SR-0 (18)
C/ED:EDD:PC:JPM:CSR
INFORMATION ITEM
Santa Monica, California
October 10, 1989
TO:
The Mayor and city Council
FROM:
City staff
SUBJECT:
Response to Councilmembersl Questions on the
Airport Residual Land Development Project
The following is staff's reply to councilmembers' questions and
requests for information.
1. Clarify the composition of the estimated revenue during the
first 10 years of the ground lease.
Attachment N to the staff report on the Airport proj ect
provides the composition of the city's estimated ground lease
income generated by the project. As Attachment N indicates,
the City will receive ground rent income during the first 10
years of the lease totaling an estimated $27,940,000 for the
Minimal Impact Project (1,078,100 gsf) and $25,786,000 for
the No Significant Impact project (873,000 gsf).
This estimated ground rent income is derived from three
sources -- guaranteed base rent, participation rent based on
net proj ect revenue, participation rent based on the net
proceeds from the sale of the leasehold interest and
refinancing of the project. The components of the estimated
total ground rent in the first 10 years are:
10 year Minimal Impact No Sign. Impact
Base Rent $ 21,336,000 $ 19,416,000
Revenue Partic. 4,379,000 4,146,000
Sale/Rafi. Partic. 2,225,000 2,225,000
TOTAL $ 27,940,000 $ 25,786,000
.. See Attachment N to the staff report ..
(NOTE: The staff report incorrectly identified the amount of
guaranteed ground rent on page 28, paragraph 3 of the staff
report. The correct amount of estimated guaranteed base rent
in the first 10 years of the lease is $21,336,000 for the
Minimal Impact Project and $19,416,000 for the No Significant
Impact Project. All other revenue figures in the staff
report and in Attachment N are correct.)
If these figures are adjusted assuming annual inflation of
4%, the Minimal Impact project is estimated to generate
$21,922,000 (adjusted $$) and the No Significant Impact
- 1 -
Project is estimated to generate $20,325,000 (adjusted $$) in
total ground rent.
These figures do not include estimated tax revenues generated
by the project. If the three largest tax revenue sources are
included, the Minimal Impact Project is estimated to generate
$7.3 million in tax revenue and the No significant Impact
Project is estimated to generate $6.5 million during the
first 10 years of the lease. (See Attachment 1.)
2.
Describe the "zero
wastewater treatment
project.
Section 6 (m) of the Development Agreement for the proj ect
requires the developer to install and operate an on-site
wastewater treatment facility to treat all project
wastewater. The treated effluent will be used to irrigate
project landscaping~ to maintain the water level in the water
feature; to irrigate Clover Park, "phase 411 recreational
fields, or other proximate City-owned land: to recirculate
into project toilets; or to flow into the public storm drain
if approved by appropriate agencies.
net flow"
facility
re~irement if an
is not permitted
on-site
in the
The Development Agreement permits the proj ect to use the
public sewer system when the on-site treatment facility is
not operating due to emergencies, standby needs, or for
overflow purposes.
The Agreement also permits the proj ect to use the public
sewer system if other governmental agencies do not permit the
installation and use of the on-site wastewater treatment
facility.
To offset this potential use of the public sewer system, the
Development Agreement requires the developer to apply for a
sewer allocation permit AND to retrofit off-site buildings
and facilities identified by the developer or the city to
reduce the projected amount of sewage flow from the project
to a "zero net flow".
3. Describe the city's obligations related to potential
contamination of Airport soil.
Preliminary soil tests have been conducted at three locations
on the residual land parcel. These locations were selected
for testing because they were proximate to the location of
old fuel tanks used at Airport businesses. These locations
represented the areas most likely to be contaminated by
hazardous materials if such materials existed on the site.
Aviation fuel was found at two of the locations.
The Disposition and Development Agreement CDDA) ;equires the
City to take any remedial action it determines ~s necessary
to comply with applicable laws to clean up the contamination
- 2 -
so as to permit development. The obligations and
responsibilities of each party is listed below:
Reliance:
IdentifY location of buildings to determine
testing sites.
city:
Conduct soil boring tests to determine the
presence and extent of contamination, if any.
Reliance:
Pay all costs to clean up contamination up to
$5,000.
city:
Pay all costs over $5,000 but under $1,000,000
for Phase 1, $1,000,000 for Phase 2, and
$1,500,000 for Phase 3.
4. Estimate the revenues generated by the Planning Commission's
recommended project.
