Attachment 6
PREPARED BY: MATT MORLEY
PARKS AND PUBLIC WORKS DIRECTOR
41 Miles Avenue, Los Gatos, CA 95030 ● 408-399-5770
www.losgatosca.gov
MEETING DATE: 1/30/2018
ITEM NO: 3
TOWN OF LOS GATOS
COUNCIL PARKING AND INFRASTRUCTURE
AD HOC COMMITTEE REPORT
DATE: JANUARY 25, 2018
TO: COUNCIL PARKING AND INFRASTRUCTURE AD HOC COMMITTEE
FROM: LAUREL PREVETTI, TOWN MANAGER
SUBJECT: RECEIVE AND DISCUSS FINANCIAL AND DESIGN OPTIONS FOR A
DOWNTOWN PARKING GARAGE
RECOMMENDATION:
Receive and discuss the financial and design options for a downtown parking garage.
BACKGROUND:
The Town Council has authorized exclusive negotiations with Presidio Development Partners,
LLC (Presidio) as well as the hiring of a consultant to assist the Town with the goal of
constructing a mixed-use parking structure, market rate, and below market housing project.
The direction on project scope includes achieving at least 300 total parking spaces, six below
market price (BMP) residential units, and up to 18 market rate residential units. The project
should be designed to be compatible with other downtown buildings in mass and scale.
The Ad Hoc Committee received a second set of conceptual design documents and provided
input on the design. While the project design is preliminary, the current stage of design is such
that identifying project costs and funding options is the logical next step. At the last meeting
the Ad Hoc Committee reviewed the projects financial pro forma that identified a funding gap
of approximately $8.5 million to construct the project as currently scoped.
As a result of the financial pro forma review the Ad Hoc Committee asked that staff further
review several items. These included cost reduction efforts through review of equity financing
and Town permitting costs. In addition, the Ad Hoc Committee asked for costs summaries for
several scenarios, including a garage only and a garage plus six BMP units (no market rate
housing). Finally, the Ad Hoc Committee asked for options for funding the project.
PAGE 2 OF 5
SUBJECT: RECEIVE AND DISCUSS FINANCIAL AND DESIGN OPTIONS FOR A DOWNTOWN
PARKING GARAGE
JANUARY 25, 2018
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1/26/2018 3:04 PM MM
DISCUSSION:
Project Scenarios
The project scope continues to be an early version of the project and as with all projects
changes or additional scope during design will add to the costs. The sections below outline
some aspects of the design and funding as requested by the Ad Hoc Committee. Each are
supported by worksheets (Attachment 1). The basic concept and project components outlined
above remain the starting point, with design revisions as noted. The concept revolves around a
public project that results in the construction of a garage with private construction of
residential (market and BMP) units.
Garage Only - Cost: $13.9M
This project assumes a three story garage built completely above grade. The advantage to this
project is the reduction of costs due to below grade construction and the elimination of
residential components. The disadvantages include a boxy design without setbacks in the
upper levels as envisioned in the full design option and the inability to use Town funds set aside
for BMP construction.
Garage plus six BMP – Cost: $17.3M
This project assumes one below grade level of garage with two garage levels above grade and
six BMP units on the third level above grade. This project reduces the residential footprint and
makes use of the BMP funds available to the Town. Costs increase on this version as the
market rate residential units are no longer included to subsidize project costs. However, the
inclusion of BMP units does allow for the use existing Town BMP funds.
Town Financing Model – Cost $5.4M
This model assumes the Town finances the entire project as originally conceived, including the
garage, BMP, and market rate residential. The costs come down significantly under this
assumption, due to the financing costs being calculated at an assumed rate of four percent
versus private equity rates of twenty percent. This shifts the risk associated with the project
from a shared risk scenario to a full Town risk. It is important to note th at the full project costs
in excess of $25M will still need to be funded in some way – the cost identified in this option is
the assumed balance owed by the Town once the project is complete and the sale of residential
units partially offsets the project costs. Additionally, this structure may be overly optimistic in
that public financing of the private activity (market rate residential) may not be as affordable as
assumed or even viable. Further review of the legal and cost elements will be necessary.
PAGE 3 OF 5
SUBJECT: RECEIVE AND DISCUSS FINANCIAL AND DESIGN OPTIONS FOR A DOWNTOWN
PARKING GARAGE
JANUARY 25, 2018
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1/26/2018 3:04 PM MM
DISCUSSION (cont’d):
Cost Reduction
The Ad Hoc Committee also asked staff to review the reduction of project costs, especially costs
associated with permits fees, in addition to reducing costs with financing alternatives. Staff
reviewed the associated fees and to this point those fees remain in the calculation. The
reasons are several. Primarily, there will be significant plan review and inspection costs with
the project. These costs would fall mostly within the Community Development Department,
which operates on a cost recovery basis. By not charging the fees, the cost s would by definition
then be absorbed by other developers through a shift in fees, an inappropriate method for
paying for these costs.
