HomeMy WebLinkAboutC-1201 - Necessary Analysis, Prepare Information for Submission to the County for Relocation of Municipal Judicial Facilities in Civic Center Plazacy CiPf" cou.N'lCIL
CITY OP klc-yVPORT BEACH
Economics Research Associates
M&
Los Angeles, California
Washington, D.C.
A PLAN FOR RELOCATION OF
THE NEWPORT BEACH CIVIC CENTER
Prepared for:
THE CITY OF NEWPORT BEACH
November 24, 1969
TABLE OF CONTENTS
Page
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INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . .
. 1
DISPOSAL AND DEVELOPMENT POTENTIAL OF SITE "A" . .
. 2
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ALTERNATIVES . . . . . . . . . . . . . . . . . . . . . . . . . .
. 3
RECOMMENDATIONS FOR THE DISPOSAL OF SITE "A" . . . .
. 6
FEASIBILITY OF ATTRACTING OTHER FACILITIES TO THE
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NEWPORT CIVIC CENTER . . . . . . . . . . . . . . . . . . . .
. 7
EVALUATION OF PROPOSED NONMUNICIPAL FACILITIES
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FOR THE NEWPORT BEACH CIVIC CENTER
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CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .
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INTRODUCTION
On August 28, 1968, Welton Becket and Associates, in collabora-
tion with Economics Research Associates, presented a civic center site
selection study to the City Council of the City of Newport Beach. Based
on the findings of that study and in consultation with a citizen's advisory
committee, it was recommended that the City select Site "C" located in
the southeast portion of the Newport Center for the location of a new civic
center complex. This report was approved in principle on September 10,
1968. Subsequent to this site selection study, Cedric A. White, Jr. ,
M.A. I. , prepared an appraisal of the existing civic center site (Site "A ")
and Site "C. " The City of Newport Beach recently purchased Site "C, "
comprising 19.23 acres, from The Irvine Company.
The total area of Site "C" is approximately 10 acres greater than
the acreage required for the proposed city -owned facilities, namely, an
administration building, i/ police facility, and main headquarters library.
However, in accordance with the recommendations of the consultants, the
City of Newport Beach is encouraging other governmental and quasi - public
facilities to locate in the proposed civic center complex. Nonmunicipal
facilities which may be developed in the Newport Beach civic center include
the Harbor Judicial District Municipal Courts, United States Post Office,
Newport -Mesa Unified School District Administration Building, Newport
Harbor Chamber of Commerce, area offices of the three utility companies
serving the Newport Harbor area,?/ an art gallery, and a multi - purpose
civic auditorium. A civic center containing most, if not all, of these
facilities will constitute not only a major economic asset, but also a major
community asset to the City of Newport Beach.
The City of Newport Beach again retained the services of Economics
Research Associates in the formulation of a development strategy for the
new civic center. The scope of this study was delineated in two phases.
The results of the first phase, dealing with the evaluation of the Newport
Center as a location for the Harbor Judicial District Municipal Courts,
were presented to the City of Newport Beach in January of this year. The
present report is devoted to the completion of the objectives of the second
' 1/ For purposes of this report, the administration building includes the
Council chambers.
2/ Southern California Edison Company, Southern Counties Gas Company,
' and Pacific Telephone Company.
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phase of the assignment as set forth in ERA's contract with the City of
Newport Beach:
1. Development of alternative plans for disposal of the present
City Hall site. Consideration will be given to selling the
property, leasing it on a long -term basis to a developer, or,
possibly, trading the site or another city -owned property for
the new civic center site in the Newport Center complex.
' 2. Analysis in depth of the implications of the various public and
semi - public facilities which previously have been enumerated
for inclusion in the Newport Beach Civic Center complex and
development of the strategy and steps to be taken to attract
the various facilities which are determined to be beneficial
to the community.
The consulting memorandum report which follows was prepared by
' G. Christopher Davis and Andy Trivedi, under the project management
and administrative supervision of William S. Lund, Executive Vice
President of Economics Research Associates. ERA is grateful to the city
officials and community leaders of the City of Newport Beach for their
assistance and cooperation in the preparation of this report.
' DISPOSAL AND DEVELOPMENT
POTENTIAL OF SITE "A"
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Objectives
Because of the long- standing use of the present Site "A" property
(since 1949) as the location for the City Hall and police facility, and the
perceived impact of this property on the adjacent neighborhood, a working
set of criteria and objectives, including monetary and non - monetary
considerations, were formulated in analyzing the alternatives available to
the City of Newport Beach in the vacation and disposal of Site "A." The
ERA project team considered three specific criteria, which are used sub-
sequently to measure various alternatives in this analysis.
First, the investment gain by the City of Newport Beach in the
disposal of this site is held to be an important consideration. By
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' maximizing the investment gain, the capital requirements for the new
ALTERNATIVES
Utilizing the foregoing three considerations, the following major
1 alternatives for disposal of the City Hall site are analyzed.
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civic center can be lowered. There are two ways in which to measure
this investment gain. The potential direct value of the monetary amount
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received by the City upon disposal of the property constitutes the first
measure. This amount may be in cash or in the present value of an income
stream received in leasing the property. The previously mentioned
appraisal study of Cedric A. White, Jr. , M.A. I. , estimated the fair mar-
ket value of Site "A" as of January 1, 1969 to be $675, 000. On a net -net
basis and a ground lease of 7 percent, this site could yield an annual
revenue of about $47, 000 to the City of Newport Beach. Additional invest-
ment gain to be realized by the City as well as by other governmental
taxing jurisdictions from those alternatives which place the property back
on the property tax rolls constitutes the second measure. The subject
Site "A" (land only) is presently assessed at $182, 180. Therefore, by
placing it on the property tax rolls, the City and other taxing governmental
agencies will realize annual tax revenues in the amounts of $2, 250 and
$13,150, respectively, on the basis of prevailing rates. Furthermore,
new, private developments on the site will also produce substantial
additional tax revenues to the City and to other local governmental agencies.
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Second, the measurement of the effect on the existing business area
surrounding the present City Hall site as a result of relocation of munici-
pal facilities to Site "C" is held to be an important consideration. Em-
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ployees of and visitors to the City Hall and its related facilities are pre-
sently considered a source of patronage by the retail shops and business
services located near Site "A. " Thus, the economic health of the retail
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area surrounding Site "A, "after relocation of the civic facilities, is an
important consideration in the analysis of various alternatives involving
the disposal of the present civic center site.
Third, extremely high public acceptance of whatever course of
action is taken in terms of disposal of the property is held to be a final
important consideration. The attitude of the citizens of Newport Beach
with regard to questions relative to the objectives of this study bears
greatly upon the analysis of the various alternative disposal propositions.
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ALTERNATIVES
Utilizing the foregoing three considerations, the following major
1 alternatives for disposal of the City Hall site are analyzed.
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All alternatives open to the City in the disposal of Site "A" were
explored by ERA. The following three, considered to be most plausible,
are included for evaluation.
Alternative 1
The first major alternative open to the City is the lease of the
existing facilities at Site "A" to a public agency or private business for a
period of five to 10 years. At the end of the lease period, the subject
property might possibly be more valuable than at present, commanding a
higher sales price than estimated in the aforementioned appraisal report.
An example of such rising property values in the Newport Beach area is
the Balboa Bay Club site (land only) which; while admittedly on the bayfront,
experienced a dramatic increase in assessed valuation from $373, 000 in
1965 to $525, 000 in 1968.
A possible drawback to this alternative is that, according to the
findings of ERA, it is highly unlikely that any of the public agencies present-
ly functioning in the community, including the Newport -Mesa Unified School
District, would be interested in leasing the present building facilities at
Site "A. " Furthermore, any private use of these present building facilities
on an interim basis would be limited to one or two large tenants, since, as
reported in the 1968 ERA study, these structures are not easily adaptable
to partitioning which would be necessary in order to create space for smaller
tenants. (During the field research for this study, ERA was unable to
identify any large tenants prepared to lease the existing buildings at Site "A"
at rental rates commensurate with the value of the property. )
It should also be noted that these structures will not be vacated by
the City of Newport Beach for at least three years. While the lease alter-
native could provide the City with an annual income of about $47, 00011
(without loss of ownership of the property), the present value of that income
stream and even the eventual sale price might not be as great as an im-
mediate sale due to prevailing high interest rates. This cannot be avoided
to any significant degree by refinancing at a later date when interest rates
are lower because of the severity of prepayment penalties. For these
reasons, the alternative should be considered only in the event that a most
attractive and firm proposal is submitted to the City.
1/ Net -net ground lease at 7 percent on an initial fair market value of
$675,000.
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Alternative 2
The second major alternative open to the City involves the lease of
the property on a long -term basis, based on the appraised value of the
site. The lease rate would be established on the basis of a 25 -year term
' and 7 percent interest rate. (The City is limited by law to a maximum
lease period of 25 years unless a change is obtained through voter approval.
A longer lease term would make this alternative more attractive than at
present, and, if changes were made in the term, arrangements in the lease
characteristics could be accordingly made.
In the opinion of ERA, potential developers would not be seriously
interested in the lease - purchase option for Site "A, " as described above,
' unless the City were to hypothecate the lease to a construction loan.
The City of Newport Beach generally maintains the first lien on the leased
property, raising the total financing cost of the development and resulting
' in a higher interest cost on the mortgage. Hypothecation of the lease
could make financing much easier to obtain and, thus, possibly make this
alternative attractive to a limited number of investors. Furthermore, even
if a serious developer could be found to acquire Site "A" on a lease - purchase
option basis, past experience indicates that it is very difficult for the
City to be an effective lessor due to the multiplicity of constraints affect-
' ing its ability to achieve full market value for the property.
' Alternative 3
The third major alternative open to the City is the outright sale of
the property for cash which, in turn, could be applied in the development
of the new civic center complex at Site "C. " In addition to cash proceeds,
the City also would realize substantial tax revenues under this alternative,
as, in the opinion of ERA, potential buyers would not purchase this prop-
erty without an immediate plan for development. Also in the opinion of
ERA, the rental income from existing buildings on Site "A" would not justify
a fair market value of $675, 000 for this property. Hence, any new owner
would put the site to a higher and more dense use soon after purchase.
Although the City could be deprived of future value appreciation by such an
outright sale of the property, it is felt that, on balance,the merits of this
alternative outweigh those of Alternatives 1 and 2.
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RECOMMENDATIONS FOR THE
DISPOSAL OF SITE "A"
Of the three alternatives, the outright sale of Site "A" appears
to be most advantageous in terms of monetary gain, enhancement
of the adjacent neighborhood, and community acceptance. As stated
previously, the City could use the sales proceeds to reduce the develop-
ment costs of the new civic center at Site "C. " In addition, placement of
Site "A" on the tax roles as well as early development would generate
tax revenues to the City of Newport Beach and other governmental agencies.
