8.a Staff Report Date: July 25, 2017 To: From: Prepared by: Subject: City Council/City Council Sitting as the Local Reuse Authority Valerie J. Barone, City Manager Guy S. Bjerke, Director, Community Reuse Planning Guy.Bjerke@cityofconcord.org 925 671-3076 Receiving an informational report on the funding of Local Reuse Authority efforts in the planning and management of the Concord Community Reuse Project at the former Concord Naval Weapons Station. Report in Brief In 2006 the Department of Defense designated the Concord City Council as the Local Reuse Authority for the Inland Area of the former Concord Naval Weapons Station. Since then, the Local Reuse Authority (LRA) has been working to entitle the property for future development and preservation, and to facilitate the transfer of the property from the Navy to the City, the County and the East Bay Regional Park District, in accordance with the adopted Area Plan for the 5,074 acre site. (See Attachment 1 to view the adopted Area Plan). The LRA Board (which is the Concord City Council) has requested staff to report on the total funding and expenditures to date for the project, and to outline expenditure predictions on a go-forward basis. This report is divided into three sections: (1) Review of the work and funding of the LRA from 2006 through 2017; (2) Estimate of the future work and funding requirements of the LRA; and (3) Discussion of future decisions that the LRA Board will need to make regarding repayment of City loans to the LRA. Recommended Action Take public testimony, ask questions, and receive the report. Page 1 of 10
City Council Agenda Report Agenda Item No. 8.a July 25, 2017 Background Reuse Planning In 2005, the Inland Area of the Concord Naval Weapons Station was approved for closure by the U.S. Department of Defense through the federal Base Realignment and Closure (BRAC) process. Through the federal process, the City was designated the BRAC Local Reuse Authority. In 2006, the City began to consider the ultimate re-uses of the base. Following an extensive public process and incorporation of input from public health and resource agencies, the City Council, acting as the LRA Board, adopted a Reuse Plan in 2010, which was the first step in defining the community s vision for reuse of the site. The Area Plan and Conveyance Methods In January 2012, the City adopted the Area Plan as part of Concord s 2030 General Plan, which sets forth the vision, policies, and standards for the development of the base and surrounding areas as envisioned in the Reuse Plan. The Area Plan describes City (or City-authorized) development that will take place on approximately 2,380 acres that will be transferred to the City by the Navy through an Economic Development Conveyance (EDC). In addition, the Area Plan shows approximately 2,516 acres of regional park and conservation lands that will be transferred to the East Bay Regional Park District, and an approximately 76 acre portion for a First Responders Training Center that will be transferred to Contra Costa County, both through Public Benefit Conveyances (PBC). An Economic Development Conveyance is a negotiated transfer providing a payment to the Navy. A Public Benefit Conveyance is a free transfer of property for a specific public use. The Area Plan will accommodate various types of community facilities, such as a fouryear university and a tournament sports complex. The Area Plan provides for a transitoriented community of up to 12,272 residential units and 6.2 million square feet of commercial or retail uses, and nearly 3,500 acres of recreation, opens space, and conservation. This equates to a projection of 29,000 residents and 27,000 new jobs to be developed over the next 30 years. Property Transfer The LRA has worked since 2012 to assist the Navy with tasks they must complete to transfer the property. These tasks include preparation of an Environmental Impact Statement (EIS), a Biological Opinion regarding endangered species, a report documenting the clean-up of any contaminated properties included in the transfer, and a negotiated agreement regarding payment to the Navy for the EDC property. Most of these tasks are nearing completion and the partial or First Transfer of property is now expected to occur in late 2018. The first transfer of property is expected to be Page 2 of 10
