procurement process, notwithstanding its embryonic stage.

This article originally appeared in New Jersey Municipalities.

DMR Redefines Fitness Facilities to Encompass 21st Century Uses

DMR Redefines Fitness Facilities to Encompass 21st Century Uses 789 444 DMR Architects

DMR is designing 21st-Century fitness spaces throughout North Jersey to support not just the physical well-being of the communities we serve, but also the mental and social well-being, with modern spaces in schools, community centers and sports facilities.

DMR’s designs reflect the needs for all ages including safe after-school programs for children, extensive exercise options for adults, and places for seniors to meet up or take classes.

“Our clients are looking for spaces to get people out of their homes—away from their computers and game consoles—so that they can get back to face-to-face interactions,” Lloyd A. Rosenberg, AIA.  “Technology is great for so many things, but it can’t replace the physical and mental benefits of sports and fitness, and shared experiences with your neighbors.”

DMR’s current portfolio includes the following physical fitness facilities:

Public Community Center

DMR’s plans for the renovation and expansion of the M&M Building Community Center at 116 Holt St. in Hackensack encompass converting the existing 8,000 square foot one-story building with 24-foot ceilings into a two-story structure, and the addition of 14,000 square feet to accommodate a new lobby on the first floor and a multi-purpose gymnasium on the second floor.  Plans addressed the city’s need for more space to accommodate for more athletic team practices and game spaces, an after-school program for elementary and middle school-aged kids, and classes and activities for retired seniors.

The first floor will offer community meeting and classroom spaces, new restroom facilities, a snack bar, storage area, an office for the center’s administration, and elevator for access to the second floor.  In addition to the new gymnasium space, the second floor will have more meeting and classroom space, two offices, a kitchen and restrooms.

Renovations to convert this underutilized building into a center of activity are expected to be completed in summer 2019.

Private Community Center

DMR repurposed the former NBA Nets training facility at 390 Murry Hill Parkway in East Rutherford into an 83,200-square-foot Meadowlands Area YMCA which answers the needs of today’s health-conscious population in a modern accessible environment.

Using the building’s already-existing NBA-grade basketball courts as the facilities focal point, DMR converted the rest of the building, previously used for offices, into spaces traditionally expected at a YMCA including an expansive fitness center with Technogym cardio machines, an aquatic with a six-lane, Olympic-sized competition pool, and daycare at the Mara Center for Early Childhood Learning, with modern add-ons like informal meeting spaces throughout the building, group exercise classes, and education space for students and adults of all ages, mental and fitness levels.

The Meadowlands Area YMCA is the first centralized location for the organization’s 15,000 members from eight municipalities in almost a century.  It opened in 2017.

Indoor Athletic Facility

DMR’s plans will convert a currently vacant 2.5-acre lot on Meadowlands Parkway in Secaucus into a 51,750 square foot indoor sports facility for the Town of Secaucus to fill the recreation department’s gap in adequate centralized space for group youth and adult sports activities, training and league competitions in sports including football, soccer, wrestling and lacrosse.

In addition to a 24,300-square foot synthetic turf field that can be divided into up to four fields, the new facility will include administration offices, lockers, a convenience stand, storage, and bleachers with a forced air heating system.

Construction on the project will start in summer 2019 and is expected to be completed in summer 2020.

Educational Athletic Facility

Students at the newly-opened Frank J. Gargiulo Campus in Secaucus are taking physical education and elective classes that rival options more likely found at a spa or private club with its 12,000-square foot gymnasium complemented by indoor spaces for yoga, dance, cross fit training, cycling, Martial arts, weight training, and climbing.  The school’s campus includes a paved outdoor path for walking and running with fitness stations throughout the path.

The design team included numerous professionals who paid special care to keep the fitness areas separate from each other and the rest of the school, employing a sound engineer to ensure that sound and vibrations from one area of the school do not affect the utilization of other areas.

Space was also dedicated to faculty to encourage their use of the exercise options with locker rooms separate from those used by students, complete with showers and saunas.

Former Annin Flag Factory Is new Standard for Luxury Apartment Living

Former Annin Flag Factory Is new Standard for Luxury Apartment Living 789 444 DMR Architects

The rehabilitation of the former Annin Flag Factory and completion of a new sister building at 151 Bloomfield Avenue into Annin Lofts marks a new standard for luxury rental options in Essex County.

Joint venture partners Russo Development and Dinallo Construction Corporation used the original building’s industrial history and façade as inspiration incorporating exposed brick, beams and duct work, shiplap accents, industrial lighting, high ceilings and floor-to-ceiling windows into the design of its 52 loft-style apartment homes and common areas.

The 60 apartment homes in the second building complements the first with large windows and expansive floorplans but with finished walls and ceilings for those going for a more traditional vibe.

“Annin Lofts is the only residential rental option in the area that offers homes in a rehabbed historic building and a brand-new build in the same place,” Edward Russo, CEO of Russo Development, said.  “Our design team seamlessly married the vintage industrial vibe with modern conveniences to meet the market’s desire for diverse and unique living spaces.”

