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Santa Ana Redhill Development Prepared for: City of Santa Ana AECOM 7 Industrial Prototype would yield an RLV of approximately $17 million ($26/SF of land). Current market conditions indicate that development of both projects would be feasible. Economic Impact – AECOM estimated the economic impacts both of construction and ongoing operations (normalized to 2019) at stable occupancy for the Project and Industrial Prototype for the City of Santa Ana and Orange County. Due to greater construction costs and scale, the estimated one-time construction economic impacts the Project ($498 million) to the City of Santa Ana is greater than the impact of the construction of the Industrial Prototype ($76 million). On the other hand, due to the larger quantity of jobs that generate value to the economy, the estimated annual economic impact of the ongoing operations of the Industrial Prototype ($153 million) to the City of Santa Ana is greater than that of the ongoing operations of The Project ($58 million). Ongoing operations 1of the Project are estimated to generate over 1,200 jobs in Orange County annually, 349 of which could be captured by Santa Ana. These jobs are likely to be concentrated in Retail, Restaurants, Wholesale Trade and Real Estate with low to medium average annual wages. Ongoing operations of the Industrial Prototype are estimated to generate over 1,400 jobs in Orange County, 638 of which could be captured by Santa Ana. These jobs are likely to be concentrated in Architecture and Engineering, Scientific Research and Development and Wholesale trade with medium to high average annual wages. Fiscal Impact – AECOM estimated the potential revenues to the City’s General Fund from ongoing operations of the Project and Industrial Prototype, both of which are expected to generate a net fiscal surplus. The Project could generate an estimated $2.5 million in annual revenue to the City and cost $1.5 million in expenditures, resulting in an annual net fiscal surplus of approximately $1 million. The Industrial Prototype could generate an estimated $710,000 in annual revenue to the City and $185,000 in expenditures, resulting in an annual net fi scal surplus of approximately $525,000. Calculations for expenditures are based on an estimated service population 2 of approximately 2,300 for The Project and 300 for the Industrial Prototype. Discussion The market analysis provides evidence that both the Project and the Industrial Prototype would likely experience sufficient market demand to warrant development interest and attract tenants to the buildout project with strong rents and low vacancy rates. The development feasibility shows that under these market conditions, both alternatives yield positive residual land values (RLV) through a proforma analysis. The Project yields a higher RLV than the Industrial Prototype, but it also requires a much larger investment from the developer and could require further entitlements or impact fee assessments before construction could commence. The economic impact of the Industrial Prototype is larger than that of the Project, both in terms of employment and total economic output. The median salary of the jobs produced by the Industrial Prototype likely to accrue to the City of Santa Ana are also higher than those created by the Project. The fiscal impact of the Project is greater than that of the Industrial Prototype on both sides of the City’s balance sheet (expenditures and revenues). As such, the net fiscal benefit to the City of the Project is greater than that of the Industrial Prototype, but the City would also endure greater costs to extend services to the Project’s residents and employees. This results in a Revenue to Expenditure Ratio of approximately 1.6:1 for the Project and 3.8:1 for the Industrial Prototype. While the Project would likely create a greater net fiscal benefit, the greater expenditures to the City could warrant further discussion of cost allocation. The existing conditions of the industrial buildings at 2300, 2310, and 2320 Redhill Ave in Santa Ana are generally considered to be underperforming in the market and are not achieving the highest and best use for the two parcels (APN’s 43-222-07 and 43-2222-16) under currently allowable land use designations. According to Costar, the three buildings encompass approximately 212,000 square feet of warehouse and light manufacturing space built in 1979 and 1981, and a significant portion of one parcel lies vacant. Private investment into the land could achieve greater economics of scale and attract a high-end industrial client who demands updated, modern facilities. This would allow for a single tenant to maximize economic output in this industrial space. Through discussions with the City, AECOM developed the Industrial Prototype that would raise the assessed value, square feet of usable space, and employment to allow a more significant benefit/cost comparison to the Project at full buildout. 1 Ongoing operations are understood to be annually recurring impacts once the projects are built out, or permanent jobs and economic outputs as long as operations continue 2 The service population consists of all residents and a percentage allocation of workers based on residency and operating hours of Santa Ana residents and workers 3-234