SCCCRS_FINAL_2024-01-17

SANTA CLARA CIVIC CENTER RELOCATION STUDY

CITY OF SANTA CLARA | DRAFT | DECEMBER 2023

SANTA CLARA CIVIC CENTER

RELOCATION STUDY

ACKNOWLEDGMENTS

City of Santa Clara

Lesley Xavier, Planning Manager

Andrew Crabtree, Director, Community Development

Reena Brilliot, Assistant Director Community Development

Manuel Pineda, Assistant City Manager

Downtown Community Task Force

Butch Coyne

Rob Mayer

Dan Ondrasek

Matthew Reed

Chan Thai

Adam Thompson

Ana Vargas-Smith

Atisha Varshney

Debra von Huene

Consultant Team

WRT / Team Leader, Urban Design & Planning

Siegel & Strain Architects / Programming & Architecture

PFAL / Project Finance & Project Delivery

EPS / Economic Impact Analysis

TBD Consulting / Construction

Cost Estimating

CSW|ST2 / Civil Engineering

Runde & Partners / Land Value

Estimating

01. INTRODUCTION | 7

PURPOSES

Policy Implementation

Informed Decision Making

Downtown Precise Plan Demonstration

Financial Analysis and Feasibility

PLANNING PROCESS

02. PROGRAM ASSUMPTIONS | 13

OVERVIEW

EXISTING USES

APPROACH AND RATIONALE

03. CASE STUDIES | 23

CONSIDERATIONS

INDIVIDUAL CASE STUDIES

Long Beach CA

Malden MA

Mountain View CA

Redwood City CA

Sandusky OH

Sonoma County CA

Watsonville CA

Winter Garden FL

04.

SITE LOCATION EVALUATION | 49

ALTERNATIVE SITE LOCATIONS

SITE EVALUATION CRITERIA

EVALUATION OF ALTERNATIVE LOCATIONS

Blocks A&B

Blocks C&E

Blocks D&F

Blocks G&H

Hybrid: Block D with Commerce Building

COMPARISON OF SITE ALTERNATIVES

05. DESIGN & DELIVERY OPTIONS |

67

SHARED ASSUMPTIONS FOR ALL OPTIONS

OPTION 1 - LAND SALE OR LAND LEASE

OPTION 2 – BLENDED PARTNERSHIP

OPTION 3 – CONSOLIDATED CIVIC CENTER

PREFERRED BLOCK D CONCEPT

06. POTENTIAL

REUSE OF EXISTING CIVIC CENTER

| 91

CONSIDERATION AND ASSUMPTIONS

INITIAL CONCEPTS

PREFERRED CONCEPT

FINANCIAL APPRAISAL

07. ECONOMIC & FINANCIAL ANALYSIS | 99

ECONOMIC IMPACTS ON DOWNTOWN

FINANCIAL ANALYSIS

Financial Programs and Tools

Project Delivery Models and Financing Alternatives

Stay-or-Relocate Scenarios

Financial Evaluation of Preferred Concept Comparative Analysis of Stay versus Relocate Scenarios

08. RECOMMENDATIONS | 127

RELOCATION MERITS FURTHER CONSIDERATION

INTRODUCTION

INTRODUCTION

PURPOSES

POLICY IMPLEMENTATION

The Santa Clara Civic Center Relocation Study describes options, considerations, benefits, and costs associated with relocating City Hall facilities and potentially Silicon Valley Power facilities from their current locations to Santa Clara’s emerging Downtown within the framework established by the Draft Downtown Precise Plan1.

This Study implements Santa Clara’s General Plan Policy

5.4.2‐P2, to “[c]onsider relocating existing City offices to the Downtown Focus Area, and establishing a Civic Center with high density residential uses,” and if relocation was to occur to “[r] eplace existing City offices with senior and affordable housing.”

Policy 5.1A of the Draft Downtown

Precise Plan acknowledges the possibility of a relocated Civic Center in the Downtown Area, as it promotes Downtown as a highintensity mixed-use residential and employment district with a mix of office, public, and commercial amenities.

During development of the Precise Plan, Downtown Community Task Force (DCTF) members and other community stakeholders asked that the City undertake the Relocation Study. Proponents of the Study recognized that a new Civic Center could play a catalytic role in transforming the Downtown Area with a project that the City could initiate, but that more information was needed to understand how the Civic Center might fit, what benefits it might bring, what financing options might be suitable and what the cost to the City might be.

INFORMED DECISION MAKING

The Study offers a comprehensive understanding of what would be involved to relocate the Civic Center to the Downtown, through consideration of the following:

B. Program Assumptions – a reasonable estimate of what a new Civic Center would contain and to inform design and planning scenarios;

C. Case Studies - examples of new civic centers in other communities, the planning and financing that brought them about, and what impacts they’ve had;

D. Alternative Site Locations –description of the urban design potential and implementation challenges associated with different Downtown locations for a new Civic Center, along with their relative merits;

E. Design and Delivery

Options – examination of three different program, design, and project delivery options on a site preferred by the Downtown Community Task Force (DCTF);

F. Potential Reuse of Existing Civic Center – description of different development scenarios if the existing Civic Center were to be reused, and identification of a preferred program and design;

G. Economic and Financial Analysis – a realistic assessment of economic benefits followed by a financial analysis describing funding options, costs and benefits associated with a preferred concept; and

H. Recommendations –needed actions and next steps based on the Relocation Study’s design scenarios, potential economic impacts, and financial analysis.

DOWNTOWN PRECISE PLAN DEMONSTRATION

The Civic Center Relocation Study can also serve the purpose of demonstrating the objectives of the Downtown Precise Plan. Design studies illustrate how a relocated Civic Center could conform to and help implement Downtown Precise Plan policies and Downtown Form-Based Code related to:

Land Use Mix and Activation - in different locations, a new Civic Center should increase and diversify activity in Downtown; Placemaking - the Civic Center should bring about a sense of place along street edges and public spaces;

Building Height and Form – the massing of buildings illustrated meet building height, setback, stepback, and ground-floor frontage standards;

Economic Vitality – Civic Center employees and visitors would bring economic activity to Downtown, and analysis is provided to compare such activity to other employment uses, were they to occur.

FINANCIAL ANALYSIS AND FEASIBILITY

A principal purpose of the Relocation Study is to estimate the net additional cost to the City if the Civic Center were to move.

The Study presents a financial analysis that factors costs and revenues associated with a new Civic Center, and estimated costs and revenues associated with reuse of the Existing Civic Center, were it to occur. To make a fair comparison, the analysis describes the various considerations necessary for informed decision-making, and calculates an order-of-magnitude “bottom line” based on explicit assumptions.

General Plan Policy 5.4.2‐P2: [C]onsider relocating existing City offices to the Downtown Focus Area, and establishing a Civic Center with high density residential uses,” and if relocation was to occur to “[r]eplace existing City offices with senior and affordable housing.

PLANNING PROCESS

In 2022, the City of Santa Clara retained a team led by WRT (Wallace Roberts & Todd) to conduct a Relocation Study for the Civic Center. WRT’s team included consultant expertise in key disciplines, such as public sector finance, economic development, construction cost estimating, real estate

appraisals, civic center programming, architecture, and urban design.

The DCTF met five times during the process and guided decisions at key milestones.

City staff provided technical guidance, such as to provide critical information, and

represented the City’s legal and fiscal interests throughout the process.

PROGRAM ASSUMPTIONS 02.

PROGRAM ASSUMPTIONS

OVERVIEW

The program for this Civic Center study was based on the 2019 study by Smith Group for the City of Santa Clara. Prior to 2019 the City determined that the current City Hall and the leased Silicon Valley Power (SVP) facilities had inadequate floor area to accommodate fulltime employees (FTE) and space needs projections for 2040. The Smith Group study assumed that facilities would be built on the existing Civic Center site, whereas this Study examines a potential relocation Downtown.

Note that the term “Civic Center” is used as an umbrella term that may or may not include the SVP program. The term “City Hall” is used to distinguish municipal government program elements from SVP program elements, and “Utilities Building” is used to describe a potential new SVP

facility that could also include utilities-related departments that would otherwise be housed in City Hall.

EXISTING USES

CITY HALL OVERVIEW

The existing Santa Clara Civic Center is one block north of El Camino Real, between Civic Center Drive, Lincoln Street and Warburton Street. The existing Civic Center site is divided into three segments: the north block accommodates the Triton Museum, the Santa Clara Players, and two historic homes. The southern block of 1.9 acres is made up of the Civic Center Park. The middle block of 10.2 acres houses the current City Hall and is the focus of this study as a redevelopment project were the Civic Center to move to a downtown location.

The Civic Center site currently consists of four main buildings: City Hall, combined Engineering and Fire Department facilities, Information Technology services, and a building now used for storage. The City Hall has the largest footprint and has a floor area of about 106,500 square feet (sf). The City Hall has east and west wings of approximately 28,700 sf and 41,100 sf respectively. These house the Council Chambers, Mayor’s Office, City Manager’s Office, City Attorney’s Office, Finance Department, Park and Recreation Department, Public Works Department, Water and Sewer Department, among other departments.

SVP OVERVIEW

Silicon Valley Power (SVP) is a City-owned utility agency with leased offices at the intersection of Martin Avenue and Lafayette Street. The Utilities Building considered in some of the options studied in this report assumes that SVP and utility-focused Water & Sewer Departments would be combined in a single building for operational efficiencies.

|

APPROACH AND RATIONALE

SMITH GROUP STUDY

The 2019 Smith Group study was based on projected City needs in 2040, along with spatial reorganization and modernization reflecting best practices. The study estimated a 20% growth from the 2020 baseline along with the addition of grossing and circulation factors. The project was informed by a survey to gather feedback from the different departments on their spatial needs and elements affecting productivity and workflow.

The City directed the Relocation Study consultant team to use the Smith Group program as the baseline for this study. The new City Hall program of 155,000 sf is approximately 38,000 sf larger than the existing City Hall. This represents a 32.5% increase from the currently

available area of the Civic Center footprint. The proposed Utilities Building program is 90,000 sf as compared to the existing 59,000 sf area. This Study adds an additional 5,000 sf of ground-floor commercial amenity to each building’s assumed floor area to activate street edges. Summaries of projected development program are described in Tables 1 and 2.

The team further refined program assumptions by addressing the extent to which each use requires public access and by considering adjacencies between uses for operational efficiencies. At City Hall, Council Chambers, meeting spaces, and a public counter associated with Public Works and Fire Departments would require direct public access from the entry lobby. The City Clerk, Finance and Human Resources Departments would also need an accessible counter space,

though they are less frequented by members of the public, as described in Figure 6. Other departments do not need public access and could be in locations without direct public access in City Hall.

Program refinements also considered Staff shared spaces, such as for small meetings, breakrooms, and work stations for temporary day use. Circulation and grossing factors were distributed between the departments, common and amenity spaces for purposes of this discussion and analysis work.

The Utilities Building would be split into two primary divisions – SVP and Water & Sewer Departments. The Utilities Building would also include shared meeting and huddle spaces, a cafeteria, and a fitness center for staff use, as seen in Figure 7 – Utilities Building Adjacencies. Smith Group

assumed that these shared amenities would serve all City staff, but located them in the Utilities Building out of funding considerations. As is discussed in Chapter 5: Design & Delivery Options, the City Hall need not be accompanied by the Utilities Building because an independent SVP, such as in leased space, is acceptable.

6 | PROGRAM ADJACENCIES - CITY HALL

CASE STUDIES 03.

CONSIDERATIONS

Eight civic center case studies were developed to illustrate how other communities created new civic centers, what the new civic centers contain, and, how they contribute to nearby design character, social function and economic activity. To match characteristics under consideration as part of this Study, the case studies were selected by considering the following factors:

▶ availability of information;

▶ public use only or mix of uses;

▶ use of public-private partnership;

▶ part of a downtown revitalization plan; and

▶ whether other development occurred around the time of the civic center’s completion.

In consultation with City staff, the consultant team selected an initial set of six case studies from a list of twenty candidates:

▶ Long Beach, CA

▶ Malden, MA

▶ Mountain View, CA

▶ Redwood City, CA

▶ Sonoma County Government Center CA, Santa Rosa, CA, and

▶ Watsonville, CA

The DCTF requested two additional case studies because they appeared to be particularly relevant to downtown Santa Clara:

▶ Sandusky, OH

▶ Winter Garden, FL

INDIVIDUAL CASE STUDIES

Each case study is accompanied by a summary of:

▶ context – the physical setting as well as issues that contributed to the creation of a new civic center;

▶ program and design – a description of the project and design issues addressed;

▶ economic impacts – a brief description of development and employment near each project; and

▶ project delivery and financing – an overview of how the project was funded and implemented.

“Key take-aways” are summarized following individual case studies.

Mountain View

Redwood City

Sandusky

Winter Garden

TABLE 3 | CHARACTERISTICS OF SELECTED CASE STUDIES

SANDUSKY | OH

PROJECT WITH CITY HALL & MIXED-USE COMPONENTS

|

Hall Site | One-Half Acre

Total Project Floor Area –68,000 square feet

City Hall - 20,000 square feet

Public Market and Wine Bar Residential Lofts above Ground-Floor Retail

Financing | Design-BuildFinance-Operate-Maintain

CONTEXT

Twenty years ago, downtown Sandusky was vacant. Like many older cities in the Midwest, Sandusky benefited from industrialization during the 20th century, but experienced economic decline as the manufacturing sector waned and urban sprawl pulled local commercial activity from Sandusky’s core.

Revitalization of Sandusky’s downtown began as urban destinations, like upscale restaurants and a boutique hotel, reoccupied downtown’s historic fabric and attracted people downtown. In addition, the City promoted the downtown as a premier location within the region by hosting events and adopting a plan for downtown’s transformation from which grew the idea of a new city hall downtown. The City had outgrown its former city hall, and a relocated city hall was a deliberate move to build momentum downtown.

PROGRAM AND DESIGN

The 68,000-square-foot project that was completed in 2019 includes adaptive re-use of historic buildings, which combines 20,000 square feet of government functions with “a ground-floor public market & wine bar that offers a new downtown destination, as well as residential lofts over commercial storefronts.

