Richmond City Council
March 18, 2022

1 The SunCal Concession on Fiscal ImpactStaff and finance team presented Council concerns regarding fiscal impact to SunCal last weekSunCal made the following concessions in the Rate and Method of Apportionment (“RMA”) in response:Special Tax B (services) on undeveloped property, whether owned by SunCal or another developer, to mitigate adverse fiscal impactAmount of annual tax determined by City appointed fiscal consultant, using actual sales prices and BAE (City peer review consultant) modelTax limited by the following:$6.3 million per year maximum tax allowed under the RMA on undeveloped taxable property within CFDAnnual inflator in maximum tax equal to no less than 2% per year, or the CPI subject to a 6% per year capAbility to reimburse undeveloped land owner for such taxes from Special Tax A (facilities) up to a cap of $15 million (lifetime for CFD). 2 Revised Worst Case Fiscal Impact Analysis with SunCal ConcessionAssumptionsUse homes sales prices from the Strategic Economics study done for the Point Molate Alliance and September 8, 2020These home sales price assumptions are significantly lower than those assumed by BAE in their June 29, 2020 study and by Integra in their February 7, 2022 studyAverage homes sales price, based on current product mix, is $571,000 per unitUse the same fiscal model prepared by EPS and refined by BAE, but with the Strategic Economics homes sales prices30 year build outNo need to set-aside $22.5 million cash payment from SunCal as a Fiscal Security Fund for negative fiscal impact 3 Comparing the Projected Homes Sales Price for Point MolateConsultantEPS Study/BAE reviewStrategic Economics IntegraDate of study6/29/20 9/8/20 2/7/22Product TypeSingle family1,400,000 1,088,200 1,800,000 Low rise townhomes1,175,000 652,700 1,300,000 Mid rise condo's1,250,000 521,000 1,350,000 Low rise apartments400,000 400,000 400,000 Mid rise apartments450,000 450,000 450,000 4 Withoutthe SunCal Concession: 30 Year Build Out (Strategic Economics Home Sales Prices)Cross-over in FY 205048 units per yearFiscal impact is not mitigated during build out, with potential release of the Fiscal Security Fund in FY 2039Fiscal Security Fund is fully depleted by FY 2034, resulting in negative impact to General Fund through FY 2049 $(25) $(20) $(15) $(10) $(5) $- $5 $10 $15 $20 $25202220242026202820302032203420362038204020422044204620482050 MillionsEnding Fund Balance (FY) $- $10 $20 $30 $40 $50Total Inflows Total OutflowsMillionsFiscal Security Fund: Cumulative Inflows vs. Outflows Property Transfer Tax on SunCal DDA Payment and Inter-Developer Land Sales CFD Special Fiscal Impact Tax on SunCal and Other Developer Property Initial Deposit from SunCal DDA Payment Draws to Mitigate Adverse Fiscal Impact 5 30 Year Cash Flows Withoutthe SunCal Concession on Fiscal ImpactFY Ending Beginning Fund Balance Initial Deposit from SunCal DDA Payment CFD Special Fiscal Impact Tax on SunCal and Other Developer Property Property Transfer Tax on SunCal DDA Payment and Inter-Developer Land Sales Draws to Mitigate Adverse Fiscal Impact Ending Fund Balance 2022- 22,500,000 - 562,500 - 23,062,500 202323,062,500 - - - - 23,062,500 202423,062,500 - - - - 23,062,500 202523,062,500 - - - - 23,062,500 202623,062,500 - 2,000,000 30,250 (5,137,361) 19,955,389 202719,955,389 2,000,000 30,250 (4,919,722) 17,065,918 202819,955,389 - 2,000,000 30,250 (4,702,082) 17,283,557 202917,283,557 - 2,000,000 30,250 (4,484,443) 14,829,363 203014,829,363 - 2,000,000 30,250 (4,266,804) 12,592,809 203112,592,809 - 30,250 (4,049,165) 8,573,894 20328,573,894 - 30,250 (3,831,526) 4,772,619 20334,772,619 - 30,250 (3,613,887) 1,188,982 20341,188,982 - 30,250 (3,396,247) (2,177,015) 2035(2,177,015) - 30,250 (3,178,608) (5,325,374) 2036(5,325,374) - 30,250 (2,960,969) (8,256,093) 2037(8,256,093) - 30,250 (2,743,330) (10,969,173) 2038(10,969,173) - 30,250 (2,525,691) (13,464,613) 2039(13,464,613) - 30,250 (2,308,052) (15,742,415) 2040(15,742,415) 30,250 (2,090,412) (17,802,577) 2041(17,802,577) 30,250 (1,872,773) (19,645,100) 2042(19,645,100) 30,250 (1,655,134) (21,269,984) 2043(21,269,984) 30,250 (1,437,495) (22,677,229) 2044(22,677,229) 30,250 (1,219,856) (23,866,835) 2045(23,866,835) 30,250 (1,002,216) (24,838,801) 2046(24,838,801) 30,250 (784,577) (25,593,129) 2047(25,593,129) 30,250 (566,938) (26,129,817) 2048(26,129,817) 30,250 (349,299) (26,448,866) 2049(26,448,866) 30,250 (131,660) (26,550,275) 2050(26,550,275) 30,250 85,979 (26,434,046) Total 22,500,000 10,000,000 986,000 (63,142,268) 30 Year Build Out With $22.5 Million Payment from SunCal Used to Fund Security Fund, Assuming An Average For Sale Price of $571,000/unit, Consistent with Strategic Economics Report 6 Withthe SunCal Concession: 30 Year Build Out (Strategic Economics Home Sales Prices)Cross-over in FY 205048 units per yearFiscal impact is fully mitigated during build outNo Fiscal Security Fund needed $- $0 $0 $1 $1 $1 $1202220232024202520262027202820292030203120322033203420352036203720382039MillionsEnding Fund Balance (FY): With SunCal Concession Scenario $- $5 $10 $15 $20 $25 $30 $35Total Inflows Total DrawsMillionsCumulative Inflows vs. Draws: With SunCal Concession Scenario Property Transfer Tax on SunCal DDA Payment and Inter-Developer Land Sales Initial Deposit from SunCal DDA Payment Draws to Mitigate Adverse Fiscal Impact 7 30 Year Cash Flows Withthe SunCal Concession on Fiscal ImpactFY Ending Beginning Fund Balance Initial Deposit from SunCal DDA Payment CFD Special Fiscal Impact Tax on SunCal and Other Developer Property Property Transfer Tax on SunCal DDA Payment and Inter-Developer Land Sales Draws to Mitigate Adverse Fiscal Impact Ending Fund Balance 2022- - - 562,500 - 562,500 2023562,500 - - - - 562,500 2024562,500 - - - - 562,500 2025562,500 - - - - 562,500 2026562,500 - 5,137,361 30,250 (5,137,361) 592,750 2027592,750 4,919,722 30,250 (4,919,722) 623,000 2028592,750 - 4,702,082 30,250 (4,702,082) 623,000 2029623,000 - 4,484,443 30,250 (4,484,443) 653,250 2030653,250 - 4,266,804 30,250 (4,266,804) 683,500 2031683,500 - 4,049,165 30,250 (4,049,165) 713,750 2032713,750 - 3,831,526 30,250 (3,831,526) 744,000 2033744,000 - 3,613,887 30,250 (3,613,887) 774,250 2034774,250 - 3,396,247 30,250 (3,396,247) 804,500 2035804,500 - 3,178,608 30,250 (3,178,608) 834,750 2036834,750 - 2,960,969 30,250 (2,960,969) 865,000 2037865,000 - 2,743,330 30,250 (2,743,330) 895,250 2038895,250 - 2,525,691 30,250 (2,525,691) 925,500 2039925,500 - 2,308,052 30,250 (2,308,052) 955,750 2040955,750 2,090,412 30,250 (2,090,412) 986,000 2041986,000 1,872,773 30,250 (1,872,773) 1,016,250 20421,016,250 1,655,134 30,250 (1,655,134) 1,046,500 20431,046,500 1,437,495 30,250 (1,437,495) 1,076,750 20441,076,750 1,219,856 30,250 (1,219,856) 1,107,000 20451,107,000 1,002,216 30,250 (1,002,216) 1,137,250 20461,137,250 784,577 30,250 (784,577) 1,167,500 20471,167,500 566,938 30,250 (566,938) 1,197,750 20481,197,750 349,299 30,250 (349,299) 1,228,000 20491,228,000 131,660 30,250 (131,660) 1,258,250 20501,258,250 30,250 85,979 1,374,479 Total - 63,228,247 986,000 (63,142,268) 30 Year Build Out With SunCal Concession on CFD Tax on Undeveloped Property to Mitigate Fiscal Impact, Assuming An Average For Sale Price of $571,000/unit, Consistent with Strategic Economics Report 8 Conclusion: The Potential for Negative Fiscal Impact is as Fully Mitigated as it can be Under the Mello-Roos LawThe Special Tax B for services levy on undeveloped property over a 30 year build out fully covers the interim negative fiscal impactTotal Special Tax B paid for by developer in this scenario is $63 millionReimbursement from Special Tax A (facilities) to developer is $15 millionNet loss to developer of $48 millionSpecial Tax A reimbursement reduce funding for facilities, but have no impact on City’s fiscal impact (Special Tax B does not pay reimbursement)Fiscal impact is fully mitigated without the use of the $22.5 million payment from SunCal for a Fiscal Security FundNegative fiscal impact can only occur if (1) inflation in City operating expenses exceeds 6% per year for a number of years and (2) inflation in home prices is significantly less than 6% per year over the same period