Report Prepared by: Maggie Lemos, Risk Analyst, Human Resources Department
Title
SUBJECT: Approval to Accept Revenue from an Insurance Claim and Appropriate $1,401,256.94 for the Sun Star Building and Approve a Statement of Service with CVE Demolition for $211,775 Plus 20% Contingency
REPORT IN BRIEF
Considers approving a partial proof of loss payment from McLarens Property Insurance Company for the claim submitted to Alliant Property Insurance for damages caused by the August 27, 2024, structure fire to the Merced Sun Star Building.
RECOMMENDATION
City Council - Adopt a motion:
A. Ratifying the Emergency Declaration due to the fire of the Sun Star Building; and,
B. Approving the Partial Proof of Loss Sworn Statement; and,
C. Accepting, Increasing Revenue in the amount of $1,401,256.94 and appropriating the same in Fund 5004 Public Safety CIP; and,
D. Ratifying Waiving Competitive Bidding due to the Emergency Declaration and approving a Statement of Services with CVE Demolition to demolish the Merced Sun Star building for $211,775 plus 20% contingency for a not to exceed amount of $254,130; and,
E. Approving the use of pooled cash until reimbursement from the insurance claim has been received; and,
F. Authorizing the City Manager to execute and sign the necessary documents; and,
G. Allowing the Finance Officer to accept and appropriate future funds received from the insurance claim.
Body
ALTERNATIVES
1. Approve, as recommended by staff; or,
2. Approve, subject to conditions other than recommended by staff; or,
3. Deny; or,
4. Refer to staff for reconsideration of specific items; or,
5. Continue to a future meeting.
AUTHORITY
Article XI - Fiscal Administration and Municipal Code Section 3.04.210 - Exemptions from competitive bidding.
CITY COUNCIL PRIORITIES
As provided for in the 2024-25 Adopted Budget.
DISCUSSION
The Sun Star Building was damaged by a structure fire on the evening of August 27, 2024. The damage was extensive, and a claim was submitted to the City’s property insurance broker, Alliant (APIP). Alliant submitted the claim to McLarens Property Insurance Company to contract hazardous material clean up, work with the City and contractors to develop a scope of work for repairs, and payment of the claim.
On November 20, 2024, McLarens requested the processing of a partial proof of loss to the City of Merced for the actual cash value of the building minus the $25,000 deductible. The amount of the payment is $1,401,256.94. The City also expects to receive additional payments from McLarens for immediate emergency work that had been completed in response to the fire.
On February 18, 2025, City Manager, Scott McBride, declared an emergency per Merced Municipal Code Section 3.04.300 which determined that there was an urgent necessity for the preservation of life, health, and property. Since the building was severely damaged by the fire, it left it structurally unsafe and dangerous to enter. Attempts had been made to secure the building from unauthorized access but there were reports that it was continuously being broken into. This not only tied up police resources daily but also created a liability for the City.
The emergency declaration allows a Statement of Services to be executed and move forward without the required bidding process and without Council approval for the Sun-Star Building Demolition. Staff is requesting City Council ratify the emergency declaration as well as waiving the competitive bid and approving the Statement of Service with CVE Demolition for $211,775 plus 20% contingency for a not to exceed amount of $254,130.
The scope of work to be performed will include the demolition and removal of the Sun-Star building down to the foundation. The Sun-Star building is approximately 30,500 square feet. Work will include but not limited to the abatement of asbestos prior to demolition as identified in previous surveys. All utilities will be capped and abandoned. Care to be taken to prevent damage to adjacent property and remaining pavement.
IMPACT ON CITY RESOURCES
If the recommendations are adopted there are no impact on resources since expenses for the demolition will be reimbursed by the payment from the City’s property insurance.
If the recommendations are not adopted, then the City will need to provide funding for the demolition from an appropriate fund.
Recommendation C. and G. will require five affirmative votes.
ATTACHMENTS
1. Partial Proof of Loss
2. Emergency Declaration Memo
3. Statement of Service