HomeMy WebLinkAboutRDA 03 MCAS DEV PLAN 11-16-98AGENDA
DATE:
NOVEMBER 16, 1998
RDA NO. 3
11-16-98
i r-Com'"
TO:
FROM:
SUBJECT:
WILLIAM A. HUSTON, EXECUTI~T DIRECTOR
CHRISTINE A. SI-RNGLETON, ASSISTANT CITY MANAGER
SUPPLEMENTAL SERVICES FOR PREPARATION OF
DEVELOPMENT PLAN FOR THE MCAS-TUSTIN PROJECT
A BUSINESS AND
RECOMMENDATION
It is recommended that the Agency authorize the Assistant City Manager to exeCute a Consultant
Services Agreement with Economic and Planning Systems for supplemental services for completion
of a Business and Development Plan, subject to approval of the contract by the City Attorney.
FISCAL IMPACT
The anticipated costs for supplemental services for preparation of a Business and Development Plan
for the MCAS-Tustin project is estimated at $46,170. Partial fimding for a portion of the scope of
work has been secured with 1997-1998 Community Development Block Grant funds in an amount
of $8,000. The $38,170 balance of anticipated costs for the project has been programmed as part of
the Redevelopment Agency's 1998-99 budget for the MCAS-Tustin Project fund.
BACKGROUND
The Agency in April of 1996 authorized consultant services with the finn of Sedway Kotin
Mouchly Group (now PCR/Kotin) for preparation of a Business and Development Plan for the
Marine Corps Air Station (MCAS)- Tustin. The Business and Development Plan is one of the
required prerequisites to the City of Tustin's Economic Development Conveyance (EDC)
application. The EDC process provides the City an oppommity to obtain title to surplus military
properties. Its purpose is to foster economic development and creation ofjobs, enhancing economic
recovery of areas negatively impacted by base closure. The Business and Development Plan must
include the following:
William A. Huston
Supplemental Services for Business and Development Plan
November 16, 1998
Page 2
· A development timetable, phasing plan and cash flow analysis;
· A market and financial feasibility analysis describing the economic viability of the project,
including an estimate of net proceeds over a fifteen-year period, the proposed consideration
or payment to the Department of Defense, and the estimated fair market value of the
property;
· A cost estimate and justification for infrastructure and other investments needed for the
development of the EDC parcel;
· Local investment and proposed financing strategies for the development.
Based on the economic and financial analysis proposed in the Business and Development Plan, the
City would determine whether to seek an economic conveyance of a portion or all of the base. If
the City decides to seek an EDC, the Business and Development Plan will become an integral part
of that application. In addition, the document is a critical resource document for planning and
administration purposes as well as for securing much needed loans, financing and bonds necessary
to offset the significant infrastructure improvement costs which must be accommodated for
economic development to occur at the base. As the Agency is aware, staff are interested in rapidly
transferring the base for reuse by the private sector. The Business and Development Plan is
essential to assist the City in detemfining how best to proceed with acquisition and redevelopment
of the base.
While significant progress on preparation of the Business and Development Plan has occurred,
particularly on the preparation of modeled market scenarios for redevelopment of the base, the
preparation of the Business and Development Plan was significantly delayed as the City worked its
way through various concems and issues with the Navy. Unfortunately, the City now has an
immediate need to meet a Navy schedule for submittal of our Economic Development Conveyance
Application in early 1999.
Economic and Planning Systems (EPS), a subconsultant to PCRJKotin, was to be responsible for
completion of a financing plan and strategy for the project. Since the f'mancing plan, any
disposition strategy and the final Business and Development Plan need t° be internally consistent
and integrated, staff believes the fastest way to ensure expeditious completion of a product
acceptable to the Navy would be for EPS to assume a more direct role on the project and to assume
additional services for completion of the project. After discussion with PCRJKotin, they concur that
EPS should assume supplemental services to complete the Business and Development Plan
particularly since EPS has considerably more experience in working on and submitting EDC
applications to the Navy than PCR/Kotin (i.e., Treasure Island, Alameda NAS, Mare Island).
William A. Huston
Supplemental Services for Business and Development Plan
November 16, 1998
Page 3
To afford the City the maximum degree of control and to expedite completion of the project, staff
would recommend entering into a direct contract with EPS. PCRYKotin's obligation in their
contract would be modified to require completion of all their development model nms, assumptions
and back-up exhibits and summary information as well as an updated Market Study. They would
also continue in a coordination role.
A proposed scope of work is attached. Depending on available time and staff resources available,
the scope also provides the City with the flexibility to exercise two additional optional tasks for
EPS: definition of the business terms for any acquisition for the site and preparation of the EDC
application. Costs for the supplemental services for completion of the Business and Development
Plan by EPS are anticipated not to exceed $46,170.
