HomeMy WebLinkAbout7/18/2017 Item 14, JohnsonCM
COUNCIL MEETING:lle 1,00
ITEM NO.: 1
Council Memorandum
R ECF.i� �
JUL 14 2017
Date: July 14, 2017
TO:
FROM:
VIA:
RE:
ENC:
Mayor and Council
Derek Johnson, Assistant City Manager
Katie Lichj ity Manager
San Luis Ranch -Supplemental Financial Information and July 5, 2017 Meeting
Follow -Up
Revised Term Sheet (Attachment A)
Economic Planning Systems Financial Analysis Update (Attachment B)
On July 5, 2017, the City Council considered a staff report, public testimony and provided direction
on the Tentative Tract Map Conditions of Approval ("COA") and Term Sheet and closed public
comment. This memorandum covers 1) Additional COAs directed by the City Council, 2) Revised
Term Sheet, and 3) a high-level summary of the financial analysis which tested the feasibility of
funding key public infrastructure. These three areas are discussed below and will be covered
during Staff's presentation on July 18th
CONDITIONS OF APPROVAL (COA)
The City -Council provided direction to add two new conditions of approval. These two conditions
were proposed and endorsed by the full Council at the July 5th meeting. The first condition attends
to comments made by Caltrans and the second condition responds to Council comments
concerning protected bike lanes and related improvements at key entrance points to the San Luis
Ranch project. These entrance points are Madonna/Prado and Los Osos Valley Road/ Froom Ranch
Road. The following is the exact language that Staff is recommending that the City Council add
to the COAs:
1. The intersections of Madonna & Dalidio/Prado and LOVR & Froom shall be designed as
bicycle protected intersections per NACTO guidelines unless otherwise determined to be
infeasible by the City Engineer. If determined to be infeasible, these intersections shall
include some form of augmented bicycle treatment such as green lanes and bike boxes.
2. The applicant shall fund monitoring of Hwy 101 mainline merge, diverge, and weave level
of service between Marsh & LOVR at occupancy of 100 units and, again at occupancy of
200 units during phase 1 of the project. If deemed necessary by the City and Caltrans,
components of the Prado Road Interchange Project, such as ramp metering or auxiliary
lanes may be advanced.
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City of San Luis Obispo, Title, Subtitle
2.TERM SHEET
3.PROJECT FINANCIAL ANALYSIS
Revenues TypeExisting Tax Increment AllocationFutureTax Increment Allocation
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The County currently receives 27.6 percent of property tax revenue which is approximately $19,400 per year from the entire
site and about $4,900 from the residential portion of the proposed project site for a total of approximately $24,300 per year.
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City of San Luis Obispo, Title, Subtitle
Revenues TypeExisting Tax Increment AllocationFutureTax Increment Allocation
2
The County is projected to receive $552,000 in new property tax increment in addition to the $24,300 per year for a total of
approximately $575,000. The City is projected to receive approximately $275,000 per year in property tax based on the Master
Tax Exchange Agreement.
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1.13.9. Costs of Growth: The City shall require the costs of public facilities and services needed for new development be borne
by the new development, unless the community chooses to help pay the costs for a certain development to obtain community-
wide benefits. The City shall consider a range of options for financing measures so that new development pays its fair share of
costs of new services and facilities which are required to serve the project and which are reasonably related to the new growth
attributable to the development.
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Non-fair share is the proportion of infrastructure costs that will benefit existing or future development.
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City of San Luis Obispo, Title, Subtitle
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Enhanced Infrastructure Financing District: An EIFD is a governmental entity established by a city or a county that
carries out a plan within a defined area (boundaries of which do not need to be contiguous) to construct, improve
and rehabilitate infrastructure; construct housing, libraries, and parks; remediate brownfields, etc.
