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Gilroy council rejects $144,774 design contract for Old City Hall HVAC; staff told to revisit
Summary
Council voted 7-0 to reject awarding a $144,774 design contract for replacement of the HVAC system at Old City Hall restaurant, citing timing, budget and strategic-planning priorities. Staff will return with alternatives later.
The Gilroy City Council unanimously voted to reject awarding a $144,774 contract to Advanced Design Consultants for design services to replace the HVAC system at Old City Hall, a city‑owned, historic building leased to a restaurant.
The decision followed a lengthy staff presentation and council discussion about escalating total project costs, the restaurant’s month‑to‑month lease, and competing budget priorities as the council completes a new strategic plan.
Administrative Services Director Leanne McPhillips told the council the design contract would cost $125,890 before a 15% contingency, bringing the contract total to $144,774 (project number 25 RFP ASD‑505). McPhillips said the city has $360,700 budgeted in the FY25 capital improvement program for the project, but estimated construction could ultimately be in the “neighborhood of $800,000” once bids are solicited.
Council members pressed staff on alternatives. Council members asked whether the city could simply hire an HVAC contractor directly rather than pay for a formal design; staff responded that public works procurement rules require a design to be prepared, bid and then awarded under the public works process. Staff and Facilities Superintendent Walter Dunkel said the building’s age and the absence of reliable original plans make a designer necessary to produce construction documents.
Council members also raised tenant issues. Staff said the restaurant has been a tenant since 2012 and is currently month‑to‑month, with rent in the roughly $2,500–$3,000 per month range. Council members noted the city has spent about $40,000 on repairs over the last 2½ years and that a complete system failure in summer could cause severe tenant disruption.
Public commenters expressed concern about spending and about whether the replacement should incorporate broader decarbonization measures. Several council members urged pausing the item until the new strategic plan and budget priorities are finalized. A motion to reject the contract award passed 7–0.
Staff said the project remains in the CIP and can be brought back at a later date with additional information about costs, phasing and funding options. If council later approves design and construction bids, those construction contracts would be a separate council decision.