The project occupies a small site along the city’s main street, Columbus Avenue, that has a theater and ends at Lake Eire. Across the street from the civic center site lies a park, a new library, and a County-owned public parking garage that serves the project. Recent development has succeeded in maintaining the human scale and historic character of downtown. Several new mixed-use buildings combine ground-floor retail with residential and office space in the vicinity, including a mixeduse building by Bowling Green State University that includes classroom space.

Government officials who were interviewed as part of this case study describe the city hall project to have made a significant contribution to – and be a visible symbol of – revitalization in Sandusky’s downtown. The officials believe that the city hall is an important anchor for the downtown that brings people who come for meetings and then stay to enjoy restaurants and other amenities. Planned streetscape improvements are expected to further strengthen downtown as a regional destination.

FINANCING

Sandusky’s city hall was created in tandem with mixeduse development, using a public-private partnership project delivery model, in which the City selected a developer that was responsible for delivering a build-to-suit project in which the City specified the design of the government facility, and the City agreed to lease those

facilities from the developer with an option to buy after tax credits used to finance the project had expired.

Funding for the project totaled $9.8 million which included:

▶ $5 million in private financing to Vintage Development, the project developer and owner of the properties;

▶ $1.8 million in lease payments from Sandusky’s annual budget. over 7 years, funded in part by shifting expiring debt budgeted for other City buildings; and

▶ $3 million in Ohio and federal New Markets & Historical Preservation tax credits.

The city hall opened in 2019 and rent is reported to be $250,000 per year. The City is considering additional improvements that would be funded using tax increment financing.

WINTER GARDEN | FL

MIXED-USE DEVELOPMENT

AT A GLANCE

Population | 47,000

City Hall Site | 4 Acres

Program

City Hall (44,000 square feet including)

Lobby used for Art Exhibitions

Surface Parking Lot

Financing | Design-Build

CONTEXT

Winter Garden grew initially as an agricultural center surrounded by citrus orchards. Its downtown was the commercial hub for the region, with retail, packing houses, and rail service. In the 1970s, the citrus economy was in decline, which spurred a loss of economic activity downtown, and in the 1980s, the City began to plan for its revitalization.

Plant Street is Winter Garden’s main street, and early revitalization efforts created a linear open space down Plant Street’s center, which broadens into a plaza near the historic commercial core, along with other major streetscape investments. The City also provided incentives for development, such as the Plant Street Market, by waiving development fees and by providing public parking. According to city officials, there has been enormous developer interest in downtown Winter Garden as “success builds on itself.”

PROGRAM AND DESIGN

The creation of a new city hall began to be considered as the community began to outgrow a city hall built in the 1960s. The City chose to relocate its city hall to a location that would help anchor the west end of commercial and cultural activity along Plant Street.

Winter Garden’s new city hall opened in 2008 and, a few years later, a City-solicited mixed-use project (office over retail) was built on an adjacent block that was owned by the City. The new 44,000 square foot city hall contains meeting chambers, administrative offices, and a lobby featuring art exhibitions. The building has a historic look that was based on the original city hall. The surface parking lot that serves the city hall is located behind the building.

PROJECT DELIVERY AND FINANCING

Winter Garden’s new city hall Hall was delivered using

a design-build procurement strategy. Voters approved a new half-cent sales tax in August 2006, and the reported $10 million project construction cost was financed with a tax exempt bond issuance three months later in October 2006. The 30-year bonds are sales tax revenue bonds that have an underlying rating of A+ and an insured rating of AAA.

MALDEN | MA

Population | 66,000

Project Site | 2 Acres

Program

Cit y Hall (1 acre, 49,000 sf)

Mixed Use Site (1 acre)

Ground-Floor Retail (26,000 sf)

Apartments (320 dwelling units)

Parking Garage (276 spaces)

New Street Connection

Financing | Design-BuildFinance-Operate-Maintain

CONTEXT

Malden’s previous city hall was built on the same site in the 1970s. The previous city hall had significant deferred maintenance, and it obstructed traffic flow between Malden Square and rail station. In addition, the previous city hall blocked Pleasant Street, which now provides a direct connection between parts of downtown to Malden’s regional transit center. Temporary city hall space was leased while construction occurred on the site.

The demolition of the previous city hall made significant land area for development with public and private uses at significant urban intensity in a transitoriented location. The new city hall project also consolidated city office locations that had been leased. The project also implemented downtown revitalization goals with a project that could serve as an economic catalyst attracting urban activity and investment. The project site is

uniquely situated at a gateway from regional transit towards downtown, and its urban design potential was further revealed when urban design students at Harvard used the site for a design studio exercise.

PROGRAM AND DESIGN

The new city hall opened in 2020. The project is comprised of two sites that straddle Pleasant Street, which has become a pedestrian-oriented “main street” as other buildings with ground-floor storefronts have been built incrementally. Notably, the new city hall restored an important street connection along Pleasant Street between other parts of downtown and Malden’s regional transit center. The Pleasant Street connection was lost when the previous city hall was built across the street right-of-way in the 1970s.

On one side of Pleasant Street stands the new 6-story city hall with high-ceiling lobby, retail, and community meeting space. Across the street, a 6-story

mixed-use apartment building has ground-floor commercial. A parking garage is located behind the mixed-use building, and a bridge over Pleasant Street connects the garage and city hall directly.

ECONOMIC IMPACTS

City officials reported that the project served as a major catalyst toward infill development and retail activity. The project helped downtown Malden location within a robust real estate market influenced by proximity to Cambridge MA. An agglomeration of jobs and industries has occurred within the subregion, with an emphasis on research, life sciences, health care, and other industries.

PROJECT DELIVERY AND FINANCING

As part of a public-private partnership, the city sold its land to a developer, and obtained ownership of the city hall portion of the project, as a kind

of condominium. Most of land purchased was developed as a privately-owned apartment project, which was reflected in the project’s financing. The city sold buildings and land (2.2 acres) to Jefferson Apartment Group for $9.8 million.

The $36 million capital cost associated with the city hall was covered by the land sale ($10 million), grant funding from the Commonwealth of Massachusetts ($10 million), and issuance of bonds ($16 million). The entire project is governed by a condominium association board comprised of the developer, the City, and the bank that helped finance the project.

The project employed a design-build-finance-operatemaintain (DBFOM) form of public-private partnership.

A developer agreement stipulated city hall program and design requirements. A condominium association oversees on-going operations and maintenance, toward which the City contributes.

REDWOOD CITY | CA

Hall Site | 3 Acres

City Hall (45,000 sf) Public Plaza

Financing | Design-Bid-Build

CONTEXT

Redwood City’s city hall site stands near the east edge of downtown, with proximity and walkable connections to urban amenities, businesses, housing, regional transit, and government offices for San Mateo County. Redwood City’s downtown has seen significant new growth due, in part, to adoption of a Precise Plan in 2011 (fourteen years after city hall opened).

Redwood City’s previous city hall opened in 1912 and stood on the same site. The old city hall was described by one city official as “an inefficient hodgepodge.” Principal motivations to build a new city hall included to modernize facilities (including seismic and ADA upgrades) and consolidate City functions. In addition, the old city hall lacked enough space, as three city departments leased space in private office buildings at an annual cost of $200,000. The community also wanted large indoor and outdoor civic gathering spaces.

The new city hall in Redwood City opened in 1997. Its construction took about two years, during which the City leased interim space in other locations. An affordable housing project immediately adjacent to the city hall was built at the same time as the new city hall but connected to the city hall project. A public library is located across the street from city hall.

PROGRAM AND DESIGN

The city hall contains council chambers, community meeting rooms, and a full complement of departments, except for fire and police departments. The city hall frames a plaza on three sides. Across the street, a public library frames the remaining side of the plaza. The city hall project is only comprised of public uses.

ECONOMIC IMPACTS

Downtown Redwood City experienced significant growth

in the five years after the new city hall opened (1997-2002). In that time period, almost 300 new dwelling units and over 500,000 square feet of new office space were built within one-half mile of city hall. Job growth further accelerated after the Precise Plan was adopted in 2011. The most recent data indicates a high concentration of jobs -nearly 25,000 -- in that same radius. Downtown employers include professional, information technology and health care industries.

PROJECT DELIVERY AND FINANCING

Redwood City’s 40,000 sq ft city hall was delivered under a best value procurement process with a guaranteed maximum fixed price of $7.3 million. The project was reported as the first governmental facility in California delivered using best value instead of the traditional low bid for a public works construction project. Best value procurements consider the

qualifications and experience of the contractor and price is a consideration but not the sole factor in determining the award. The City directly hired and requested firm fixed prices from each of the subcontractors.

Information on the project’s funding and financing is not publicly available.

MOUNTAIN VIEW | CA

Performing Arts Center

Library

CONTEXT

Mountain View’s civic center project opened in 1991. The prior city hall was in a repurposed church building from the 1950s. Space constraints and outdated structure required remodeling, which started in 1982. The City began to remodel the old city hall, but decided to abandon the renovation and ultimately demolished it.

Motivations for the new civic center were driven by space needs of the growing city and downtown revitalization plans that focused on Castro Street, the downtown’s “main street” and main address for the city hall and plaza. A downtown precise plan was completed in the 1980s and expressed a desire to recruit an activating anchor use near where the site of the planned new civic center.

The community also wanted to create a symbol of civic pride of exceptional architectural value, as well as space for indoor and outdoor gathering and events.

A performing arts center was added to the civic center project following community input.

PROGRAM AND DESIGN

The civic center contains a complement of public uses. The city hall is accompanied by an active performing arts center and a well-used plaza. A halfblock park is behind the city hall and performing arts center, and faces streets that extend into the surrounding neighborhood. The park is flanked by a public library and community meeting facilities.

ECONOMIC IMPACTS

Downtown Mountain View is the location for about 10,000 jobs, with a focus on professional services, information & technology, and food services. In the decade following when the civic center opened (19912002), six midrise office buildings were built within one-half mile of the project. A 120-unit midrise apartment building was also constructed nearby.

PROJECT DELIVERY AND FINANCING

The civic center cost $40 million. Public financing for the civic center project was provided through a joint powers authority for capital improvements. A joint powers authority involves the cooperation of two or more public entities that jointly agree to build facilities or deliver services. After completion, the City leased the facilities from the joint powers authority. This arrangement avoided the need for a bond measure subject to voter approval.

LONG BEACH | CA

AT A GLANCE

Population | 470,000

Civic Center & Mixed Use

Project Area | 16 Acres

Program

City Hall (4 acres, 270,000 sf including utility offices and council chambers)

Port of Long Beach (1 acre, 240,000 sf)

City Library

Parking Garage

Civic Plaza

Neighborhood Park

Mixed-Use Development (not built; residential & retail)

Financing

Design-Build-FinanceOperate-Maintain

CONTEXT

Long Beach’s new city hall was built in 2019 and in response to the prior city hall being seismically unsafe and not cost-effective to renovate. The prior city hall also interrupted streets in the downtown and its brutalist design contributed to perceptions that downtown was unsafe.

The new city hall was sought to revitalize downtown as was expressed in a 2012 downtown plan in terms of increased activity, economic impacts, and public perceptions. A 2015 master plan gave further guidance. At the time, the Port of Long Beach was also seeking new facilities and became an important project partner. This period also saw a rise in private infill development in downtown.

The civic center site is situated near the southern edge of downtown and within walking distance of Long Beach’s shoreline park and convention center. Uses in the immediate vicinity include recent mixed-

use development (residential over retail), a State of California courthouse, and hotels. The city hall has its address at the intersection of two major streets, Broadway and Magnolia, and two blocks from a transit center and light rail station.

PROGRAM AND DESIGN

The city hall occupies a portion of a 16-acre that also includes an administration building for Port of Long Beach, a public parking garage, a public library, a neighborhood park with skate park. Across from the city hall on Broadway are streetlevel commercial amenities with apartments above. While the civic center presents a grand civic gesture, particularly with its distinct plaza and council chamber, buildings do not activate street edges with ground-floor commercial or cultural amenities.

ECONOMIC IMPACTS

While direct economic effects from the new civic center cannot be discerned from general trends, it is noteworthy that about 1,500 dwelling units have been constructed within one-half mile since the city hall opened, and 600 dwelling units are in the pipeline. Developer interest in a mixed-use housing site made available as part of the project has not occurred, however, and would deliver 500 additional dwelling units. In addition to residential activity, the city hall has contributed to an established downtown employment center comprised of public administration, management, professional services, retail, and hospitality positions

PROJECT DELIVERY AND FINANCING

The project was delivered by a public-private partnership using a “design-build-finance-operatemaintain” (DBFOM) model, which means that the selected

development partner fulfilled all five of these roles.

As part of the developer selection process, each developer/-bidder accompanied its proposal with a benefit-cost analysis. This allowed the city to evaluate the value of each proposal in a comprehensive way. The selected developer estimated that the project would generate over $1.4 billion in economic impacts over the 43-year concession period, in the form of public construction ($400 million), private construction ($260 million), increased economic activity ($640 million), and events such as parks programming ($90 million). The developer’s analysis indicated that roughly 6,000 direct, indirect, and induced jobs would be created.

The developer selection process was unusual in that it asked two short-listed firms to fully develop finance and design proposals. Doing so provided a direct connection between the proposed design,

on-going responsibilities, and associated costs. To compensate the unsuccessful bidder for this effort, a $500,000 stipend was paid.

The capital cost of the civic center project was just over $513 million. Payment to the selected developer included a land transfer for mixed-use development (valued at $22 million), cash on hand ($18 million), and annual payments over a 43-year period ($12.6 million escalated for inflation starting in 2013). In return, the developer agreed to cover project delivery costs and on-going operations and maintenance costs, while also receiving a return on developer investments.

The City makes the annual payment using property tax, retail sales tax, and transient occupancy tax revenues. Project funding did not rely on any voter-approved bond measures. Notably, the City’s annual payment amount was sized to be equivalent to the operations and maintenance

costs associated with prior city hall. And because the delivery model includes long-term operations and maintenance, the project was designed for life cycle efficiencies, such as using more durable materials and investing in energy efficient systems.

The developer’s financing uses a combination of long-term debt (fixed-rate, investment grade, taxable, and delayed draw private placement), a construction loan, equity contributions (pre-income with internal rate of return on equity of 13.25%), and contributions of cash and land from the City – which were the only upfront costs to the City.