“Converting a 100-year old industrial building into modern, diverse living spaces always presents unique challenges,” Donald N. Dinallo, President and CEO of Dinallo Construction Corporation, who built the project, said. “Each apartment home has something special—a private outdoor space, original materials, or an imaginative floorplan—providing a distinctive canvas for residents to make their own once they move in.”

DMR designed the project, which includes a sixth floor penthouse structure to the Annin building to accommodate a large indoor club room and two outdoor entertaining spaces that residents of both buildings can use. The design also included four penthouse homes with wrap-around porches and 180-degree views of the surrounding valley.

The name of the project was chosen to respect the legacy of Annin, the largest and oldest flagmaker in the United States. The Annin Flag Company occupied the property from 1919 to 2013 where it made numerous flags of historical significance including those flown atop Mt. Suribachi during World War II, on the moon during the Apollo 11 mission, and during America’s bicentennial celebration in 1976.

A healthcare office showing an equipment room and the adjacent patient services area. The author’s photo is also included.

Six Factors to Consider When Making Healthcare Build/Retrofit Decisions

Six Factors to Consider When Making Healthcare Build/Retrofit Decisions 1045 592 DMR Architects

Finance leaders in the healthcare sector should be aware that the actual budget for adding to an existing building can far exceed the contractor’s bid once additional costs are added.

By Lloyd A. Rosenberg, AIA

Many hospital administrators find themselves contemplating if they should build on campus or retrofit or move physicians into new spaces in response to the many changes in healthcare today, including hospital mergers and expansions, technology implementations, value-based care, and changing patient demographics and needs.

That decision involves many factors, from obvious issues such as cost to more obscure considerations such as hospitals’ and health systems’ reach in their communities. Here are six areas hospital leaders should consider when deciding how to expand their facilities.

Cost

The architect should provide examples of costs for similar facilities so that hospital leaders can consider all costs, not just the price per square foot for construction.

The actual budget for adding to an existing building can far exceed the contractor’s bid once additional costs are added, including permits, new heating and cooling systems to accommodate the extra space, and other costs associated with construction. Hospital leaders should talk with all the experts—the contractor, architect, electrician, lawyer—to determine what other costs are involved and what items might not be part of the bid.

The architect may not be able to provide a standard check list, because every project comes with its own unique challenges, but hospital leaders should expect that the assigned team of architects has experience on similar projects.

Reach

Many hospitals are feeling the need to compete for patients throughout the state, making reach into other counties a necessity. For example, Hunterdon Healthcare’s main hospital is in Flemington, N.J., Hunterdon County, but hospital leaders were interested in expanding the health system’s services into neighboring Somerset County. They recently opened a renovated 55,000 square foot, three-story building that provides the services of Hunterdon Cardiovascular Associates, Hunterdon Heart and Vascular Center of Bridgewater, Hunterdon Urological Associates, Hunterdon Healthcare Center for Endocrine Health, and Hunterdon Healthcare Physical and Occupational Therapy.  The result is convenience for current and new patients who live in Somerset County needing services and treatments closer to home.

Space

With many procedures that once required overnight stays now being done on an outpatient basis, some hospitals have surplus space that can be repurposed.

One example is St. Peters Hospital in New Brunswick, N.J., which recently refurbished its dialysis lab into admissions, financial advising, and phlebotomy. The relocation and consolidation of these three departments next to the main lobby offers convenience for patients because they typically access those services at the beginning of their hospital stay. In addition, the change allowed for more space and patient privacy, adding to patient satisfaction.

Similarly, new technologies often take up less space, giving hospitals room to reorganize. Even the equipment that was designed around a few years ago has become obsolete. For example, after 15 years, Robert Wood Johnson Health System redesigned a project to accommodate newer, updated technologies.

Interconnectivity of Practices

New construction or retrofit decisions should also include consideration of which practices and administrative services should be together, and which might function more effectively away from the rest of the main building. Placing administrative staff who work directly with patients in the same building as the practices they serve offer convenience and efficiency to patients and staff.

Similarly, providing space for complementary practices, such as housing physical therapy and neurology staff with orthopedists in the same facility, makes it easier for patients to get to their appointments and for physicians to work together to handle patients’ health needs holistically.

Robert Wood Johnson recently redesigned the 3,500 square foot first floor of its Somerset Street medical office building in New Brunswick, N.J., in order to better serve patients by relocating the obstetrics/gynecology and orthopedics offices from the main hospital. Since these services are done on an out-patient basis only, giving them their own space removed the need for patients to find parking and walk through the main building for short visits.  The new facility will include a reception and waiting area for patients, five exam rooms, an X-ray room, and physicians’ and staff offices.

Relationship with Community

Because of increasing life spans, more people are in need of geriatric care, bringing medical practitioners and caretakers out of the hospital and office environment and into the communities. Off-campus space can play an important role in a hospital’s commitment to continue to be part of the healthcare team for this demographic.

These spaces are often off-site and can be in different counties and regions, adding new buildings and staff to the budget.

Transportation and Parking

Once a hospital decides that it is time to expand off-campus, location, as with any real estate decision, is the most important feature of a building. The architect and planner are great resources to help hospital leaders find a location that patients — current and new — can get to easily, either on their own or via public transportation.

This article originally appeared in the Healthcare Financial Management Association Strategic Financial Planning newsletter. 

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