Also, the early development of Site "A" could create source of patronage
to the Via Lido business district, thereby filling a potential void that
might be created by the relocation of the civic center to the Newport
Center.
In regard to the manner of sale of Site "A, " it is suggested that
the City consider using the techniques generally followed in the selling
of land parcels located in urban redevelopment projects in which neighbor-
hood enhancement is an important object. Through an active advertising
program, the institution of the City of Newport Beach could invite pro-
posals relative to the purchase and development of the site. Moreover,
upon request, potential bidders should be given the opportunity to review
the physical data, appraisal information, and all other relevant material
concerning the site which is available to the City. In addition to the
amount offered for purchase of the site, the City of Newport Beach could
apply the following criteria in evaluating development proposals for
Site "A;"
1. Potential economic benefits to the Via Lido business district
and to the entire community.
2. The proposed development plan, including its architectural
quality and the scheduled completion date.
3. The financial feasibility of the project, including the integrity
of the potential purchaser.
Developers should also be given an opportunity to propose purchase
of the fire station located on the site if this becomes requisite to the
implementation of development plans. The City could very well obtain sub-
stantial additional proceeds from such a sale, of which only a portion would
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be necessary to relocate the fire station to a nearby, suitable site. It
1 should also be noted that at such time as the City of Newport Beach
relocates its facilities to Site "C, " the existing fire station at Site "A"
would lose parking and gas storage space now available at this site.
1 Hence, the continued use of this fire station, even in the wake of the sale
of Site "A, " would necessitate purchase by the City of a suitable nearby
property for parking and gas storage. Therefore, on balance, it appears
' that it would be most advantageous to the City to respond favorably to the
inclusion of the fire station in the sale of Site "A. "
1 As the City of Newport Beach has already purchased Site "C," it is
appropriate for the City Council of Newport Beach to consider initiating
the sale of Site "A. " In the event that it is determined to be advantageous
' to finalize this sale prior to the completion of the new civic buildings
at Site "C, " it is recommended that the City lease back the existing
1 facilities at Site "A" during the interim period. The new owner of Site "A"
as well as the City could very well use this time for the careful finalization
of the plans and program for development of Site "A. "
FEASIBILITY OF ATTRACTING OTHER
FACILITIES TO THE NEWPORT CIVIC CENTER
Background
In the civic center site selection study of 1968, Welton Becket and
Associates and Economics Research Associates surveyed the development
and relocation plans of several governmental and quasi - public organizations
serving the Newport Beach area. Organizations and agencies contacted by
the project team included Orange County (with regard to the Harbor Judicial
District Municipal Courts), Newport -Mesa Unified School District, U.S.
Post Office, Newport Harbor Chamber of Commerce, fine arts and cultural
groups, and the three public utility companies, namely, Southern California
Edison Company, Southern Counties Gas Company, and Pacific Telephone
Company. A majority of these organizations expressed a keen interest
in the development of the City's new civic center, indicating their desire to
develop new facilities in the civic center complex under certain conditions.
These conditions related primarily to the availability of development funds,
selection by the City of one of the three sites originally under consideration
in the spring and summer of 1968, probable land costs, and the extent of
other development amenities to be offered by the City of Newport Beach
and /or the landowner. Selection of Site "C" was favorably received by the
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majority of these organizations. It also was the conclusion of the economic
and planning consultants that the inclusion and, where possible, integration
of the proposed facilities of these organizations in the City's new civic center
would be compatible with the municipal functions at the site. A new civic
center containing many of these facilities would become a central focal
point in the community, improving public convenience and generating sig-
nificant savings to occupants in terms both of development and important,
recurring operation and maintenance cost.
In regard to the likelihood that these organizations would locate
in the Newport Beach Civic Center, the consultants pointed out that the
Orange County Board of Supervisors was considering several sites in Costa
Mesa and Newport Beach for the location of municipal courts for the Harbor
Judicial District. The development timing of facilities by other organizations
was considered to be largely dependent upon the availability of financing and
amenities that might be offered by the City of Newport Beach.
The situation, as described above, i/ has been reassessed in
meeting the objectives of this study. The Orange County Board of Super-
visors has received the staff report and proposals from Costa Mesa and
Newport Beach regarding court location, but has not yet made the site
selection for the Harbor Judicial District Municipal Courts. The other
public and quasi - public organizations still are waiting for more concrete
development proposals from the City of Newport Beach. In accord with
its interest in a total civic center development, the City has purchased
a 19. 23 -acre land parcel in the Newport Center. As stated previously,
this amount of site area exceeds the requirements for an administration
building, police facility, and main headquarters library by about 10 acres.
The Irvine Company, developer of the Newport Center, has also indicated
its support of the development of the civic center at the scale projected
in the planning studies.
In addition to ascertaining current plans of public and quasi -
public organizations interested in locating in the Newport Beach Civic
Center, ERA analyzed the implications of various public and semi - public
facilities which previously have been enumerated for inclusion in the
Newport Beach Civic Center. As a part of this analysis, ERA surveyed
the experience of other comparable communities which have developed
civic centers in recent years.
1/ These conditions prevailed in the spring and summer of 1968, at the
time of completion of the civic center site selection study by Welton
Becket and Associates and Economics Research Associates.
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' Comparable Experience in
Civic Center Development
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A survey of newly developed civic centers in Southern California
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indicates that scale, including the types of facilities included, was
primarily determined by the location, population, economic base,
and political status of the respective communities. For example,
the Los Angeles Civic Center has emerged as the major governmental
and cultural center of Southern California. Under a strong leadership,
the Pomona Civic Center also has become an important regional branch
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of Los Angeles County administrative and judicial activities, contributing
to the development of the city as the center of commercial and financial
activities in the greater Pomona Valley. Several communities in Orange
County have developed their centers in cooperation with the county through
the use of joint powers of authority financing.
No set pattern exists for the inclusion of cultural and community
facilities in the newly developed civic centers of smaller communities in
Southern California. Also, although a city government may act as a
catalyst, offering limited financial assistance in the operation and mainte-
nance of quasi - public facilities, the development funds for these facilities
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must be provided by private sources. A time delay of about 10 years
between the conception of a major community cultural facility and its
actual development is not uncommon. It should also be noted that these
facilities generally operate on an area -wide basis; therefore, there can
be some reluctance on the part of center sponsors to be closely identified
with a single community. However, as explained subsequently in this
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report, the excellent image of Newport Beach would probably negate the
occurrence of this situation in this particular instance. Moreover,
only communities such as Anaheim, which derive substantial public and
private income from tourism and convention activities, seem to be
interested in the development of multi - purpose auditoriums. The
observable experience of other comparable communities is used where
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relevant in evaluating proposed nonmunicipally owned and operated
facilities for the Newport Beach Civic Center.
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EVALUATION OF PROPOSED NONMUNICIPAL
FACILITIES FOR THE NEWPORT BEACH CIVIC CENTER
Community Goals
As stated previously, the catalystic nature of the City's role in the
development of the Newport Beach Civic Center becomes prerequisite for
successful completion of a center of the scale considered herein. In most
cases, justification for this role is based upon the value of a total civic
center complex to community status in terms of retail, commercial, and
financial activities. Moreover, this type of integrated center tends to
generate significant financial savings and operational efficiency for all
occupants. Finally, such a development, consisting of municipal, county,
and quasi - public operations, greatly facilitates public convenience in ob-
taining needed services.
The City of Newport Beach also has the option of applying for
federal funds for the planning and construction of certain portions of the
civic center. However, it is significant that the bulk of development funds
for municipal facilities must be provided by local government resources.
An evaluation of the feasibility of attracting nonmunicipal facilities to the
civic center, as presented in the remainder of this report, assumes that
the City will construct a new administration building, police facility, and
main headquarters library at Site "C" in the Newport Center.
Municipal Courts
The attributes of the Newport Beach Civic Center site as a
location for municipal courts have been demonstrated in detail in previous
studies conducted by Economics Research Associates. However, at the
time of preparation of this report, it is not clear whether or not the
Board of Supervisors will locate the proposed Harbor Judicial District
Municipal Courts at the center.
Newport -Mesa Unified School District
Although the Newport -Mesa Unified School District owns a site
which can be used for the construction of its new administration building,
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recent school financing trends indicate that some difficulty may be en-
countered in obtaining the approval necessary for development. Hence,
as an alternative to the construction of a new facility, district officials
might be receptive to leasing unoccupied space in the new civic center on
an interim basis. Consequently, and as this would be very beneficial to
the City of Newport Beach, it is suggested that the City Council consider
submitting this type of proposal to the Newport -Mesa Unified School District.
U.S. Post Office
A current inadequacy of space and the proposed demolition of the
existing premises by construction of the Pacific Coast Freeway will
necessitate relocation of the Newport Beach Post Office to another site
within three years. The U.S. Post Office presently is evaluating a number
of sites in the City, including Site "C, " for this purpose. In addition to
the requirement of a site area of about 5 acres, direct accessibility to
the area's ultimate freeway network and reasonable land cost are other
factors being considered in the site selection process.
Research findings indicate that Post Office officials are very much
interested in obtaining a location within the proposed Newport Beach civic
center. To this end, the City has authorized Welton Becket and Associates,
architectural consultant for the civic center, to prepare planning studies
for the inclusion of the new Post Office.
In the opinion of ERA, the Post Office would constitute an asset be-
' cause of the logical focal nature of such a facility would further emphasize
the importance of the Newport Beach civic center. Moreover, The Irvine
Company believes the addition of the City's main Post Office to the Newport
' center would be an asset to the area. The Post Office also could very well
become the forerunner of a future federal office building. For these
reasons, it is recommended that the City of Newport Beach, with the
' cooperation of The Irvine Company, encourage development of the Post
Office in the new civic center.
Newport Harbor Chamber of Commerce
and Utility Companies
Field research and discussions with the officials of the Newport
Harbor Chamber of Commerce and local utility companies indicates that
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these organizations desire to relocate their offices within or near the new
civic center complex. Except for cooperation in physical planning, these
organizations do not seek any financial assistance from the City in the
development of their new facilities.
Research findings also indicate that the local Chamber of Commerce
requires about 10, 000 square feet of building space to accommodate its
operation as well as that of its allied organizations. Building space
requirements of the area offices of the three utility companiesl/ are
estimated at 2, 000 square feet each. The proximity of these organizations
to the various municipal offices not only would be mutually beneficial, but
would provide a public convenience. The building space needs of these
organizations could be accommodated on an interim basis through the
leasing of unoccupied space in the civic center. As an alternative, either
a private party such as the Chamber of Commerce or the City itself could
construct a commercial building for prospective tenants wishing to locate
within the civic center complex. If private development is chosen, such
a building, which would be very compatible with the civic center concept,
could be constructed within the civic center complex on a site owned by the
City, but ground — leased to a private party.