The capital cost of the civic center project was just over $513 million. Payment to the selected developer included a land transfer for mixed-use development (valued at $22 million), cash on hand ($18 million), and annual payments over a 43-year period ($12.6 million escalated for inflation

starting in 2013). In return, the developer agreed to cover project delivery costs and on-going operations and maintenance costs, while also receiving a return on developer investments.

The City makes the annual payment using property tax, retail sales tax, and transient occupancy tax revenues. Project funding did not rely on any voter-approved bond measures. Notably, the City’s annual payment amount was sized to be equivalent to the operations and maintenance costs associated with prior city hall. And because the delivery model includes long-term operations and maintenance, the project was designed for life cycle efficiencies, such as using more durable materials and investing in energy efficient systems.

The developer’s financing uses a combination of long-term debt (fixed-rate, investment grade, taxable, and delayed draw private placement), a construction loan, equity

contributions (pre-income with internal rate of return on equity of 13.25%), and contributions of cash and land from the City – which were the only upfront costs to the City.

WATSONVILLE | CA

| 52,000

Center Site | 2 Acres

Civic Center (140,000 sf including courthouses)

Superior Court for Santa Cruz County Library & Community Rooms

Ground-Floor Commercial Non-Profit Offices Parking Garage (460 spaces) Financing | Design-Build

CONTEXT

Watsonville’s relatively new Civic Plaza Building opened in 2008, and includes the City’s council chambers and most of its administrative offices. It dramatically increased the amount of space available to the City. The 1965 city hall that preceded the new facility was considerably smaller and insufficient. The old city hall is situated across the street from the new building and still used by the planning and public works departments. The need for a new Civic Plaza Building was also precipitated by the community’s need for a new library.

The main address for the new city hall is Main Street. To the north, Main Street is Watsonville’s principal pedestrian-oriented shopping street, to which construction of the new city hall and library provided a southern anchor of activity. The new city hall and library were part of the City’s downtown revitalization efforts. Parts of downtown

were damaged by the 1989 Loma Prieta earthquake and rebuilding efforts were sluggish. Immediately north of the new city hall is a retail center with upper-story offices, which was built shortly after the new city hall was completed.

Old city hall lies immediately east and across Main Street from the Civic Plaza Building. In other directions, the immediate context is auto oriented.

In addition to city hall and library facilities, the Superior Court for Santa Cruz County operates within the Civic Plaza Building. Inclusion of the court adds considerable complexity to delivery of the project, as is further discussed below.

PROGRAM AND DESIGN

The Civic Plaza project principally contains Watsonville’s council chamber, most of its administrative offices, and some services such as those obtained with the city clerk. Main Street serves as the principal address

for City facilities. Next to the City’s principal entrance, a large community room faces Main Street.

Permitting services provided by Watsonville’s planning and public works departments are across Main Street from the project in the old city hall.

The project also includes a Superior Court for Santa Cruz County. The Superior Court has a separate entrance on Second Street. Ground floor retail space is also along Second Street and near the public parking garage that occupies the half block farthest from Main Street.

ECONOMIC IMPACTS

Watsonville is the southernmost city in Santa Cruz County and continues to be a center of agriculture and industry. While Watsonville enjoys single-family growth, the city lacks proximity to the Bay Area’s robust real estate market.

On account of very different real estate market characteristics

than in the Bay Area, little new construction has occurred in downtown since 2008, when the Civic Plaza Building opened. About seven recent development projects in the vicinity, mostly residential but also office and industrial, and most notably a 20,000-squarefoot mixed-use retail-and-office building immediately to the north. Only 85 dwelling units have been built since 2008 in downtown. Overall employment in downtown has grown modestly beginning in 2011, but employment growth has not been related to the city hall project in that retail and food service jobs have contracted.

PROJECT DELIVERY AND FINANCING

The Civic Plaza Building project was initiated by Watsonville’s redevelopment agency, and redevelopment agency funding largely funded an adjacent public parking garage. The overall project cost of the project was $50 million,

exclusive of the parking garage. The City required a “guaranteed maximum price” as part of the construction procurement, which made the private sector bear more risk.

Funding for the project came from diverse sources including:

▶ Sustainable Communities grant from Caltrans,

▶ SB 2 local assistance grant from State of California,

▶ Community Development Block Grant (CDBG),

▶ Active Transportation Program (ATP) grants,

▶ Safe Streets and Roads for All (SS4A) grants,

▶ Regional Early Action Planning (REAP) grants,

▶ Enterprise Funds (water and sewer enterprises),

▶ Development impact fees,

▶ Mello-Roos Community Facilities District special taxes,

▶ Benefit assessment district fees, and

▶ Local tax increment financing (TIF).

Santa Cruz County and the State of California operate courtrooms for which on-going lease revenue helps to pay off the project. Note however that inclusion of courts for Santa Cruz County and the State of California complicated delivery of the project, as courts have complex space requirements and security needs. Lease revenue is also generated by ground-floor retail-restaurant space and by office space used by non-profits.

SONOMA COUNTY | CA

AT A GLANCE

Population | 486,000 County Center Site | 22 Acres Program

Administrative Office Space (591,000 square feet)

Board of Supervisors Chambers

Emergency Operations Center (13,000 square feet)

Public Health Facilities (26,000 square feet)

Parking Garage (2,300 spaces)

Multifamily Housing (existing campus alternative)

Office Tower (downtown alternative)

Financing | Financing methodology not determined.

Design-Build-FinanceOperate-Maintain (DBFOM) model was studied.

CONTEXT

This project is an “alternative site analysis” that compared costs and benefits associated with construction of a new County Government Center in downtown Santa Rosa, to costs and benefits associated with remaining at and modernizing the County’s existing suburban campus. A third location in another suburban location was also consider but is not discussed by this case study.

Consultant team member, PFAL, developed the alternative site analysis, which touches on issues applicable to this Relocation Study, such as costs associated with aged buildings. Functional obsolescence of the existing campus was an issue. Eighty percent of the existing campus was built over fifty years ago, and the aged buildings were found to be beyond their useful life and had accumulated significant deferred maintenance of about $325 million.

The existing Government Center campus sprawls over 22 acres, and does not have a coherent physical form that would give it a greater sense of identity and offer greater pedestrian connectivity. Most buildings are surrounded by surface parking lots. On the existing campus, the County owns about 2.0 million square feet of usable space, and had to lease about 2.9 million additional square feet. The County had a Capital Program for the campus of about $87 million.

be shared by the County and City of Santa Rosa. Downtown businesses advocated for relocating the County facilities to downtown.

PROGRAM AND DESIGN

The project included extensive site evaluation and space-needs programming. For the potential locations, the alternative site analysis assumed a program that included:

to be more sustainable and resilient to seismic and other risks. The existing campus alternative would improve pedestrian connectivity among government facilities, but the existing campus would remain relatively far from transit and commercial amenities.

Construction of new housing was also considered as a potential source of revenue by leasing land long-term.

Multiple potential sites were considered in downtown Santa Rosa, and a subset of potential sites could be combined to meet objectives, including superior access to regional and local transit. Of particular interest was consideration of the partial reuse of a shopping mall experiencing very high vacancy rates. The potential revitalizing impact of a County Government Center was also considered, as were advantages of the Center being near transit, downtown amenities, and housing. Additionally, the project presented opportunities for co-locating facilities that could

▶ administrative office space

▶ Board of Supervisors chambers

▶ public health lab and County morgue

▶ an emergency operations center

▶ multifamily housing

▶ a parking garage

For the existing campus alternative, new construction would consolidate and organize functions, such as to make County more accessible to constituents, and it would allow infrastructure to be modernized

While the low site coverage of the existing campus was perceived as offering opportunities for new building locations, the analysis process revealed that this was not the case due to the County’s desire to minimize disruptions to existing services and staff space, and avoid costs to build a parking garage to make land available for redevelopment.

A preferred downtown alternative included a site for administration and services, a separate site for Board of Supervisor chambers, and a site for an office tower that would

reuse a part of an adjacent partly-vacant mall.

ECONOMIC IMPACTS

Discussions with economists suggest that there would be little discernable difference between sales tax generation between downtown and existing site. Concerns were expressed that government employees would vacate downtown after hours, and that employees and fleet vehicles would take up businessserving parking spaces.

Potential urban design benefits to downtown were significant, however, and could not be quantified. Notably, the downtown project would remove the shopping mall where it passes above 3rd Street and create a hostile pedestrian environment between downtown and the SMART station area.

PROJECT DELIVERY AND FINANCING

Sonoma County’s alternative site analysis assumed that a 3P financing would be applied to both sites. In the case of downtown, it was estimated that an availability payment of $27 - $39 million annually would cover all debt service, operations, and equity returns, for the downtown program, and depending upon the percentage of remote workers assumed. The city hall site was considered less expensive than development on the existing campus due to the cost of constructing a parking garage and the potential for staff relocation during construction. Constructing a garage on the existing campus with swing costs would have increased the annual availability payment on the campus to between $56 - $63 million.

The downtown site’s location midway between a SMART rail station and downtown’s transit center qualified the project

for the Federal Transportation Administrations TIFIA lowinterest loan program.

The new construction options were compared to the alternative scenario of remaining on the existing campus and catching up on a 10-year deferred maintenance liability. Given the estimated $325 million deferred maintenance backlog, the County’s catchup cost was estimated to be $42 million per year for 10 years. Additionally, even with the investment in deferred maintenance the County would need to continue maintenance investments on aging facilities, such as to address, seismic deficiencies (not included the scope of work for deferred maintenance), service delivery inefficiencies, and space assignment inequities between departments would remain.

KEY TAKEAWAYS

PROGRAM AND DESIGN

All eight of the civic center case studies helped to implement each community’s downtown revitalization goals. Each provided infill development that brought more activity to the downtown. In addition to generating foot traffic, most civic centers further activated adjacent street edges with ground-floor storefronts and meeting/event space. Most were located to help anchor a local “main street,” and were accompanied by lobbies and plaza space that host events and for informal use. A few also included anchor destinations, such as library, performing arts, and a market hall. In addition, several projects restored important street connections that were lost to mid 20th-century modernism. While architectural styles varied, every city hall expressed its civic importance.

ECONOMIC IMPACTS

For the most part, downtown areas saw employment and residential growth after civic center projects opened. Growth surrounding each project cannot be directly attributed to construction of each civic center. Places that experienced robust growth are in geographic subareas that were flourishing generally. Civic center projects that included land area for mixeduse residential and office projects capitalized on these trends.

A few case studies illustrated how a civic center could bring a commercial or cultural destination to a struggling downtown, such as a market hall in Sandusky and performing arts center in Mountain View.

Employees and visitors to civic centers also contributed to downtown economic activity in the vicinity, but this effect would be comparable to infill

development with private office space or other employment, as is discussed in G. Economic and Financial Analysis.

PROJECT DELIVERY AND FINANCING

The case studies illustrate diverse approaches toward project delivery and financing. Three case studies relied exclusively on public sources of financing. Redwood City and Winter Garden were financed in traditional ways; Redwood City using accumulated municipal reserve funds, and Winter Garden relying on voter-approved tax-exempt revenue bonds. Mountain View used a capital improvements financing authority involving multiple government entities. Watsonville’s financing combined an array of grants, impact fee revenues, special assessment district revenues,

and redevelopment agency tax increment financing.

A guaranteed maximum construction price played an important role in Redwood City and Watsonville.

Four case studies employed public-private partnerships. Long Beach, Malden, and Sandusky relied on publicprivate partnerships that followed a design-buildfinance-operate-maintain model. In each case, a private partner met each city’s needs with guarantees, while covering each project’s finances using a combination of sources, which included private financing, lease payments from government office and other uses, land sales, government loan programs, and private sources of capital.

The Sonoma County Government Center case study shows how a large

government center could be integrated into and help fulfill urban design and economic development goals in Santa Rosa’s downtown. While the downtown project has not been built, the project illustrates trade-offs and challenges associated with considering new construction versus remaining in existing aging facilities. The project quantified the costs associated with aged facilities, including: on-going operations (such as growing space needs, and utilities expenses), staging retrofits (creating disruptions to government activities as major renovations occur), and the fiscal hazards of a longterm accumulation of deferred maintenance costs (like building system replacements, ADA and seismic upgrades). The analysis performed by the County underscored the importance of comprehensively

considering all of the costs and potential risks associated with status quo options.

The Sonoma County case study also illustrates the importance of stakeholder and political alignment and timing. The case studies suggest that jurisdictions are successful when communities are engaged in the planning processes and have established specific plans or downtown master plans with combined housing and civic functions supporting the proposed relocations and especially where the decisionmaking body is focused on results.

SITE LOCATION EVALUATION

ALTERNATIVE

SITE LOCATIONS

To help frame discussion on where a new Civic Center should be located Downtown, the consultant team described and DCTF discussed the relative merits of four different site locations. The alternative sites were comprised of pairs of blocks envisioned by the Downtown Precise Plan. The alternative site locations were distributed geographically to help illuminate opportunities and challenges associated with each.

BLOCKS A & B

Blocks A & B comprise the Downtown’s eastern edge along Lafayette Street, and they will serve as a Downtown gateway from this major roadway, Santa Clara University and Santa Clara’s regional transit center. The land is owned principally

by the City, except for a parcel owned by Santa Clara University. Buildings would create active frontage along Franklin Street and around the Arts Commons on Block A.

BLOCKS C & E

The Park Central Apartments presently occupy Blocks C & E, which is owned by Prometheus Real Estate Group. Future development allowed by the Precise Plan is intended to activate north portions of a planned Central Green.

BLOCKS D & F

Block D has parcels owned by the City and by the Judicial Council of California. The principal parcel on Block F is presently occupied by Jackson University Plaza, a 2-story commercial building, with City- and Judicial Council-

owned parcels to the east. Redevelopment of these blocks will require land assemblage and lot line adjustments. Future development allowed by the Precise Plan is intended to activate the south portions of a planned Central Green, and Main Street is to extend between Block D and F, and is to be designed as a civic-oriented connection to City Plaza Park and Mission Branch Library.

BLOCKS G & H

Blocks G & H currently contain the Franklin Square commercial center with plaza, and Downtown’s historic post office. The post office site is owned by the federal government. The commercial center site is owned by the City, but the commercial center buildings are private condominiums owned by multiple owners.

