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Draft Memorandum July 25, 2013 EPSP Infrastructure Feasibility Analysis Page 9 infrastructure range from $14 million to $19 million are not currently allocated to on-site EPSP improvements. Conversely, it should be noted, that the fees do not cover the entire cost associated with building the park and recreation-related improvements envisioned for the plan. Phasing Specific phasing of the EPSP could have substantial implications on its feasibility. There are two phasing considerations that include absorption and geographic positioning of subareas within the plan. Given the level of uncertainty about future development timing and conditions, phasing is not considered in this analysis. The EPSP will take a number of years to build out. Given the amount of development, the plan will be subject to various changes in economic and real estate conditions over multiple economic cycles that will impact absorption of new space. The relationship between market absorption and the phasing of infrastructure costs will determine the creation of real estate value over time. To the extent that absorption is strong and real estate values are high, the overall feasibility of the plan would improve. It is worth noting that growth area and growth management allocations create absorption challenges due to a residential development cap, which would adversely impact development feasibility of the EPSP. The geographic phasing of subareas could also have an important implication on performance. Large-scale development projects often require "over-sizing" of backbone infrastructure in early phases. To the extent that large infrastructure items, such as the El Charro Road/Stanley Boulevard undercrossing and El Charro Road Improvements could be deferred, the overall feasibility of the EPSP would improve. The gap between infrastructure costs and subsequent land or building sales in each phase should be minimized to reduce the cost burden for the Project. A detailed phasing strategy should be developed in the subsequent planning efforts. Financing The development community is likely to pursue a variety of financing mechanisms to cover the infrastructure costs, including conventional debt, private equity, CFD proceeds, and others. A more strategic approach to financing, for example, one that combines both CFD proceeds with developer equity and conventional debt, could increase the financial feasibility of the program options. Methodology and Assumptions This section describes the key methodology and assumptions. Appendix A presents detailed data and calculations, including the program options use mix, development values (also discussed below), impact fee calculations, and residual land value estimates by land use. Development Value The Cost Burden Review analysis considers the potential market value of various development types envisioned by the EPSP, including residential, retail, office, and industrial/flex uses (see Appendix A for detailed market value assumptions). EPS assumes real estate values that are typical of the Pleasanton real estate market. This analysis relies on value assumptions that are representative of new development projects. These values are generally conservative, with the analysis seeking to avoid overestimation of building values and supportable infrastructure cost. P:1121000\121090EasWMeasan fon\ReportUnfrastructure Burden Memorandum\121090_inha_mm3_072913.docx