City Council Agenda Report Agenda Item No. 8.a July 25, 2017 approximately 1,288 acres through the EDC and 2,285 acres through a PBC. The remainder of the base will be transferred to the acquiring agency in the future as contaminated parcels are cleaned by Navy to the satisfaction of state and federal regulatory agencies. Master Developer Selection In 2013, the LRA began the process of selecting a Master Developer for the first phase of the project. Master Developer candidates competed based on their proposed development program, financial capabilities, commitment to community benefits and adherence to Area Plan objectives as reflected in their Term Sheet or offer to the LRA. In May 2016, the LRA Board chose Lennar Concord, LLC to be the Phase One Master Developer for the first 500 acres of development and accepted their Term Sheet. Disposition and Development Agreement & Specific Plan Documents The LRA is now negotiating a Disposition and Development Agreement (DDA) with Lennar Concord, LLC to clarify and formalize the agreements found in the accepted Term Sheet. At the same time, Lennar Concord, LLC is taking the next step in implementing the Area Plan by drafting a Specific Plan, Infrastructure Plan and working with the City to prepare the required environmental review. The firm, FivePoint has been retained by Lennar Concord, LLC to manage the Lennar project and prepare the Specific Plan documents for the entire EDC area, so necessary infrastructure (water, sewer, electricity) is properly sized and to provide more detailed guidance on future site development. Both the DDA and Specific Plan documents are scheduled for LRA Board/City Council consideration in late 2018. After approval of the DDA and Specific Plan documents, it is estimated that the construction of horizontal infrastructure could begin in 2020-2021 and vertical residential and commercial buildings could begin in 2022-23. Analysis This report has been divided into the following sections: 1. Review of the work and funding of the LRA (2006-2017) 2. Estimate of the future work and funding requirements of the LRA. 3. Discussion of the repayment of loans from the City to the LRA. 1. Review of the work and funding of the LRA (2006-2017) Over the last 12 years, between 2006 and 2017, the Local Reuse Authority has received approximately $25M from federal and state grants, former Redevelopment Agency funds, loans from the City to the LRA, and Master Developer reimbursements. Funds were used to pursue tasks implementing the community s Page 3 of 10
City Council Agenda Report Agenda Item No. 8.a July 25, 2017 vision for the reuse of the former Concord Naval Weapons Station. (See Attachment 2 to view the funding source by year). Funding Source (2006-2017) Amount Office of Economic Adjustment $ 6,232,101.00 Redevelopment Agency $ 8,064,075.66 Regional, State and Federal Grants $ 1,817,261.07 Loans from City $ 7,315,983.00 Lennar Concord, LLC - DDA $ 725,000.00 Lennar Concord, LLC Specific Plan $ 1,299,061.00 Total $25,453,481.73 Between 2006 and 2010, when the Reuse Plan was adopted by the LRA Board, the work of the LRA was paid for mainly through grants from the Department of Defense (DOD) Office of Economic Adjustment (OEA) and funds from the City s former Redevelopment Agency (RDA). Those funding sources were also the primary financial support for LRA activities between 2010 and 2012 as the Reuse Plan was amended into the City s General Plan becoming the Area Plan. Starting in 2013 the LRA s focus shifted to coordinating the environmental work necessary to secure site-wide resource permitting from state and federal regulatory agencies in order to facilitate future development of the base property consistent with the Area Plan. Development impacts related to endangered species, wetlands, and archeological and cultural resources needed to be evaluated and remediation associated with environmental cleanup from prior Defense Department operations required, and continues to require, review and coordination with the Navy to facilitate transfer of the property. The funding sources for these efforts continued to be a mix of regional and state grants, and loans from the City to the LRA. The loan from the City were necessary to fund LRA activities once the state-wide dissolution of redevelopment agencies was implemented in 2012. These on-going site-wide environmental permitting efforts, are now almost exclusively funded by loans from the City. Between 2013 and 2016, as part of the process to select a Phase One Master Developer, negotiate a Term Sheet, and negotiate a Disposition and Development Agreement, the LRA has received $750,000 from Lennar Concord, LLC to reimburse LRA costs associated with those tasks. In addition, thus far in 2017, Lennar Concord, LLC has provided $1.3M to reimburse LRA staff and consultant costs associated with developing the Specific Plan, Infrastructure Plan, and required environmental review consistent with the California Environmental Quality Act (CEQA). Page 4 of 10