The alternative site locations were explored as a starting point for discussion. Other block combinations would be possible, and one was illustrated by a “Block B & D Hybrid” alternative described below. Additionally, the Civic Center could be accommodated on a single block, if height restrictions allow sufficient height to meet floor area requirements. See Figure 9, for maximum heights for buildings with qualifying height bonus(es).

SITE EVALUATION

CRITERIA

Design concepts were developed for each of the alternative site locations. The design concepts served to illustrate opportunities and challenges associated with each location, and they were evaluated using the following criteria.

SITE CONTROL

What entity owns the potential site, and how readily could the City obtain control to plan, construct, and occupy a new Civic Center? What parcels would need to be acquired and assembled by the City? The pattern of ownership on the alternatives sites can be seen in Figure 10.

FIT AND ACTIVATION

To what extent would development on an alternative site advance Precise Plan land use and urban design objectives? Would the Civic Center create an anchor of activity at an important location that might not be activated otherwise? Could the Civic Center project serve as a catalyst toward redevelopment of blocks that might otherwise lag? Would it help activate public open space and critical street edges? The Precise Plan requires street-edge activation where retail use is indicated in Figure 8 and where solid lines frame streets in Figure 10. Would Civic Center floor area fit within the allowable envelope, as illustrated in Figure 9?

10 | SITES EVALUATED WITH LAND OWNERSHIP

LEGAL, FUNDING AND FINANCING

Would any existing uses need to be relocated and therefore reduce project readiness? Would project construction be more or less complex, such as how easily construction could be staged? Are there legal obstacles? Would the alternative site be able to qualify for and leverage available funding? Would financing of the alternative site be more or less complex?

Following discussion that relates to these themes, site evaluation criteria are translated into a scoring system that describes and compares relative performance of each alternative.

EVALUATION OF ALTERNATIVE LOCATIONS

Site evaluation was organized around four sets of paired blocks, along with a hybrid scheme to illustrate that additional options are possible.

BLOCKS A & B

“ARTS COMMONS”

DESIGN OPPORTUNITY

The Arts Commons concept would be strategically centered on Blocks A and B within the Downtown area. The City is the principal landowner in these blocks, owning the majority of Block A and all of Block B. Santa Clara University owns the remaining portion of Block A. In this proposed design, the existing office building at the intersection of Lafayette Street and Homestead Road would be repurposed to accommodate the Utilities programming of the Civic Center (SVP + City Water & Sewer Departments). This choice is substantiated by the building’s approximate alignment with the required square footage, presenting an efficient solution to meet

the project’s spatial needs. The adaptive reuse strategy addresses the imperative of repurposing existing structures, preserving embedded carbon and contributing to cost reduction by obviating the necessity for new construction. It also aligns with the guidance of office building reuse provided in the Santa Clara Downtown Precise Plan (SCDPP).

Within Block A, the City Hall program would be strategically situated around the Arts Commons Plaza, in tandem with anchor retail and cultural uses as stipulated in the SCDPP. To maximize the activation of public space, the entrance to City Hall would be oriented towards the plaza.

The remaining segments of Block B would be developed with two mixed-use buildings. These structures would

feature retail and cultural uses on the ground floor, while a public parking garage would be placed at the corner of Homestead Road and Washington Street. This parking facility would cater to the parking needs of the Civic Center functions and the broader Downtown area.

PROJECT DELIVERY CONSIDERATIONS

Blocks A and B are relatively unencumbered compared to the other blocks in the Downtown Area, in that the City owns most of the land area, except for a parcel owned by Santa Clara University (SCU). While the SCU parcel represents a significant and potentially related development opportunity, it would not need to be relied on to create a new Civic Center.

Blocks A and B would involve no land acquisition and

costs associated with the displacement of two small lowrise buildings would be relatively low. As illustrated in the design concept for these blocks, the Commerce Building could be repurposed to be municipal office space. For other parts of the site, demolition and staging would be straight-forward and unencumbered.

But while locating a new Civic Center on Blocks A and B would be relatively straightforward, a significant opportunity costs would be associated with not making the entirety of these blocks available for mixed-use development. Frontage on Lafayette Street and proximity to SCU make Blocks A and B Downtown’s prime development site, with sufficient site area for a rich mix of ground-floor commercial and cultural uses with high-intensity office or residential space above.

| DESIGN CONCEPT FOR BLOCKS A & B

BLOCKS C & E

CENTRAL GREEN

NORTH

DESIGN OPPORTUNITY

The Central Green North concept for Blocks C and E strategically situates City Hall and the Utilities program along Franklin Street, flanking the Central Green. The primary objective is to invigorate the downtown core. Both the City Hall and Utilities buildings would be oriented to have entrances facing the plaza, contributing to the activation of this public space. The plaza is envisioned to serve as a valuable asset for hosting community events, becoming a civic square for Santa Clara.

Conforming to the SCDPP, the ground floor frontage of the City Hall and Utilities buildings along Franklin Street would

be activated with retail and retail-ready uses. The Civic Center parking facility would be strategically positioned in one subterranean level plus some additional levels above the ground floor within the Utilities building.

The remainder of these blocks would feature residential development, with taller buildings planned along Main Street and the central section of the block. The buildings would step down to townhomes or 2-3 story buildings fronting Benton Street as we near the residential neighborhood across Benton. This deliberate design strategy ensures a harmonious integration with the existing fabric around the Downtown area.

PROJECT DELIVERY CONSIDERATIONS

Significant challenges would accompany site acquisition and

redevelopment to create a new Civic Center. Site control is held by a private company, and the existing apartment building is presumed profitable and has significant economic value.

Furthermore, redevelopment of the entire site would involve displacement of residents and would add considerable construction complexity if their displacement were phased.

BLOCKS D & F

CENTRAL GREEN

SOUTH

DESIGN OPPORTUNITY

The Central Green South Concept consists of Blocks D and F where the present Courthouse building and University Plaza stand. The site has complex ownership, with parts of the blocks having private ownership, State of California ownership, and City of Santa Clara ownership. This new block of Main Street has been conceptualized as a special street in the SCDPP with double rows of trees and wider sidewalks. This design scheme builds the City Hall and Utilities programs on either side of Main Street to create a “civic spine” between the center of Downtown and City Plaza

Park & Mission Branch Library to the south. Entry to both buildings would be located on Main Street, along with access via Central Green South for the City Hall to enliven the public space. The design maintains retail and retail-ready spaces on the ground floor along Main Street and the Central Green in line with the SCDPP. Parking for the Civic Center uses, cultural uses, and Downtown uses are located above the ground floor in the Utilities building and the stand-alone parking garage at the intersection of Homestead Road and Washinton Street.

The remaining blocks comprise mixed-use development with taller development along Franklin Street and steppeddown development as we approach Homestead Road.

PROJECT DELIVERY CONSIDERATIONS

Blocks D & F contain parcels with multiple owners and active uses. Use of these blocks for a Civic Center would be enabled by the City’s ownership of around half of Block D. On Block F, Jackson University Plaza, a commercial center of low development intensity, can be assumed to have less economic value and therefore a reasonable candidate for redevelopment.

The Santa Clara Courthouse parcel presents a significant obstacle. The Courthouse occupies over half of Block D and adjacent future Main Street right-of-way. The Courthouse property is owned by the State of California, and the State’s Judicial Council manages the courthouse facility. In a letter from the Judicial Council to

the City dated November 25, 2020, the Council stated that it has no plans to make the property available for sale or redevelopment. Furthermore, in the event that Council was to find the property to be excess and surplus property in the future, the Council would need to grant the County of Santa Clara a right of first refusal to the property.

|

BLOCKS G & H

DESIGN OPPORTUNITY

The Franklin Square development concept on Blocks G and H would create a gateway to Downtown from Monroe Street, create the new “Franklin Square” envisioned in the SCDPP, and provide a vehicle for the extension of Franklin Street. The City Hall program would be located on Block G along Franklin Street, wrapping around the public plaza. The main entry to the City Hall would be through the plaza. The ground floor frontages along Franklin Street and Monroe Street would have retail uses in line with the SCDPP. The Utilities program would be split into two parts; the shared amenities would be located in Block G along with the City Hall, whereas the SVP, Water & Sewer Departments program

would be located in Block H, fronting Homestead Street.

The remainder of Block H hosts the existing post office and two potential future mixed-use buildings. Development would step down toward the adjacent neighborhood, with townhomes along Benton Street.

PROJECT DELIVERY CONSIDERATIONS

The condominiumized ownership of Franklin Square would make obtaining site control considerably complex. Additionally, Block G & H are more than one-half mile from rail and intercity bus service, and would therefore not qualify for federal TIFIA low-cost loan programs.

14 |

HYBRID: BLOCK D WITH COMMERCE BUILDING

DESIGN OPPORTUNITY

Another alternative that was considered would combine a City Hall on Block D with reuse of the Commerce Building on Block B for the Utilities Building. This choice enables us to find a sustainable use for the existing building while helping move the Utilities program to Downtown.

Civic and cultural uses on either side of Main Street would help develop the “civic spine” between the center of Downtown, City Plaza Park, and Mission Branch Library to the south. Access to the City Hall will be from Main Street along with secondary access via the Central Green public spaces to active the plaza.

PROJECT DELIVERY

CONSIDERATIONS

The hybrid scheme illustrates how site alternatives might be combined.

COMPARISON OF SITE ALTERNATIVES

16 | SITE CONTROL

Using the established site criteria, each site alternative was evaluated using a simple scoring system. The scoring was provided to make comparisons easier to understand, and was not intended to provide definitive assessments.

SITE CONTROL

Blocks A & B score highest because of City control. Other site alternatives were problematic in different ways.

FIT AND ACTIVATION

Blocks A & B (Arts Commons) and Blocks D & F (Central Green South) scored highest. They both would help activate Downtown open spaces. Blocks A & B would also help create a large cultural space, whereas Blocks D & F would serve as a development catalyst in a

TABLE 4 | RELATIVE PERFORMANCE OF SITE ALTERNATIVES location that might otherwise lag.

FUNDING AND FINANCING

Blocks A & B (Arts Commons) score highest because of the relative ease of construction, availability of financial tools, and the financial potential a mixed-use building on City land. Blocks D & F (Central Green South) rank second on account of complexity associated with combining multiple properties and potential need to relocate the Courthouse.

DESIGN & DELIVERY OPTIONS 05.

SHARED ASSUMPTIONS FOR ALL OPTIONS

FIGURE 18 | SITE ALTERNATIVES AND PREFERRED SITE (BLOCK D)

The five options described in the previous section were presented to the DCTF and their recommendation was to further pursue a hybrid option: to relocate the Civic Center or its City Hall component to Block D. Their reasoning had to do with a combination of factors: the opportunity cost of developing a City Hall on Block A, the complications of developing Blocks C, E, G & H, the ability to activate the “civic axis” (Main Street) with a new civic use with a prominent public lobby on the south park blocks among other considerations. At the recommendation of the DCTF, the WRT Team developed three design and project delivery options for Block D:

▶ to demonstrate how a future City Hall can fit on Block D, conform to the Downtown Precise Plan and FormBased Code, and leverage community benefits through design; and ▶ to perform a financial analysis of each option that accounts for costs and project delivery methods associated with each option.

Each Block D option works within a shared set of assumptions, as follows.

PRECISE PLAN IMPLEMENTATION

Every option conforms to the Downtown Precise Plan and Form-Based Code, to activate street and plaza edges, step building height down toward the south edge of Downtown, and reserve land for the Central Green. Notably, the Main

Street civic space would be implemented as part of this project, and feature enhanced walking environments flanked by trees, as illustrated in Chapter 4: Site Location Evaluation.

Construction of garage parking is assumed in each option using parking standards in the Form-Based Code, even though California law AB 2097 exempts any use from parking requirements if within one-half mile of high-quality transit.

Cultural uses are encouraged by the Precise Plan. While not required in this location, all Block D options assumed 8,000 square feet of cultural space. After hearing DCTF concerns regarding the cost and viability of cultural space, subsequent schemes did not include designated cultural use space. More limited cultural activity could still occur, such as to use City Hall lobby space for receptions and exhibitions, and

to use Council Chambers for meetings and small events.

SITE CONTROL

All Block D options assume that the Santa Clara County Courthouse property can be obtained by the State of California, which would be combined with City-owned land just north of the Courthouse. As was presented to the DCTF before recommending Block D, the State’s Judicial Council manages the courthouse facility and, as of 2020, has no plans to declare the courthouse as surplus. Possible ways for overcoming this impediment are discussed in Chapter 8: Recommendations.

5 |

SUMMARY OF BLOCK D OPTIONS

PROGRAM ELEMENTS

All three Block D options assume a City Hall that is 155,000 square feet, which includes 5,000 square feet of commercial amenity. Two options assume a mixed-use building to show how a private developer partner might benefit the City financially. A third Option illustrates a purely public project with a 90,000-squarefoot Utilities Building, and would contain 5,000 square feet of commercial amenity for streetlevel activity. A numeric summary of Block D options appears in the table below, and variations among Block D options are under each option.

PROJECT DELIVERY MODELS

Different project delivery models are associated with each of the Block D options. Variations in project delivery models represent the degree

to which the private sector is involved to coordinate project delivery at various stages, thereby increasing efficiencies and carrying a greater share of project risk. At the lowest level of private involvement, “design-bid-build” can involve only a private contractor constructing a building that is designed by a design & engineer contractor; both kinds of contractors are directly responsible to a public agency that provides coordination and post-construction operations and maintenance. Public-private partnerships (3P) models involve a private partner to coordinate several phases of project delivery for greater efficiency and/or reliability; “design-build-finance” model integrates activities to deliver a building, whereas a “design-build-finance-operatemaintain” model also involves the private partner in long-term costs post-construction.

OPTION 1

CITY HALL & MIXED USE: LAND SALE OR LAND LEASE

The City Hall lobby and cultural space would have entrances from the Central Green and from Main Street. The cultural space would also feature a direct connection to the Central Green, while commercial amenities would activate the corner of Homestead and Main Street. Other arrangements are possible, however, such as repositioning the lobby or commercial amenity space. A terrace would overlook the Central Green.

City Hall uses with more interaction with the public would be on lower floors, with less visited departments stacked above. Shared staff break room and support space would be available on every floor.

