Monday, June 21, 2010

Rubicon’s Financial Strategy for AuthentiCity

Below's a funding outline for the proposed AuthentiCity and Boqueria California Plan.

By summarizing Rubicon’s project into two financial columns (equity & public funding) the city staff oversimplified Rubicon’s funding strategy. This led the city staff unfortunately to inaccurately represent what Rubicon’s ‘Financial Ask’ of the City is. Rubicon is not asking for $100 M in City funding. In fact, Rubicon’s 700 Block-Only proposal uses half the City Funding that the city staff’s committee recommendation uses to achieve the Same Size project in the Same Time frame.

Rubicon knows the City has but $80M remaining for redevelopment on K Street: $40M of land value (the purchase price of the 700/800 land), $20M of available funds, and $20M of MOPA Funds (ear-marked for David Taylor). Rubicon’s approach is to conservatively leverage this $60M City Investment to create as many jobs, residential units, unique trips, sales tax and real estate tax dollars as possible.

This is not so different than when someone has $20,000 and wants to buy a house. She can buy a smaller house that will cost her $20,000 or the house that is a better fit for $80,000. In order to buy the larger house she leverages (adds additional resources) to the $20,000 to accumulate the $80,000 necessary to buy the larger house. In other words she leverages her available funds to get more.

Rubicon proposes safely leveraging the City’s resources so the City gets more without putting the City at financial risk by using methods the City itself is exploring on other projects and in other parts of town.

If one looks closer at Rubicon’s financing there are basically three categories of funding: Existing Public Funds, New Project Funds, and the Reinvestment of Project Generated Funds.

-The Existing Public Funds consist of the City’s available funds (described above).

-The New Project Funds consists of Rubicon’s Equity and Debt (Rubicon is investing more equity than the staff committee’s recommended project) and not City but Private, State, Federal and Parking funds. The Boqueria California is a perfect example of this. By partnering the City’s land with the State’s Food and Agriculture Industry its possible to create a Civic Amenity that draws potential visitors from through out the region, bringing tax dollars into the downtown without cannibalizing from other parts of Sacramento such as Midtown or the R St Corridor. Another way of saying this is Rubicon is leveraging the Land to attract an investment from the $40Billion/yr Food & Agriculture Industry and create something that otherwise could not be possible.

-Reinvestment of Project Generated Funds consists of funds created by the project that would not exist without the project. These are reinvested into the project.

Because its difficult to summarize Rubicon’s entire proposal into a few paragraphs, let’s compare Rubicon’s 700 Block-Only proposal side by side with the staff committee’s recommendation on all three blocks.

With Rubicon’s proposal Sacramento gets the Same Size project, in the Same Time frame, at Half The Cost and still reserves the opportunity to do something special on the 800 Blocks and still has the $20M of MOPA funds for future reinvestment. (click here for detailed comparison and background data)


Please email the City Council in support of this proposal.


wburg said...

So, in other words...slightly less than half of the Rubicon project uses slightly less than half of the $100 million in total public funding requested. If Rubicon has amended their proposal to only include the 700 block, then it isn't an "apples to apples" comparison either, because the recommended proposal covers the city-owned lots on both the 700 and 800 blocks. Although it's difficult to compare the Rubicon proposal to any of the other projects, because nearly half of the project takes place on property the city doesn't own--and the proposal does not explain how that half will be funded.

Finally--if the city only has $80 million in redevelopment funds, how does Rubicon propose to fund the other phases of their projects? Are they just hoping for a massive rebound of the housing market in the next five years?

Zwahlen Images said...

The math is simple.
With the staff committee's recommendation (on all the Agency Owned Land) you get:
256 residential units
70,000 sf of retail
Completion in 2012/13
Requiring a CITY subsidy of $80M (40-land, 20-RDA funds, 20-MOPA)
Per unit the subsidy comes to $313,000

With Rubicon's proposal (on the 700 Block alone) you get:
213 residential units
60,000 sf of retail
Completion in 2012
Requiring a CITY subsidy of $40M (20-land, 20-RDA funds)
Per unit the subsidy is $191,000

Now what's so confusing about that?

By the way you should attend Monday's Boqueria Open Forum at the Citizen Hotel-5:30pm.

Michael said...

Email sent. I really hope there isn't any favoritism going on with the Taylor group.

wburg said...

What's so confusing about that is that it is one of four phases, in what one assumes is a package deal. The first phase is one with relatively little public subsidy, but the other three make up the difference. The comparison isn't fair because it doesn't include the total financial requirements of the project--including the more expensive portions, like the high-rises, and the parts that will need continual subsidy, like the "Bogueria." It's confusing because it makes the easily tricked think that this incomplete portion of their proposal is an accurate picture of the whole proposal--and it isn't.

With the staff-recommended proposal, you get a project that can be finished in a reasonable amount of time, with a reasonable budget. With the Rubicon project, it just seems like a lot of glitz that would get value-engineered out of the final product assuming it was ever completed.

Zwahlen Images said...

½ The land, ½ The subsidy, same size project, same time frame as committee recommendation.

From what I understand, financing in place, ready to start immediately.

Pretty simple math.

The only question left is does Sacramento want to settle for reasonable or go for what is achievable?

wburg said...

But this project is not just the chunk you're talking about--you are deliberately omitting three-quarters of the project, including most of the subsidy and most of the still-undefined costs (like the private lots.) The view presented by the Rubicon proposal, only talking about one part of a larger project, is deceptive and inaccurate.

Zwahlen Images said...

Rubicon has stated many times that their project can be completed with or without the private land sites.

The point is – again - one phase of Rubicon’s is the same size and time frame as the committee’s recommendation.

This reserves the right for Sacramento to do something special on the other sites. Don’t we deserve more?

The point is not just to rush and fill the City owned parcels with buildings. Let’s think about this for a moment and really change K Street for good.

wburg said...

When and where did Rubicon make claims about the scalability of their proposal? What I have seen so far, both at the public meeting and online, were that this was a package deal in four phases.

This is an incomplete picture--it does not accurately account commercial space (the Rubicon proposal in this portion has far less commercial space), just residential, or the type of housing (low-income vs. workforce vs. market rate.)

It's a bit like claiming a Lincoln Navigator gets better gas mileage than a Smart Car because 1/4 of a Navigator weighs 1500 lbs (100 less than a Smart) while holding the same number of people (8 in a Lincoln, 2 in a Smart.) While true in a certain sense, cutting a Lincoln Navigator into four pieces makes each chunk considerably less useful. Similarly, comparing the entire recommended proposal to a severed chunk of the Rubicon proposal is only useful for propaganda purposes.

Other problems include an unfair and inaccurate portrayal of the subsidies required. The D&S project asks for two $8 million loans--one forgivable upon completion, one that would be repaid with interest. By contrast, the Rubicon project (this portion) asks for a $15 million grant, plus a $14.5 million parking bond request, plus a few million in permit fee waivers (as if the Community Development Department can afford to write off millions in development fees right now.) That's about $33 million, vs. $8 million after loan repayment, for the 700 block.

The recommended project is more fiscally prudent, but that's not all. It's also more green, because they are making use of already-built buildings instead of demolishing them (except for a couple of walls) and using all-new building materials. It's also more unique and special, because it makes use of that which already makes our city special, our historic architecture. It thus has an intrinsic connection to Sacramento's urban history and its urban culture.

That's something pretty special, and unique, and I would hate to see it bulldozed for someone's pipe dream. The fact that it is also cheaper and greener are nice bonuses.