In addition, there will be other internal costs for project management necessary to complete
this project. Staff anticipates a full time project manager for up to two years. These additional
costs are not yet factored into the project.
Because the project costs are still high level estimates with much refinement required to get to
contract level pro forma numbers, staff left the internal costs at the current level.
Funding Options
As all of the scenarios include a funding need, the Ad Hoc Committee may want to review the
following funding options, with the starting point that there are not Town funds immediately
available to allow for construction of this project in any of the above scenarios.
Bonds – funding mechanism
The Town may ultimately wish to issue bonds as a means of financing a project. Because bonds
are a mechanism for funding a project and not a source of funds, the Town would need to
either identify a revenue stream with which to pay back the bonds or adopt a long-term annual
budgetary commitment to pay down the bonds.
Construction Loan – funding mechanism
Similar to bonds, the Town may pursue other debt, such as a construction loan, to fund the
project. A loan would also need a source of funds to pay off the loan.
PAGE 4 OF 5
SUBJECT: RECEIVE AND DISCUSS FINANCIAL AND DESIGN OPTIONS FOR A DOWNTOWN
PARKING GARAGE
JANUARY 25, 2018
DISCUSSION (cont’d):
Sales Tax – source of funds
The Town could opt to float a special sales tax measure, as has been discussed in other forums,
utilizing/pledging the revenue from that sales tax to pay for the project. The use of the sales
tax funds for a garage should be weighed against other Town budgetary needs.
Downtown Assessment District – source of funds
There are two types of assessment districts available for the Downtown with slightly nuanced
spending authority. Both would likely result in a property tax assessment. One type would be
put together by the Town with impacted property owners voting for or against the asse ssment.
A 50% plus one vote would establish the assessment. Funds for this assessment could be used
for a number of improvements, including parking facilities and is renewed annually.
The second type of assessment is put together by the property owners through submission of a
petition to the Town. A similar vote would occur as with the other alternative. Funds for this
assessment can be used for somewhat broader uses, including parking facilities and is renewed
every five years.
Paid Parking – source of funds
The use of paid parking may provide a dedicated source of funds through revenue associated
with the parking. At a recent Board meeting of the Chamber of Commerce, the Board
expressed interest in this concept as a potential parking management strategy. Associated
revenue may serve to pay for additional Town services or facilities, like a garage.
Year End Fund Balance – source of funds
Each year the Town Council programs the previous year’s fund balance for future use. By
Council policy, the priorities are for capital projects and to ensure reserve s are fully funded.
The year end fund balance could serve as a potential partial source of funds for this project.
The year end excess does equal the gap of funding needed for the current garage proposal and
other Council priorities would determine how much funding is available. Staff would anticipate
this could contribute to the project in a small way, but fully funding the project through fund
balance would likely take many years.
PAGE 5 OF 5
SUBJECT: RECEIVE AND DISCUSS FINANCIAL AND DESIGN OPTIONS FOR A DOWNTOWN
PARKING GARAGE
JANUARY 25, 2018
NEXT STEPS:
Staff believes that identifying the viability of a project is an essential next step. Staff
recommends that the Ad Hoc answer the following questions:
• Given the budget numbers for the cost of a project as provided , is there a project the Ad
Hoc Committee would recommend to the Town Council?
If the answer to the above question is yes and a project is identified, staff recommends that the
Committee then discuss potential funding options by discussing the following questions.
• Which of the funding options are non-starters and which would the Ad Hoc Committee
like staff to pursue further?
• What outreach would the Ad Hoc like to see on the project and project funding?
• What additional information is required?
If no project is identified as viable, the questions below do not need to be discussed at this
time.
Depending upon the Committee’s decisions at this meeting, a status report to the Town Council
might be a reasonable next step to determine if the full Council agrees with the direction of the
Ad Hoc Committee.