The Mixed Use building would line Franklin Street with about 10,000 square feet of groundfloor commercial space. Approximately 116 residential apartments would occupy upper floors. Parking dedicated to the Mixed Use project would be below-grade and behind the building. The top of the parking garage structure could provide open space for residents’ use. SVP needs would not be addressed as part of this scheme.

PROJECT DELIVERY MODEL

In Options 1 and 2, residentialover-commercial development (“Mixed Use”) accompanies the City Hall on Block D. In Option 1, City Hall and Mixed Use projects would occupy different parcels. The private developer would be given use of the Mixed Use parcel through a long-term

land lease. There would be two separate parking garages associated with each use.

Option 1 presents the simplest project delivery method in that it entirely separates the Mixed Use development from City Hall development. It assumes that once Courthouse land was obtained, and Courthouse and City land were assembled, that Block D would be subdivided to create two parcels or “project limit lines,” as depicted in Figure 19: Option 1 Design Concept. Two projects would be timed and delivered independently from each other, with separate design, finance, construction, maintenance, and operations activities.

In Option 1, less activity would front onto Washington Street and Homestead Road than in other options. While the diagram could be adjusted to show shallow commercial space

along these edges, the parking that would be displaced would have to be accommodated with taller parking garages.

21 | OPTION 1 DESIGN CONCEPT

OPTION 2

CITY HALL & MIXED USE: BLENDED PARTNERSHIP

Option 2 integrates City Hall and Mixed Use in a blended way. While the City Hall program is held constant among the three schemes, the Mixed Use program for Option 2 would be larger than Option 1. This is because Option 1 is constrained by horizontal segregation from two independent City Hall and Mixed Use projects, whereas Option 2 allows more flexibility in designing and maximizing the capacity across the entire block. After DCTF input and subsequent design refinements that were included in a “Preferred Block D Concept,” the residential yield for Option 2 would be 167 dwelling units – about 40% more than with Option 1. The ground floor of

the Mixed Use building would have about 10,000 square feet of commercial space along Franklin, and shallow commercial space along Washington .

In Option 2, the lobby for City Hall and the cultural space would face Main Street near the middle of the block. Cultural space and a small commercial amenity would have access directly from the Central Green, while commercial amenity would anchor the corner of Homestead and Main Street. City Hall uses with more public interface would be on lower levels. Every City Hall floor would have a break room and other shared staff areas.

Along Homestead, townhomes would provide architecture and activity in the form of front stoops, and complement the scale of the neighborhood

farther south. A parking garage would be below grade and in the middle of the block, on top of which open space would serve residents in the Mixed Use building. The parking garage could be designed to create shallow commercial space along Washington to help activate that street.

Option 2 yields the most floor area of the three options, because development without parcel boundaries can fill more of Block D’s allowable height envelope and because a single larger parking garage can be more efficient.

Under this scheme, SVP space needs would be met in another way such as leased space.

PROJECT DELIVERY MODEL

In Option 2, Mixed Use development and the City

Hall are delivered together in an integrated way, through a public-private partnership for the whole of Block D. Bringing the financing and project delivery of the City Hall and Mixed Use elements together offers a greater range of financial tools that can be employed through all stages of development and even -- if desired -- address postdevelopment operations and maintenance costs.

DCTF selected Option 2 as the “preferred option” and was subsequently refined and became the basis for the financial analysis of 3P delivery models used, as is described later in this document.

FIGURE 24 | OPTION 2 DESIGN CONCEPT

OPTION 3

CITY HALL & UTILITIES: CONSOLIDATED CIVIC CENTER

In Option 3, City Hall and a Utilities Building come together to create a more comprehensive Civic Center, where a majority of local government activities and services come together in a single Downtown location, and would allow for more integrated government operations. There would be no private uses as part of this scheme, except for modest ground-floor commercial amenities where Main Street at the Central Green and at Homestead.

In this scheme, the City Hall lobby was assumed to face the Central Green, from which users could circulate to an

adjacent cultural space or upstairs to City Hall space and Utilities Building space via a pedestrian bridge over the alley. The lobby was envisioned to be a tall 3-story space in which stairs and escalators would animate the space. A terrace would overlook the Central Green.

As with the other schemes, uses with higher levels of public interaction are on lower floors, and every floor would contain a break room and support space for staff. Additionally, the Utilities Building would include a dining hall and fitness room for staff. Parking would serve both buildings and would be provided in a garage that is below grade and in the middle of the block.

The amount of development is consistent with City Hall

and Utilities Building program assumptions, which when combined represent a floor area that is slightly less than Option 1 and about 22 percent less than Option 2.

PROJECT DELIVERY MODEL

In Option 3, the Utilities Building, which contains Silicon Valley Power and the City utilities departments, accompanies City Hall on Block D in this scheme. Financial tools are limited to those available to public uses and no revenue would be generated through private development.

27 | OPTION 3 DESIGN CONCEPT

PREFERRED BLOCK D CONCEPT

PROGRAM AND DESIGN

Discussion with DCTF resulted in the selection of a “Preferred Concept” that was based on “Option 2 – City Hall & Mixed Use: Blended Partnership.” The Preferred Concept maintains a City Hall that would:

▶ be oriented towards Main Street and the Central Green (with a total City Hall floor area of 160,000 square feet that includes 5,000 square feet of commercial amenity);

▶ provide direct access from the City Hall lobby to council chambers and other community meeting space, a “permit center” with representative from multiple departments;

▶ place functions and

departments that receive more public visitors on lower floors,

▶ include a terrace that would overlook the Central Green and Franklin Street; and

▶ establish small commercial space facing the Central Green and the corner of Main Street and Homestead.

The Preferred Concept also maintains a Mixed Use program that would:

▶ feature upper-story residential apartments along Franklin and Washington Streets;

▶ line Franklin Street and Washington Street with 10,000 square feet of ground-floor commercial space; and

▶ line Homestead with lowrise residential with frequent entrances.

Development of the Preferred Block D Concept further refined Option 2 to:

▶ maximize the residential component of the Mixed Use program within allowable height limits by further extending apartments along Washington Street and by adding ground-floor flats below 2-story townhouses along Homestead (thereby increasing residential yield to a total of about 167 dwelling units);

▶ provide a more efficient parking garage by extending its footprint to the rear of townhouses above flats with direct access from townhouses to shared open space above parking;

▶ eliminate a large cultural space that had been assumed to be part the City Hall program but design an atrium lobby space so that

it can host large receptions, exhibits and small events;

▶ make the lobby accessible from both Main Street and the midblock parking garage; and

▶ include a ground-floor arcade surrounding the Central Green, as called for in the Precise Plan.

The City Hall and Mixed Use building would share a belowgrade parking garage extending across the entire block, which would be integrated with a midblock 2-story parking garage. The parking garages would provide a total of just over 500 parking spaces.

PROJECT DELIVERY AND FINANCE

Financial models that would apply to the Preferred Alternative are evaluated as part of the Financial Analysis presented in Chapter 7: Economic & Financial Analysis. Three financial models were examined to understand their relative performance:

▶ Traditional Financing – Debt financing using municipal bonds issued by the jurisdiction. Operations and maintenance functions and expense typically managed by the jurisdiction.

▶ Developer Tax Exempt Financing – Debt financing issued and managed by the developer, typically using a lease-leaseback structure. Land is transferred to developer under a ground lease and then leased back to the jurisdiction over the

term of the debt financing. Rental payments by the jurisdiction are sized to cover the debt service. Operations and maintenance functions and expense can be managed by the jurisdiction or the developer and expenses are typically paid for by the jurisdiction.

▶ Design-Build-FinanceOperate-Maintain (DBFOM) – Financing issued and managed by the developer who is also responsible for designing, building, operating and maintaining the facility. Land and facility ownership remains with the jurisdiction. Payments from the jurisdiction are sized to cover financing costs and operations and maintenance costs with deductions for poor performance.

PFAL presented information to the Task Force in July 2023 on the differing financial approaches and how they impact project and lifecycle cost responsibilities, time to occupancy and risk transfer.

FIGURE 30 | PREFERRED DESIGN CONCEPT (BASED ON OPTION 2)

CENTER 06.

POTENTIAL REUSE OF EXISTING CIVIC

PURPOSE AND CONTEXT

Relocating City Hall to Downtown would make the existing Civic Center campus available for reuse. While the campus is presently designated as “Public/Quasi Public” by the General Plan, General Plan policy 5.4.2‐P2 says to “[c]onsider relocating existing City offices to the Downtown Focus Area and establishing a Civic Center with high density residential uses … with affordable housing.”

If City Hall were to relocate Downtown, the existing Civic Center could be redeveloped for housing or other profitable uses. Development could generate revenue for the City in the form of a long-term land lease, and confer community benefits, such as to activate street edges and provide

housing and neighborhood amenities.

The Relocation Study makes an assumption for highest and best use that would blend with existing development that surrounds the site, while capitalizing on the site’s highdensity development along the El Camino Real corridor. The General Plan designates the central block of the Civic Center for High Density Residential use (Figure 31) . The site is in the Public or Quasi-Public zoning district, and future development would require a zoning amendment (Figure 32).

The Relocation Study estimated the potential ground-lease revenue from development of predominantly market rate housing. A financial valuation (appraisal) was performed by Runde & Partners, Inc., using the program illustrated in the Preferred Concept, and are presented in Chapter 7: Economic and Financial Analysis.

The appraisal conforms to Santa Clara’s “inclusionary ordinance” (section 17.40.090) by assuming that at least 15% of all dwelling units could be affordable to households with income at or less than Santa Clara’s average median income (AMI).

DESIGN

CONCEPTS

PRELIMINARY CONCEPTS

A preliminary set of site planning concepts were developed to understand the reuse potential of the site and how development could relate to its surrounding context. Three kinds of residential types were explored, as well as a hybrid option, and are illustrated in Figure 32 and further described in Table 6

▶ townhomes;

▶ garden apartments; and

▶ podium apartments.

All concepts maintain a twenty-foot setback and show around 40 percent of the site area as open space.

CHAPTER 6: POTENTIAL REUSE OF EXISTING CIVIC CENTER

33 | PRELIMINARY CONCEPTS FOR CIVIC CENTER REUSE

DESIGN

PRINCIPLES

All design concepts developed by WRT illustrate best practices for walkability and urban form, including:

▶ building edges, entrances, and windows facing all streets and community open space

▶ active ground floor uses facing Civic Center Drive and Civic Center Park

▶ extending Reeve Street to improve street connectivity

▶ publicly-accessible open space, including a midblock space that connects directly to Civic Center Park and El Camino Real

PREFERRED CONCEPT FOR CIVIC CENTER REUSE

A Preferred Concept was arrived at after reviewing preliminary design concepts with DCTF and receiving guidance. The Preferred Reuse Concept shown in Figure ## illustrates the following:

▶ a density of 50 du/ac, consistent with the High Density General Plan Land Use Designation;

▶ building height of four stories and forty-five feet in height, except to allow added height facing Civic Center Park and El Camino Real;

▶ street setbacks not less than twenty (20) feet in depth;

▶ permanent open space across at least 40 percent of the site; and

▶ at least one parking spot per unit.

CHAPTER 6: POTENTIAL REUSE OF EXISTING CIVIC

FIGURE 34 | PREFERRED REUSE DESGIN CONCEPT

ANALYSIS 07.

ECONOMIC AND FINANCIAL

This analysis is comprised of two related parts. The first assesses the economic impacts of a new Civic Center if located Downtown, such as increased economic activity and the sales tax revenues it might generate. The second part provides a financial analysis that describes financial models, project costs, potential sources of revenue, and cost offsets that would result.

ECONOMIC IMPACTS ON DOWNTOWN

This Relocation Study was undertaken, in part, to test to what extent a new City Hall could serve as an important economic catalyst in Santa Clara’s emerging downtown.

ESTIMATED SPENDING IN DOWNTOWN

To help evaluate the potential economic benefits of a new Civic Center on Downtown Santa Clara, Relocation Study team member Economic & Planning Systems (EPS) estimated potential spending at local retail and restaurant businesses by Civic Center employees and visitors. Because a new Civic Center would be built on land that could be used alternatively

for private development, EPS also compared Civic Center spending levels with other employment types, namely typical office, technology company office, and life science office with labs.

Factors that determine levels of spending for each alternative use include:

▶ the number of employees expected for a given floor area;

▶ per day spending estimated for each employee, on average;

▶ the number of visits associated with each type of use; and

▶ the amount a visitor would spend every visit, on average.

Table 7: Downtown Spending among Alternative Uses provides estimates for each of these factors to arrive

at an approximate level of spending for each alternative use. EPS derived data on worker spending from an ICSC survey of office workers.1 The analysis relies on per diem travel expense allowances for business travel published by the U.S. General Services Administration. 2

Estimated localized spending associated with the Civic Center is slightly more than can be expected for technology company offices and life science offices with labs, but is about one-quarter less than can be expected with typical offices. Technology companies typically provide on-site food and other employee amenities that reduce potential for external retail and restaurant sales. A key factor in the economic impact of the Civic Center is the on-site meetings that draw visitors to downtown. EPS assumes meeting visitors spend $10 on average. The

analysis considers spending ranges, with the higher end of the spectrum being more likely a greater number of retail and restaurant businesses operating in the downtown.

Note that this analysis assumed a floor area that included both a new City Hall and a new Utilities Building and it used the Smith Group Civic Center 2021 program estimate of 244,000 square feet, nearly equivalent to floor area assumptions used in this report. When considering options that have the City Hall without the Utilities Building, the number of employees generated, and the absolute dollar amounts associated with only a City Hall would be about one-third less.

TABLE 7 | DOWNTOWN SPENDING AMONG ALTERNATIVE USES

1 Niemira, Michael P. and John Connolly, International Council of Shopping Centers Research Department, Office-Worker Retail Spending in a Digital Age, 2012.

2 https://www.santaclaraca.gov/our-city/departments-a-f/communitydevelopment/planning-division/specific-plans/downtown-precise-plan/communityengagement/task-force/-fsiteid-1#!/

SALES TAX REVENUE

A portion of retail sales would be subject to local sales tax, which generates revenue for the City’s General Fund. Local sales tax accruing to the City is one percent of taxable sales. Annual sales tax revenue generated by spending Downtown would be modest, as indicated in Table 8: Annual Tax Revenue among Alternative Uses. Spending

associated with a 244,000 square-foot Civic Center would generate about $12,000 per year, while a new Civic Center without Utilities Building would generate about $8,000 annually.

