pages: CityCouncil/2010-07-07.pdf, 5
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CityCouncil | 2010-07-07 | 5 | change anything; underlying assumptions embedded in the analysis still have to be determined and negotiated. Councilmember/Board Member/Commissioner Tam inquired how much would the IRR gain if the assumptions are revised. The Deputy City Manager - Development Services responded SunCal is requiring an IRR of 20 to 25%, so - -12% is not a feasible project; stated staff tested the sensitivity; using SunCall's assumption for the single family home values, the IRR increases by 10% points; assuming the average single family price premiums, the IRR increases by 3% points; with SunCal's single family direct construction costs, the IRR increases by 8% points; the cumulative effect of these three changes result in the 14% IRR rather than the -12% IRR, which is still well below the 20 to 25% required by SunCal in the ENA; the three changes do not add up to 14% is because a compounding effect happens when you add of the changes into the pro forma at the same time; moving forward on a project with unrealistic assumptions presents significant risks to the City and to the developer. Councilmember/Board Member/Commissioner Matarrese inquired whether the land payment is still an absolute figure of $108 million or is the premium per house above a threshold that adds up to $60 million, assuming $40 million for cleanup, to which the Deputy City Manager - Development Services responded SunCal's proposal is a $10 million up-front payment and $50,000 per unit starting with the first unit in phase three, which is different than what was in the draft term sheet agreed to with the Navy, but does add up to $108 million. Mayor/Chair Johnson inquired if there is another possibility that the developer could come back to the City to renegotiate the deal, to which the Deputy City Manager - Development Services responded in the affirmative; stated if SunCal is unable to fulfill requirements and scale back on the assessments promised, they would have to come back to renegotiate in order to keep the deal. Councilmember/Board Member/Commissioner Gilmore inquired about a discussion a while ago regarding holding the developers feet to the fire and having protections and a phasing approach to try to ensure that the City would get what is important to the community. The Deputy City Manager - Development Services responded staff would absolutely want to incorporate all of those things into the DDA; stated ultimately, the bigger issue is whether to move forward on a project that is financially risky for the City or one that has the financial performance or underpinnings for an entirely feasible project so the City is not left with unfinished phases. Councilmember/Boaro Member/Commissioner Gilmore stated the Navy ultimately has Special Joint Meeting Alameda City Council, Alameda Reuse and Redevelopment Authority, and 4 Community Improvement Commission July 7, 2010 | CityCouncil/2010-07-07.pdf |