Title
Memorandum of Understanding for a Central Utility Plant to Support Innovation Square and UF Innovation Hub (B)
GRU has been selected by the University of Florida ("UF")and Shands Teaching Hospital and Clinics, Inc. ("Shands") to be the exclusive provider of utility services including electricity, gas, water, wastewater, reclaimed water, fiber optic connectivity, chilled water for space conditioning, and back-up power ("Utility Services") to the proposed Innovation Square development project. This will require GRU to design, finance, construct, own and operate a central utility plant system to serve the entire Innovation Square site, which is located on the site of the former Alachua General Hospital (AGH). The central utility plant will be designed to incrementally serve the future phases of Innovation Square and adjoining properties as they are developed. The City Commission is being requested to authorize the General Manager to negotiate and execute the agreements necessary to allow design and equipment acquisition to proceed immediately for all phases of the project. It is anticipated that several contracts will be required in anticipation of project phasing and the different interests of UF and Shands.
Explanation
Shands in conjunction with UF is developing a new Innovation and Technology Transfer park known as Innovation Square at the site of the former Alachua General Hospital ("AGH"). Innovation Square is to be located in an area generally bounded on the north by S.W. 2nd Avenue, on the east by S.W. 7th Terrace, on the south by S.W. 4th Avenue, and on the west by S.W 10th Street. The master plan for Innovation Square includes numerous buildings to be developed and owned by third parties and constructed over an extended period of years. UF has committed to build the first building, called the "Innovation Hub", which will be located in the north-east corner of the Innovation Square development. The Innovation Hub is to be constructed in two phases with construction on the Phase1 building to begin in the summer of 2010 with occupancy planned for June of 2011.
To aid in effective planning and development of Innovation Square, Shands desires to have GRU as the exclusive provider of utility services including electric, gas, water, wastewater, reclaimed water, fiber optic connectivity, chilled water for space conditioning, and back-up power at Innovation Square ("Utility Services"). The Utility Services need to be provided in a phased approach such that they are available to buildings as they are constructed at Innovation Square. Additionally, the delivery of chilled water requires the construction of a chiller plant at or near Innovation Square that is also expandable to match the increasing demand for chilled water. Such chiller plant is expected to be constructed by GRU on property owned by Shands under a long term lease. GRU will finance, construct, own, operate, and maintain the chilled water and back-up power systems required to serve the Innovation Hub in a manner similar to GRU's South Energy Center serving the new Shands cancer hospital.
In order to meet this schedule, agreements and purchase orders will have to be executed in the very near future. No expenditures will be made unless a binding commitment which assures GRU recovery of investments has been executed in accordance with GRU purchasing procedures and subject to approval as to form and legality by the City Attorney. The Innovation Hub Phase 1 is a 50,000 SF building, and the ultimate build out of the Innovation Square development is projected to be approximately 1.3 million square feet.
Serving Innovation Square will further GRU's goal to promote the use of chilled water and back-up power systems in multi-tenant, commercial, institutional, and industrial properties throughout the Gainesville community on an enterprise basis as a way to promote and demonstrate energy efficient facility systems while benefiting all utility ratepayers and system subscribers. This agreement will also enable UF to take advantage of the potential economies of scale, organizational depth, regulatory experience, convenience of operation, and transparency of capital costs that GRU can provide.
Recommendations
The City Commission: 1) Receive a presentation from staff summarizing the proposed project; 2) Authorize the General Manager or his designee to negotiate and execute agreements between the City of Gainesville d/b/a Gainesville Regional Utilities ("GRU") and the University of Florida ("UF"), and between GRU and Shands Teaching Hospital and Clinics, Inc. ("Shands") to provide Utility Services to the Innovation Square on an enterprise basis to earn reasonable and customary rates of return on capital investment in accordance with GRU Purchasing Procedures and subject to approval as to form and legality by the City Attorney; and 3) Authorize the General Manager or his designee to negotiate and execute Contracts and Purchase Orders for the design, finance, equipment acquisition, construction, operation, maintenance and future expansion of the Central Utility Plant and associated infrastructure required to provide utility services to the Innovation Hub and Innovation Square complex at an initial cost not to exceed $5,500,000 in accordance with GRU Purchasing Procedures and subject to approval by the City Attorney as to form and legality.
Fiscal Note
The concept of providing innovative utility services to Innovation Square was described in the FY 2011-2012 Budget. The initial phase of design and construction is currently estimated at a cost not to exceed $5,500,000. Contracts will be structured to manage and ameliorate financial and operating risks associated with the project and charges for services provided will be designed to recover all costs through time while providing benefits for all of GRU's ratepayers in the form of an appropriate return on the investments made.
Drafter
Prepared by John Stanton, Assistant General Manager Energy Supply
Submitted by Robert E. Hunzinger, General Manager