City Cancels $1.15 Million in Sycamore North Contracts, Reviews Millions More

City staff sent out notices to 29 service providers Thursday to stop work, interim City Manager Fred Deltorchio said.

The city plans to cancel more than $1.15 million in agreements with various contractors for work on what city staff has described as Hercules’ biggest “money suck,” and it is reviewing about $25.5 million more in contracts related to the retail-residential project.

It is unknown how much the city will save by terminating the contracts. Muncipal Services Director John Stier said his department is working on an estimate, which involves dozens of contracts with varying termination clauses.

In of Hercules' , the city's Sycamore North contract cancelling approach is: Terminate now, tally savings later. “The sooner you cancel them, the bigger the savings,” city spokeswoman Michelle Harrington said.

“There is also a lag time between the date you give notice to cancel” and when the city officially stops paying the contractor, she added.

On almost all of the active contracts, work has started and the city has made payments. Hercules is still calculating the potential savings of the cuts, city records show.

After suggesting at the last City Council meeting that all work on Sycamore North project stop immediately, city staff has indicated that it will continue to build the project to avoid the rapid devaluation that would occur if construction stopped completely, Interim City Manager Fred Deltorchio said. Sycamore North, which was designed to have 40,000 square feet of retail space as well as 96 residential units is roofless and without a fence around the property, leaving little protection from rain and potential squatters and vandals.

A $23 million contract with Oliver & Company for construction was one of the few contracts connected to the project that was not terminated, and Deltorchio will urge the City Council when it meets Tuesday to allow $2.25 million of city funds to be used to pay Oliver & Co. to proceed with work on the project through May. Deltorchio said he hopes to find a buyer before then but is preparing to simply close down Sycamore North there are no takers.  

"The construction that’s going on now is aimed at shutting" down the project, adding windows and other protective materials to the building, Deltorchio said.

The city has spent $35.3 million on the project. It will cost an estimated $32.7 million to complete and is valued between $25 million and $30 million. The city is looking for a buyer and retained commercial real estate broker CB Richard Ellis in mid-February to try to sell the property.

City staff is negotiating with over $669,000 in contracts related to the project. Main Street Properties is contracted to find Sycamore North tenants and manage the retail space of the project upon completion. Since the city has plans to sell the property, it doesn't need the services Main Street Properties was hired to provide, Deltorchio said.

Also at the last city council meeting, Stier said Main Street Properties asked for $224,000 to sever its contract, but city staff did not agree to pay that severance.

Available list of companies that received letters of contract termination from the city this week (amount reflects contract amount, not amount saved by cancelling). The rest of the 29 letters went out to service providers for miscellaneous work and material orders:

Auerbach Glasow French, Contract: $90,027

DK Consulting, Contract: $143,871

Giacalone Design, Contract: $10,536

Simpson Gumpertz & Heger, Contract: $74,771

SZFM Design, Retail Storefront Architect, Contract: $57,238

Jeffrey G. Wagner, Contract: $13,130

Applied Materials, Contract: $4,534

John H. Beatty & Associates, Contract: $9,000

Equity Community Builders, $744,208