Attachment N to the City's Airport Project staff report
provides the estimated revenue from the proposed project, the
Minimal Impact Project, and the No significant Impact
project.
Revenue projections cannot be accurately made for the
Planning commission's recommended "no significant impact"
project. The developer has stated that he would require a
major restructuring of the business terms of the ground lease
and DDA if the project is reduced below 873,000 gross square
feet ("No significant Impact" project alternative 3C in the
EIR) .
The size of the Planning Commission's recommended project of
750,000 gsf is 14% less than the staff recommended No
S igni f icant Impact proj ect . The reduction in ground rent
revenue to the city from the Planning Commission recommended
project would likely be much greater than the 14% decrease in
floor area.
5. Clarify the term IINo Impact project".
The term "No Impact projectll used in the staff report on the
proj ect should more accurately be stated "No Significant
Impact Project".
6. Describe how parking will be operated.
The developer is planning to charge for parking in the
proj ect. Staff believes that free parking would be
inconsistent with the City's Transportation Demand Management
goals to reduce vehicular trips Citywide. It should also be
noted that the City will receive 5% of the gross revenue from
the parking facilities.
- 3 -
The parking will be operated and managed by the project
association under the terms of the Declaration of Covenants,
conditions, and Restrictions (CC&Rs).
The project is required to comply with any transportation
system management ordinance adopted by the City council if
that ordinance is of general application. The charge for
parking in the project must comply with the ordinance if the
ordinance regulates parking charges to encourage a reduction
in peak hour vehicular trips.
7. Estimate the number of motorists from Pacific 'Palisades/
Malibu that may travel through sunset Park.
The EIR estimates that about 24% of the total trips
generated by the project will originate in areas west and
north of the project in Santa Monica, Brentwood, Pacific
Palisades, and Malibu. The EIR traffic consultant estimates
that most of the trips coming from the west and north will
travel south on Bundy Drive (62.5%) or travel on the Santa
Monica Free..,-ay and exit at Centinela or Bundy (12.5%) thus
avoiding the Sunset Park neighborhood. About 25% of these
trips from the north or west (6% of the TOTAL trips to the
project) will travel along surface streets through the Sunset
Park.
8. Estimate the costs to date incurred by the City for project
planning.
Since FY 1984-85, the City has budgetted or spent
approximately $798,000 for studies and analyses, legal work,
staff work, consultants, and other work on the project.
9. Explain why the ground lease does not provide the amount of
ground rent to be charged.
The ground lease in Attachment I of the staff report is the
tlForm Ground Lease" referred to in Seciton 3.1.1 of the DDA.
As each Phase or parcel in a phase is leased to Reliance, the
dollar amounts in Section 4.01 (a) of the Form Ground Lease
will be filled in based on the amount of rentable floor area
to be constructed in that phase or parcel in the phase.
10. Explain why Reliance is not required to satisfy total housing
demand rather than affordable housing demand.
The Development Agreement requires the developer to pay the
in-lieu park and housing mitigation fee called for by Santa
Monica Municipal Code Section 9046. Staff has relied upon
the city Council's adopted mitigation ordinance in
determining the appropriate level of fees to be charged for
affordable housing.
11. Explain why the EIR for the sports connection
project used a different trip generation rate
buildings than the Airport project EIR~
relocation
for office
- 4 -
The trip generation rates used in the Airport project EIR are
from the ITE Trip Generation, 4th Edition, 1987 which are
based on ITE Land Use Code Section 750, General Office
Building. This section specifically states, "It is suggested
that the office building category be used ... when estimating
trip generation for one or more office buildings in a single
development" and "when buildings are interrelated ... it is
suggested that the total area or employment of all buildings
be used for calculating the trip generation". The traffic
generation rates for the Airport proj ect utilized the rate
for the entire proj ect rather than a rate which considers
individual buildings since the project is one project and
interrelated.
The Sports Connection relocation project consists of 85,000
square feet of office development and the relocation and
expansion of a health club. Kaku and Associates investigated
and found that the ITE, 4th Edition did not adequately
provide a set of traffic generation rates for a health club.
The SANDAG rates were evaluated and found to accurately
reflect the projected conditions for a health club and
adjacent office.
12. Estimate the costs of the city'S obligations under the terms
of the Airport agreements.
The City is required to share in the cost to install traffic
mitigation improvements and the cost to pay for cleaning up
the site of toxic contamination.