Art Gallery and Other Cultural Facilities
Local residents have shown a keen interest in the development of
' cultural facilities and activities in the Newport Beach community. The
previously cited survey of local public opinion:/ indicated that a cultural
center would be preferred by residents over all other potential new recre-
ational facilities. Moreover, about 73 percent of those persons surveyed
also conveyed the wish that this cultural center serve the residents of
adjacent cities. A number of citizen groups are working towards the
development of new cultural facilities in the area. As reported in the 1968
report of the consultants, The Irvine Company has promised to donate up to
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1/ Southern California Edison Company, Southern Counties Gas Company,
and the Pacific Telephone Company.
2/ Opinion Research of California, A Public Opinion Survey, March 1969.
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16 acres of land in the general vicinity of the Newport Center for a cultural
center. However, local groups have not yet raised sufficient funds for the
construction and operation of such facilities. Experience in other com-
munities has demonstrated that, although local municipal government can
provide limited financial assistance towards the physical maintenance of
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these facilities, the bulk of capital and operational funds typically comes
from private groups. Furthermore, the federal governmentand foundations
generally do not grant substantial financial support for the development of
cultural centers, particularly in an economically affluent community such
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as Newport Beach.
Although inclusion of a cultural center would be a major asset to
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the City civic center, it is far from certain that interested private
associations could formulate a concrete program towards this end in the
foreseeable future. Consequently, while the City should continue to encourage
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these citizens' groups, the development of the new civic center, at least in
the first phase, could not be predicated on its containing such cultural
facilities. However, for example, the Fine Arts Patrons, which operates
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the Balboa Pavilion Gallery, has already obtained approximately $90, 000 in
donations and pledges for a new art gallery. Moreover, this cultural
organization is receptive to the idea of developing this facility in the new
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civic center, a basis upon which it would be well for the City to continue
to maintain contacts with officials of this group.
Multi- Purpose Auditorium
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Similar to the cultural facilities of the community, the prime financial
responsibility for the development of a multi - purpose auditorium in the
civic center complex should be assigned to interested private groups and
businesses which benefit directly from convention activities. 1 Only if the
community wishes to become a major tourist and convention center should
general municipal funds be expended in the development of such a facility.
1/ A majority of the municipal auditoriums in the nation, including the
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Anaheim Convention Center, are operated at a deficit which is defrayed
by general funds or revenues collected from such special taxes as the
uniform transient occupancy tax.
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CONCLUSIONS
As set forth in this section, only through continued encouragement
by the elected and appointed officials of the City and the community can the
City of Newport Beach fully implement the proposed civic center on the
scale projected in the 1968 site selection study. Although it is difficult to
measure the precise financial and economic gains to the community which
would result from a total civic center, there is no doubt that tangible
benefits would be generated by such a development.
Because of apparent fiscal benefits, the municipal courts should
still be given the highest priority among all public and quasi - public
organizations cited herein. Prospects of bringing the main Post Office,
the Newport Harbor Chamber of Commerce, and area offices of the three
major utility companies to the new civic center complex appear to be quite
good. The recent purchase of Site "C" by the City has also revived the
interest of local cultural organizations in the development of their facilities
at the new center. Similarly and as previously stated, the Newport -Mesa
Unified School District is receptive to locating its administrative facility
in the new civic center on a temporary basis. Since even the preliminary
plans of the majority of nonmunicipal facilities considered for location at
Site "C" are yet to be formulated, the City Council should preserve maximum
flexibility in the determination of a development strategy for the new center.
Certainly the City can continue to act as a catalyst in the realization of a
total civic center, with its elected and appointed officials continuing to
monitor the development and relocation plans of public and quasi - public
organizations surveyed in this study. As in the case of the municipal
courts, the City Council could put forward development proposals to these
organizations at the appropriate time.
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Memorandum Report
EVALUATION OF THE NEWPORT
CENTER FOR ORANGE COUNTY
MUNICIPAL COURT FACILITY
Prepared for
THE CITY OF NEWPORT BEACH
January 15, 1969
(eO jr 8O
ECONOMICS RESEARCH ASSOCIATES
LOS ANGELES • WASHINGTON, D, C.
Memorandum Report
EVALUATION OF THE NEWPORT CENTER
FOR ORANGE COUNTY MUNICIPAL COURT FACILITIES
INTRODUCTION
Orange County is divided into five judicial districts, one of
which is the Orange County Harbor Judicial District; this District
includes the cities of Costa Mesa and Newport Beach as well as
certain unincorporated areas. The Harbor Municipal Court complex
located in Costa Mesa consists of three courts which are both
functionally obsolete and physically inadequate for the needs of
District residents. Consequently, the Orange County Board of
Supervisors has instructed the County Department of Real Property
Services to prepare a site selection study for relocation of the
municipal courts. The county requires that the site accommodate an
expansion to twelve courts of which six would initially be constructed,
and four activated,. The county projects a need for five courts by 1975
and. seven by 1980. In addition, it estimates a peak parking require-
ment of 45 parking spaces per courtroom- -about 12 employee spaces
and 33 public spaces.
After evaluating approximately ten sites, the Board of
Supervisors chose three for further consideration. Its final site
decision is expected. to be based primarily on the following factors:
1. Adequacy of site area
2. Site acquisition and construction costs
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1 3. Access
1 4. Land use compatability
One of the three selected sites is the Newport Beach civic
1 center, proposed for development in the southeast corner of Newport
1 center (see Figures 1 and 2). The city of Newport Beach would like
to obtain the new Harbor Judicial District courts for its compre-
hensive civic center complex. As a result, Economics Research
1 Associates was retained to determine the benefits of locating the
municipal court facilities within the Newport Beach civic center. The
1 conclusions of this study are presented below.
1 ADVANTAGES OF NEWPORT CENTER SITE FOR THE
HARBOR JUDICIAL DISTRICT COURTS
1 Opportunity to Become Part of a Totally Planned Civic Center
Construction on Phase I of the civic center master plan is
1 expected. to be completed. by 1972; this Phase will include a 58, 000-
1 square -foot City Hall and. a 55, 000- square -foot police facility. The
construction both of six municipal courts and the Newport Harbor
1 Chamber of Commerce facility would also be included in Phase I.
1 Phase II construction is expected to be completed by 1980; it tentatively
is scheduled. to include a 58, 000 - square -foot city headquarters library
1 and the remaining six -court addition to the municipal courthouse. A
1 civic auditorium, a post office distribution facility, and an art gallery
' also are considered possible future additions.
Opportunity to Coordinate Development of the Courts and Police Facilities
1 The courts and police facilities could be jointly developed.
1 _2
from the master planning stage through completed. construction. Dis-
cussions with a representative of the Marshal's office indicated that
close proximity of the police facility to the courts is necessary for
joint use of detention cells and other police equipment. While re-
duction of the Marshal's staff would not be possible, cost savings
would accrue to the county through elimination of the need for court-
house detention cells.
Location in Relation to the Harbor District's Population Center
The District is forecast to have a population of 139, 000
persons in 1970, increasing to 274, 000 persons by 1980. Analysis
by the County Department of Real Property Service indicates that the
current population center is located at the intersection of Irvine
Avenue and. 22nd Street. Population expansion is projected to occur
in the undeveloped eastern portion of the Harbor Judicial District;
thus, by 1980, the anticipated population center is expected to be at
the intersection of the Corona Del Mar Freeway and Bonita Canyon
Road (see Figure 3). In addition, there is a possibility that the
District will expand to include that portion of the South Orange County
Judicial District which extends to the city of Laguna Beach. The
Newport center site is, thus, ideally located in relation to the present
population center, to the population center projected for 1980, and
to that which would come into being assuming an expanded. District.
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I1
' Accessibility of the Site
' The municipal courts will have direct access to the pro-
' posed. Pacific Coast and Corona Del Mar freeways, both scheduled .
for completion by 1975. Their location at the intersection of these
' two freeways would provide excellent accessibility to any area of
the Harbor Judicial District, even assuming expansion.
Opportunity to Participate in Joint - Powers Financing
' There are four possible financing alternatives for the new
municipal court facility. These are: (1) bonds of a building
authority established under a joint - powers agreement between Orange
' County and the city of Newport Beach; (2) nonprofit corporation
' bonds; (3) county general obligation bond.s; and (4) cash payment from
the current capital budget, or "pay as you go" financing.
' Joint - powers financing offers a major advantage from a
' time standpoint since it would allow the county to begin preparation
of detailed plans and specifications, call for construction bids, and
' start construction immediately after reaching agreement with the
city of Newport Beach. Thus, no delays would be incurred, due to:
(1) limitations in the current capital budget; (2) delay in terms of
approval for issuance of nonprofit corporation bonds by state and
'
Federal agencies; or (3) delay in terms of approval by two - thirds
of those voting at a countywide election to authorize issuance of
1 general obligation bonds.
1 Because of rapidly escalating construction costs, time delays
1 -4-
in initiating construction of the municipal court facility could be of
material importance. For example, if general obligation bond
financing were to be utilized, a countywide election could not be
held sooner than two months after notification of the proposed
election had been filed with the County Clerk. And, realistically,
a campaign of the magnitude required to convincingly demonstrate
to county voters the need for additional courts in the Harbor
Judicial District would probably require much longer than two months
for preparation and. campaigning. In addition, the cost of such a
campaign would be extremely expensive.
Financing a project through issuance of nonprofit corporation
bonds is similar in many respects to financing with authority bonds.
However, inherent differences in the two financing methods make
utilization of joint authority financing much more desirable, especially
from a time standpoint. Prior to issuance of nonprofit corporation
bonds, approval must be obtained from the Internal Revenue Service,
the Securities and Exchange Commission, and the California
Corporation Commission. Projects have been delayed as long as
six months because of the time required to process applications for
approval of nonprofit corporation bonds through these agencies.
Welton Becket and Associates and Rose and Fears both
have estimated that a six -court facility will require approximately
48, 000 square feet of building area. Assuming a construction cost of
-5-
$30 per square foot, the capital investment in buildings and equip-
ment will total approximately $1,440,000. These cost estimates
reflect current construction prices. By accelerating the development
schedule for courthouse facilities by three to six months, anticipated,
savings would range between $21, 600 and $43, 000 (assumes a 1. 5 to
3. 0 percent construction cost increase over the period).