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ATTACHMENT B
M EMORANDUM
To: Katie Lichtig, City Manager
Derek Johnson, Assistant City Manager
From: Walter Kieser and Ashleigh Kanat
Subject: San Luis Ranch Financial Feasibility and Funding of Region-
Serving Improvements; EPS #161142
Date: July 14, 2017
As a part of our broader scope of services related to the San Luis Ranch
Project, Economic & Planning Systems, Inc. (EPS) has been asked to
evaluate the financial feasibility of the Project from a private sector
“developer” perspective and also explore how the costs for the regional
infrastructure beyond the “fair share” of costs attributable to San Luis
Ranch can be funded. This Memorandum documents this effort which
has included a careful and cooperative effort to identify Project-related
infrastructure items and their cost estimates, receiving and reviewing
confidential financial information (i.e., information subject to a non-
disclosure agreement) from the Project Developer, and identification and
evaluation of funding options available to the Developer and the City to
fund needed regional-serving infrastructure.
Findings
1.San Luis Ranch Project has the potential to achieve the
financial returns necessary to attract the needed equity and
commercial credit.
Based upon our review of the Developer’s pro forma financial
analysis it is our opinion that the San Luis Ranch Project can be
financially feasible as indicated by the measures of financial return
applied. This finding is sensitive to the market pricing ultimately
achieved and absorption rates, the actual project costs, and the
Project’s “fair share” allocation of region-serving infrastructure and
how these costs are financed. As the average home price increases
within the range of pricing indicated by market analysis financial
returns improve proportionately. It is noted that the Developer is not
providing a “guarantee” on the pricing of the homes (other than
deed restrictions on the affordable units).
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ATTACHMENT B
Memorandum July 14, 2017
San Luis Ranch Financial Feasibility and Funding Region-serving Improvements Page 2
2.The City has a range of options for funding region-serving infrastructure beyond
the “fair share” allocated to San Luis Ranch.
As a part of the broader environmental impact and traffic analysis for the San Luis Ranch
Project the City has identified some $54 million of improvements that are needed to serve
the Project along with alleviating existing traffic congestion and serving other future
development in the southern area of the City and the County as it develops over the coming
decade. Approximately $23 million of these costs are attributable to the San Luis Ranch
Project based upon the City’s “fair share” cost allocation. This leaves a net amount to be
funded of $31 million. The City has a range of funding and financing options to pay for these
improvements, including working with the County to ensure the County pays its “fair share”
allocation.
3.The pro forma financial analysis provides a sound basis for subsequent preparation
and negotiation of a San Luis Ranch Financing Plan.
As a result of this effort a basic framework for infrastructure financing has been assembled
(seeAttachment A) that will be subsequently reflected in the San Luis Ranch Infrastructure
Financing Plan, the San Luis Ranch Development Agreement, and in the implementation of
the Community Facilities District and other financing mechanisms.
Project Revenues
The San Luis Ranch Project revenue will be derived primarily from building and selling homes.
Additional revenue will be derived from sale of parcels to other builders. The residential pricing
assumptions used in the pro forma financial analysis reflect a market range of average prices for
the single family for-sale housing from a “base case,” at $525,000 (consistent with the objective
to provide housing affordable to the local workforce) to $625,000 (the top of the market range
indicated by market analysis for the expected residential prototypes). The pro forma financial
analysis shows sales of housing and the commercial parcels occurring (following a construction
period that begins in 2018) from 2020 through 2026. Pricing and absorption assumptions are
consistent with current and expected future market conditions, and considered conservative for
purposes of the pro forma analysis. The Project’s affordable housing program is reflected (as a
discount) on Project revenues and beyond these price-restricted units, as noted above, no other
price restrictions will occur.
Project Costs
Project costs shown in the pro forma financial analysis include the full range of costs required to
develop the San Luis Ranch:
Land Acquisition
Pre-Development Costs
Site Improvements
City Development Impact Fees and Permitting Fees
Offsite Improvements
Vertical Construction Costs and Contingency
These costs as reflected in the pro forma financial analysis all fall in a range typical for such
development projects. Financing (construction loan interest) is also included.
