Concert venue price tag has fair board singing the blues

Concert venue price tag has fair board singing the blues
Plans to transform about half of Surfside Race Place at the Del Mar Fairgrounds into an entertainment venue have been reduced after bids for the full project came in well over budget. Photo by Bianca Kaplanek

DEL MAR — Plans to convert a portion of Surfside Race Place into an approximately 1,800-seat concert venue hit a sour note at the April 24 meeting, causing the 22nd District Agricultural Association to wait a month before awarding the construction contract.

The board of directors that governs the Del Mar Fairgrounds, where the facility is located, received a cost estimate of $11 million when plans were 60 percent complete and opted against spending an additional $45,000 to $50,000 for an updated quote when plans were final.

The project also calls for storm water and air conditioning improvements.

Although eight contractors attended a job walk, only two responded to a request for proposals.

Barnhart-Reese Construction Inc., which came in with the lower bid at nearly $18 million, estimated the remodel would cost $15.5 million and the air conditioning improvements would be another $2.4 million.

The other bid, from Woodcliff Corp., was slightly higher at $18.6 million, with the Surfside renovation costing about $16.5 million.

The estimate for the storm water portion was not included and had not yet been received, but board members said that, too, could come in higher than anticipated.

The directors had the option to reject both bids and rebid the project as is.

“But we don’t feel that’s in your best interest because we did extensive outreach on this,” said Jim Donovan, project manager with the California Fairs Financing Authority. “We generated a lot of interest in this project. It wasn’t due to a lack of interest that we only received two bids.”

Board President Stephen Shewmaker agreed.

“We’re not going to get a better deal by … going back out,” he said. “In fact, we may get a worse deal.”

Donovan said several contractors told him this is the “worst possible time to be bidding a project.”

“They told me everyone in the region is busy,” he said. “They asked if you could extend the bid date because they don’t have the manpower for the job right now.”

Donovan said the project could also be redesigned and rebid, which would cause an eight- to 10-month delay, or accept the lower bid using a deductive change order.

Under that process, the 22nd DAA and the architectural team would work with the contractor to identify items such as landscaping and hardscaping that could be eliminated temporarily and completed later when the budget allows.

“I think there are savings to be realized,” Director Russ Penniman said. “We did come up with something that has all the bells and whistles, and I think there are opportunities to reduce some of the bells and whistles.”

While his colleagues were interested in the concept, some had concerns.

“It’s a tad counterintuitive to say we’re signing a contract and then we can change it,” Richard Valdez, an attorney, said.

“The contract defines the … project scope,” added David Watson, also an attorney. “He can say, ‘You signed a contract to have me build this, and you agreed to pay me if I build it. So, go pound sand. I’m going to build it and you’re going to pay me.’ That’s what contracts do.”

“It is a sticky wicket,” Donovan said. “It is a hostile action. … There is a certain risk on your part.”

While the contractor may agree to the deductive change order terms, he could also devalue the items that are eliminated, which would result in a lower cost savings, Donovan said.

“If it gets to the end of your job and obviously you don’t have enough money for a certain component, you can eliminate that component,” he added. “But in your mind, you might think you’re eliminating $1 million and he might say it’s only $100,000.”

Penniman said that may not be an issue given that Barnhart-Reese is a family-owned company founded by a former 22nd DAA member who was appointed to the board in 2004 by then-Gov. Arnold Schwarzenegger.

“One of the reasons he bid it is he still has an affinity for this property,” Penniman said of Doug Barnhart. “It will probably irritate him less than it would somebody coming in that doesn’t know us and doesn’t know the property.

“We get more latitude out of that,” he added. “However … that’s not a guarantee.”

Board members opted to wait until the May 22 meeting to award the construction contract because they should know the cost of the storm water portion of the project by then.

It also gives staff time to clarify the provisions of the deductive change order.

“I support this project, but we have just been fed a tidal wave of information in 48 hours,” Watson said. “I have no doubt, with all the expertise sitting in this room, the questions can be answered. But I’m very uncomfortable just voting for something where I have all these questions.”

Surfside is an approximately 100,000-square-foot satellite wagering facility that opened in 1991 to accommodate about 5,500 people. It used to attract about 2,700, but a decrease in offsite betting resulted in an average daily attendance of less than 450.

Fair board members spent about four years considering options to make the venue profitable.

Studies conducted by fairgrounds staff and students from California State University San Marcos concluded that turning it into an entertainment venue would be “highly profitable,” with a return on investment in less than five years if at least 90 concerts are held annually.

The current plan is to hold about 60 concerts a year. The remodel will convert about 40 percent of Surfside into a flexible-seat concert venue and 7,000-square-foot beer-tasting exhibit area.

Satellite wagering will remain in a portion of the facility. The 22nd DAA has been approved for an $18.5 million California Infrastructure and Economic Development Bank loan.

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