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Draft Memorandum June 11, 2013
<br /> EPSP Alternatives Infrastructure Cost Burden Review Page 4
<br /> financing mechanisms to cover the infrastructure costs, including conventional debt, private
<br /> equity, CFD proceeds, impact fees, and others. A more strategic approach to financing, for
<br /> example, one that combines both CFD proceeds with developer equity and co-ventional debt,
<br /> could increase the financial feasibility of the Program alternatives.
<br /> On the other hand, large-scale development projects of this nature often require "over-sizing" of
<br /> backbone infrastructure in early phases. In such cases, the cost/value ratio and the tax burden
<br /> thresholds may be exceeded in early phases, requiring the developers to make investments
<br /> beyond what the immediate development can support. However, for this initial feasibility screen,
<br /> EPS evaluates the EPSP alternatives as a snapshot in time, assuming full build out.
<br /> Consequently, future analysis will also need to consider the role of market absorption and the
<br /> phasing of infrastructure costs relative to the creation of real estate value over time.
<br /> Figure 2 presents detailed findings from the two tests of the EPSP alternatives. As shown, all
<br /> alternatives perform relatively poorly based on the Cost/Value Ratio test and relatively favorably
<br /> based on the Tax Burden Threshold test. The main reason for the discrepancy between the two
<br /> feasibility measures is the significant cost associated development impact fees and connection
<br /> charges. These fees and charges are substantial, especially for sewer and water service, and
<br /> combined represent between 66 and 79 percent of the total backbone infrastructure burden.
<br /> These fees are excluded from Tax Burden Threshold test since they are typically borne by
<br /> vertical builders and would not be funded through land-based financing mechanisms such as a
<br /> Mello-Roos bond. The Appendix to this memorandum presents detailed data and calculations,
<br /> including the program alternatives use mix, development values (also discussed below), and
<br /> impact fee calculations.
<br /> Figure 2 Finding from Feasibility Testing
<br /> Private Financing Scenario,with Redevelopment
<br /> Alternative
<br /> Item 1 2 3 4 5 6
<br /> Infrastructure Costs(rounded)
<br /> Backbone Infrastructure $60,185,000 $59,015,000 $59,148,000 $59,015,000 $59,148,000 $59,148,000
<br /> Off-Site Utility Improvements' $2,000,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000
<br /> Fees and Connection Charges' $122249000 5134 119 000 $143 362 000 6198 705 000 $2093150® $230 586 000
<br /> Total Infrastructure Cost Burden $184,434,000 $195,134,000 $204,510,000 $259,220,000 $270,463,000 $291,734,000
<br /> Development Value $926,290,000 $1,077,185,000 $1,146,320,000 $1,218,570,000 $1,454,070,000 $1,741,612,500
<br /> Infrastructure Cost/Value Ratio 19.9% 18.1% 17.8% 21.3% 18.6% 16.8%
<br /> Tax Burden Threshold Test
<br /> CFD Bond Proceeds and Issuance Cost' $65,294,250 $64,065,750 $64,205,400 $64,065,750 $64,205,400 $64,205,400
<br /> Proceeds Required for Annual Debt Service' $5,925,871 $5,814,377 $5,827,051 $5,814,377 $5,827,051 $5,827,051
<br /> Debt Coverage Factor 120% 120% 120% 120% 120% 120%
<br /> Special Tax Revenue Required(Annual) $7,111,045 $6,977,252 $6,992,461 $6,977,252 $6,992,461 $6,992,461
<br /> Potential Special Tax(%of Development Value) 0.77% 0.65% 0.61% 0.57% 0.48% 0.40%
<br /> Source'.Kier&Wright Civil Engineers Surveyors and EPS.
<br /> Reflects a conservative"place-holder"assumption to cover any upgradesto off-site sanitary sewer pipes,water systems and other utility systems.
<br /> 'Include water,wastewater,impervious surface,public facilities,traffic development,Tri-valley Transportation Committee,school,park dedication,and GI5 fees based on the
<br /> City's January 2013 fee schedule.
<br /> s Assumes a Community Facilities District bond(CFO)is used to corer backbone and off-site infrastructure,but not fees(bond issuance costs assume(at 5 percent of bond value(.
<br /> a Assumes an Interest rate 65%fora 20-year term.
<br /> P:5121000 t121090Easfâ˘leasantonnteporrilnfrasbucfure Burden Memorandum\DraIt 4(6.10)t121090_lnframm061011.docx
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