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ATTACHMENT B
Memorandum July 14, 2017
San Luis Ranch Financial Feasibility and Funding Region-serving Improvements Page 3
Rate of Return to Equity Investment
The San Luis Ranch Project, as is the case for all major development projects, requires
substantial equity investment as well as commercial credit for both site development and vertical
construction costs. Real estate finance became considerably more difficult as the result of the
Great Recession due to increased standards and costs for commercial credit including higher
equity requirements to obtain credit. These higher equity requirements increase the need for
equity investment and also contribute to overall costs due to the greater risks involved in equity
investment. The “internal rate of return” method and “threshold” returns identified in the San
Luis Ranch pro forma financial analysis meet typical real estate industry standards.
San Luis Ranch Infrastructure Financing Strategy
In cooperation with City staff and the Project Developer Team, EPS has been documenting
infrastructure needs and costs and options for funding this infrastructure. In the case of San Luis
Ranch there are two components of this Strategy: 1) assuring that the San Luis Ranch Project
commits developer equity to funding infrastructure costs within the Project and also their “fair
share” of offsite regional improvements; and 2) funding the portion of offsite regional
improvements not allocated to San Luis Ranch. While the analysis is not complete, our initial
review has determined that the funding of both the project related, project fair share, City fair
and Regional fair share can be secured based on current information. Should the situation
change in a negative manner as it relates to any of the major funding sources the overall
feasibility of the project could be at risk. Table 1 presents the Strategy for funding region-
serving infrastructure.
Table 1 – Funding Region-Serving Infrastructure
Item Estimated Cost Status
Total Infrastructure Cost $54,000,000Initial engineering cost estimate
Developer Fair Share $23,000,000Reflected in pro forma, based on
traffic model
Total “Fair Share” Cost Gap $31,000,000 Regional and City
San Luis Ranch CFD $10,000,000-$12,000,000 Preliminary estimate of capacity;
use of funds subject to CFD
formation negotiations between
City and Developer
Regional Portion of “Fair Share” $5,000,000-$7,000,000 Options for regional funding
Cost Gap include: Tax Sharing, EIFD,
SLOCOG (federal or regional
funding)
Remaining City Fair Share Cost $12,000,000-$16,000,000 Options for additional City
Gapfunding include: EIFD, tax
sharing, exactions on other
developers, impact fees,
reimbursement, and additional
developer equity
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ATTACHMENT B
Attachment A
San Luis Ranch Project Feasibility and Funding
for Region-Serving Infrastructure
This Attachment provides further documentation regarding the review of the San Luis Ranch pro
forma financial analysis and also the elements of the financing strategy for the region-serving
transportation improvements.
Project Summary
The City received a formal application for the proposed San Luis Ranch Specific Plan project on
June 10, 2015. The Project envisions a mix of residential, commercial, and office uses while
preserving substantial areas of open space and agriculture on a 131.3-acre property. The Project
site is currently outside the City, but within its Sphere of Influence and Urban Reserve Line, and
will require annexation. The site is generally bounded by Madonna Road, Dalidio Drive and U.S.
Highway 101. The Project includes construction of up to 580 residential units, 150,000 square
feet of commercial development, 100,000 square feet of office development, and a 200-room
hotel. A substantial portion of the site is shown in the Specific Plan as preserved for agriculture
and open space uses. The Project is planned to be constructed in six phases beginning in 2020
and extending to 2026.
Financial Feasibility of the San Luis Ranch Project
As part of the ongoing consideration of the pending San Luis Ranch development entitlements,
the topic of the financial feasibility of the project from a private investment stand point has
arisen, essentially, “will the project generate sufficient market value to offset the full range of
land development and vertical construction costs and also produce financial returns sufficient to
attract the necessary private equity investment and commercial lending?” If not, the Project will
not be constructed as envisioned in the pending Specific Plan. A related question is whether the
Project can support the range of required infrastructure investments, including the normal “in-
tract” improvements, on-site “backbone” improvements (transportation, open space, recreation,
water and drainage facilities, etc.) and a “fair-share” of offsite region-serving infrastructure and
still meet minimal financial return thresholds. This matter is of concern due to several factors
including the high cost of region-serving infrastructure needed to serve the Project area (along
with other planned growth in the southern area of the City) and the intention, as stated in the
Specific Plan, for the new housing to be affordable by the City’s working families.