City Council Agenda Report Agenda Item No. 8.a July 25, 2017 As of the end of FY 16-17 (June 30, 2017) the LRA has a project fund balance of approximately $2.2M consisting of about $ 750,000 furnished by Lennar Concord LLC for future work related to the DDA or Specific Plan, and $ 1.45M in carry-over work by LRA consultants or unallocated project reserves for future LRA tasks. 2. Estimate of the future work and funding requirements of the LRA. The LRA s future work can be described in three broad categories: 1. Entitlement Tasks: Tasks related to the completion and future implementation of the Specific Plan, development entitlements, and selection of the master developer(s) for future phases of the project s development. These tasks will be reimbursed by the Master Developers as the work is performed by either the LRA or City staff under the terms of either existing or future Reimbursement Agreements and/or Disposition and Development Agreements. The estimated budget for the completion of the Specific Plan, Infrastructure Plan and related environmental review for the entire Economic Development Conveyance (2,380 acres) is $10 million which includes $4 million in reimbursement of LRA/City staff and consulting costs. All of this funding is being invested by Lennar Concord, LLC with a Reimbursement Agreement provision obligating future Phase Master Developers to reimburse Lennar Concord, LLC for their share of these costs. Future entitlement tasks will be subject to their own reimbursement agreement, development agreement or the typical City of Concord fees related to the requested approval/entitlement. 2. Transfer Tasks: Tasks related to the completion of property transfer from the Navy, including site-wide permitting, resource management plans, off-site mitigation identification, and the clean-up of contaminated parcels. These tasks will be funded by the LRA from loans from the City consistent with our current practice. Future loans, like all current loans, will be repaid with interest 1, from land sales or leases within the former Concord Naval Weapons Station. Staff anticipates that all Transfer Tasks will be complete within the next ten (10) years. This will enable the elimination of the LRA and all remaining monitoring and reporting responsibilities of the LRA can be transferred to the City. A broad estimate for the completion of the Transfer Tasks is $8 million (FY 17-18 through FY 26-27). If this estimate proves accurate, the total loan amount from 1 Interest accrues on the unpaid principal balance of each loan at the rate the City would have received had the funds been invested in the Local Agency Investment Fund ( LAIF ) until paid in full. Page 5 of 10
City Council Agenda Report Agenda Item No. 8.a July 25, 2017 the City to the LRA over the entire project would total approximately $15 million. However, the total loan amount may rise due to the Navy s request regarding base management, as discussed below. 3. Base Management: The Navy has requested, as part of the discussion of payment for the Economic Development Conveyance that the LRA and East Bay Regional Park District each agree to take over Base Management responsibilities under a lease arrangement coupled with the First Transfer of property. Those responsibilities will primarily involve providing site security and basic maintenance (i.e. fence repair, weed abatement through continued cattle grazing). Staff is researching potential costs to manage the entire base area and how long such an interim arrangement would be required. The Navy has indicated a willingness to consider these interim Base Management costs as an in-kind contribution of value or payment in our ultimate Economic Development Conveyance agreement. Further, the accepted Term Sheet with Lennar Concord, LLC requires them to assist with the funding of interim Base Management. That provision limited Lennar Concord, LLC s responsibility to the First Transfer parcel (approximately 1,200 acres) not the entire EDC parcel of 2,380 acres. Staff s current estimate is interim Base Management may be required for eight (8) years at $1 million/year for a total of $8 million. Staff will seek a provision in the Disposition and Development agreement, consistent with the accepted Term Sheet, seeking Lennar s share of that amount roughly 50% of the annual costs or an estimated $4 million total. The balance will need to be treated as a loan to the LRA from the City. This will increase the total loan amount from the City to the LRA from an estimated $15M to something higher. Staff is still determining how much higher. 