The Development Agreement requires that the City share l/2 of
the cost of street and intersection improvements above
$1,791,200 which will be paid by the Developer. Current
estimates indicate that the cost of the required street and
intersection improvements is $2,300,000. The City's share of
this total is $254,400 ($2,300,000 - $1,791,200 = $508,800 /
2 = $254,400). If street and intersection improvements total
$5 million, the city's share would total $1,604,400
($5,000,000 - $1,791,200 = $3,208,800 / 2 = $l,604,400).
The DnA requires the City of clean up hazardous materials
from the site if it is found on the parcel. However, the
City'S obligation to clean up any toxic material is limited
to a total of $3.5 mill ion for the entire proj ect site.
Based on a preliminary examination of the parcel, the clean
up of hazardous material is anticipated to cost much less
than this maximum amount.
13. Explain the adequacy of the on-site restaurants and take out
food facilities to serve project employees and visitors.
The project includes two types of eating establishments
sit-down restaurants and take out restaurants. The sit-down
restaurants are expected to be high-quality, low turnover
establishments. One restaurant is planned for Phase 1 of the
project near Bundy Drive and the other restaurant is proposed
- 5 -
to be included in Phase 3 of the proj ect adj acent to the
Orange Grove Garden. The take out restaurants are to be
located in the retail building located adjacent to the
Hedgerow Garden. These take out restaurants are intended to
serve primarily, if not exclusively, proj ect employees and
their guests.
The assumption that 50% of the patrons of the restaurants
will be on-site employees and their guests is a realistic
estimate by the EIR traffic engineer, the City of Santa
Monica Parking and Traffic Engineer, and the staff of the Los
Angeles Department of Transportation (LADOT). The proposed
sit-down restaurants are expected to generate 770 daily auto
trips which is equivalent to 385 auto trips in and 385 out.
It is expected that each auto has an average occupancy of 2.5
persons, indicating that a total of 960 people are expected
to patronize the restaurant on a daily basis. It is
reasonable to expect that 480 patrons per day could be
generated from an office project with 5,000 or 6,000
employees. These 480 on-site patrons could be either actual
employees or business visitors to one of the offices on site.
The visitors could also be discounted since their trip was
already considered in the office traffic generation estimate.
For the take out restaurants (or for a higher-turnover
restaurant), it is reasonable to expect that a much higher
percentage of the patrons eating at these establishments
would be on-site employees or their guests. Few, if any, of
the patrons of the take out restaurants would be persons who
do not have a reason for being on the site. It is very
unlikely that a motorist traveling down Bundy Drive will
drive into the project, locate a parking space in the closest
parking structure, walk to the take out restaurant, and eat
lunch. These facilities will not even be readily visible
from Bundy Drive to attract the casual motorist.
14. Describe the EIR mitigation monitoring processes.
The measures recommended in the EIR to mitigate significant
environmental impacts to below a level of significance are
required in the Development Agreement for the project. There
are several provisions in the Development Agreement that
require that implementation of the mitigation measures be
monitored. These include the following:
TDM Report -- an annual review of the effectiveness of the
Developer's Transportation Demand Management Program,
recommendations for changes or improvements to the TDM
Program, determination of the actual reduction in peak hour
trips, and calculation of the TOM fee if the goal to reduce
peak hour trips by 15% is not met.
Parking intrusion stUdy -- an analysis prepared once each
phase in the project is completed and occupied to determine
if project employees and visitors are parking in the adjacent
neighborhood in significant numbers. Based on the findings
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from the study, the developer must prepare a Parking
Intrusion Reduction Plan to reduce the number of vehicles
parked in the adjacent neighborhood.
On-site wastewater facility analysis -- two years after the
first certificate of Occupancy is issued, the effectiveness
of the on-site treatment facility will be conducted to
determine the actual decrease in the use of the public sewer
system by the proj ect. The analysis is intended to adj ust
the developer r s sewer connection credit for installing the
on-site facility but can also be used to fine tune the
operation of the facility itself.
periodic Review of Compliance section 13 of the
Development Agreement requires the city to review the
Agreement annually and determine if the developer is in good
faith compliance with its provisions. staff is recommending
that the Development Agreement contain a provision that the
City also monitor its own implementation of required
mitigations.
15. Discuss the amount of money and formula used to determine the
amount of traffic mitigation funds required for the Colorado
Place Phase 3 and Water Gardens' projects. Discuss the
amount of these funds to be used in sunset Park.