Such financial feasibility analysis is commonly conducted as a part of large real estate projects
where infrastructure and other project-related costs required may render the project infeasible,
thus failing to achieve public policy (i.e., City General Plan) objectives as well as private-sector
aspirations for their land holdings. However, because of the proprietary aspects of business, it is
necessary for such analysis not to disclose sensitive financial information. In these
circumstances, a city typically retains a third-party consultant to conduct a financial review,
subject to a non-disclosure agreement, and render an opinion regarding feasibility and the
related factors influencing feasibility. In this case the City tasked EPS with this assignment.
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ATTACHMENT B
Attachment A
San Luis Ranch Project Feasibility and Funding for Region-Serving Infrastructure
Accordingly, following entering into a non-disclosure agreement, we received confidential
financial information regarding the San Luis Ranch Project from the Developer Team and have
conducted a detailed review of their pro forma financial analysis. This review included review of
sources of revenue (are market value and absorption assumptions reasonable, etc.); review of
project costs including the land purchase, pre-development costs, site development costs, off-
site infrastructure costs, and vertical construction costs; and review of costs related to equity
and commercial credit.
Project Revenues
The San Luis Ranch Project will derive revenue from several sources including selling parcels of
land as unimproved or improved lots and building and selling homes on lots retained by the
Developer/builder. The residential pricing assumptions used in the pro forma financial analysis
reflect a range of average prices for the single family for-sale housing from a “base case”, at
$525,000 (consistent with the objective to provide housing affordable to the local workforce) to
$625,000 (the top of the market range indicated by market analysis for the expected residential
prototypes). Additional revenue will be derived from sale of commercial parcels to other builders.
The pro forma financial analysis shows sales of housing and the commercial parcels occurring
from 2020 through 2026, which appears to be consistent with current and expected future
market conditions.
Project Costs
Land Acquisition
After a period of having the Project Site property under option, the Developer purchased the
131-acre parcel in 2014 in anticipation of obtaining a development entitlement from the City.
The land price, as a portion of overall development costs falls in the range of large scale
development projects.
Pre-Development Costs
In pursuit of the development entitlement, the Developer has funded planning (the Specific Plan)
and environmental review (the Project Environmental Impact Report) and related engineering,
project management, and legal services. Costs shown for these items fall into the typical range
(as a percentage of project costs) for such costs.
Site Improvements
Site improvements include the typical grading and creation of “in-tract” infrastructure (local
neighborhood streets, in-street utilities, drainage and flood control facilities, etc. The scope of
these improvements is documented in the San Luis Ranch Tentative Map Conditions. Costs
shown in the San Luis Ranch pro forma financial analysis fall into a typical range for such costs in
other large master-planned residential developments.
City Development Impact Fees
The City currently charges a range of development impact fees (one-time fees to fund
infrastructure and capital facilities). The City’s fee programs include a Citywide transportation fee
plus subarea transportation fees, parks fees, as well as water and wastewater connection and
capacity fees. There are also open space, parks, affordable housing, and public art in lieu fees.
The pro forma financial analysis included payment for fees at the existing fee schedules for the
traffic impact fee and the parks fees. The ongoing Development Impact Fee Update Study is
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ATTACHMENT B
Attachment A
San Luis Ranch Project Feasibility and Funding for Region-Serving Infrastructure
focused on updating the transportation and parks fee programs and also developing a new
“public facilities” fee for police, fire, and general government capital expenditures linked to
additional growth in the City. Water and wastewater connection and demand fees are being
prepared concurrently and in cooperation with the Development Impact Fee Update.
As a part of these fee updates there will be recognition of economic considerations (the potential
effects of impact fee burdens on project feasibility. The San Luis Ranch Project budget includes
cost contingencies that address potential cost increases, including the higher development
impact fees, should they occur.