3. Discussion of future decisions the LRA Board will need to make regarding the repayment of loans from the City to the LRA. The work funded by the City loans is exclusively related to the Transfer Tasks and Base Management Tasks, activities that benefit the entire Economic Development Conveyance making redevelopment of the property possible. If the repayment of these loans is spread out over all of the developing acreage repayment may take up to 30 years or more. However, other options to repay the loans from the project exist that rely on other sources of revenue from the project to repay the City. These project sources of funding could then be repaid through land fees over time, thereby allowing the project, rather than the City s general fund, to carry the project costs long term. These possible sources of more near term project revenue to repay the City loan include the guaranteed annual Community Benefit Page 6 of 10
City Council Agenda Report Agenda Item No. 8.a July 25, 2017 Fund payment of $2M/year and/or using the City s prospective share of the Waterfall or Profit Participation (should the Project s financial return meet or exceed expectations) as provided for in Lennar Concord, LLC s Term Sheet. The LRA Board will need to consider and decide on the appropriate loan repayment method before the completion of the Specific Plan process, as the preferred method will need to be reflected in the first, and all future, Disposition and Development Agreement(s). Consequently, staff will bring this topic back before the LRA Board in the summer of 2018 for consideration and a decision. Financial Impact This report provides background information. No decisions are being made. There are no financial impacts from this report. Public Contact The City Council Agenda was posted. Attachments 1. Area Plan 2. Funding Source by Year (2006-2017) Page 7 of 10
$WWDFKPHQW Area Plan Diagram &O\GH Ev in e ss Rd av w La el D i ab Concord Blvd d Galindo Creek Rd Concord Legend Transit Oriented Districts yr y d Babel Ln ell R le ai De Rd Cow B d e au Rd t Bur to n k a Dr m Far C l ay Cr dan t w lo ee ts Downtown Concord llo s Lan an Rd Gr Wi s Pa ile ann vd Ba Ch s Bl rr ok ano Mt Æ Ä lbro d ed ge Ho ra R rr in l i ve lo nk EO sm w Pa Lo E Leland Rd Wi l l o Ä Æ ts a Evo ra R d d Delta R l Wy Æ Ä To Tournament Tourname our urrn ment facility fac aciility and an d adjacent adja ad djacentt park parkk W es stri Hwy ndu ago Ar di nol e Pittsburg or Di l C Diablo Creek ree re eek e Golf Course Cou oursse Chic v Bates A ar d Po r t Bay Point ker Pass R d K ir N 0 1,250 2,500 5,000 Feet Commercial Planning Area Boundary North Concord TOD Core North Concord TOD Neighborhood City of Concord Boundary Commercial Flex Seasonal Wetlands (delineated as of 2010) 2010 Concord parks Conservation, Open Space and Recreation Lands Neighborhoods Central Neighborhood Village Center Village Neighborhood Civic and Institutional Conservation Open Space Greenways, Citywide Parks, and Tournament Facilities Not shown: Potential bike and pedestrian facilities in the Regional Park. Activities Included Housing Regional Auto Access Offices Transit, Bicycling + Walking Priority Shopping Parks and Recreation Schools + Public Facilities Conservation and Species Protection Primary Circulation Network Campus First Responder Training Center Through Streets Collector Streets Research + Development Page 8 of 10
Table 2-1: Adopted Reuse Plan Development Program Acres Units and Population SF and Jobs Notes Land Uses Total Acres Gross DU/Acre Units % of Units Persons/ Unit Population Gross FAR SF SF/Job Jobs Residential 150 acres are designated as Recreation/Residential Low Density Flex Area Total 1022.0 0 12,272 272 100.0% 0% 28,800 800 Commercial 25 acres are designated as Commercial/Retail Flex use 15 acres are designated as Commercial/Retail Flex use T otal 285.0 6,246,833 21,95 6 Institutional T otal 150.0 2,286,900 4,57 4 Community/Other Total 285.0 Parks Total 3286.0 1. Recreation/Residential Low Density Flex Area: 2. Commercial/Retail Flex Space: 3. Open Space 4. Percent Open Space: TOTAL 5,028 12,272 28,800 8,533,733 26,530 Average DU/Acre 12.0 Percent Open Space (see Note 4) 65.4% revised February 23, 2010 Page 9 of 10
