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According to the Building Research Board of the Federal Facilities Council, the appropriate budget allocation for routine maintenance and repair for a substantial inventory of facilities will typically be in the range of two to four percent of the aggregate current replacement value of those facilities. Assuming a minimum of two percent and replacement costs at $16.74 per square foot for all buildings, the estimated recommended maintenance and repair annual cost allocation should be $2,686,200, as shown in Table B-3 below. As compared to the Port's $614,000 budget, less than one-quarter of the funds are available for basic maintenance and repair. With the current budget, the Port does not have money to maintain and repair all buildings. The cost of maintenance and repairs does not include the extraordinary cost of remediation measures for environmental contamination and disposal of contaminated building materials. MAINTENANCE AND REPAIRS COST TABLE B-3 ROUGH AND READY PROJECT AREA Estimated Replacement Costs 1/ Total Costs $ 134,310,042 Recommend Maintenance and Repair (2%) 2,686,201 Current Budget Labor Maintenance 80,000 Building Services 214,000 Material 320,000 Port Budget 614,000 Difference Between Recommend and Actual $ 2,072,201 1/ Assuming lowest replacement cost possible for storage warehouses @ $16.74/ sqft Source: Marshall and Swift Valuation Guide In addition, more than half of the buildings generate rental rates that are so low that they do not generate sufficient income to cover capital expenses such as renovations and hazardous material abatement. According the Port property management staff, the average lease rate for a warehouse between 20,000 and 120,000 square feet is about $0.20 per square foot per year. This is extremely low when compared to $3.15 per square foot per year, the average lease rates of similar properties in the City. The low lease rates provide few financial incentives to renovate or repair the other buildings since they do not generate sufficient rent and revenue. Due to their limited revenue potential, these buildings will unlikely be considered for renovation or even maintenance given the Port's tight budget. With redevelopment, the Agency will be able to assist the Port financially to renovate and rehabilitate dilapidated structures thereby preventing future deterioration and dilapidation. The Agency will also be able to assist in ROSENOW SPEVACEK GROUP, INC REDEVELOPMENT AGENCY OF THE CITY OF STOCKTON MAY 3, 2004 ROUGH AND READY ISLAND REDEVELOPMENT PROJECT - B-17 - PRELIMINARY REPORT