CONCLUSIONS

Based on EPS’ analysis, economic impacts associated with Civic Center in the form of localized spending is not

enough to justify its relocation Downtown by itself, because office development on the same site would generate more spending and annual sales tax revenues would be modest. However, case study analysis conducted by EPS suggests that civic investments can be a factor in revitalizing downtown districts, with public investment signaling government commitment

to the district, new facilities drawing visitors for meetings and civic events, and new and adaptively reused buildings adding architectural interest. In the absence of early market demand for new commercial office development, a new civic center could help catalyze a new downtown.

FINANCIAL ANALYSIS

This section provides a financial analysis that describes:

▶ financial programs and tools;

▶ financial models for finance and project delivery for a new Civic Center;

▶ fundamental stay-orrelocate scenarios for the Civic Center; and

▶ financial evaluation for the Preferred Civic Center Concept on Block D with reuse of the Existing Civic Center campus, versus remaining at the Existing Civic Center.

FINANCIAL PROGRAMS AND TOOLS

A wide range of revenue, funding, and financing sources are available to support economic development projects such as the Santa Clara Civic Center Relocation project. The different sources each have their own risks and potential benefits that must be carefully considered in the context of the City’s goals, objectives, and budget. The most desirable options – and combinations thereof – will be those that offer the greatest potential impact and revenue certainty with the lowest associated risk for both the City and the project developer. Protecting the City from economic downsides, transaction simplicity, and lowest costs are traits of “low risk” funding options.

Some of the revenue and funding sources that were assessed for the Project are described below. These sources are all either known to PFAL, identified through research, or were included in the funding programs for the case studies that the WRT team developed.

JOINT DEVELOPMENT SUPPORTED BY USER FEES / TENANT LEASES

Joint Development refers to the development of a public project and an adjacent complementary private real estate development. In a joint development, the City would partner with a private developer to share capital costs and, ideally, benefit from the rewards of a successful development. Most frequently, this takes the form of a contribution of

land to a real estate developer who would then complete a commercial, residential, or mixed-use real estate project. The private developer then provides ground lease payments to the government partner over time, implements the public project directly, or alternatively, provides payment to a public sector sponsor to offset the costs of the public project. These payments or contributions would be sourced from tenant user fees or tenant leases of the private development. The City could potentially also be a tenant of the new development.

Under the right circumstances and with careful consideration of the equitable sharing of both costs and benefits, joint development can be a very effective tool for government to advance priority projects.

Risk Rating: High – given

occupancy and rental demand fluctuations, but this can be managed with the right partner and commercial arrangements between the parties. Maintaining high-quality, full-occupancy tenancy and reducing/managing vacancies requires careful management. Medium risk in managing stakeholder and public perception. Community outreach and education is essential to ensure the public understands the benefits and structure of the development agreement.

Potential Impact: Best option for funding a portion of capital costs. The City also has the opportunity under this structure to offset operations and maintenance expenses. Significant revenue potential exists that can help support capital cost, and ongoing operations and maintenance costs.

TA X INCREMENT FINANCING

Tax increment financing (“TIF”) uses dedicated tax revenue growth for a special purpose, such as, in this case, to repay debt for a public project. The baseline tax receipts are maintained while any growth is allocated to the new project. According to a 2020 report prepared for the California Governor’s Office of Planning and Research, the factors that support the establishment of a TIF district include:

▶ A strong real estate market where new private development is anticipated.

▶ Ability to capture a significant portion of the property tax.

▶ Ability to partner with other taxing entities to increase the revenue generated by the district.

▶ Availability of other sources of funding. Up-front funding sources are frequently required given that TIF revenues are often not sufficient at the outset to issue a bond.

▶ Community support to avoid public protests.

▶ A local champion to advocate for the project.

▶ An adopted specific plan that identifies the need for the new project.

There are three types of TIF financing options available to municipalities in California:

1. INFRASTRUCTURE FINANCING DISTRICTS (“IFDS”)

Formation of an IFD requires a two-thirds vote, and another two-thirds vote must be won to issue debt. The vote is taken among registered voters if there are twelve or more such voters in the district; otherwise, a vote of property owners is taken.

IFDs may be initiated by any affected taxing authority, including a city, county, or special district. The IFD is governed by an Infrastructure Financing Plan (“IFP”) and is authorized to collect tax increment from California’s general one-percent property tax. Funds can be used for capital improvements such as highways, transit, water systems, sewer projects, flood control, childcare facilities, libraries, parks, and solid waste

facilities. IFDs have not been widely implemented because of the restrictions and challenges associated with them.

2. ENHANCED INFRASTRUCTURE FINANCING DISTRICTS (“EIFDS”)

Enhanced Infrastructure Financing Districts (“EIFDs”). EIFDs offer more flexibility than IFDs. EIFDs may be initiated by any affected taxing authority, including a city, county, or special district, and like IFDs, are also governed by an IFP. Each participating taxing authority may choose to contribute a portion of its share of the general one-percent property tax as well as the property tax in lieu of a vehicle license fees (“VLF”). EIFDs can be used for the purchase, construction, or improvement of any real property with a

useful life of at least 15 years inside or outside the district, and, since 2018, they can fund the maintenance of public facilities financed by the district. However, EIFDs cannot be used to finance any other costs of ongoing operations or services. EIFDs can be formed when a simple majority of the member public agencies vote in favor of formation. Voter approval of 55% is required to issue any debt financing, and debt may not have a term of more than 45 years. Many jurisdictions are using EIFDs to fund large scale capital infrastructure projects. The cities of West Sacramento, Napa, San Diego, and the counties of Riverside and Los Angeles are among those using EIFDs. When considering whether forming an EIFD is a viable option, the first test would be to evaluate the projected amount of tax increment revenue that would

be generated. In some cases, it may take several years before the revenue is sufficient to adequately bond against.

3. INFRASTRUCTURE AND REVITALIZATION FINANCING DISTRICTS (“IRFDS”)

Infrastructure and Revitalization Financing Districts (“IRFDs”). IRFDs must receive approval of two-thirds of voters both to form and issue bonds. Property tax in lieu of VLF revenues may not be used. However, IRFDs come with some advantages over EIFDs. For example, IRFDs allow multiple “project areas” within a district, for which bonds can be issued secured by the entire district. While IRFDs have a 40-year term, the term can start at different times for each project area within the IRFD. The flexibility in the start dates for different project areas

and ability to cross-collateralize debt between the project areas are among the main benefits of IRFDs. Additionally, they can also be created without the development of a separate financing authority and are allowed to annex property.

Risk Rating: Medium. Complex inter-agency requirements and set-up costs.

Potential Impact: Marginal revenue potential could support capital, operations, and maintenance costs over time.

PARKING FEES

Parking fees can be a significant revenue source if in highparking-demand areas but can be controversial when implemented in locations where there is not already a culture of paying to park. Fees can be adjusted to support policies such as encouraging transit and retail utilization.

Risk Rating: High. Market demand, volatility, and stakeholder management can result in implementation complexity.

Potential Impact: Marginal revenue potential could help offset capital, operations, and maintenance costs.

MELLO-ROOS TAXES

A Mello-Roos is a special tax assessment district to finance local infrastructure or services.

Mello-Roos must be approved by 2/3 of the voters within the district. Taxes are secured by continuing lien and levied annually against property in district.

Risk Rating: High. 2/3 voter approval required. High level of coordination required with County tax assessor.

Potential Impact: Marginal revenue potential could help offset capital, operations, and maintenance costs.

SOLAR GENERATION

Solar power can offset operating costs. Revenue can also be generated through rental payments from solar developers who lease public property for solar installations.

Risk Rating: Medium. 3rd party coordination required.

Potential Impact: No

significant revenue is expected but rental payments could help defray operating costs.

LAND SALES

The sale of the existing City Hall site could generate meaningful revenue for City, however the City has indicated a preference to not sell owned property.

Risk Rating: Medium. Valuation, timing of sale, potential legal restrictions, Surplus Land Act requirements.

Potential Impact: Could be a source of a significant amount of revenue for the City.

NEW TAX

Research in the City of Santa Clara (2018) suggests voter support on the order of 7090% for a new property tax if proceeds were used for infrastructure improvements,

new parks, maintaining & repairing local parks, etc.

Risk Rating: High. Voter approval required.

Potential Impact: Unknown due to multiple demands on generated revenue.

RETAIL CONCESSION RENTALS

Retail concession rentals include cafés, sundries, etc. where businesses pay rent to the City to occupy space in Cityowned buildings. Based on an assessment performed in other jurisdictions, potential revenue is not expected to be substantial - in fact City might need to subsidize rent.

Risk Rating: Low. Ease of implementation and low expected revenue.

Potential Impact: No significant revenue expected.

CELL TOWER INSTALLATION

Cell towers can generate rental revenue on the order of $2,000-5,000 per month for the property owner.

Risk Rating: Low. Ease of implementation and low expected revenue.

Potential Impact: No significant revenue expected.

NAMING RIGHTS AND ADVERTISING

Opportunity might exist to name public facilities, sell billboards, signage, or other advertising media. While this is a low risk undertaking, it is unlikely to generate significant revenue. Local attitudes will need to be considered – it may not be publicly acceptable to name specific publicly owned properties.

Risk Rating: Low. Ease of implementation and low expected revenue.

Potential Impact: No significant revenue expected.

NEW MARKET TAX CREDITS (“NMTC”)

NMTC are a form of funding for a project where a developer is provided with authorization to sell tax credits to an investor who wishes to reduce their tax burden. Santa Clara’s Project area is within a boundary identified as Qualified, Severely Distressed which is therefore eligible for the NMTC.

Risk Rating: Medium. Transaction structures are complex, size of investment is small compared to the Project’s potential construction cost, and there would be a limitation on available transaction structures to maintain NMTC eligibility.

Potential Impact: Could marginally subsidize the capital cost of the Project.

STATE-LEVEL TAX CREDITS

The California Competes Tax Credit for commercial businesses applicants requires that 75% of employees work in areas of high unemployment or high poverty, so the project may not be in an eligible geography. The Project is in areas that qualify for New Employment Tax Credits, which requires that new jobs be created. Programs may help support tenancy needs but would not help fund project’s construction costs.

Risk Rating: High. Tenants need to apply for tax credit.

Potential Impact: Could marginally subsidize the capital cost of the Project.

FINANCING OPTIONS

Some of the financing options that were assessed for the Project are described below. These sources are all either known to PFAL, identified through research, or were included in the funding programs for the case studies that the WRT team developed.

FEDERAL LOAN PROGRAMS

TIFIA + RRIF DEBT SERVICE

USDOT Transportation

Infrastructure Financing and Innovation Act (TIFIA) loans and Railroad Rehabilitation Infrastructure Act loans at a fixed-rate equivalent to 30-year Treasuries for maturities of up to 35 years. Eligible projects must be within one-half mile radius of a federally-regulated railroad or intercity transit facility. Projects

must secure a credit rating and meet federal assurances to be eligible. For example, projects must satisfy the federal NEPA process and meet Buy America requirements.

Risk Rating: Low. While the timeline of securing a loan is about 18 months, it is a relatively predictable process if the City’s revenue supports credit analysis by the DOT.

Potential Impact: High. Lowest cost of debt available in the capital markets.

TAX EXEMPT BONDS AND CERTIFICATES OF PARTICIPATION

Tax-exempt bonds and certificates of participation are both a source of financing. For joint development opportunities, private use components of the project could not be financed with tax exempt debt, but private activity bonds could potentially be utilized for workforce and lower-income housing if awarded allocation by the state.

Risk Rating: Low. Assumes credit analysis by rating agencies and investors.

Potential Impact: Cost efficient form of debt.

BANK DEBT

Banks with municipal, real estate, and infrastructure appetite will likely be willing

to lend to the City and the Project. The maturity of a bank loan will likely be shorter than using bonds (3-10 years versus 30-40 years), bank debt may be favorable because of the way interest is incurred and debt can be structured.

Risk Rating: Low. Risk assumes that committed revenue supports credit analysis by rating agencies and investors.

Potential Impact: Cost efficient form of debt.

SUMMARY

A summary of these options is provided in the table below. To be conservative, PFAL limited its investigation into the Project costs to the revenue and funding sources that could reasonably be quantified within the time and budget constraints of this study. While most of these options were not included in

the financial modeling, they do remain as viable alternatives to pursue to help defray City costs for the Project. PFAL strongly recommends that the City apply for grants available through the state to help defray the cost of any new construction.

PROJECT DELIVERY MODELS AND FINANCING ALTERNATIVES

PFAL considered a wide variety of different models that could be used to deliver the Project, ranging from a traditional designbid-build approach through several different variations of public private partnerships. Our chief area of focus was to consider how best to manage the risks associated with undertaking a major project such as the Downtown Relocation. PFAL did not investigate privatization options, as these were deemed to be unattractive to the City and inconsistent with their goals and objectives.

In a typical large-scale construction project, there are multiple categories of risk that can be allocated to either the

public or private sector. The graphic below shows a typical allocation of risk based on different delivery methods.

DELIVERY OPTIONS

Each delivery alternative has different characteristics. Broadly

speaking, a public private partnership model is the most effective means to transfer risk to the private sector developer without losing ownership or control of the process and the facilities. The key features of the different delivery methods are shown in the chart below.

By transferring risk to the private sector, the public sector can have the greatest certainty around cost and schedule for a project’s construction, operations, and maintenance.

FINANCE AND PROCUREMENT SEQUENCE AND KEY DECISIONS

A well-planned and considered procurement process would proceed in several distinct steps. A potential process that includes the City acquiring the existing courthouse site, relocating to downtown, and leasing the existing Civic Center site would generally proceed as follows under best practice:

1. The City determines:

▶ The desired project delivery methodology (D/B, DBFOM, Build-to-Suit) based on thorough risk assessment that identifies qualitative and quantitative risks associated with different project elements.

▶ The desired property ownership model and whether the City has a preference to lease or own the new facilities.

In some cases, building ownership is not a necessary objective of the government. This depends largely on the transaction

structure and the potential consequences of a default by the government in terms of lease payments or debt service.