Assuming utilization of general obligation bond financing,
a bond issue of approximately $1,543, 000 would probably be sufficient
to meet construction and related. costs ($1,483,000 plus contingencies
of $60, 000). Authority financing or nonprofit corporation financing
would require a larger bond issue because a bond reserve fund would
be necessary, interest accruing during construction would have to
be funded, and. additional incidental costs would. be required. A
$1, 543, 000 general obligation bond project would require a bond
issue of approximately $1, 720, 000 if authority bonds were sold and an
issue of approximately $1, 790, 000 if nonprofit corporation bonds were
sold,, as illustrated below:
Nonprofit
Authority Bonds Corporation Bonds
Construction and
related costs $ 1,500,000
Increase in con-
struction costs
because of six
months' delay --
Bond reserve 115,000
M
$ 1,500,000
43,200
126,500
Funded interest
Legal services,
financing, and
incidentals
Nonprofit
Authority Bonds Corporation Bonds
77,400
27,600
$ 1,720,000
89,500
30,800
$ 1,790,000
However, the bond, reserve fund, shown above is not an actual
cost, but, in fact, a sum that can be invested till the bond
matures.
The firm of Stone & Youngberg, financing consultants to
the city, has indicated that the interest rate on bonds of a building
authority secured by a lease with the county would be only approxi-
mately one - fourth of one percent higher than the interest rate which
the county could expect to receive on comparable general obligation
bond.s. By way of contrast, if financing of the municipal court were
undertaken through issuance of bonds of a nonprofit corporation, the
interest rate would most certainly be higher than on comparable
authority bonds -- possibly by as much as an additional one -half of one
percent.
For illustrative purposes only, E.R.A. has attempted. to
show what the resulting costs would. be for amortizing the construction
of the courthouse facilities over 30 years, utilizing both authority
financing and. nonprofit corporation financing. (There appears to be
no question that general obligation bonds would be the least expensive
-7-
financing method, even in consideration of the cost of a bond election,
assuming approval of the bonds, and a possible six months' delay in
construction. For purposes of the following analysis, it has been
assumed that the interest rates would be 4- 1/2 percent for authority
bonds and 5 percent for nonprofit corporation bonds. It should be
remembered. that these interest rates are for illustrative purposes
only and are not intended to accurately forecast actual bond interest
rates at the time the bonds go to bid.
Nonprofit
Authority Corporation
Bonds Bonds
Anticipated, time delay (months) 0 6
Basic construction cost for a
48, 000- square -foot municipal
court (000) $ 1,440 $ 1,483
Assumed bond interest rate
(percent) 4 -1/2% 5%
Maturity (years) 30 30
Annual amortization payment (000) $ 105.6 $ 116.4
Total amortization payments (000) 3,168 $ 3,49Z
Anticipated, saving over nonprofit
corporation bonds from:
Construction (000) $ 43 $ 0
Bond, amortization (000) 324 0
Total $ 367 $ 0
As shown, joint - powers authority bonds indicate a possible
savings of $367, 000 over nonprofit corporation bonds.
so
A Site Requirement of Only 4.686 Acres
Based on the following assumptions, the county will be able to
fulfill the needs of the 12 -court facility with 4.686 acres:
1. A 12 -court facility will normally require approximately
96, 000 square feet of building area. This requirement is
based on information derived from the county; Welton Becket
and Associates; and Rose and Fears, architects for the
Westminster Courthouse. If the city of Newport Beach
provides the detention cell area, the building space require-
ment can be reduced by approximately 5, 000 square feet.
In addition, the topography of the Newport site will allow
ground entrance from two levels; thus, the six -court addi-
tion could be conveniently built on a second story level.
Therefore, the required land area would total approximately
only 45, 500 square feet.
Z. The county will provide 350 of the required 540 parking
spaces, or 115, 000 square feet of parking area (330 square
feet per parking space).
3. The city of Newport Beach will provide an additional 190
public parking spaces for courthouse needs. According to
H. Hamill, library consultant to the city of Newport Beach,
the proposed 58, 000 - square -foot Newport Beach Library
will require 250 parking spaces. Approximately 75 percent
of the demand for these spaces occurs after 3:00 p.m.,
-9-
while peak demand for the courts occurs in the morning.
Therefore, almost 190 parking spaces can be made available
for court use. These library parking facilities can fulfill
the needs of the six -court addition due for construction in
Phase II.
4. While Welton Becket and Associates estimates a requirement
of two acres of landscaping area for a free - standing court-
house, the county will provide only 1 acre. Because the courts
will be part of a totally landscaped civic complex, I acre of
county landscaping should be sufficient.
Thus, the total building and parking area requirement for the
courthouse is 4.686 acres, or 204, 100 square feet, as shown below:
uare Feet
Building area 45,500
Parking area 115,000
Landscaping area 43,600
Total 204, 100
The appraised value of the Irvine property upon which the 12 -court
municipal facility will be located is $82, 765 per improved acre ($1.90
per square foot), or $387, 800 for the total site. 1/
Development Cost Saving of $270, 400
Development cost savings are delineated below:
1. The joint use of detention cells in the city police facility
1/ This appraisal was prepared by Cedric White, M.A.I.
-10-
will save the county approximately $150, 000. It is
estimated that at least 5, 000 square feet of detention
cell space normally would be necessary for a free-
standing, 12 -court complex.
2. Because the courthouse will be constructed concurrently
with the City Hall and police facilities, Welton Becket
and Associates estimates that only one construction
superintendent will be necessary. Orange County thus
will save approximately $25, 000 in construction costs.
3. The joint use of civic center landscaping will eliminate
about $32, 700 in landscaping installation costs ($0.75
per square foot of landscaping).
4. The joint use of parking facilities will save the county
$62, 700 in paving costs ($1. 00 per square foot of paving).
If the Harbor Judicial District courts are located at the Newport
site, development cost savingstothecountywilltotal $270,400, as shownbelow:
Concurrent construction of
courthouse facilities, City Hall,
and. police facilities $ 25, 000
Joint use of detention cells 150,000
Joint use of landscaping 32, 700
Joint use of parking 62.700
Total $ 270,400
35e
' Maintenance Cost Savings of $320, 000
If the Harbor Judicial Courts are located at the Newport site,
annual maintenance cost savings of approximately $6, 400 will accrue
' to the county as the result of joint use of facilities. Over a 50 -year
' building life, the savings will total $320, 00011 as shown below:
' Joint Use Annual Savings 50 -Year Savings
NET POTENTIAL ECONOMIC ADVANTAGE
OF NEWPORT CENTER SITE
If the new Harbor Judicial Districts Courts are located at the
Newport Center site, the county will realize a $270, 400 savings in
development costs. On the basis of this savings alone, the $387, 800
site acquisition cost would in effect be reduced to $117, 400.
Maintenance costs at the Newport Beach site would reflect a
50 -year savings of $320, 000, which on a present worth basis is equiva-
lent to $137, 500 at a discount rate of 4.0 percent. This discount rate
reflects an anticipated inflationary factor of 2.0 percent annually.
If the county were to choose joint powers of authority of financ-
ing over nonprofit corporation bonds for development of the municipal
court, an additional savings of $367, 000 would be realized over a
l/ In 1968 dollars.
-12-
Detention cells
$1,600
$ 80,000
'
Landscaping
2,900
145,000
Parking
1,900
95,000
'
Total
$6,400
$320,000
NET POTENTIAL ECONOMIC ADVANTAGE
OF NEWPORT CENTER SITE
If the new Harbor Judicial Districts Courts are located at the
Newport Center site, the county will realize a $270, 400 savings in
development costs. On the basis of this savings alone, the $387, 800
site acquisition cost would in effect be reduced to $117, 400.
Maintenance costs at the Newport Beach site would reflect a
50 -year savings of $320, 000, which on a present worth basis is equiva-
lent to $137, 500 at a discount rate of 4.0 percent. This discount rate
reflects an anticipated inflationary factor of 2.0 percent annually.
If the county were to choose joint powers of authority of financ-
ing over nonprofit corporation bonds for development of the municipal
court, an additional savings of $367, 000 would be realized over a
l/ In 1968 dollars.
-12-
30 -year bond amortization period. The present worth of this $367, 000
is equivalent to $168, 300 at a discount rate of 6.0 percent.
Assuming the advantages in construction and maintenance to be
highly probable, the Newport Center Civic complex would offer a present
worth savings of $20, 100 to the County even after deducting the cost of
property acquisition. Adding the present worth savings from joint
powers of authority, a total savings of $188, 400 could be anticipated
after property acquisition costs.
Analyzing the advantages of the Newport Beach Center site in an-
other manner, it would offer development savings of $270, 400,
probable 50 -year maintenance savings of $320,000 and possible 30 -year
financing savings of $367, 000.
HYPOTHETICAL ECONOMIC COM:
NEWPORT SITE WITH ALTERNAT
For a free - standing, two - story, 12 -court municipal facility,
approximately 7. 19 acres, or 313, 300 square feet, would be required,
as shown on the following page.
-13-
it
1
1 Building area
Parking area
Landscaping area
Total
Square Feet
48,000
178,200
87,100
313,300
The Newport site would, of course, be economically superior to any
alternative site with a free - standing courthouse even if the land was
donated to the county. If, for purposes of comparison, the maintenance
cost savings of the Newport site could be equaled by those of
alternative sites, the Newport site, still would be economically
superior to all other sites with land value exceeding $16, 300 per
improved acre. This is based on the Newport site's development cost
1 savings of $270, 400 which deducted from its site cost of $387, 800 (for
4.686 acres) results in a net cost of $117,400. This net cost can be
compared with site costs of alternative locations (each of which would
require approximately 7. 19 acres). As shown in Figure 4, if an
alternative site were to cost $30, 000 per improved acre, the county
would save $98, 300 by selecting the Newport site; this saving increases
proportionately to $242, 100 if an alternative site were to cost $50, 000
per acre and to $421, 800 if a site were to cost $75, 000 per acre.
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Figure 1
NEWPORT BEACH CIVIC CENTER LOCATION
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SOURCE: ECONOMICS RESEARCH ASSOCIATES
Figure 4
ECONOMIC COMPARISON OF NEWPORT BEACH SITE
VERSUS ALTERNATIVE SITES
.0
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i
TO: FINANCE DIRECTOR
FROM: City Clerk
SUBJECT: Contract No. 1201
DATE January 10. 1969
Description of Contract Make necessary anal is/ information for
s son to ty ra
Mayor authorized Judicial Facilities in Civic Center Complex
Authorized b}!1M1ft4!1lAM. , adopted on 11/17/6a
Effective date of Contract 12/3/68
Contract with per, ;cm Research Assneiwtpa
Address 615 South F3mmr Rtrwat _ Snitn 500
Los A36glm , Calif. 90017
Amount of Contract $50000
_�La 4Z�-'
-City Cierk
ih
Attached (spy of contract)
E \
r
� g cou ►� �'— � � o
OSITION:
FILE: .. w� November 5, 1968
TO: MAYOR DOREEN MARSHALL l i3 L�ZL L -L r/ L�yGc
O
FROM: Thomas J. Ashley, Economics Research Associates
SUBJECT: GENERAL CONSULTING RELEVANT TO THE FORMULATION OF'CIVIC
CENTER DEVELOPMENT STRATEGY _.