The Development Agreement for Colorado Place Phase 3
(containing l,040,500 sf of development) requires the
developer to pay $5,000,000 in traffic mitigation fees in
addition to making street and intersection improvements in
the immediate vicinity of the project site. The amount was
established by the City council when the Development
Agreement was approved.
The Development Agreement for the Water Gardens project
(containing 1,259,600 sf of development) requires the
developer to pay $6.4 million in traffic mitigation fees in
addition to making street and intersection improvements
immediately adjacent to the project site. This amount is
based on the "formula" established for Colorado Place Phase
3 .
The approach for the Airport project was to analyze traffic
impacts at intersections over a wider area than the areas
analyzed for the other two projects and to identify specific
street and intersection improvements necessary to mitigate
significant traffic impacts. As a result, the EIR for the
Airport project and the required mitigations measures are
more specifically identified that they were for the other two
project. Specific improvements and dollar amounts to
implement those specific improvements are contained in the
Airport Development Agreement rather than providing for a
"traffic mitigation fund" to be used for general street and
intersection improvements in a given area.
- 7 -
Both development agreements permi t the Ci ty to use these
mitigation funds to help implement a Citywide Traffic Systems
Management Program. However, use of these funds for street
and intersection improvements are restricted to the Mid city
and pico Neighborhoods.
16. Explain how the city will require that low flow fixtures be
installed in the project.
Section 10 of the Development Agreement requires that the
project comply with city requirements in effect at the time
the Development Agreement is executed. Installing low flow
fixtures in new development projects is currently required by
the City and is required by the Development Agreement.
17. Explain how the city will require that the on-site wastewater
treatment facility is built and utilized.
Section 6(m) of the Development Agreement requires that the
project install and operate at all times during the term of
the Agreement (except for repairs, emergencies, and
maintenance) the on-site wastewater treatment facility if
that facility is approved by appropriate governmental
agencies. staff is currently working with the Water Gardens
developer to receive Los Angeles County Department of Health
approval of a similar on-site treatment system required of
that project. It is anticipated that the County will approve
that facility in early 1990.
If for some reason the on-site system is not approved by the
County, the developer of the Airport project will be required
to apply to the City for a sewer allocation permit and
retrofit off-site buildings with ultra low flow fixtures to
achieve a "zero net flow" of sewage into the City's public
sewer.
18. Explain how the Developer will be required to pay for the
clean up of hazardous materials.
The City as the landowner of the parcel is required to pay
for clean up of hazardous materials. However, the City's
costs are limited to a total of $3.5 million. If the costs
to clean up the site exceeds this amount, the City may elect
to terminate all agreements for the project unless the
developer elects to pay for all costs exceeding $3.5 million.
19. Describe the specific features contained in the Neighborhood
Protection Plan for Sunset Park and the costs of their
implementation and discuss whether the city should implement
the Citywide Traffic study prior to project approval.
The Sunset Park Neighborhood Protection Plan is proceeding.
Preliminary plans have been prepared, have been presented at
community meetings, and are currently being revised to
reflect neighborhood comments and concerns. The Protection
- 8 -
Plan could include many different features to minimize the
amount of traffic cutting through the neighborhood.
The approval process for the Airport project began prior to
commencement of the citywide Traffic Study. The EIR analysis
of the Airport project is a very comprehensive study of
unusually broad scope. It concludes that the 873,000 gsf
project will result in no significant traffic or other
environmental impacts.
20. Describe the "fall back" plans if access to Bundy Drive
proves inadequate.
An EIR on a project provides the city council with
information about the environmental consequences of a project
if it is approved. This information is based on the best
information available and on forecasts of future conditions
made at that time. To minimize the potential for misjudging
future impacts of a project, EIRs are prepared using
conservative assumptions. Impacts resulting from the project
are thus anticipated to be no worse than are described in
that EIR.
Such is the case for the Airport project. The Airport
project EIR forecasts that no significant environmental
impact will result from the Airport project if it contains
873,000 gross square feet.
21. What decisions can the Council make as to the desirability of
the use of the property and the aesthetic approach of the
site plan and design.
The City council has full discretion in its consideration of
the Airport project. However, the Council has indicated its
support of the desirability of the use of the property and
the aesthetic quality of the project at two key steps.