Attachment 2 Funding Source by Years (2006-2017) Funding Source FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 Total OEA 220,500.00 2,469,488.00 609,279.00 554,007.41 706,976.00 241,197.59 561,000.00 330,688.00 306,437.00 232,528.00 - - $ 6,232,101.00 Grants - - - 750,000.00 - - 859,970.00 207,291.07 - - - $ 1,817,261.07 RDA 800,000.00 900,000.00 1,700,000.00 2,575,000.00 1,700,000.00 389,075.66 - - - - $ 8,064,075.66 City Loan - - - - - - - 147,000.00 1,100,000.00 2,048,983.00 2,220,000.00 1,800,000.00 $ 7,315,983.00 Lennar-DDA - - - - - - - - - 250,000.00-475,000.00 $ 725,000.00 Lennar-SP 1,299,061.00 $ 1,299,061.00 Total 1,020,500.00 3,369,488.00 2,309,279.00 3,879,007.41 2,406,976.00 630,273.25 1,420,970.00 684,979.07 1,406,437.00 2,531,511.00 2,220,000.00 3,574,061.00 $ 25,453,481.73 Legend: OEA - Office of Economic Adjustment Grants - Regional, State and Federal Grants RDA - Redevelopment Agency City Loan - Loans from the City of Concord Lennar-DDA - Lennar Concord, LLC - DDA Lennar-SP - Lennar Concord, LLC - Specific Plan Page 10 of 10
Historic Concord Community and Reuse Future Project Funding of the Local Reuse Authority for the Concord Community Reuse Project
Historic Funding & Work (2006-2017) Funding Source (2006-2017) Amount Office of Economic Adjustment $ 6,232,101 Redevelopment Agency $ 8,064,075 Regional, State and Federal Grants $ 1,817,261 Loans from City $ 7,315,983 Lennar Concord, LLC DDA $ 725,000 Lennar Concord, LLC Specific Plan $ 1,299,061 Total $25,453,481 Concord Community Reuse Project
Historic Funding & Work (2006-2017) 2006 2010 Reuse Plan and Environmental Review 2010 2012 Reuse Plan to Area Plan and Environmental Review OEA, Grants RDA Concord Community Reuse Project 2013 2017 Site-wide Resource Permitting Transfer Tasks: Navy EIS, Remediation Monitoring 2013 2016 Master Developer Selection Process, Term Sheet OEA, City Loans Master Developer 2017 > Specific Plan, Infrastructure Plan, and Environmental Review Disposition and Development Agreement
Historic Funding & Work (2006-2017) Project Balance (6/30/2017) Amount LRA Tasks or Reserves $ 1,450,000 DDA or Specific Plan (Lennar) $ 750,000 Total $ 2,200,000 Concord Community Reuse Project
Future Funding & Work Entitlement Tasks Funded by Master Developer(s) Completion of the Specific Plan Infrastructure Environmental Review Development Entitlements Selection of Master Developer(s) for future development phases Concord Community Reuse Project Transfer Tasks Funded by loans from City Site-wide Resource Permitting Resource Management Plans > Off-site Mitigation Identification Monitoring the clean-up of contaminated parcels Completed over the next 10 years at an estimated cost of $8 million
Future Funding & Work Interim Base Management Combined funding from Master Developer / loans from City Assume responsibility for entire Base (security & maintenance) at First Transfer. Cost and duration still being estimated ~ 8 years at $1 million/year - $8 million Master Developer obligated to ~ 50% funding - $4 million Concord Community Reuse Project Additional funding to complete Transfer Tasks ($8M) & Interim Base Management ($4M) is estimated in the range of $12 million. Total loans to the LRA from the City ~ $7.3M + $12M = $19.3M
Repayment of City Loans All Base property benefits from the tasks funded through the loans from the City. Concord Community Reuse Project Loans to be repaid from the sale or lease of property Loan amount spread against developing acreage over the next ~30 years. Expedite repayment by using other revenue from the project Community Benefit Fund guaranteed $20M over first 10 years by Master Developer. City s prospective share of Waterfall/Profit Participation in Term Sheet/DDA. These sources could then be replenished as land sells or leases over the next ~30 years.
Repayment of City Loans Staff will return with a repayment strategy next year so it can be memorialized in the first, and all future, Disposition & Development Agreements with Master Developer(s). Concord Community Reuse Project
Questions? Concord Community Reuse Project ConcordReuseProject.org