Privatization, Part 3

Part 3: Privatization: The Story of Courthouse Square

Susan Gray, LWVMPC Privatization Study Committee 

In September 2010, ten years after its completion, the $34 million Courthouse Square office building and transit mall were vacated after an evaluation by an engineering firm determined that the transit mall could collapse under its own weight and that the building was unsafe to occupy. How did this happen?

How it began

In November 1995, Salem Transit Authority manager and former mayor R. G. Anderson-Wyckoff proposed Courthouse Square to enlarge the bus mall downtown and provide additional office space for county offices along with some retail space on property owned jointly by Marion County and the Salem-Keizer Transit District. The county and transit district entered into a public partnership for the development of Courthouse Square, with the management of the site set out in a “condominium agreement.” This agreement required the building to be repaired if damage is less than 75%. The transit authority owns about 31% and Marion County owns the rest of the project.

The Courthouse Square project included a 163,000 square foot five-story office building, a transit mall and a future development site called the North Block. In Spring 1995, two bids were received for building Courthouse Square. The winning bid was submitted by Dan Berrey, a commercial real estate agent in Salem, whose team included Arbuckle Costic Architects and Pence/Kelly Construction as general contractor. In a dispute with the county and transit authority over his fee, Berrey left the project with a mediated settlement of $360,000. Arbuckle Costic and Pence/Kelly remained on the project, although they had little experience with a project the size and scope of Courthouse Square. In the summer of 1997, Melvin Mark Development Company of Portland was hired as the Project Manager, and two project coordinators, one each from the county and the transit authority, were appointed to oversee the project. During the planning stages of the project, allegations of mismanagement led some taxpayers to call for the project to be abandoned.

Financing the project

In 1997, the Federal Transit Administration issued two grants to the transit authority totaling about $9 million given with the expectation of a full project life of the transit mall. Since the mall is no longer useable, the FTA can recoup some or all of that money. The county’s share of the costs came from bonds that are payable annually through 2023 costing about $1.55 million per year.

Engineering on the project

The structural engineering firm was Century West Engineering. The structural engineer on the project was Mike Hayford, an experienced engineer. Hayford died of natural causes in 2001 at age 55. Century West had been the structural engineering firm and Hayford had been the structural engineer on a 7-story parking garage built by Salem Hospital in 1998. Salem Hospital sued Century West over structural defects in the parking garage, which was subsequently torn down. In January 1999, Hayford left Century West and by June 1999, Century West no longer had a full-time structural engineering department.

The county and transit authority had building and safety officials of the City of Salem review the engineering plans for Courthouse Square. Their “review” of the plans consisted of verifying that there was the stamp of a licensed engineer on the plans. Salem’s building and safety officials lacked the expertise to evaluate the engineering plans and no peer-review by a structural engineer was required. The method chosen for building the concrete slabs at Courthouse Square was post-tension construction, presented to the county and transit officials as “leading edge and highly efficient,” but the design team and contractors were relatively inexperienced in post-tension construction.

Problems observed

Construction commenced in 1999. Revisions to the plan were made during construction. On February 18, 2000, Melvin Mark Development, the project manager, wrote to architects Arbuckle Costic about several cracks it had observed in critical locations beneath the bus mall. Melvin Mark recommended a second engineering opinion and stated that the transit authority and county agreed that a second opinion was desirable. The second opinion was never sought. Instead, the county and transit authority asked Mike Hayford, the project engineer, whether there was a problem because of the cracks. In a letter dated July 11, 2000, Hayford stated that the cracks were merely cosmetic in nature. By this time, he was no longer employed by Century West.

Construction of Courthouse Square was completed and opened in September 2000. By 2002, problems with the building began to be noticed, and several engineering firms were hired over the years to evaluate the condition of the building and transit mall. In July 2010, engineering consultants recommended closure of the transit mall and the office building.

What went wrong

In 2010, the county and transit authority hired Golder and Associates, an engineering consulting firm, to determine what went wrong and established a citizens’ task force to decide whether Courthouse Square should be rebuilt, repaired or torn down. In May of that year, Golder concluded that the causes for the problem included: a flawed structural design that was not peer-reviewed prior to construction and government officials that lacked the technical expertise to evaluate the design; the departure of the structural engineer from Century West in January 1999 and no replacement was hired; concrete that failed a strength test; the lack of experience of Arbuckle Costic and Pence/Kelly with a project the size and scope of Courthouse Square, all of which resulted in poor construction practices.

What happens now

Due to limitations in the insurance coverage of the contractors, to date the county and transit authority have recovered about $1.8 million in lawsuits from Arbuckle Costic and Pence/Kelly. A lawsuit against Century West is pending. The Condominium Association had insured Courthouse Square for about $29 million. The insurance claim is pending.

The citizens’ task force met several times and then requested proposals for repair of the building. By late December 2011, four firms had filed a letter of intent to submit formal proposals to repair the building.  The proposals must be submitted by March 6, 2012, and proposal evaluations and interviews with the firms will begin in late March.

Sources:

Interim Report of the Courthouse Square Solutions Task Force dated May 23, 2011 “Courthouse Square’s red flags” by Michael Rose, Statesman Journal, August 14, 2011 “4 interested in repairing Courthouse Square” by Michael Rose, Statesman Journal, Dec. 23, 2011 “Courthouse Square deadline extended” by Michael Rose, Statesman Journal, Dec. 29, 2011