▶ Whether additional revenues are available to offset project costs. These may include rental payments for ground leases, parking revenue, NMTC, etc.)

▶ If co-location with other government agencies or other related building uses would be desirable or beneficial in terms of

creating cost efficiency or cost sharing opportunities.

2. Once these key decisions have been made, City would initiate an environmental approval process and procurement process to identify a Developer for the new facility, such as a qualifications-based selection or a two-step process where developers are shortlisted and then provide committed bids to design, build, and potentially finance, operate, and maintain the new facilities.

3. Site acquisition and preparation

▶ Simultaneously with steps 1 and 2 listed above, the City would purchase the Courthouse property downtown, assemble the owned parcels, and eventually demolish the courthouse facility and prepare the site for construction.

▶ Parcels are assembled.

▶ Courthouse is demolished.

4. Developer selected

The selected developer would initiate site work. The courthouse facility would be demolished and the New City Hall designed and constructed.

5. City Hall and personnel would relocate to the new downtown facilities.

6. Under the Surplus Land Act, the City would make the existing,

now unoccupied Civic Center site available to affordable housing developers. Development of the site – whether by affordable housing developers or another developer option – would occur on its own timeline.

SUMMARY OF PROCUREMENT AND FINANCING OPTIONS

Because the capital cost of the Project will likely exceed available funding sources, PFAL anticipates that the City will need to finance a significant portion of the Project’s capital cost. The following alternatives were considered as part of PFAL’s analysis:

▶ Traditional, tax-exempt municipal bonds (allowable for public use facilities only).

▶ Private Financing to be secured by the relevant developer for any private uses such as market-rate

residential, commercial, or retail development.

▶ Private Financing to support a design-buildfinance-operate-maintain (“DBFOM”) delivery model.

▶ Hybrid – tax exempt municipal + private financing.

▶ TIFIA/RRIF loans for public facilities that meet eligibility requirements.

These financing options are available to use in different combinations for the options assessed by the WRT team. The optimal combination of the financing strategies will depend on market conditions at the time.

1. New Downtown City Hall and Long-Term Land Lease to a Mixed-Use Developer

▶ Traditional municipal debt for public uses only

▶ Private financing for private uses

▶ Hybrid – municipal debt + private financing

▶ TIFIA/RRIF for public uses

2. New Downtown City Hall + Mixed Use / Blended Partnership in Single Development Effort

▶ Hybrid – municipal + private financing (condominiumized facility)

▶ Note: limited developer competition and limited interest from private tenants

▶ TIFIA/RRIF for public uses

3. New Downtown City Hall + Utilities Building in Consolidated Civic Center

▶ Traditional municipal debt

▶ Private financing for DBFOM

▶ Hybrid financing

▶ TIFIA/RRIF financing

STAY-ORRELOCATE SCENARIOS

The WRT team received instruction from the Downtown Task Force to analyze the implications of a downtown relocation compared to remaining at the existing Civic Center campus. Financial implications of relocating the Civic Center involve both direct and indirect impacts, benefits, and costs. A high-level look at the most fundamental stayor-relocate scenarios has been provided to illuminate considerations that might be less apparent.

The future of the Civic Center could follow several scenarios, as described in Table 12: Stayor-Relocate Scenarios. The City could follow one of two paths if it remained in the existing Civic Center facilities.

Under Scenario 1 , the “maintain status quo” scenario, the City stays in the Existing Civic Center, continues to pay routine O&M expenses as currently budgeted, and does not invest in strategies to catch up on deferred maintenance. Scenario 1 also includes the cost of leasing an additional 38,000 square feet of office space off-site to meet futures space needs, consistent with Smith Group projections and in order to make a fair comparison with the other “build scenarios.”

In Scenario 2 , the City stays but addresses accumulated lifecycle and deferred maintenance costs, such as to upgrade building systems, rooftops, and essentially bring buildings to current code. Scenario 2 requires City staff to relocate entirely or in phases, depending on the renovation approach, leasing space offsite during construction. It

also assumes that the City would continue to lease an additional 38,000 square feet of office space off-site after improvements are complete, to address the space needs and floor area anticipated by Smith Group for future growth.

Importantly, Scenario 2, as a stay-and-modernize approach, would logically also involve building renovation costs. Empirical evidence suggests that major renovations on buildings of the age of Santa Clara’s current facilities can be as or more expensive than new build construction. The reasons for this are (1) that structural, seismic, and foundation condition cannot be known until renovations commence and (2) limited renovation typically uncovers unknown issues that result in additional work and repair that had not been anticipated in initial budgeting exercises. More extensive work

leads to extended construction durations, and the owner has few choices once the renovations have commenced. The owner is unlikely to be able to negotiate or procure competitive pricing within required timelines, leading to higher pricing and cost escalation. Scope and cost of renovations can vary greatly, and an estimate of renovation costs has not been made due to all the variables described above. Scope and cost of renovations can vary greatly, and an estimate of renovation costs has not been made due to all the variables described above.

In Scenario 3 , the City could demolish existing Civic Center buildings and rebuild on the current Civic Center site. Scenario 3 also requires that staff relocate during construction. There would be no need to lease additional

office space off-site because new construction would fully address future space needs.

Scenarios 4 and 5 describe relocating the Civic Center to Downtown by leasing facilities, or by building and owning new facilities. Staff need not relocate during either of these scenarios. Table 7 describes the model, assumptions and comparisons of these alternatives. Given the preliminary nature of the overall program and space requirements, the comparative results are illustrative as options with associated cost estimates.

The following sections compare the estimated costs of: Scenario 1. Maintain Status Quo; Scenario 2. Stay & Modernize; and Scenario 5. Build New Facilities Downtown. Analysis of remaining options (Scenario 3. Rebuild on Existing Site and Scenario 4. Relocate to Leased Space Downtown) were outside the

scope of the Relocation Study.

1. MAINTAIN STATUS QUO

Status quo – all facilities remain in place at Warburton campus. Additional space is leased offsite.

2. STAY & MODERNIZE

3. REBUILD ON EXISTING SITE

Current facilities gut renovated, reorganized for modern space requirements and additional staff. Add’l space is leased offsite. Current facilities are demolished and rebuilt onsite, and include additional space to meet future space needs.

PRO No immediate additional large expenditure required. Can be progressed in phases.

No acquisition required. Reduced O&M costs, all staff in single building. Cost control over design and construction processes.

4. RELOCATE TO LEASED

SPACE DOWNTOWN

City leases existing buildings downtown.

5.

BUILD NEW FACILITIES DOWNTOWN

All City functions move to new, purpose-built construction site downtown, and fully address future space needs.

Low upfront cost.

COST

Growing deferred maintenance and financial liability.

Higher than necessary operating costs to maintain current buildings.

Facilities undersized for current staff.

Little room for growth and expansion.

Cost of replacing deficiencies in Facilities

Condition Assessment is $18M. If deferred, current deficiencies would cost $30M in year 20. Additional 38,000 sf required at an average annual lease cost of $2.7 million.

Renovation risk: contractor appetite low. Unknown/ noncontrollable costs. Unknown maximum cost. Swing space required for staff during renovation. Aged building may require more extensive rehab than expected. Continued deferred maintenance issue.

Temporary space required for staff during construction estimated at $8.3M for lease costs along.

City does not own property. Risk of lease cost increases. No control over future improvements.

Removes deferred maintenance liability. Improved efficiency in modern facilities. Cost control over design and construction.

Operations, lifecycle, deferred maintenance and renovation costs. Temporary relocation leasing costs estimated to be $4-8 million.

An additional 38,000 sf required to house City staff at an average annual lease cost of $2.7M.

$260 million capital cost estimate.

$450 million in lease costs over 30 years.

Costliest construction option.

$260M capital cost estimate. Maintenance and storage structures TBD.

COMPARATIVE FINANCIAL EVALUATION

To perform the comparative analysis, PFAL requested data on the cost of operations at the existing campus, and information on the current life-cycle replacement program which were unavailable from the City. In the absence of available data from the City, PFAL made a number of assumptions that informed a quantitative comparison of these options. These assumptions are based on a thorough review of benchmarked values in other jurisdictions for similar facilities.

OPERATIONS & MAINTENANCE (O&M)

Operations and maintenance includes routine day-today activities necessary for a building’s use, such as janitorial duties, adjustments to mechanical equipment, regular replacement of features

for normal wear-and-tear, and repairs, but not equipment replacements.

LIFECYCLE COSTS

Lifecyle costing is an asset management approach that accounts for the whole life of asset ownership and specifically includes replacement and upgrades of building systems in a timely and appropriate manner. These expenses are described separately from routine operations and maintenance (O&M). If performed in a thorough and timely manner, O&M and lifecycle replacements avoid deferred maintenance. The benchmarks for O&M and lifecycle maintenance are illustrated below.

DEFERRED MAINTENANCE LIABILITY

Deferred maintenance is preventative maintenance that has not been completed on schedule. This includes

accumulated building system and building upgrade costs that have not been addressed within O&M or lifecycle activities. Deferred maintenance liabilities are an issue of concern for nearly all government facilities. Major maintenance dollars are difficult to program in public budget processes, where infrastructure investments compete for revenue allocations against the community’s need for public services. Consequently, city maintenance engineers are challenged to maintain buildings with fewer resources than best practices require, and they are usually tasked with keeping aging buildings operating with limited staff and resources. PFAL has been conservative in the estimate of the City’s deferred maintenance liability described in Table 14. Deferred maintenance costs are likely growing every year as the current facilities age beyond their useful life. An accurate understanding of the City’s deferred maintenance liability is essential for a reliable estimate of the “stay and

modernize” alternative (Scenario 2) described above.

RENOVATION COSTS

Renovation costs would be incurred if the City chose to stay and modernize (Scenario 2). Renovation costs include changes to create more functional space for City staff, such as to reconfigure walls for greater efficiency or add wayfinding signage, or to make aesthetic improvements, such as to replace finishes and light fixtures. Because municipal priorities vary and the underlying condition of the buildings is unknown, the scope and cost of renovation cannot be ascertained as part of this report for reasons stated earlier. Nevertheless, it is safe to say that renovation costs can be significant, in that project precedents known by PFAL have per square-foot renovation costs that approach – and even exceed – the costs of new construction.

TABLE 13 | ROUTINE O&M AND LIFECYCLE BENCHMARKS

LEASING COSTS

Two types of leasing costs are associated with “Stay Scenarios.” If the City were to stay in existing buildings at the current Civic Center, their total floor area would be about 38,000 square feet under than the total future space needs estimated by Smith Group. For Scenarios 1 and 2, therefore, this amount of space would need to be leased off-site to maintain the same space-need assumptions constant among all Scenarios. Scenarios 2 and 3 would also involve temporarily leasing “swing space” – office space that would be leased across about two years as Scenario 2 renovation or Scenario 3 new construction occurred. Leasing space to accommodate City staff is expected to have a cost of about $8 million per year. In the chart below, we have assumed that only 50% of staff is relocated at any one time.

(1) Operations and Maintenance Benchmarks: International Facility Management Association (IFMA), September 2017. Benchmarks in the report are escalated to year 2022

(2) Range is dependent on housekeeping and other soft services, unionization of staff, information technology infrastructure, and condition of elevators.

(3) Dependent on handback criteria and information technology infrastructure.

CONSTRUCTION COSTS

Rough order magnitude (ROM) construction costs used as inputs to financing a new facility were assembled and analyzed by TBD Consultants, which provided dollar estimates for Block D Options 1 and 3, as well as the Preferred Option that was based on Option 2 in TBD’s Cost Report. TBD Consultants’ Cost Report appears in the appendices.

“Mid-range” construction costs

were developed based on reasonable assumptions and based on standard industry practice, as well as TBD’s professional experience and knowledge of local construction market costs. Costs are based on construction costs in July 2023, with labor as local prevailing wage. The dates of construction are unknown, therefore cost escalation from July 2023 to the midpoint of construction have been excluded. Costs were gathered for each

Note that building renovation costs are NOT included. These would include improvements to more functional space for City staff and aesthetic improvements. The cost of renovations can vary significantly and, while renovation costs can be similar to new construction, these costs have not been included in this analysis on account of renovation cost uncertainty and variability. The magnitude of these costs could as much as double the total costs shown above, potentially bringing this scneario in line with the cost of new construction.

program element, including City Hall, Utilities Building, mixed use, subterranean parking, and above-grade parking, and development impact fees. Costs were organized using broad categories of costs, including construction of building core and shell, interior “fit-out” costs, and site preparation costs like demolition of existing buildings and removal of existing utilities. Exclusions consist of design fees and other preconstruction services, fixtures and

equipment, land acquisition, and other typical soft costs, etcetera. Site preparation costs associated with the demolition and removal of the Existing Civic Center were also estimated. With the exception of the City’s development impact fee all construction work beyond property lines (sidewalks, roads, paving, other hardscape and softscape, site improvements, site utilities, etc.) has been excluded from this construction cost estimate.

Based on TBD’s analysis, midrange ROM construction costs for the entire City Hall, Mixed Use, Blended Partnership development on Block D is $333 million. The City Hall portion is $153 million including core and shell, fit-out and city-owned site work required. The City Hall portion described here does not include parking costs, which were considered separately and are described below.

The mid-range construction costs for the subterranean and above-grade parking structure assume that a 141,237 SF parking garage is needed to accommodate the City’s 315 vehicles and the private development’s 193 vehicles, for a total of 508 parking spaces. Costs associated with the parking structures equal about $41 million and roughly 12 percent of ROM construction costs. A pro rata allocation was used to attribute the relative

cost share of constructing the new garage to the public versus private users. The City’s pro-rata share of the parking structure is approximately $25 million.

With regard to high costs attributed to the parking structure, note that California law AB 2097 eliminates parking requirements within one-half mile of high-quality transit, which includes Block D. Given increased opportunities for remote work, availability of public transit use, and expected availability of local Downtown destinations, reducing the overall parking garage structure size might be considered as a way to reduce construction cost.

Costs of acquiring the Courthouse parcel have also been accounted for within constructions costs, based on land valuation analysis performed by Runde and Partners

FINANCING A NEW FACILITY

PFAL’s financial model performed calculations based on a number of assumptions across additional project cost categories. These assumptions are shown in the table below.