Christine A. Shin~
Assistant City Manager
CAS:kd\ccreport\busdevplan.doc
Attachment
November 4, 1998
Ms. Christine A. Shingleton
Assistant City Manager
300 Centennial Way
Tustin, CA 92780
ECONOMIC d~PLANNING SYSTEMS
Subject: Proposed Scope and Budget, MCAS Tustin EDC Business Plan; EPS #8192
Dear Chris:
In line with our conversation last week, this letter sets forth a proposed scope of work
and budget to complete the Business Plan and financial analysis needed for the MCAS
Tustin EDC application. Based on our prior discussions and review of work to date, we
believe the work effort described herein will provide the analysis and documentation
needed for the EDC in the most efficient and timely manner.
We will work closely with you and other City staff throughOut this effort tO develop the
strategies and policy parameters that are integral to implementation of the Business
Plan. We also will work with PCR/Kotin Consulting as needed to ensure full and
efficient use of the work they have completed to date.
As you know, we have already begun this work in order to meet the very tight time line.
Nevertheless, there is still time to modify and refine the scope of work presented in the
proposal to better meet your needs, if necessary. We are very pleased to have the
opportunity to work with you on this exciting and important project, and we look
forward to helping re-establish the project momentum on a solid base of analytical tools
and sound business strategies.
PROPOSED SCOPE OF WORK
TASK 1: PREPARE CASH FLOW MODEL
In order to test alternative development, disposition, and financial alternatives, it will be
necessary to develop a fast and flexible cash flow model. EPS will build a new model of
the MCAS Tustin project, derived from EPS cash flow models developed for other base
reuse projects. This model will incorporate, in a more aggregated form, the land and
building data, infrastx~cture costs, and other assumptions utilized by PCR/Kotin
Consulting in their model.
A key element of this task is relating infrastructure improvements to specific land areas
that may be appropriate for individual dispositions. We will want to build in as much
flexibility as possible for alternative strategy testing, but we will no doubt be somewhat
1815 Fourth Street, Suite B Phone: 510-841-9190 ~-a~,,~ s ^ c a A M ~, T o Phone: 916-649-8010
Berkeley, CA 94710-1910 Fax: 510-841-9208 ~ Fax: 916-649-2070
www.epsys.com '
Ms. Christine Shingleton
November 4, 1998
Page 2
limited in how much refinement to existing cost data can be done in the available time.
Therefore, we will seek to strike a balance between flexibility in "packaging" land and
infrastructure, on the one hand, and being able to readily use existing data on the other.
The model will be designed to allow for the testing of alternative assumptions on a
variety of development parameters, including absorption, price, land use, building
reuse, disposition packaging, financing, and asset management and operating costs.
The model will include a cost allocation component that will assign infrastructure costs
to the various land uses and subareas within the plan.
TASK 2: PREPARE TAX INCREMENT'MODEL
EPS will develop a tax increment forecasting model that will work in conjunction with
the cash flow model. This model will' allow us to develop tax increment forecasts
specific to each of the development/disposition scenarios that are tested.
TASK 3: REVIEW AND SUMMARIZE MARKET POTENTIALS
EPS will review prior market work prepared by ERA as well as recent "comparable"
updates prepared by PCR/Kotin Consulting. This information will be synthesized into
a summary to be included in the Business Plan and will provide the basis for the market
assUmptions reflected in the financial analyses.
TASK 4: CONDUCT DEVELOPMENT AND DISPOSITION WORKSHOP
The Business Plan and cash flow model for the MCAS Tustin reuse program will need
to reflect a nUmber of decisions about how the development and disposition of the
property will be carried out. We propose to develop the assumptions and strategies to
be embodied in the financial analysis in an intensive workshop with staff and any other
consultants deemed appropriate, in order to get everyone's best thinking in the shortest
possible time. We have tentatively scheduled this workshop on November 18 and 19.
Key issues that Will be addressed in the workshop include the folloWing:
· Organizational and Operations Strategy. We will need to define the organizational
entity that will carry out the reuse program (i.e., whose cash flows are being
projected), its roles and responsibilities. An element of this issue is how the master
developer roles will be divided up between the public and private sector.
Development and Disposition Program. The size, configuration, sequence, and
timing of districts or land areas that will be subject to individual dispositions needs
to be identified. The relationship between the land disposition program and the
infrastructure development program needs to be specified.
Ms. Christine ShingIeton
November 4, 1998
Page 3
Financing Strategies/Assumptions. Elements of the financing program need to be
defined, including land-based developer funding responsibilities (e.g., through
Mello-Roos or assessments), application of tax increment financing, and use of other
public sources including land disposition proceeds, lease revenues, and exisling
citywide funding so~ces such as impact fees and CIP expenditures.
Development Alternatives and Issues. The range of development alternatives and
issues to be tested in the model need to be defined clearly. Currently, PCR/Kotin is
charged to look at two absorption scenarios, and eight additional alternatives related
to specific deVelopment issues. It may be useful to st:ructure the latter as queries-
i.e., what are the implications of doing this versus that--rather than full alternatives
to make the analysis more focused and manageable.