In response to your request, I recommend -that William S. Lund,.
Executive Vice President of Economics Research Associates, be retained
to assist the City Council of Newport Beach.in formulating a strategy
that will determine the most appropriate method.-,of attracting the munici-
pal court's to the potential civic center site.at.Newport Center. Mr.
Lund is a very experienced economist with extensive knowledge of growth
forces, land values, market-support and financing conditions bearing
upon Orange County. He did the original Orange:County Economic Growth
Analysis, 1940 -1980, for the Orange County.Board.of.Supervisors while
associated with Stanford Research Institute-...He..has performed economic
planning studies for Disneyland in-Anah-eim,-.The..irvine Ranch, the City
of Anaheim, the City of Orange,.the.City of- Westminster, the Balboa Bay
Club, the Chevron Land Company in La Habra,.Howard..Lawson in Town &
Country, Orange and "The City" in Orange.- In'-addition to his familiarity
with Orange County, he has served.as a consultant to:MCA, Metromedia,
Walt Disney Productions, Great Lakes Properties, the.Aga.Khan, the Ford
Motor Company, The Irvine Company and'the Janss- Corporation. He is also
a Director of California Federal Savings and Loan Association.
My discussions with Mr. Lund indicate that there are two al-
ternative approaches the City could take in achieving its objective of
attracting the courts to the proposed civic center. The .strategy could
be one which looks at the courts independently of other potential civic
center occupants, and attempts to determine what kinds of inducements
could be offered irrespective of the requirements of other occupants. Al-
ternatively, the strategy formulated would consider the courts as being
merely a part of the whole which would lead to a more intelligent evalua-
tion of what kinds of inducements could or should be offered in light of
other needs. Mr. Lund would opt for the second alternative. The effectu-
ation of this would require him to investigate the potential exchange
value of land at Newport Center for all potential civic center users as
to what they can bear before determining what write -down inducements, if
any, could be offered the courts. There is a potential that the possibili-
ty of shared parking could reduce the need for the courts to have as-much
land in its ownership at Newport Center than what it wotYld require at the
County Fair Grounds. In addition, there is the possibility that non - monetary
benefits that can be quantified, such as the greater centrality, accessi-
bility, civic center environment and surrounding land uses could have a
greater meaning for the courts than the environment associated with the
Fair Grounds.
It would be desirable to establish on the basis of an income
approach to value what the potential market value of land is for various
private.uses at the proposed civic center. site. It is.quite possible that
,.
IV
0 0
To: Mayor Doreen Marshall
Page -2-
a real differential can exist between what the land owner believes is
possible and what the market would be willing or prepared to bear. This
could be important during negotiation. To the extent a suitable-recon-
ciliation cannot be reached the City may want to consider the potential
trade value of some of its Beacon Bay properties or the present civic
center site. It is possible an adjusted land value could be applied that
would make a land exchange between the City and The Irvine Company feasi-
ble. Such a reconciliation likewise could lead to land being offered the
courts that would be highly competitive with what Costa Mesa has tendered
($40,000).
It could well be that there are severe limits as to what kinds
of inducements the City of Newport_ Beach can make available to the courts
without crowding the potentiality of attracting other occupants to the
center. Under such circumstances the City would want to know what are
the practical limits of its bargaining power so that the offer that is
made to the courts is realistic and appropriate. If the courts should
be unwilling to accept the City's offer, the City would know that its
proffer was reasonable and not regrettable. It should also'be under-
stood that to the extent a major cultural facility were situated in the
civic center on donated land, the possibility of shared parking and mak-
ing a reasonable land price to the courts would be feasible. All of these
things need to be considered, in addition to others, in formulating a
practical development strategy.
Mr. Lund has advised he can commence this study on the 11th of
November. It will take at least two weeks for the strategy to be for-
mulated. He would be ready to assist the City in conducting negotiations
with the County of Orange relevant to the courts. Any negotiations with
The Irvine Company over the value of land would best be left to another
party. Mr. Lund's billing rate would be $340.00 per day. It is expected
that he would master -mind the strategy and direct the'work of lower
echelon professional staff to generate the data that would culminate in
a program that could be used by the City in launching its new civic center.
The billing rate for ERA professional staff that would assist Mr. Lund
would range from $100 to $150 per day. While it is uncertain as to the
exact amount of time that would be involved in pursuing negotiations, it
is reasonable to project the development strategy could be programmed
within three weeks. Thus the comprehensive program could be put together
at an estimated cost ranging from $4,000 to $5,000. The cost of conduct -
ing negotiations would best be handled on a per diem basis, depending on
their frequency.
I am sure that after Mr. Lund has met with members of the
Newport Beach City Council and administration he will want.to develop in
detail a more precise approach to the way he will work with the City in
achieving the objective. I trust what I have set forth here, however
will square with his approach, judging from our conversations.
0
TO: FINANCE DIRECTOR
FROM: City Clerk
SUBJECT: Contract No. 1201
.0
DATE December 4, 1966
Description of Contract Hake Necessary analysis & prepare infarmaticn
or a Diet*
mayor civic Center Complex
Authorized by RdQQDQ0DQPDRQ= ,A" on 13 32-68
Effective date of Contract Peembee 3, 1068
Contract with Eom- macs Research Associates
Address 615 South Flower ST. - Suite 500
im Antteles, Calif. 90017
Amount of Contract $5,000
City Clerk
ih
Att:
a- '
-' _ 4
�J
E.R.A.
ECONOMI..M.RESEARCH ASSOCIATES
615 South Flower Street, Suite 500
Los Angeles, California 90017
Mr. Harvey L. Hurlburt
City Manager
City of Newport Beach
3300 Newport Boulevard
Newport Beach, California 92660
Dear Mr. Hurlburt:
December 3, 1968
Proposal No. 6311 -R
As a result of recent meetings, Economics Research Associates
is pleased to submit this proposal. It is our understanding
that the City of Newport Beach wishes to obtain the new Harbor
Judicial District Courts building as part of a new civic center
complex proposed for development in the southeast corner of
Newport Center. The Newport Center site is one of three being
considered by the County for the new municipal court facilities.
The County has indicated that it will require approximately
10 acres for this new facility unless joint -use parking is
available on adjacent land. The City of Newport Beach wishes
to prepare as strong a case as possible to present to the
County Board of Supervisors in an effort to procure the new
court facilities as part of its own proposed civic center com-
plex.
E.R.A. has been requested to assist the City Council of Newport
Beach in formulating a strategy that will determine the most
appropriate method of attracting the municipal courts to the
proposed civic center site. In addition, E.R.A. will provide
assistance in preparation of tho City's presentation to the
County Board of Supervisors, as well as participation in the
negotiations with the County.
The study will direct its atteation to pointing out the benefits
that the City of Newport Beach and the Newport Center can offer
the new municipal court facilities. The areas to be covered in
the report will include, but will not necessarily be limited to,
the following:
:Y_. %Ym __r
L
PHASE I
-2-
1. Analysis of advantages to the County Municipal Court system
if the City of Newport Beach provides a holding area for
prisoners in close proximity to the court, and any monetary
savings that may be incurred.
2. Evaluate possible cost savings to the municipal courts if
they share a central heating system with the City of Newport
Beach.
3. Determine cost savings that might be incurred by developing
the municipal court facility and the Newport Beach Civic
Center complex simultaneously, and at one location. Dis-
cussion will be held with Welton Becket & Associates to
determine the possible cost savings.
4. Analyze parking requirements for the City and municipal
courts to determine the possibility of sharing automobile
parking areas. From this analysis it will be possible to
determine whether or not the 10 -acre parking requirement of
the County can be reduced, and if so, how much.
5. Analyze the economic implications to both the County and
the City for various combinations of site development
responsibility as might be borne by the City, the County
or the Irvine Company.
6. Determine the availability of commercial office space in
the Newport Center which could be used by attorneys and
other persons dealing with the court.. In addition, a
determination will be made of the availability of restaurants
and other commercial shopping facilities to serve employees
of the municipal court.
7. Analyze the site location in relation to existing and future
population centers in the Orange County Harbor Municipal
Court District and the ease of accessibility.
8. Itemize for the County the various financing alternatives
which might be available to it if the municipal court
facility is included in the Newport Beach Civic Center
complex. Discussion will be held with Stone & Youngberg
to obtain this information.
9. Development of other factors which can be used as positive s =-
arguments to the County Board of Supervisors for locating "`'`':;:;.•
the new municipal court facility in the Newport
complex.
I
,r 4
r
-3-
10. An economic analysis will be made of all trade -offs and
benefits to the County with dollar values being attached
where possible.. If it- appears that these benefits and
trade -offs in combination with the property value do not
represent an attractive package when compared to other
municipal court facility sites available, E.R.A. will then
outline for the City additional steps or concessions which
might conceivably put the City in a more competitive
position for inclusion of the municipal courts in the New-
port Beach Civic Center complex at the Newport Center.
11. An in -depth analysis and evaluation will be made of the
assets and liabilities to the City of Newport Beach by
virtue of inclusion of the municipal courts in the Newport
Center Civic Center complex.
PHASE II
1. Develop alternative plans for disposal of the present City
Hall site. Consideration will be given to selling the
property, leasing it on a long -term basis to a developer,
or possibly trading this site for another city -owned
property for the new civic center site in the Newport
Center complex. Other possible sites that might be traded
with the Irvine Company include the Beacon Bay property,
disposal site, and others.
2. Analyze in depth the implications of the various public
and semi - public facilities which have previously been
enumerated for inclusion in the Newport Center Civic Center
complex and develop the strategy and steps to be taken to
attract the various facilities which are determined to be
beneficial to the community.
Once Phase I has been completed, a memorandum report will be
prepared summarizing the study conclusions. During the course '
of this study, E.R.A. will work with the City of Newport Beach
to establish a strategy and negotiating policy with the County
Board of Supervisors. A rough draft of the summary report will
be submitted to the City for its review prior to final publica-
tion.
E.R.A. will work with the City of Newport Beach in its negotia-
tions with the County. E.R.A. does not propose to carry on
negotiations with the Irvine Company for acquisition of the
subject property. It should be mentioned, however, that the
memorandum report will point out the direct and indirect
In
:., _4-
benefits that the municipal co` acilitr will have on the -
over -all Newport Center complex.
Due to time limitat -ions of the cli° E.R.A. proposes to com-
plete Phase I in the sedonid °week ;o�cember. Phase II will be
completed within 30 days: sr After, and a memorandum report
will be submitted,with th �'II findings. The budget for
this study is $5 000. How "should it be .possible to
complete the ass1gament for than the indicated budget, the
City will only be charged for the amount actually spent in the
conduct of this study. William S:':hund, Executive Vice Presi-
dent of Economics Research AssoclAt".. will serve as Project
Manager, and Jay Pauly will ass isEa the research.