In February 1986, the City Council approved the final Request
for Development Proposal (RFP) determining that it desired to
develop the residual land parcel and that that development
should contain office and other commercial uses.
In October 1987, the City council selected Reliance
Development Group to develop the property finding that its
proposal was the most responsive to the Council I s early
determination as to the scope, scale, site plan, amenities,
business terms, and goal and obj ecti ves for development of
the property.
22. Describe staff recommendations on the use of the surplus
residual land that was once "phase 411 of the project.
Staff recommends in the staff report that the city Council
authorize a public process to determine the specific uses for
the remaining residual land not needed for the Reliance
project. staff is recommending that decisions regarding the
- 9 -
use of the "Barker Hanger" be made as part of that planning
process.
The developer has no rights to determine the uses on the
surplus residual land property retained by the city.
However, the Development Agreement does prohibit the city
from permitting the construction of new commercial office
buildings on this portion of the residual land parcel.
23. Describe how the Airport agreements address the
transportation demand management requirement that peak hour
trips be reduced.
Section 6(h) of the Development Agreement describes the
transportation demand management requirement of the project.
24. Describe how the Airport agreements address the on-site
wastewater treatment facility.
Section
on-site
project.
6(m) of the Development Agreement describes
wastewater treatment facility requirement of
the
the
25. Exp1ain the assumptions used to ea1culate estimated revenue.
The consultant who prepared the revenue projections for the
project assumed that the buildings would achieve a 95%
occupancy level, that lease up would take place over an 18
month period, that the space rents charged would be
$26/sf/year, that sale of each phase would occur 6 years
after its completion, and that inflation would be 4%
annually.
airccnsr
- 10 -
ATTACHMENT 1
AIRPORT RESIDUAL LAND DEVELOPMENT PROJECT
ESTIMATED GROUND RENT AND TAX REVENUE
(Actual and Adjusted $$) i
!ncome
Source
5 YR Actual
Ground Rent
Taxes
TOTAL
5 YR Adjusted
Ground Rent
Taxes
TOTAL
~
10 YR Actual
Ground Rent
Taxes
TOTAL
10 YR Adjusted
Ground Rent
Taxes
TOTAL
20 "1'1\ Actual
Ground Rent
Taxes
TOTAL
20 YR Adjusted
Ground Rent
Taxes
TOTAL
~
"
55 YR Actual
Ground REmt
Taxes
TOTAL
55 YR Adjusted
Ground Rent
Taxes
TOTAL
65 YR Actual
Ground Rent
Taxes
TOTAL
65 YR Adjuste~
Ground Rent
Taxes
TOTAL
75 YR Actual
Ground Rent
Taxes
TOTAL
75 YR Adjusted
Ground Rent
Taxes
TOTAL
airmoney
Minimal Impact
Alternative 31\.
(1,078,100 gsf)
$ 6,076,000
1,965,000
$ 8,041,000
$ 5,438,000
1,763,000
$ 7,201,000
$ 27,940,000
7,28B,OOO
$ 35,228,000
$ 21,922,000
5,78B,000
$ 27,710,000
$ 102,891,000
21,611,000
$ 124,502,000
$ 64,978,000
13,863,000
$ 78,841,000
$ 744,113,000
136,120,000
$ 880,233,000
S 202,663,000
39,122,000
$ 238,785,000
$ 1,399,191,000
204,723,000
$ 1,603,914,000
$ 265,747,000
45,737,000
$ 311,574,000
$ 2,377,041,000
303,452,000
$ 2,680,493,000
$ 329,368,000
52,168,000
$ 381,536,000
1 Assumes 4% Annual Inflat~on
- 1 -
No Significant Impact
AlternB.t.ive 3C
(873,000 gst)
$ 6,076,000
1,965,000
$ 8,041,000
$ 5,438,000
1,763,000
$ 7,20~,000
$ 25,786,000
6,495,000
$ 32,281,000
$ 20,325,000
5,197,000
$ 25,522,000
$ 88,400,000
181321,000
$ 106,721,000
$ 56,265,000
11,854,000
$ 68,129,000
$ 635,733,000
113,111,000
$ 748,844,000
$ 173,198,OQo
32,766,000
$ 206,564,000
$ 1,194,772,000
169,992,000
$ 1.,364,764,000
$ 227,633,000
38,251,000
$ 265,884,000
$ 2,029,219,000
251,908,000
$ 2,281,127,000
$ 281,924,000
43,586,000
$ 325,510,000
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