Offsite Improvements
There are a number of offsite regional improvements needed in the vicinity of the San Luis Ranch
needed to relieve existing congestion and provide capacity for development in the area, including
the San Luis Ranch Project. Total cost estimates for these improvements are in the range of $54
million (the actual need for these investments spans as much as a decade providing time for
financing capacity and sources to develop). The planned Prado Road overpass and ramp
improvements, in combination, are the largest cost item with an estimated cost between $30 and
$35 million. The pro forma financial analysis reflects the current estimate, prepared by City staff,
of the “fair share” allocation of these regional improvements to the San Luis Ranch Project of
approximately $23 million.
Vertical Construction Costs
Assumptions regarding the “hard” cost of constructing the new homes in San Luis Ranch fall
within typical construction cost ranges for residential development in the region. As a part of
vertical construction, the builders will pay the City’s building permit and other related planning
and engineering review fees.
Rate of Return to Equity Investment
A development project requires substantial equity investment as well as commercial credit for
both site development and vertical construction costs. Real estate finance became considerably
more difficult as the result of the Great Recession due to increased standards and costs for
commercial credit including higher equity requirements to obtain credit. These higher equity
requirements increase the need for equity investment and also contribute to overall costs due to
the greater risks involved in equity investment. The methods and “threshold” returns used in the
San Luis Ranch pro forma financial analysis meet typical real estate industry standards.
Considerations to Strengthen Financial Performance
The Project Developer has identified a range of options that can improve the Project’s financial
performance. In addition to the creation of the CFD and its use to offset a portion of the
Developer’s “fair share” of regional improvement costs, these options include items that the City
could, at its discretion, grant as a part of the Development Agreement. While not constituting
large amount of cost (less than $10 million) by proportion to overall project costs, such options
are shown to improve the Project’s financial performance and thus should be considered as a
part of subsequent Development Agreement negotiations.
Implications for Infrastructure Financing Strategy
The pro forma financial analysis provides a sound basis for subsequent preparation and
negotiation of a San Luis Ranch Financing Plan. This Financing Plan will be incorporated in the
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ATTACHMENT B
Attachment A
San Luis Ranch Project Feasibility and Funding for Region-Serving Infrastructure
proposed Development Agreement and also serve as a basis for implementing the CFD and other
financing mechanisms. The pro forma analysis clarifies the need for the City, in cooperation with
the Developer, to identify and obtain funding for the portion of region-serving beyond the
Developer’s “fair share” allocation.
San Luis Ranch Infrastructure Financing Strategy
As noted above, City staff, the Project Developer Team, and EPS has been documenting
infrastructure needs and costs and options for funding this infrastructure. In the case of San Luis
Ranch there are two components of this Strategy; 1) Assuring that the San Luis Ranch Project
commits developer equity to funding infrastructure costs within the Project and also their “fair
share” of offsite regional improvements; and 2) funding the portion of offsite regional
improvements not allocated to San Luis Ranch.
Infrastructure Improvements
Infrastructure and municipal facilities required to serve the Project include “backbone” and “in-
tract” infrastructure as well as “City-serving” or “region-serving” infrastructure, which is typically
located beyond the Project boundary but is required (at least in part) to accommodate the
Project development.
Backbone and In-Tract Infrastructure
The San Luis Ranch Project, as a largely undeveloped area, will require the full complement of
local infrastructure to serve the Project area including streets and in-street utilities, drainage,
parks and trails and bikeways. These improvements are typically divided into “in-tract”
improvements, typically the neighborhood streets and utilities, and “backbone” improvements
that include collector streets and public facilities such as parks that service the whole project
area.
Improvements to City-Serving and Region-Serving Infrastructure
As noted above, significant investment to region-serving transportation improvements is
required to reduce existing congestion, provide adequate transportation capacity for San Luis
Ranch and other pending development projects as well as the remaining development potential
in the City broadly. As a part of the broader environmental impact and traffic analysis for the San
Luis Ranch Project the City has identified some $55 million of improvements that are needed to
serve the Project along with alleviating existing congestion and serving other future development
in the southern area of the City. Approximately $23 million of these costs are attributable to the
San Luis Ranch Project based upon the City’s “fair share” cost allocation. This leaves a net
amount to be funded of $32 million. Funding sources to fund this “net” cost is discussed below.