Attachment:
1. Pro Forma Documents
Downtown Parking Garage
Budget and Cap StructureCONFIDENTIAL
Option 1 - Base Project
Los Gatos parking lot proposed project
1/21/2018
Capital Budget and Capitalization Structure
(numbers in italics to be verified)
Capital Budget Residential
Line #Soft Costs Total (MRUs, BMPs)Garage
1 A&E, consultants 1,200,000$ 800,000$ 400,000$
2 Town entitlement fees 75,000$ 37,500$ 37,500$
3 Town building permits and impact fees 900,000$ 900,000$ -$
4 Utility fees and costs 200,000$ 150,000$ 50,000$
5 Testing and inspections 100,000$ 75,000$ 25,000$
6 Project mgmt and Dev fee, staffing and overhead 1,110,000$ 555,000$ 555,000$
7 Legal, taxes and accounting 150,000$ 75,000$ 75,000$
8 Subdivision map and condo fees 75,000$ 56,250$ 18,750$
9 Environmental testing 30,000$ 15,000$ 15,000$
10 Marketing 250,000$ 250,000$ -$
11 Insurance 600,000$ 300,000$ 300,000$
12 Property taxes 50,000$ 25,000$ 25,000$
13 Bank/financing fees and costs 360,000$ 240,000$ 414,000$ Assuming 6
14 Interest reserve 1,440,000$ 960,000$ 414,000$ Assuming 6
15 Misc costs 100,000$ 50,000$ 50,000$
16 Soft cost contingency 350,000$ 210,000$ 140,000$
17 Total Soft Costs 6,990,000$ 4,698,750$ 2,519,250$
18 Hard Costs
19 Garage building costs 14,031,450$ -$ 14,031,450$
20 Residential BMP building costs 3,150,000$ 3,150,000$ -$
21 Residential Market rate unit building costs 10,382,400$ 10,382,400$ -$
22 Demo 100,000$ 50,000$ 50,000$
23 Site work, on-site utilities 1,250,000$ 750,000$ 500,000$
24 Environmental remediation -$ -$ -$
25 Dewatering 100,000$ -$ 100,000$
26 Hard cost contingency 1,250,000$ 625,000$ 625,000$
27 Total Hard Costs 30,263,850$ 14,957,400$ 15,306,450$
28
29 Land Costs (air rights payment to the Town)5,000,000$ -$
30
31 Total Capital Costs 37,253,850$ 24,656,150$ 17,825,700$
39
40 Public/Private Financing Capitalization Structure
41 Garage
42 Garage cost 17,825,700$
43 Less: Town Funds Available (4,000,000)$
44 Less: Potential value of residential air rights (5,000,000)$ To be at Fair Market Value assuming BMPs provided by
45 Net Garage cost to finance over time 8,825,700$ If air rights sold at completion of the garage, then $13.8M
46
47 Residential
48 Residential cost 24,656,150$
49 Private equity 8,629,653$ 35%
50 Private construction loan 16,026,498$ 65%
Downtown Parking Garage
Budget and Cap Structure
CONFIDENTIAL
Option 4 - Base Project with Town Financing
Los Gatos parking lot proposed project
1/21/2018
Capital Budget and Capitalization Structure
(numbers in italics to be verified)
Capital Budget Residential
Line #Soft Costs Total (MRUs BMPs)Garage
1 A&E, consultants 1,200,000$ 800,000$ 400,000$
2 Town entitlement fees 75,000$ 37,500$ 37,500$
3 Town building permits and impact fees 900,000$ 900,000$ -$
4 Utility fees and costs 200,000$ 150,000$ 50,000$
5 Testing and inspections 100,000$ 75,000$ 25,000$
6 Project mgmt and Dev fee, staffing and overhead 1,110,000$ 555,000$ 555,000$
7 Legal, taxes and accounting 150,000$ 75,000$ 75,000$
8 Subdivision map and condo fees 75,000$ 56,250$ 18,750$
9 Environmental testing 30,000$ 15,000$ 15,000$
10 Marketing 250,000$ 250,000$ -$
11 Insurance 600,000$ 300,000$ 300,000$
12 Property taxes 50,000$ 25,000$ 25,000$
13 Bank/financing fees and costs 360,000$ 375,000$ 420,000$ Assuming 100% finan
14 Interest reserve 1,440,000$ 1,500,000$ 420,000$ Assuming 100% finan
15 Misc costs 100,000$ 50,000$ 50,000$
16 Soft cost contingency 350,000$ 210,000$ 140,000$
17 Total Soft Costs 6,990,000$ 5,373,750$ 2,531,250$
18 Hard Costs
19 Garage building costs 14,031,450$ -$ 14,031,450$
20 Residential BMP building costs 3,150,000$ 3,150,000$ -$
21 Residential Market rate unit building costs 10,382,400$ 10,382,400$ -$
22 Demo 100,000$ 50,000$ 50,000$
23 Site work, on-site utilities 1,250,000$ 750,000$ 500,000$
24 Environmental remediation -$ -$ -$
25 Dewatering 100,000$ -$ 100,000$
26 Hard cost contingency 1,250,000$ 625,000$ 625,000$