After completion of the report and presentation of the findings
to the City of Newport Beach and County Board.of Supervisors,
William S. Lund will be aq ble to consult and /or negotiate
with the City and County e>n>`,_. hourly basis, at the rate of
$42.50 per hour.
It is agreed that upon completion --of the herein described work
E.R.A. will provide the City of Newport Beach with an itemized
breakdown of the various items of expense for which the City
is being billed.
Acceptance of this proposal may be indicated by signing one
copy and returning it to Economics Research Associates.
ECONOMICS RESEARCH ASSOCIATES
Dated: Oof- -,a/ Heg
CITY ATTORNEY
r By:
WILLIam S. Lund/
- Executive Vice President
ACCEPTED BY:
CITY OF NEWPORT BEACH
By Q6i�,► \il,.Ul�t�1,
D_ ..
Resolution No. 6922
January 14, 1969
e_/2a/
The City Manager's office is hand - carrying copies of the resolution
and the proposal regarding the Judicial Courts to the Board of
Supervisors today. I have been informed by Elaine that copies will
also be given to three judges.
LL
4
u
N.I
V°01 o fio
ECONOMICS RESEARCH ASSOCIATES • 615 South Flower Street, Suite 500 • Los Angeles, California 90017
213 • 624 -8665
January 15, 1969
Hon. Doreen Marshall
Mayor's Office
3300 Newport Boulevard
Newport Beach, California 92660
Dear Mrs. Marshall:
In addition to evaluating the benefits that the Newport
Beach civic center site can offer the new Harbor Judicial District
courts, Economics Research Associates has examined advantages
and disadvantages to the city of Newport Beach in having the county
court building become part of its civic center. The results of this
analysis are presented below. All costs are estimated. in terms
of 1968 dollars.
Advantages to the City of Newport Beach
1. Substantial Police Department savings in manpower
and operational costs due to the close proximity of
the police facility to the court complex. Assuming
both that the future number of trips to the county
courthouse will increase in direct proportion to in-
creases in population and that the alternative site for
the courthouse is the Costa Mesa civic center, the
C! .f cL DR:
x
4 Newport Beach Police Department estimates that CO U CII
iCFI, N.
DI SITION:
u - Is2.
0 0
2
total savings of at least $2, 300, 000 will accumulate
to the city over a 50 -year building life. A savings of
about $25, 000 would initially be derived in 1971, in-
creasing to an estimated $39, 000 in 1980 and to
$48, 000 by 1985.
2. Annual savings of $1, 100 to the City Attorney's office
through a reduction in the loss of time and travel re-
quired for court appearances. Over a 50 -year building
life, a total savings of $55, 000 would accumulate.
3. Annual savings of about $600 to the Finance Department
due to the time saved in processing claims through the
small claims court. This indicates a total savings of
$30, 000 for 50 years.
4. As a result of shared landscaping, savings of $32, 700 in land-
scaping installation costs and $82, 800 in the land cost, The
county would provide 1 acre of landscaping for the county
courts complex, thus providing 1 acre of landscaping for the
civic center complex, the cost of which would otherwise have
to be borne by the city. In addition, annual landscaping main-
tenance costs of about $2, 900 would be eliminated. Over a
50 -year building life, a total savings of $145, 000 would
accumulate.
5. A closer personal relationship between municipal court
officials and members of the city staff, resulting in more
harmony and greater cooperation in law enforcement.
0 0
6. Convenience to local residents, the business community,
and the legal profession.
7. Enhancement of the Newport Beach image due to the
presence of the municipal courts and the County
Supervisor's office.
8. Creation of a more impressive civic center.
Disadvantages to the City of Newport Beach
1. Additional property removed from the tax roles.
Assuming occupancy of 4.686 acres by a $1.5 million
taxable structure and continuation of the current
city tax rate of $1.225 per $100 of assessed valua-
tion, an annual tax loss of $5, 780, or a total loss
of $289, 000 over a 50 -year building life, would accrue
to the city of Newport Beach. The remaining tax
loss resulting from the county, the school district,
and special district assessments would be incurred
whether the municipal courts were located in Newport
Beach or in Costa Mesa.
2. Increased maintenance and construction costs due to
additional detention cell area necessary for the city
police facility. Although, typically, a free- standing,
12 -court facility requires 5, 000 square feet of detention
cell area, this requirement can be reduced by half,
i •
4
or by 2, 500 square feet, because the new city police
facility will require additional detention cell
space only for those prisoners from areas in the
Harbor Judicial District outside Newport Beach.
Thus, Welton Becket estimates that the incremental
cost of 2, 500 square feet of additional cell area would.
be $25 per square foot, or a total of $62, 500. Annual
maintenance costs are estimated at $1, 600, or $80, 000
for a 50 -year building life.
3. Additional complexity in developing and managing the
civic center project.
Economic Comparison of Advantages and Disadvantages to the City
of Newport Beach
If the county courthouse is located in Newport Center, net
savings to the city of Newport Beach would total more than $2 million
over a 50 -year building life.
Savings over a 50 -year Building Life
Police Department
City Attorney's office
Finance department
Shared landscaping
Total
$ 2,300,000
55,000
30,000
260, 500
$ 2, 645, 500
• •
5
Increased Costs over a 50 -year Buildinv--Life
Tax loss $ 289,000
Detention cell construction 62,500
Detention cell maintenance 80.000
Total $ 431,500
Net savings $ 2,214,000
Respectfully submitted, G
William S. Lund.
Executive Vice President
WSL:fc
ECONOMICS RESEARCH ASSOCIATES 615 South Flower Street, Suite 500 Los Angeles, California 90017
213 • 624.8665
December 10, 1968
Hon. Doreen Marshall
Mayor's Office p
3300 Newport Boulevard
Newport Beach, California 92660(/ i)
Dear Mrs. Marshall: U
In addition to evaluating the benefits that the Newport Beach civic
center site can offer the new Harbor Judicial District courts, Economics
Research Associates has examined the advantages and disadvantages to
the city of Newport Beach in having the county court building become part
of its civic center. The results of this analysis are presented below.
Advantages to the City of Newport Beach
1.. Substantial Police Department savings in manpower and
I
i
operational costs due to the close proximity of the police
facility to the court complex. The Police Department
estimates that annual savings of $25, 000 will result;
N
11
r �
2
r over a 50 -year building life,total savings of $2, 300, 000
will accumulate.
2. Annual savings of $1, 100 in the City Attorney's office
through reduced lose in time and travel required for
court appearances.
3. Annual savings of about $600 in the Finance Department
due to the time saved in processing claims through the
j small claims court.
4. Due to shared landscaping, savings of $32, 500 for land-
scaping costs and $90, 000 for the land cost. The county
�I will provide one acre of landscaping for the county courts
-complex, thus providing one acre of landscaping for the
civic center complex which would otherwise be required.
3
5. Opportunity to use joint powers of authority method of
financing and begin construction of police facility
immediately. If the city finances the civic center
by general obligation bonds, a time delay of about six
months will occur, and the use of nonprofit corporation
bonds will delay the construction by at least nine months.
Due to inflation, construction costs could increase 3 to
4. 5 percent during this period; thus, a total saving in
development costs of $60, 000 to $90, 000 is possible.
6. A closer, personal relationship between municipal court
officials and members of the city staff, resulting in
more harmony and greater cooperation in law enforce-
ment.
• I
NJ
7. Convenience to the local residents, business community,
and legal profession.
8. Enhancement of the Newport Beach image by the presence
of the municipal courts and the County Supervisor's office.
9. Creation of a more impressive civic center.
Disadvantages to the City of Newport Beach
1. Additional complexity in developing and carrying on the
civic center project.
2. Additional property removed from the tax roles.
Assuming occupancy of 5. 8 acres by a $1. 5 million
taxable structure in 1971 and an annual increase in '
assessed valuation of 3. 0 percent, a tax loss of
$ , 250 is derived for 1971 if.the current tax rate of
$8.44per $100of assessed valuation is continued. It
5
i
is expected that the annual tax loss will increase
approximately 3. 0 percent per year.
3. Increased maintenance and construction cost due to
the increased detention cell area in the polich facility.
Welton Becket and Associates estimates that the
incremental cost of 2, 000 square feet of additional
detention cell space would amount to $50, 000.
4. Type of person who might be brought into the community.
Respectfully submitted,
William S. Lund
Executive Vice President
W SL: se
Memorandum Report
EVALUATION OF THE NEWPORT CENTER
FOR ORANGE COUNTY MUNICIPAL COURT FACILITIES
INTRODUCTION f /t3
Orange County is delineated in five judicial districts, one of which
is the Orange County Harbor Judicial District; this District includes the
cities of Costa Mesa and Newport Beach and certain unincorporated areas
of the county. The Harbor Municipal Court complex located in Costa Mesa
and consisting of three courts is functionally obsolete and physically
inadequate to meet the needs of district residents. Consequently, the
Orange County Board of Supervisors instructed the County Department of
Real Property Services to prepare a site selection study for relocation of
the municipal courts. The county requires that the site accommodate an
expansion of twelve courts; initially six courts would be constructed, and
four courts would be activated. The county projects a need for five courts
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/w
by 1975 and seven courts by 1980. They estimate that the peak parking
requirements will be 45 parking spaces per court room - -about 12 employee.
spaces and 33 public spaces.
After evaluating at least ten sites, the Board of Supervisors chose
rA
to consider three sites in further detail. Tkey -ewe expected to baselheir
final site decision primarily on the following factors:
1. Adequacy of site area
2. Site acquisition and construction costs
3. Access
4. Land use compatability
One of the three sites selected is the Newport Beach Civic Center,
proposed for development in the southeast corner of'Newport Center (see
figures 1 and 2), he city of Newport Beach would like to obtain the new
Harbor Judicial District courts as part of their comprehensive civic center
i •
complex. As a result, Economics Research Associates was retained to
i
2
conduct a study to determine the benefits that Newport Beach's civic
center site could offer the municipal court facilities. The conclusions of
this study are presented below.
iDVANTAGES OF NEWPORT CENTER SITE FOR THE
Opportunity to Become Part of a Totally Planned Civic Center
Construction on Phase I of the civic center master plan is expected
to be completed by 1972 and will include a 58, 000 - square -foot City Hall
and a 55, 000 - square -foot police facility. The construction of six municipal
courts would be included in Phase I. Phase II construction is expected to
be completed by 1980 and is tentatively scheduled to include a 58, 000- square-
foot city library, a post office distribution facility, and the six -court addition
to the municipal courthouse. A civic auditorium and an art gallery are also
proposed for the civic center developmentoo Ltwt Q
3
0Opportur ity to Coordinate Development of the Courts and Police Facilities
The courts and police facilities can be developed together from the
master planning stage through the completed construction This should
allow joint use of specialized police facilities and equipment. Discussion
with a representative of the Marshal's office leads to the conclusion that
detailed planning and close proximity of the police facility to the courts are
necessary for feasibility in joint use of detention cells and other police
equipment. Reduction of the Marshal's staff would not be possible, but
cost savings would accrue to the county by the elimination of the need for
courthouse detention cells.