Infrastructure Funding Sources
Developer/Builder Equity
Developer equity will be the primary source of funding for infrastructure improvements needed
to serve the San Luis Ranch area. Developer (or builder) equity will pay impact fees, fund
construction of all “in-tract” and “backbone” improvements located within the San Luis Ranch
area, fund the Project’s “fair share” of off-site “regional” improvements, some of which will be
subject to fee credits, and advance funding over and above the “fair share” costs, which will be
subject to reimbursement by the City.
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ATTACHMENT B
Attachment A
San Luis Ranch Project Feasibility and Funding for Region-Serving Infrastructure
Construction and Dedication of “In-Tract” Improvements
As is common practice, the developer of San Luis Ranch will build in-tract and backbone
infrastructure at its sole expense within the San Luis Ranch area to the specification of the City
as documented in the Tentative Subdivision Map and subsequently dedicate these improvements
and underlying lands to the City.
Participation in Area and Citywide Development Impact Fee Programs
The San Luis Ranch project will be subject to the City’s various development impact fee
programs at the time building permits are issued. As noted above, the City’s fees are currently
being updated and will likely serve as a significant source of reimbursement of costs. Additional
impact fees are charged by regional agencies including the local school districts. Impact fees may
also provide a source of reimbursement to developers who build improvements included in the
impact fee programs in advance of when they are otherwise needed or larger than their “fair
share” of costs.
Funding “Fair Share” Allocation of Regional Improvement Costs
The development of the San Luis Ranch project will increase traffic on existing roadways and
demand for other City infrastructure and facilities located beyond the project boundary. This
additional demand was studied in detail as part of the Environmental Impact Report (EIR) along
with identification of mitigation measures to maintain policy-based levels of service on these
facilities.
Funding Regional Improvements above the “Fair Share” Allocation
While not expressly obligated to do, the San Luis Ranch developer may provide, pursuant to the
yet to be negotiated Development Agreement, additional funding for regional improvements
above the “fair share” allocation to assure that the regional improvements will be built in a timely
and efficient manner, benefiting both the developer and the City. Such additional exactions are
typically achieved as part of the “extraordinary community benefits” granted by the developer as
consideration for the City’s willingness to enter into a development agreement.
City-sponsored Financing Districts
The City has the ability, in coordination with the Project Developer, to establish financing districts
to fund needed infrastructure. There are two types of districts available, one that relies on
special taxes levied on future residents and businesses in the area and the other tapping a
portion of the “property tax increment” created by the Project.
Community Facilities District (CFD)
The City has tentatively agreed to form a Community Facilities District (CFD) for the San Luis
Ranch Project area, pursuant to The Mello-Roos Community Facilities Act of 1982 (authorized by
Section 53311 et. seq. of the Government Code). A CFD allows for the levy of a special tax on
real property located within the designated boundary of the CFD for a range of purposes
including providing funding for municipal services, local area maintenance, and infrastructure. It
is common for the special taxes to be used to service municipal bonds issued for the CFD to fund
new development-related infrastructure. While providing a source of infrastructure funding the
imposition of special taxes will have a proportional effect upon real estate prices as the additional
tax obligation affects buyer’s willingness to pay. The current estimate prepared by EPS for the
capacity for a San Luis Ranch CFD to issue debt is in the range of $12 to $15 million, depending
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ATTACHMENT B
Attachment A
San Luis Ranch Project Feasibility and Funding for Region-Serving Infrastructure
upon the level of the tax levied. These estimates are consistent with the City’s policy to not
exceed an overall 1.8 percent property tax burden. The CFD would be targeted at funding the
offsite regional improvements.