27 Total Hard Costs 30,263,850$ 14,957,400$ 15,306,450$
28
29 Land Costs (air rights payment to the Town)5,000,000$ -$
30
31 Total Capital Costs 37,253,850$ 25,331,150$ 17,837,700$
39
40 Public/Private Financing Capitalization Structure
41 Garage
42 Garage cost 17,837,700$
43 Less: Town Funds Available (4,000,000)$
44 Less: Potential value of residential air rights (5,000,000)$ To be at Fair Market Value assuming BMPs provided by Developer
45 Net Garage cost to finance over time 8,837,700$ If air rights sold at completion of the garage, then $13.8M of funds
46 Less financing savings due to public financing (3,444,857)$
47 Net cost to the Town (assuming 100% Town financing)5,392,843$
48
49 Residential
50 Residential cost 25,331,150$
51 Town financing 25,331,150$
Downtown Parking Garage
Budget and Cap StructureCONFIDENTIAL
Option 3 - Garage and BMP
Los Gatos parking lot proposed project (assuming 3 level garage [1 level down, 2 levels up] with 6 BMPs on top)
1/21/2018
Capital Budget and Capitalization Structure
(numbers in italics to be verified)
Capital Budget Residential
Line #Soft Costs Total (6 BMPs)Garage
1 A&E, consultants 800,000$ 400,000$ 400,000$
2 Town entitlement fees 55,500$ 18,000$ 37,500$
3 Town building permits and impact fees 225,000$ 225,000$ -$
4 Utility fees and costs 87,500$ 37,500$ 50,000$
5 Testing and inspections 75,000$ 50,000$ 25,000$
6 Project mgmt and Dev fee, staffing and overhead 550,000$ 150,000$ 400,000$
7 Legal, taxes and accounting 125,000$ 50,000$ 75,000$
8 Subdivision map and condo fees 43,750$ 25,000$ 18,750$
9 Environmental testing 30,000$ 15,000$ 15,000$
10 Marketing -$ -$ -$
11 Insurance 300,000$ 100,000$ 200,000$
12 Property taxes -$ -$ -$
13 Bank/financing fees and costs 465,000$ 45,000$ 420,000$
14 Interest reserve 642,000$ 180,000$ 462,000$
15 Misc costs 100,000$ 50,000$ 50,000$
16 Soft cost contingency 180,000$ 70,000$ 110,000$
17 Total Soft Costs 3,678,750$ 1,415,500$ 2,263,250$
18 Hard Costs
19 Garage building costs 12,475,200$ -$ 12,475,200$ 1 level below, 2 above
20 Residential BMP building costs 3,150,000$ 3,150,000$ -$
21 Residential Market rate unit building costs -$ -$ -$
22 Demo 100,000$ 50,000$ 50,000$
23 Site work, on-site utilities 950,000$ 450,000$ 500,000$
24 Environmental remediation -$ -$ -$
25 Dewatering 50,000$ -$ 50,000$
26 Hard cost contingency 940,000$ 190,000$ 750,000$
27 Total Hard Costs 17,665,200$ 3,840,000$ 13,825,200$
28
31 Total Capital Costs 21,343,950$ 5,255,500$ 16,088,450$
32
40 Public/Private Financing Capitalization Structure
41 Garage
42 Garage cost and 6 BMP cost 21,343,950$
43 Less: Town Funds Available (4,000,000)$
45 Net Garage and BMP cost to finance over time 17,343,950$
Downtown Parking Garage
B dget and Cap Str ct reCONFIDENTIAL
Option 2 - Garage Only
Los Gatos parking lot proposed project (assuming 3 level garage above grade)
1/22/2018
Capital Budget and Capitalization Structure
(numbers in italics to be verified)
Capital Budget
Line #Soft Costs Garage
1 A&E, consultants 400,000$
2 Town entitlement fees 37,500$
3 Town building permits and impact fees -$
4 Utility fees and costs 50,000$
5 Testing and inspections 25,000$
6 Project mgmt and Dev fee, staffing and overhead 400,000$
7 Legal, taxes and accounting 75,000$
8 Subdivision map and condo fees 18,750$
9 Environmental testing 15,000$
10 Marketing -$
11 Insurance 200,000$
12 Property taxes -$
13 Bank/financing fees and costs 420,000$
14 Interest reserve 462,000$
15 Misc costs 50,000$
16 Soft cost contingency 110,000$
17 Total Soft Costs 2,263,250$
18 Hard Costs
19 Garage building costs 10,602,700$ 3 levels above grade
20 Residential BMP building costs -$
21 Residential Market rate unit building costs -$
22 Demo 50,000$
23 Site work, on-site utilities 500,000$
24 Environmental remediation -$
25 Dewatering -$
26 Hard cost contingency 500,000$
27 Total Hard Costs 11,652,700$
28
29 Land Costs (air rights payment to the Town)-$
30
31 Total Capital Costs 13,915,950$
38 Total funds