Pleasanton Economic Outlook

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Title: Pleasanton Economic Outlook

1
Real Estate Financial Update FMFADA Board June
25, 2009
2
Todays Agenda

3
The Financial Model

4
Model Inputs

5
Model Outputs

6
Overall Project Feasibility

Yes, the FMFADA can achieve overall financial
feasibility through its leasing program and other
revenue sources
The FMFADA will own marketable buildings with no
debt
Key revenue drivers are Interim Leasing Program
(starting in 2011) and Pre-paid Leasehold Program
(starting in 2014)
Ground rent ramps up over 12 years, stabilizes in
2027
Key cost drivers are scale of FMFADA organization
and decisions related to provision of municipal
services and infrastructure financing
There are multiple paths to feasibility
But,
Need to address early year municipal service
revenue deficits
Example Commonwealth appropriation increase to
approximately 2.4M/yr to cover recreation costs
shifted to FMFADA in this model run
3M improvement fund required for Interim Leasing
Program

7
Lease Revenue Mix
8
Fiscal Impact Update

Municipal Service Provider Perspective
Does tax revenue match or exceed municipal
service costs?
Additional public safety costs added
Shifted recreation costs to FMFADA
11M net present value revenues net of costs
However, 7.8M initial investment (deficit) in
first six years
Key findings
Municipal costs can be controlled to some extent
by ramping up public safety services only when
needed
Depending on terms negotiated, Army leaseback of
facilities after transfer date may partially
mitigate early tax revenue shortfalls
Significant positive net tax revenue flow after
breakeven point reached
Results sensitive to residential market
conditions for pre-paid leasehold program and
value/timing of new construction put in place

9
Municipal Perspective
10
Infrastructure Findings

Total preliminary cost of 96M
Matching of pre-paid residential leasehold
revenue (97M) to infrastructure capital
requirement is too close for comfort
External infrastructure funding sources are
available and should be maximized
Every dollar saved increases the potential for
the endowment fund of the FMFADA
Need to identify other revenue sources/FMFADA
charges

11
Residential Leaseholds

What are they?
Under a long-term leasehold, you do not own the
property
Instead, you have the right to live in a property
for a set period of time as long as you live up
to the lease terms
You are responsible for maintenance and repairs
This right is referred to as a leasehold
interest in the land and building, or leasehold
estate.
Usually these leases are for 50 or more years
Leasehold owners can freely sell, assign, or
bequeath their lease (if the lease permits it)

12
Residential Leaseholds (cont)

How would this work at Fort Monroe?
The FMFADA has been studying the concept of a
pre-paid lease
You can buy a leasehold in exchange for a
upfront payment
The price of the leasehold may or may not be
the same as if you bought a similar house
outright, often --but not always-- there is a
discount (10 to 15)
Your payment would typically have to be financed
and you would apply for a loan that is secured
against the leasehold (not the property itself)
The lease would be recorded in the official
records and subject to local property taxation
(possessory interest)
You would make monthly payment to your lender as
you would for any home purchase
You could freely refinance your loan so long as
you had enough remaining years in the lease (at
least 10 years longer than the loan term e.g. 40
years for a 30 year loan).