EIFD
The Enhanced Infrastructure Financing District (EIFD) is State-enabled district that allows local
jurisdictions to tap “property tax increment” resulting from increases in property value (including
new development) for various public purposes including funding needed infrastructure. In the
present case, it is difficult to estimate funding capacity due to the fact that the San Luis Ranch
requires annexation to the City and also negotiation of a property tax exchange agreement with
San Luis Obispo County. It is assumed that the County’s participation in the EIFD (providing a
portion of their tax increment) could be part of the overall property tax exchange agreement.
The current estimate prepared by EPS for the capacity for a San Luis Ranch EIFD to issue debt is
in the range of $3 million to $5 million, depending upon the increasing real estate value and the
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portion of City (and County) property taxes allocated to the district. This funding could be
expanded by enlarging the size of the EIFD to include other developing properties in the
southern area of the City. As an alternative to the EIFD the County could agree to a higher
percentage of property tax sharing for a fixed period of time (e.g., 25 years) needed to amortize
a bond issue (or other financing) for the needed improvements.
Other City Funding Sources
In addition to project-related financing (the CFD and the potential EIFD) other City funding
sources will be needed to meet the net costs (beyond the “fair share” allocation of region-serving
infrastructure allocated to the Developer) currently estimated to be $31 million. The fact that
these improvements and costs are scheduled to occur in phases over the next decade provides
time for these funding sources to become available.
Citywide or Area Development Impact Fees
The City is presently conducting a comprehensive update of its development impact fee
programs. As a part of this update it may include new infrastructure items into the “project list”
including offsite infrastructure required to serve the San Luis Ranch (and other nearby)
development. The City’s ability to add projects to the capital improvement list (such as the Prado
Overpass) is limited by the need to assure that overall development impact fee burdens remain
within a range consistent with development feasibility considerations. The term sheet which
accompanies the recommended entitlement actions includes a provision that the Developer will
be required to pay new impact fees when they are adopted.
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Estimate is based on San Luis Ranch development only and is limited to property tax increment (i.e.,
does not include property tax in lieu of VLF or sales tax, etc.) and assumes a tax sharing agreement
with the County that results in the County yielding an allocation factor of 0.10 (less than 50 percent of
the County’s tax increment at this time) for the EIFD (to fund regional infrastructure costs) along with
an additional 0.05 (roughly 25 percent) going toward the City for funding municipal services in the
typical fashion. This is a preliminary estimate subject to subsequent negotiations.
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ATTACHMENT B
Attachment A
San Luis Ranch Project Feasibility and Funding for Region-Serving Infrastructure
Exactions from Other Development Projects
Above and beyond infrastructure items included in the City’s development impact fee programs,
the City often levies “exactions” from new development as may be identified in the Project EIR or
other entitlement documents. In the present case, i.e., the funding of the region-serving
infrastructure needed for the San Luis Ranch Project, the City has already obtained such
exactions and expects to receive additional exactions from other pending developments including
Avila Ranch and the Froom Ranch/Madonna Senior Living Project. Additionally, other
development capacity in the southern area of the City can also be expected to provide similar
“nexus-based” exactions for these infrastructure projects.
Expectations of Increased State Funding for Transportation Projects
The Governor recently signed SB-1, a major transportation funding bill that provides for
increases in motor fuel taxes to support State highway maintenance and construction. Over the
course of the coming months it should be possible to gain a better sense of additional State
Highway funding available from Caltrans. It is important to note that there is political
uncertainty around this funding source as there are current active efforts to repeal SB-1 through
a state-wide initiative process.
Allocations of Federal Transportation Funding
The City’s improvements to US 101 are eligible for existing (and likely future) federal highway
grant programs administered by the San Luis Obispo County Council of Governments. Such grant
funds are allocated to the member jurisdictions partly on a formulaic basis and partly on a
discretionary basis as part of the Regional Transportation Plan.
Future Regional Funding
The time horizon for need for the offsite regional infrastructure spans the next decade or longer.
During this period, it may be that San Luis Obispo County will join 19 other counties in the State
and pass a local “self-help” sales tax override for transportation improvements. The sales tax
measure failed at the November ballot
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