TABLE 15 | KEY MODELING ASSUMPTIONS

Based on the TBD initial analysis, and using guidance from published materials on cost savings that are typically achieved on alternative delivery methods, PFAL calculated the following average annual costs of the new facility:

POTENTIAL OFFSETS

As discussed above, there are potential offsets to these annual costs in the form of reduced financing costs and additional revenue sources. The breakdown of these offsets described in Table 12 indicates a potential average annual debt service savings of approximately $6.5 million per year.

GROUND LEASE OFFSETS

Ground lease offsets describe the revenue that the City would receive if for-profit development were to occur on Block D and

with reuse of the existing Civic Center site. The estimates used program assumptions consistent with the Preferred Concept, which assumed that the General Plan and zoning would be amended to allow mixed-use residential on the existing Civic Center site.

A reliable and commonly used method to estimate ground lease rent is to apply a market extracted rate of return and derive the fee value of the underlying site in question. To do this, six comparable ground leases were examined. All leases were on the San Francisco Peninsula, and all but one were new leases. Lease terms ranged from 55 years, with options to extend, to 99 years. An overall rate of return of 5.5% was concluded based on comparable ground leases, which reflected the relatively low risk nature of residential development and currently high interest rates.

Includes building, site work, streets & infrastructure, pro ratacost of parking structure, parcel acquisition, other development costs and fees, 25% contingency, and efficiencies associated with each financial option.

It was the opinion of the appraiser, Runde & Partners, that as of June 2023 the annual triple net market ground rental value of the each of the subject properties would be in the order of:

Existing Civic Center Site –

$3,590,000

Block D Site (portion owned by City) – $ 297,000

To arrive at an as-is value for Block D, two deductions were applied: infrastructure upgrades required for downtown development for which cost estimates were provided by CSW|ST2 Engineering, and the cost of acquiring the Stateowned portion of Block D. The value of the portion of Block D owned by the State of California would be offset by price of the land sale. Downtown infrastructure would be financed would be paid by development.

Runde & Partners’ appraisal

TABLE 18 | PROJECTED USES OF FUNDS (NEW DOWNTOWN FACILITY)

reports are provided in the appendices. When viewing these reports, note that the initial report was drafted before Block D Option 2 was selected and refined subsequently as the Preferred Option. The initial report also included appraisals for Blocks A and B, and it included land sales as an option. From the standpoint of a fiscal administration, City staff determined that the value of Blocks A and B should remain

separate from a new Civic Center project, and that long-term leases rather than outright sales were in the City’s interest.

NET AVERAGE ANNUAL COST

Applying the offsets to the Project’s annual costs, the average annual cost to the City to build, operate, and maintain a new facility in Downtown (Scenario 5) ranges from $17.5 to $22.8 million.

COMPARATIVE ANALYSIS OF STAY VERSUS RELOCATE SCENARIOS

PFAL summarized the difference in net costs associated with three Scenarios described in Table 7 above: 1. Maintain Status Quo; 2. Stay & Modernize; and 5. Build New Facilities Downtown.

Were the City to decide to remain on the existing campus, continue routine O&M ($3.4M annually), lease additional needed space off-site, but continue to put off lifecycle and deferred maintenance investments (Scenario 1) the average annual cost to the City is estimated to be $6.1 million. As noted before, this average cost does not capture

the growing liability and risk of unmet lifecycle and deferred maintenance needs.

Alternatively, the City could choose to stay and modernize its existing facilities (Scenario 2) by making an additional investment in a major building renovation of any sum. Staff will need to be relocated during construction, with an estimated cost of $4 to $8 million per year in lease costs. Annualized over 30 years, this is equivalent to about $250,000 to $500,000 dollars per year.

As part of renovation, lifecycle and deferred maintenance needs would be addressed, and deferred maintenance upgrades could cost anywhere from $50-260 million over a 2-10 year period.

Importantly, renovation costs are NOT included. Empirical evidence from other projects indicates that these costs can

be as much as or in excess of the per square-foot costs of new construction.

Alternatively, the City could move Downtown into new facilities (Scenario 5) for an additional annual budget appropriation of $6.4 to $14.5 million over the stay and modernize (Scenario 2) with its lease costs of for additional space off-site.

As is discussed in Chapter H.8: Recommendations, the Relocation Study does not recommend Scenario 1 because it does not recognize real costs associated with deferred maintenance. To make a direct comparison among the three Scenarios more clear, absolute average annual facility costs associated with each Scenario are described in Table 19.

Annual Costs to the City

Scenario 1: Maintain Status Quo

Includes Routine O&M and Leasing Costs for Additional Space Needs.

Scenario 2: Stay & Modernize

Excludes Lifecycle and Deferred Maintenance Costs . Adds Lifecycle and Deferred Maintenance Costs, plus Temporary Lease Costs during Renovation. Does NOT include renovation costs.

Scenario 5: New Building Downtown

All Costs and Offsets

Renovation costs are NOT included and could be significant, as discussed above. These costs could potentially bring the cost of Scenario 2 in line with the cost of new construction.

TABLE 19 | DIRECT COMPARISON OF ANNUAL COSTS TO THE CITY

The benefits of relocating the City Hall facility (Scenario 5) include:

▶ attaining an appropriatelysized modern workplace,

▶ creating a place for civic gathering,

▶ avoiding the City’s growing deferred maintenance liability,

▶ establishing an architectural point of interest in

Downtown Santa Clara,

▶ encouraging housing production,

▶ activating Franklin Street, and

▶ facilitating redevelopment of the Courthouse property.

Other potential offsets include the funding and revenue options addressed above, such as:

▶ parking fees,

▶ sales tax revenue,

▶ tax increment,

▶ solar power, and

▶ additional ground leases.

Additional areas of investigation for further reducing costs include:

▶ sizing City Hall to reflect post-COVID work patterns,

▶ reintroducing Silicon Valley Power if available building capacity allows,

▶ reducing the size and cost of

the parking structure,

▶ refining the P3 leaseleaseback delivery model compared to a traditional bond financing, and

▶ sculpting the debt service payment profile to match expected City revenue.

See appendices for a summary of the pro forma that PFAL produced for this analysis.

Analysis performed at every stage of the Relocation Study culminated in the following recommendations.

RELOCATION MERITS

FURTHER CONSIDERATION

Every significant capital investment requires careful consideration of the benefits to the community and the consequences of budgetary resource allocation. Relocating City Hall would require expenditures greater than the current status quo. The report’s Financial Analysis compared the industry standard level of investment in existing comparable infrastructure to the level of investment required to build a new city hall.

Financial analysis estimated that City Hall relocation downtown (Scenario 5) would add approximately $11.4 to $16.7 million per year beyond

the estimated current annual expenditure, equivalent to between 4 to 7% of the City’s total current budget, which does not account for lifecycle and deferred maintenance costs. Deferred maintenance costs are real accumulated costs that have not been addressed nor budgeted for by the City. These costs include building systems upgrades (such as to modernize HVAC systems), structural upgrades (such as for seismic safety), and modernization upgrades (such as to comply with current ADA requirements). Because no estimate of City Hall deferred maintenance costs exists, PFAL has made conservative use of benchmarks to estimate deferred maintenance costs. Actual costs may be higher and escalate over time. Consequently, the Relocation Study does not find maintaining the status quo to be realistic and does not Scenario 1.

New downtown construction (Scenario 5) also merits consideration when compared to staying and modernizing at the existing Civic Center site (Scenario 2). Construction downtown is estimated between $6.4 and $14.5 million more than the stay-and-modernize scenario before renovation costs are considered. Renovation costs vary greatly depending on project scope and can be significant with per square-foot renovation costs approach new construction costs.

For more informed decisionmaking, financial analysis of relocating the Civic Center could be refined to include a more accurate accounting for the following questions:

How much space does the City need given changes in work since early 2020, when Smith Group concluded its work?

If the City was to stay and

modernize existing facilities, what would the scope and cost of renovations be?

What is the City’s preferred approach to project delivery and the method of financing, in consideration of capital outlays, on-going expenses (like operations and maintenance), and potential community benefits?

What would be a more accurate estimate of current O&M and lifecycle expenditures?

What would be a more accurate estimate of deferred maintenance costs at the Existing Civic Center, including seismic safety, ADA compliance, and other modernizations?

How could revenue from the reuse of the Existing Civic Center be maximized, such as by allowing higher density and a different development residential product mix than was assumed?

What can the City do to succeed in acquiring the Santa Clara Courthouse parcel from the State of California?

To what degree should community benefits that are not related to finance add weight to the relocation decision, and the design and program decisions that would accompany it?

RECOGNIZE IMPLICATIONS

OF DEFERRED MAINTENANCE COSTS

FOCUS ON CITY HALL WITH MIXED USE

The design and program that was clearly preferred by the DCTF combined a new City Hall with a maximized mixed use building on the remainder of the

site. This design orients activity around the Central Green with commercial amenities along an arcade on the Green, and orients the lobby towards Main Street and its connection to Civic Plaza Park. Locating parking primarily below grade yields more buildable area on the street frontages, allowing for commercial spaces and additional housing units along all sides of the block.

The DCTF thought that uses and activities associated with the Utilities Building would not be a priority given Block D’s size and limited development potential. Furthermore, that Silicon Valley Power would have sufficient options and resources to address future needs on their own accord, without being part of a new Civic Center.

REVIEW CHANGING NEEDS

While the civic center program recommended by Smith Group was completed in early 2020, changes have since occurred that could justify a smaller City Hall than was assumed. The COVID pandemic saw an enormous increase in remote work among office workers. While many employers are requiring that employees work in a common office on more days of the week, there appears to be a lasting trend towards some share of workers working remotely at least part of the time. An in-depth reassessment of City functions needs was not performed as part of this Study, and changes might have occurred, such as how community services are delivered and department staffing levels. Further analysis is needed by the City to determine what the appropriate mix of

remote/in-office work is desired, and the resulting space needs.

SELECT DELIVERY MODEL AND FINANCING

The financial analysis described in this report illustrates that Project delivery costs would vary depending on the delivery model assumed, as would roles and responsibilities assigned to public versus private partners. It is vital that decision-makers are informed of the different available project delivery models and parameters, along with recommendations based on City staff’s assessment of fiscal and other City interests, to reduce risk for the City and capitalize on market appetite for alternative delivery projects such as DBFOM.

ESTIMATE DEFERRED MAINTENANCE COSTS

Among the largest cost offsets associated with relocation are the growing deferred maintenance cost liabilities. Assessing the existing civic center building conditions and the level of deferred maintenance was outside the scope of this Study. Deferred maintenance goes well beyond past-due roof replacements. It includes major, often extensive upgrades related to: structural and seismic retrofits, ADA compliance, energy and other mechanical systems, etc. As discussed within “G. Economic and Financial Analysis,” the square-foot unit costs of deferred maintenance varied among available case studies, and therefore a deferred maintenance study of Existing Civic Center conditions is recommended to better inform City Hall relocation decisions.

MAXIMIZE REUSE VALUE OF EXISTING CIVIC CENTER

The potential revenue from reuse of the Existing Civic Center by a private developer could be more than was estimated for this Study, and should be further evaluated. The site could support higher density than was assumed based on DCTF guidance and the General Plan’s highest explicit density, while still addressing community character concerns. Furthermore, the residential types and unit counts assumed were illustrative, and were not informed developers’ assessments of highest and best use. The best value for the site would be ultimately determined by developers bidding to redevelop the site within design and use parameters set by the City.

ENGAGE JUDICIAL COUNCIL TO OBTAIN COURTHOUSE PARCEL

Development on Block D requires that the City engage the Judicial Council of California in order to acquire the courthouse site, as well as State and County representatives who could help facilitate the transfer and determine the community needs for specific court functions that occupy the property. If necessary, the City might work with the Judicial Council to consider alternative court locations for which site control can be obtained.

If the Judicial Council finds that the property is “surplus,” the Judicial Council has indicated that it must first provide the County of Santa Clara a right of first refusal. The City could explore options under the Judicial Council Rule 10.830 for

the Superior Court to sell or transfer or, if necessary, seek to gain special authorizing legislation to enable the disposition of the court property outside of the surplus process.

A copy of the Judicial Council’s letter appears in the appendices.

As a last resort, City might consider alternatives to Block D for the Civic Center project, such as to locate the project on City-owned Blocks A and B, or others examined in Chapter D of the report.

CONSIDER OTHER BENEFITS AND COSTS

Some case studies indicate that new civic centers can stimulate cultural activity and developer interest in the downtowns they inhabit. On the other hand, case studies and this report’s “Economic Impact Analysis,” show that economic activity in downtowns has more to do

with factors not associated with the presence of a civic center and related uses, such as the economic strength seen in the project sub-region.

Decision-makers should be informed of less-defined benefits and costs on the way to making a relocation decision. Such factors include: community identity and civic pride, catalyzing a new downtown, activation of street edges and open space, creation of cultural destinations, assistance in creating commercial destinations, and bringing developer awareness to Santa Clara’s Downtown and the many opportunities that it affords. These factors have been illustrated by urban design solutions and case studies contained in this report. Benefits and costs would also accompany reuse of the Existing Civic Center Site, such

as providing community open space and activating Civic Center Park and the El Camino Real corridor.

PURSUE GRANTS AND LOANS

This Report recommends that the City apply for grants available through the state to help defray the cost of any new construction. Of special note, the Federal Transit Administration’s “Transportation Infrastructure and Innovation Act” (TIFIA) program offers Federal credit assistance for qualifying transit-oriented development projects, in the form of direct loans, loan guarantees, and standby lines of credit. Eligible projects must be within one-half mile radius of federally-regulated railroad or intercity bus service. Block D is entirely within one-half mile of intercity bus stops along El

Camino Real, as defined by the Metropolitan Transportation Commission.

CONTINUE OUTREACH AND ENGAGEMENT

The City should continue its tradition of effective outreach and engagement. The DCTF and community input should continue to inform decision making, and cultivate an inclusive sense of shared purpose. The full value of a City Hall project could be more fully realized by engaging economists, financial institutions, Santa Clara University, and local property interests. Continued coordination among City departments and other government agencies could anticipate and help overcome potential obstacles to realizing an aspirational project. Finally, an even more aspirational

vision for a City Hall project could be cultivated by engaging community members and leaders.