Marina Highlights 2007 0410 - Laserfiche WebLink

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EiJY of San Leandro Marina Lodf/infl Development Page 14 · The funding by a public agency of a portion of the project, such as the parking garage or conference facility component. These components are then leased to the developer at a favorable rent. This type of program was utilized in Modesto and Fresno to develop hotel and conference facilities in those communities. · A rebate of a portion or all of the increased transient occupancy tax and or property taxes resulting from the development of the project. This mechanism was utilized by the City of Petaluma in the recent development of the Sheraton Hotel located along the Petaluma River Marina. · The use of tax-exempt bond financing to reduce the cost of capital for the project. There are numerous types of bond financing structures and one structure that was recently used was to fund the development of the 503-room Sheraton Grand Hotel in Sacramento. This bond financing required the city to form a special-purpose, not-for-profit entity structured in such a fashion to be eligible to issue tax-exempt bonds. Further, in order to sell the bonds to investors with less than the full faith and credit of the City of Sacramento, bond purchasers looked to certain "enhancements" to supplement the operating proforma of the hotel. The benefits to the City lie not only in the successful development of this project adjacent to its convention center, but also in the fact that all of the net operating income after the payment of the bonds, inures to the City. None of the development team has a direct or indirect interest in the profits of the hotel. The remuneration to the development team would come in the form of fees. · A direct subsidy in the form of an ongoing cash payment to the developer. An example of this is the Hyatt Regency Hotel in Sacramento. Here the City "leased" the site of the hotel to the developer. However, rather than receiving a ground rental payment, the City made an annual payment to the development group of approximately $1.5 million to subsidize shortfalls in operating income and debt service obligations. 2. City Participation for the San Leandro Marina Hotel Project There are numerous combinations of public support which can be evaluated. For the purpose of this report, we have further determined what total amount of participation would be required to generate an attractive IRR to a developer. As stated, we are of the opinion that the restaurant facility will be economically viable and will present an attractive potential development for restaurant developers and operators. On the other hand, the conference center hotel will almost certainly require the City's financial participation to equate the development cost with the estimated income- producing potential of the project.