pages: CityCouncil/2010-06-01.pdf, 17
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CityCouncil | 2010-06-01 | 17 | The Deputy City Manager - Development Services responded SunCal was responding to the April 20th letter; stated comments are now being reviewed on the letter sent six weeks ago; the City did not have the density bonus pro forma at the time the April 20th letter was sent. Councilmember/Board Member/Commissioner Tam stated the staff report seems to be contradictory to the statement that there would be sufficient funds to pay for public amenities and community benefits. The Deputy City Manager - Development Services stated staff believes the assumptions are overly aggressive and questions whether the project could support the public benefits and transportation improvements; staff has come to a different conclusion than SunCal. Councilmember/Board Member/Commissioner Tam stated that Mr. Brown has stated that there are inconsistencies in the staff analysis of EPS projections; inquired whether staff still has the same conclusions. The Deputy City Manager - Development Services responded in the affirmative; stated staff has discussed the issues with SunCal; that she would be happy to have EPS discuss the analysis; the big picture is that there are five to seven key assumptions that significantly affect the bottom line of the pro forma; SunCal's assumption are overly optimistic. Councilmember/Board Member/Commissioner Tam stated that she does not understand why SunCall's assumptions are considered overly optimistic in light of the requirements for having a project labor agreement and information on builder cost surveys that occurred in May 2010. Jim Musbach, EPS, stated EPS has been reviewing the pro forma; an independent market analysis was performed; all [SunCal] assumptions skew towards the optimistic; returns are overstated and project risk is understated; SunCal's analysis is inconsistent and is intended to paint a picture that is not supported by evidence; assuming 450 units per year versus 350 units would have a significant impact on the Internal Rate of Return (IRR); SunCal does not defend the suitability of the 14.7% IRR under the Measure A compliant project; funding public amenities and community benefits has risks; EPS calculated a premium of 22% for the area; the calculated premium would be less by starting with just single-family homes; the land values keep escalating and is a red flag and far beyond other projects; improved land values as a percentage of unit prices range from 15% to 25%; SunCal's land values are over 50% of unit value; SunCal ends up with 2% appreciation compounded year after year which all falls to the land value which means there is no escalation in construction costs and the land captures all of the value on the upside, which is not true; EPS does not see $1 million dollar houses being built for $105 per square foot; there is no evidence in today's market that land values Special Joint Meeting Alameda City Council, Alameda Reuse and Redevelopment Authority, and 6 Community Improvement Commission June 1, 2010 | CityCouncil/2010-06-01.pdf |