Location in Relation to the Harbor District's Population Center
The District is forecast to have a population pf 139,000 persons in
1970, increasing to 274, 000 persons by 1980. According to the ADepartment
of Real Property ServicesPs�snatysis, the current population center is located
4
at the intersection of Irvine Avenue and Und Street. Population expansion
is projected to occur in the undeveloped eastern portion of the Harbor O
District; thus, the anticipated population center by 1980 is expected to be
at the intersection of the Corona Del Mar Freeway and Bonita Canyon
Road (see Figure 13): In addition, there is a possibility that the District
will expand to include that portion of the South Orange County Judicial
District extending to the city of Laguna. The Newport Center site will
be ideally located in relation to the projected population center of the
current Harbor District boundary or of an expanded District.
Lccessibility of the Site
IlThe municipal courts will have direct access to the proposed
Pacific'Coast and Corona Del Mar freeways, both scheduled for .completion
by 1975. Location at the intersection of these two freeways will offer
excellent accessibility to any portion of the Harbor Judicial District,
including any possible expansion of the District.
5
M
.
Opportunity to Partic
I*
)ate in a Joint Powers of Author
Orange County has four basic alternatives to follow for financing
of the new municipal court facility. These are: (1) joint powers of
authority bonds; (2) nonprofit corporation bonds; (3) general obligation
bonds; and (4) cash payment from the current capital budget or "pay as
you go." The joint powers of authority method of financing would allow
Orange County to begin development of the new courthouse facility
immediately after reaching agreement with the city of Newport Beach.
Thus, no delays would be incurred due to limitations in the current capital
budget or the wait for approval of voters for general obligation bonds.
Because of rapidly escalating construction costs, time delays in initiating•
construction of the municipal court facility could be of material importance.
For example, the city of Newport Beach's bond consultants, Stone and
Youngberg, estimate that a time delay of six months could be anticipated
J
for general obligation bonds and nine months for nonprofit corporation
bonds if any financing, method other than joint powers of authority is used.
Such a delay would have the effect of increasing the cost of construction
ra -
betwee 3. 0 and 4.5 percent„
Welton Becket and Associates and Rose and Fears have both
estimated the six -court facility will require approximately 48, 000 - square
feet of building area. Assuming the construction cost for this facility to
be $30 per square foot, the total capital investment innbuildings and
equipment would total approximately $1, 440, 000. These cost estimates
reflect current construction prices. Thus, by accelerating the development .
schedule of the court houses by six to nine months, the anticipated savings
would range betweeq $43, 200 and $64, 600.` \It becomes apparent.then that
a substantial cost saving can be realized by expediting construction of the
new court facilities.
6
0
Stone and Youngberg have also indicated that the interest rate for
4' 4
financing through joint powers of authority would be approximately one-
fourth point above that which could be obtained if general obligation bonds
of the county were issued. By way of contrast, if financing of the Municipal
Court is secured through nonprofit corporation bonds, the interest rate is
estimated to be approximately three - fourths of a point above that which
could be obtained through financing with general obligation bonds.
For illustrative purposes only. E.R.A. has attempted to show
what the resulting costs would be for amortizing the construction of the
courthouse facilities over 30 years using the three alternative method
of debt financing. For purposes of this analysis, it has been assumed
I
that the interest rate would be as follows: 4.25 percent for general
obligation bonds; 4.50 percent for joint powers of authority bonds; and
5.00 percent for nonprofit corporation bonds. It should be remembered
that these interest rates are for illustrative purposes only, and are not
11
intended to accurately forecast what the actual bond interest rate will be
when the bond goes to bid. The following tabulation illustrates the
anticipated construction costs, annual amortization payments, and total
amortization payments under the three debt financing alternatives.
General Joint Powers Nonprofit
Obligation. Authority Corporation
Bonds Bonds Bonds
Anticipated time delay
(months) 6 0 9
9
$1,440
4.50%
30
$87.7
$2,631
$ 85
281
$366
•6
$1,505
5.00%
30
$97.1
$2,912
$0
0
$0
Construction cost for
48, 000 - square -foot
municipal court (000) ...
$1, 483
Assumed bond interest
rate
4.25%
Maturity (years)
30
Annual amortization
payment (000)
$87.6
Total amortization
payments (000)
$2, 629
Anticipated saving over
nonprofit corporation
bonds from:
Construction (000)
$_ 43
Bond amortization (000)
283
Total
$326
9
$1,440
4.50%
30
$87.7
$2,631
$ 85
281
$366
•6
$1,505
5.00%
30
$97.1
$2,912
$0
0
$0
As noted above, the joint powers authority bonds will show a possible
saving of`$366, 000 over nonprofit corporation bonds and $40, 000 over general
obligation bonds.
A Site Requirement of Only 5.86 Acres l
The county will be able to fulfill the needs of the 12 -court facility
with 5.86 acres based on the following assumptions:
1. A six -court facility will require approximately 48, 000 square
feet of building area. This is based on information from the
county, Welton Becket and Associates, and Rose and Fears,
.'AJ2 architects for the Westminster Courthouse.
2. Municipal court employee parking space will require 23, 760 square
feet for a six-court facility (330 square feet per parking space ).
3. The city of Newport Beach will provide 190 public parking spaces
l�
\ for the courthouse needs. According to H. Hamill, library
k
I• 10
consultant to the city of Newport Beach, the proposed 58, 000-
square -foot Newport Beach library will require 250 parking
spaces. Approximately 75 percent of the demand occurs after
4:00 p.m.; therefore, almost 190 parking spaces will be
available for the courts. These parking facilities will serve
the needs of the six -court addition due for construction in Phase M
',. ep 7,
4. The county will A provide only one acre of landscaping. Welton
Becket and Associates estimates a free - standing courthouse
would require two acres of landscaping area. Because the courts
will be part of a total landscaped civic complex, one acre of%� --.
county landscaping will be sufficient.:-4 �� •�
Thus, the total building and parking area requirement for the
courthouse is 5.86 acres or 254, 600 square feet as shown below.
11
Y'7117 e,
x SYC
5111323
I
Building area
Parking area
Landscaping area
Total
Square Feet
96, 000
115,000
43,600
• 254,600 r
The appraised value of the Irvine property where the 12 -court
yo
municipal facility will be located is $90, 000 per improved acre, or
�$527,�00 for the total site cost. This appraisal was prepared by Cedric
White, M. A. I.
Development Cost Saving of $180, 000
The development cost savings are listed below:
1. The joint use of detention cells in the city police facility will
save the county approximately $60, 000 according to Welton
Becket and Associates. They estimate that at least 2, 000 square
feet of detention cell space would be necessary for a 12 -court
complex.
12
2. Welton Becket and Associates estimates that, due to the need
for only one construction superintendent, Orange County will
save approximately $25,000 in construction costs as a result
of the courthouse construction occuring concurrently with that
of the City Hall and police facility.
3. The joint use of civic center landscaping will eliminate about
37/g-1 D $32, 500 in landscaping costs ($0.75 per square foot of
landscaping).
r
4. The joint use of parking facilities will save the county $62, 5001
in paving costs ($1.00 per square foot of paving).
Summarizing the cost savings to the county if the Harbor district courts
are located at the Newport site, a development cost reduction of $180, 0001
is derived.
13
0
0
Concurrent construction of
courthouse, city hall, and
police facilities $ 25,000
Joint use of detention cells 60, 000
Joint use of landscaping 32,500 '3 71 8� o
Joinruse of parking 62, 5001
Total `$180,0 00,/ _r
HYPOTHETICAL ECONOMIC COMPARISON OF
NEWPORT SITE WITH ALTERNATIVE SITES
For a free- standing 12 -court municipal facility, the number of
a .�
acres required is 8, 24 or(358, 706 square feet as shown below:
•35gl 09 y
Building area
Parking area
Landscaping area
I, Total
Square Feet
96, o00
T
175,500
87,200 S 711 yd
358,700 .
i
If the development cost savings of;$180, 000 are deducted from the $kZ7. O00
site cost of the Newport site, the resulting figure of $347, 000 can be
compared with the site cost of alternative locations.with a free - standing
14
courthouse. As Figure 4 shows, the Newport site i economically
superior to any site with land value exceeding $42, 000 per improved acre.
If the alternative site costs $50, 000 per improved acre, the county will
save`$65,000 by selecting the Newport sites this saving increases to
$147, 000 if the alternative site costs $60, 000 per acre an $271, 000 if,,,
site costs are $75,000 per acre.
15
LAND PRICE PER
IMPROVED ACRE
(THOUSANDS OF DOLLARS)
SOURCE ECONOMICS RESEARCH ASSOCIATES
TOTAL SITE COST
Figure 4
ECONOMIC COMPARISON OF NEWPORT BEACH SITE
VERSUS ALTERNATIVE SITES
s.
.
� 7 .
Opportunity to Participate in Toint
Powers Financing
Orange County has four ba
of the new municipal court facility. These are: (1) bonds of a building
authority established under a joint powers agreement between Orange County
and the City of Newport Beach; (2) nonprofit corporation .bonds; (3) County
general obligation bonds; and (4) cash payment from the current capital
budget or "pay as you go" financing.
Joint powers financing offers a major advantage from a time stand-
point for it would allow the county to begin preparation of detailed plans
and specifications, call for construction bids, and start construction imme-
diately after reaching agreement with the City of Newport Beach. Thus, no
.. delays would be incurred due to: (1) limitations in the current capital budget;
(2) waiting for approval for issuance of nonprofit corporation bonds by state
and Federal agencies; or (3) waiting for approval by two- thirds of those voting
at a countywide election to authorize issuance of general obligation bonds.
Because of rapidly escalating construction costs, time delays in
Initiating construction of the municipal court facility could be of material
importance. For example, if general obligation bond financing were to be
utilized, a countywide election could not be held sooner than two months
after notification of the proposed election had been filed with the County
Clerk. Realistically, a campaign of the magnitude required to convincingly
demonstrate to county voters the need for additional courts in the Harbor
Judicial. District would probably require much more than two months for
..� L ^:�..� ..:��a;.y` >. .. }.. r.�y7. ;.t.' �•.t fir;: y.. •.t.: °�tt. ::. .:....:N.'. "/.}i�.�,•�'
preparation and campaigning. In addiiion; the cost of such a "campaign woula•
- -be extremely expensive.
Financing a project through issuance of nonprofit corporation bonds is
similar in many respects to financing with authority bonds. However, some
inherent differences in the two financing methods make utilization of joint
authority financing much more desirable, especially from a time standpoint.