Define Tasks -- Draft EDC Application. EPS will bring an outline of a Draft EDC
Application to the workshop, to be reviewed with staff. Subsequently, a discussion
will be held on assigning reponsibility for drafting the components of this
document.
PresentationJDiscussion to Council Subcommittee. After the above issues have
been addressed in a full day workshop, we will be prepared to meet with the two
Council members on the M£AS subcommittee the following day to brief them on
project status and key issues and receive their input.
TASK 5: PREPARE CASH FLOW ANALYSES
Based on the strategy and policy parameters, assumptions, and modeling frameworks
derived from the prior tasks, we will prepare pro forma cash flow analyses of the
development program to test the feasibility of the Business Plan under alternative
strategies and assumptions, and to estimate the present value of the property.
A key component of this task will be to develop a financing strategy to be incorporated
in the financial analysis. Only land based financing will. be included in the cash flow,
for purposes of calculating the net present value of the Navy land. Public financing
'sources, such as tax increments and City funds, may be part of the project finandng, but
will not appear in the cash flow estimate of N-PV, since doing so would only pass those
funds through to the Navy in whatever consideration is offered for the purchase .of the
base.
While we do not intend this to be an open-ended task, it is difficult to spedfy at this
time exactly how many runs of the model will be necessary to fully evaluate the most
appropriate strategy and arrive at an estimate of value that is realistic and defensible.
We believe it is important to retain flexibility in this critical task..Therefore, we have
budgeted an amount we believe will allow us to conduct a thorough analysis; however,
if additional analysis is needed when this budget is exhausted, we would ask that either
Ms. Christine ShingIeton
November 4, 1998
Page 4
a supplemental budget be authorized, or additional runs be billed on a time and
materials basis.
TASK 6: DRAFT EDC BUSINESS PLAN
EPS will prepare a narrative Business Plan to be included in the EDC application. The
Business Plan will document the organizational and operations plan, market potentials,
development and diSposition program, cash flow, and financing strategies, It will
demonstrate the feasibility of the project and provide the basis for the proposed
business terms of the EDC conveyance.
OPTIONAL TASK 1: DEFINE EDC STRATEGY AND BUSINESS TERMS
At the City's discretion, EPS will assist in the definition of the.EDC strategy and
business terms. Work on this task could either be billed on a time and materials basis or
be subject to a supplementary scope. Some of this work will, of course, flow naturally
out of the economic analysis of the project.
OPTIONAL TASK 2: DRAFT EDC APPLICATION
Eps is prepared to assist in the Rafting of the EDC application, at the City's direction.
The EDC application must include a number of elements in addition tO the Business
Plan and business terms, including: a description of the property requested and
intended uses, EDC rationale, and legal authority; an analysis of the economic impact of
the base closure on the commtmity; a description of the financial condition of the City;
and a discussion of the consistency of the EDC with the redevelopment effort and the
pr. ospects for success. EPS could do all or portions of the application, working with
Agency staff. However, given the short time frame, a collaborative effort might be the
best approach. The budget for this effort could either be T&M, or subject to a
supplemental scope.
PROPOSED'MANAGEMENT, SCHEDULE, AND BUDGET
MANAGEMENT_
Jim Musbach will serve as Prindpal-in-Charge and will be responsible for managing the
overall work effort and the development of the Business Plan. Tim Youmans, Principal,
will provide additional senior level oversight and input on all phases of the effort and
will contribute to the technical work on financing and implementation strategies. Russ
Branson will serve as day-to-day project manager and will have primary responsibilities
for the cash flow model. David Zehnder will provide technical assistance in the cash
flow modeling and analysis.
~192.~'XT. DOC
Ms. Christine ShingIeton
November'4, 1998
Page 5
SCHEDULE
The City wants to retain its original deadline for submitting an EDC application by
December 31, 1998, and EPS is committed to make every effort to meet that very
challenging time frame. Meeting this aggressive schedule will require an extraordinary
work effort, and close coordination between EPS and the City, as well as cooperation
from PCR/Kotin Consulting.
Our objective is to complete the cash flow model and some initial financial analysis
prior to the workshop to be held on November 16 and 17. During this time, we will also
start drafting the market section and other pieces of the Business Plan. Financial
analyses will be completed between the workshop and the last council meeting on
December 6. It is our understanding that a verbal presentation will be made to Council
on December 6 to seek guidance on the business terms. Drafting of the Business Plan
and coordination/drafting of the EDC application will continue through the remainder
of December·
BUDGET
The estimated budget is sttmmarized in Table 1. We estimate that we can complete the
Business Plan for a budget not to exceed $46,170 without prior authorization. Optional
tasks would be subject to supplemental budget or time and materials billing, as directed
by the City.
Again, let me reiterate how pleased we are to have the oppOrtunity to assist you in this
important effort. We look forward to working with you and to assisting in the
consummation of a successful EDC conveyance and reuse of the former MCAS Tustin.
Sincerely,
ECONOMIC & I'~L~G SYSTEMS, INC.
Mr. James R. Musbach
Principal