As illustrated below, prior to issuance of nonprofit corporation bonds approval
must be obtained from the Internal Revenue Service, the Securities and Exchange
Commission, and the California Corporation Commission. Projects have been
delayed as long as six months because of the time required to process appli-
cations for approval of nonprofit corporation bonds through these agencies. A
comparison of the steps required to carry out financing in each of the two
methods is shown in the following table.
COMPARISON OF FINANCING PROCEDURES
Financing by
Nonprofit Corporation Bonds
1. Form nonprofit corporation.
2. Appoint members to corporation board.
3. Obtain exemption from franchise tax.
4. Execute lease and lease -back.
S. Obtain Internal Revenue Service ruling
on tax -free status of interest on bonds.
6. Obtain "no- action" letter from Securi-
ties and Exchange Commission.
7. Obtain California Corporation Commis-
sion permit.
- 7 -
Financing by
Toint Authority Bonds
1. Enter into Joint Exercise of
Powers Agreement.
2. Appoint members to authority.
3. Execute lease.
4. Execute bond indenture.
S. Sell bonds at public sale.
I
``:; �:r•►�Sti'Ii?i`r..�+:,: �i e.: '•i "� ... li'.,..,`y;r y:: e�l,�)f.��.�.'.� -, �Y7:�'lN�• '•,��/fw,�,,,,.y. „•Z,f•` ..
D r' Exeoute o6d1n entdre ' a
9. Sell bonds at public sale.
Welton Becket and Associates and Rose and Fears have both esti-
mated the six -court facility will require approximately 48, 000 square feet
of building area. Assuming the construction cost for this facility to be
$30 per square foot, the total capital investment in buildings and equipment
would total approximately $1,440,000. These cost estimates reflect current
construction prices. Thus, by accelerating the development schedule of
the court houses by three to six months, the anticipated savings would
range between $21,600 and $43,200. It becomes apparent then that a sub-
stantial cost saving can be realized by expediting construction of the new
court facilities.
Assuming general obligation bond financing were utilized, a bond
Issue of approximately $1,500,000 would probably be sufficient to meet
construction and related costs ($1,440,000) plus contingencies ($60,000).
Authority financing or nonprofit corporation financing would require a larger
bond issue because a bond reserve fund would be necessary, interest
accruing during construction would have to be funded, and additional in-
cidental costs would be required (including higher legal and financing fees,
printing of additional' legal documents, a title insurance with leasehold
endorsement policy fee, trustee fees, and premiums on earthquake and other
required insurance.) A $1,500,000 general obligation bond project would
require a bond issue of approximately $1,720,000 if authority bonds were
- 8 -
v
i \\ Cr a•.w ..,, ..ter .1. r.a•w� •Ci �4'. r'!•.1•;'.t'. \. a:..l�'.�j \.,, y'•`�.w • - {�;f••�`"•
\ai'•Y�3•i.,...i `,,774 4.,. a- «:✓a�•7•'.�:.. C= +.`T "'�i'�•.'.v. .\. ". ��� ��STi• T'Nf•:'a �'••'(�1
`soY 'arll atissue of approximately''$1' 79tl;Y000'if'nohjlrtifft 6brpora lop bons':• : , x,
were sold, illustrated below:
Non- Profit
Authority Bonds Corporation Bonds
Construction and
related costs . . . . .$1,500,000 $1;500,000
Increase of construction
costs because of six
months' delay . . . . - 43,200
Bond reserve . . . . . . . 115,000 126,500
Funded interest . . . . . . 77,400 $9,500
Legal, financing, and
incidentals. . . . . . . 27,600 30,800
BOND ISSUE REQUIRED: $1,720,000 $1,790,000
The firm of Stone & Youngberg, financing consultants to the city, has
indicated that the interest rate on bonds of a building authority secured by a
lease with the county would be approximately one - fourth of one percent higher
than the interest rate which the county could expect to receive on comparable
general obligation bonds. By way of contrast, if financing of the municipal
court were undertaken through issuance of bonds of a nonprofit corporation,
the interest rate would most certainly be higher than on comparable authority
bonds -- possibly by as much as an additional one -half of one percent.
For illustrative purposes only, E.R.A. has attempted to show what
the resulting costs would be for amortizing the construction of the courthouse
facilities over thirty years using authority financing and nonprofit corporation
financing., (There appears to be no question that general obligation bonds
-9
C
1
...�j :� :.r:1'rti�.• _ .. �' >�'i 'Y.r -•' .: +• 't:v'.y :.I i' {. . +.:a•4'is'a.:�w 't
would e the least e:kpensive financing methoi), even taking into aonsiiiera=
= —tion the cost of a bond election (assuming the bonds were approved) and a
possible six months' delay.) For purposes of the following analysis, it
has been assumed that the interest rates would be 4 -1/2 percent for authority
bonds, and 5 percent for nonprofit corporation. bonds. It should be remembered-
that these interest rates ate for illustrative purposes only, and are not in-
tended to accurately forecast what the actual bond interest rates will be when
the bonds go to bid.
- 10 -
Nonprofit
Authority
Corporation
Bonds
Bonds
Anticipated time delay (months) . . . .
0 .•
6
Basic construction cost for 48,000 square
foot municipal court (000) . . . . . .
$1,440
$1,483
Assumed bond interest-rate . . . . . ..
4 -1/2%
5%
Maturity (years) . . . . . . . . . . .
30
30
Annual amortization payment (000)
• $105.6
$116.4
Total amortization payments (000) , ... . '
$3,1.68.
$3,492•
Anticipated saving over nonprofit
corporation bonds from: .
Construction (000) . . . . . . .
$ .43,
$ 0
Bond amortization (000) . . . . . .
324
0
Total. . . . . . . ... . . .
$ 367
$ 0
As noted above, the joint powers authority bonds will show a pos-
sible saving of $367,000 over nonprofit corporation bonds.
- 10 -
November 5, 1968
TO: MAYOR DORREN MARSHALL
FROM: Thomas J. Ashley, Economics Research Associates
SUBJECT: GENERAL CONSULTING RELEVANT TO THE FORMULATION OF 'CIVIC
CENTER DEVELOPMENT STRATEGY
In response to your request, I recommend -that William S. Lund,
Executive Vice President of Economics Research Associates, be retained
to assist the City Council of Newport Beach in formulating a strategy
that will determine the most appropriate method.-of attracting the munici-
pal courts to the potential civic center site.at.Newport Center. Mr.
Lund is a very experienced economist with extensive knowledge of growth
forces, land values, market support and fi'nancing.conditions bearing
upon Orange County. He did the original Orange'..Caunty Economic Growth
Analysis, 1940 -1980, for the Orange County.Board_of.Supervisors while
associated with Stanford Research Institute. - .He_has performed economic
planning studies for Disneyland in Anaheim,-.The..Irvine Ranch, the City
of Anaheim, the City of Orange, the City of-Westminster, the Balboa Bay
Club, the Chevron Land Company in La-Habra,.Howard..Lawson in Town &
Country, Orange and "The City" in Orange. in-addition to his familiarity
with Orange County, he has served as a consultant to.MCA, Metromedia,
Walt Disney Productions, Great Lakes Properties, the.Aga Khan, the Ford
Motor Company, The Irvine .Company and the'Janss`- Corpo'iation. He is also
a Director of California Federal Savings and Loan Association.
My discussions with Mr. Lund indicate that there are two al-
ternative approaches the City could take in achieving its objective of
attracting the courts to the proposed civic center. The strategy could
be one which looks at the courts independently of other potential civic
center occupants, and attempts to determine what kinds of inducements
could be offered irrespective of the requirements of other occupants. Al-
ternatively, the strategy formulated would consider the courts as being'
merely a part of the whole which would lead to a more intelligent evalua-
tion of what kinds of inducements could or should be offered in light of
other needs. Mr. Lund would opt for the second alternative. The effectu-
ation of this would require him to investigate the potential exchange
value of land at Newport Center for all potential civic center users as
to what they can bear before determining what write -down inducements, if
any, could be offered the courts. There is a potential that the possibili-
ty of shared parking could reduce the need for the courts to have as-much
land in its ownership at Newport Center than what it would require at the
County Fair Grounds. In addition, there is the possibility that non - monetary
benefits that can be quantified, such as the greater centrality, accessi-
bility, civic center environment and surrounding land uses could have a
greater meaning for the courts than the environment associated with the
Fair Grounds.
It would be desirable to establish on the basis of an income
approach to value what the potential market value of land is for various
private uses at the proposed civic center site. It is quite possible that
0 0
To: Mayor Doreen Marshall
Page -2-
a real differential can exist between what the land owner believes is
possible and what the market would be willing or prepared to bear. This
could be important during negotiation. To the extent a suitable recon-
ciliation cannot be reached the City may want to consider the potential
trade value of some of its Beacon Bay properties or the present civic
center site. It is possible an adjusted land value could be applied that
would make a land exchange between the City and The Irvine Company feasi-
ble. Such a reconciliation likewise could lead to land being offered the
courts that would be highly competitive with what Costa Mesa has tendered
($40,000).
It could well be that there are severe limits as to what kinds
of inducements the City of Newport_ Beach can make available to the courts
without crowding the potentiality of attracting other occupants to the
center. Under such circumstances the City would want to know what are
the practical limits of its bargaining power so that the offer that is
made to the courts is realistic and appropriate. If the courts should
be unwilling to accept the City's offer, the City would know that its
proffer was reasonable and not regrettable. It should also be under-
stood that to the extent a major cultural facility were situated.in the
civic center on donated land, the possibility of shared parking and mak-
ing a reasonable land price to the courts would be feasible. All of these
things need to be considered, in addition to others, in formulating a
practical development strategy.
Mr. Lund has advised he can commence this study on the 11th of
November. It will take at least two weeks for the strategy to be for-
mulated. He would be ready to assist the City in conducting negotiations
with the County of Orange relevant to the courts. Any negotiations with
The Irvine Company over the value of land would best be left to another
party. Mr. Lund's billing rate would be $340.00 per day. It is expected
that he would master -mind the strategy and direct the work of lower
echelon professional staff to generate the data that would culminate in
a program that could be used by the City in launching its new civic center.
The billing rate for ERA professional staff that would assist Mr. Lund
would range from $100 to $150 per day. While it is uncertain as to the
exact amount of time that would be involved in pursuing negotiations, it
is reasonable to project the development strategy could be programmed
within three weeks. Thus the comprehensive program could be put together
at an estimated cost ranging from $4,000 to $5,000. The cost of conduct-
ing negotiations would best be handled on a per diem basis, depending on
their frequency.
I am sure that after Mr. Lund has met with members of the
Newport Beach City Council and administration he will want to develop in
detail a more precise approach to the way he will work with the City in
achieving the objective. I trust what I have set forth here, however
will square with his approach, judging from our conversations.