HomeMy WebLinkAboutEMPIRE ECONOMICS
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AGREEMENT TERMINATION
Please complete this form when the attached agreement is no 10'" _~t. Aft CJ.: 86
Retum form to the Sr. Deputy Clerk of the Council (M-30). C.af2W'1-8!!:3S)ttirA JANA.ny
questions. CLERK Or c(jORC\C-'
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The agreement with ~ P"B7u9-r1Ur.l!:>~ , No.A-;;;>.ooS-~d-f:>
was completed on 1)cA- '.d8L .3/ ~t:7~ , and final payment has been made.
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Revised 8-7-03
City of Santa Ana
Clerk of the Council
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iNSURi\0lCr ON FlU
WORK iM,Y PROCEED
UNli!. II~SURANCE EXP.IRES
/- f?- D0
CLEflK OF COUNCIL
DATE, SEP 2 9 2005
A-2005-226
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CONSULTANT AGREEMENT
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THIS AGREEMENT, made and entered into this Ir day of !:!'er,1v/ItJJeJ ,2005 by
and between Empire Economics, Inc. (hereinafter "Consultant"), and the Cify of Santa Ana, a
charter city and municipal corporation organized and existing under the Constitution and laws of
the State of California (hereinafter "City").
RECITALS
A. The City desires to retain a consultant having special skill and knowledge in the field of
real estate market studies to perform a Price Point Analysis and Market Absorption
Study for a proposed Community Facilities District.
B. Consultant represents that Consultant is able and willing to provide such services to the
City.
C. In undertaking the performance of this Agreement, Consultant represents that it is
knowledgeable in its field and that any services performed by Consultant under this
Agreement will be performed in compliance with such standards as may reasonably be
expected from a professional consulting firm in the field.
NOW THEREFORE, in consideration of the mutual and respective promises, and subject to the
terms and conditions hereinafter set forth, the parties agree as follows:
1. SCOPE OF SERVICES
Consultant shall perform those services as set forth in Exhibit A to this Agreement.
2. COMPENSATION
a. City agrees to pay, and Consultant agrees to accept as total payment for its services,
the rates and charges identified in Exhibit A. The total sum to be expended under this
Agreement shall not exceed $30,000.00 during the term of this Agreement.
b. Payment by City shall be made within thirty (30) days following receipt of proper
invoice evidencing work performed, subject to City accounting procedures. Payment need not
be made for work which fails to meet the standards of performance set forth in the Recitals
which may reasonably be expected by City.
3. TERM
This Agreement shall commence on the date first written above and terminate on June 30,
2007, unless terminated earlier in accordance with Section 12, below. The term of this
Agreement may be extended upon a writing executed by the Executive Director of Finance and
Management Services and the City Attorney.
I. "
4. INDEPENDENT CONTRACTOR
Consultant shall, during the entire term of this Agreement, be construed to be an
independent contractor and not an employee of the City. This Agreement is not intended nor
shall it be construed to create an employer-employee relationship, a joint venture relationship, or
to allow the City to exercise discretion or control over the professional manner in which
Consultant performs the services which are the subject matter of this Agreement; however, the
services to be provided by Consultant shall be provided in a manner consistent with all
applicable standards and regulations governing such services. Consultant shall pay all salaries and
wages, employer's social security taxes, unemployment insurance and similar taxes relating to
employees and shall be responsible for all applicable withholding taxes.
5. WORK PRODUCT
All work product resulting from the services provided pursuant to this Agreement shall be
delivered to City in a hard copy and an electronic format determined by City's Project Manager and
Consultant. Consultant agrees that City shall own any and all work product developed or prepared
pursuant to this Agreement, and further, City may utilize such work product in any manner deemed
appropriate by City.
6. INSURANCE
Prior to undertaking performance of work under this Agreement, Consultant shall
maintain and shall require its subcontractors, if any, to obtain and maintain insurance as
described below:
a. Commercial General Liability Insurance. Consultant shall maintain commercial
general liability insurance naming the City, its officers, employees, agents, volunteers and
representatives as additional insured(s) and shall include, but not be limited to protection against
claims arising from bodily and personal injury, including death resulting therefrom and damage
to property, resulting from any act or occurrence arising out of Consultant's operations in the
performance of this Agreement, including, without limitation, acts involving vehicles. The
amounts of insurance shall be not less than the following: single limit coverage applying to
bodily and personal injury, including death resulting therefrom, and property damage, in the total
amount of $1 ,000,000 per occurrence. Consultant shall supply City with a fully executed
additional insured endorsement in substantially the form attached hereto as Exhibit B upon
execution of this Agreement and shall be approved in form by the City Attorney.
b. Reserved.
c. Worker's Compensation Insurance. In accordance with the provisions of Section 3300
of the Labor Code, Consultant, if Consultant has any employees, is required to be insured against
liability for worker's compensation or to undertake self-insurance. Prior to commencing the
performance of the work under this Agreement, Consultant agrees to obtain and maintain any
employer's liability insurance with limits not less than $1,000,000 per accident.
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d. Professional liability (errors and omissions) insurance, with a combined single limit of
not less than $1,000,000 per claim.
e. The following requirements apply to the insurance to be provided by Consultant
pursuant to this section:
(i) Consultant shall maintain all insurance required above in full force and
effect for the entire period covered by this Agreement.
(ii) Certificates of insurance shall be furnished to the City upon execution of
this Agreement and shall be approved in form by the City Attorney.
(iii) Certificates and policies shall state that the policies shall not be canceled
or reduced in coverage or changed in any other material aspect without
thirty (30) days prior written notice to the City.
f. If Consultant fails or refuses to produce or maintain the insurance required by this
section or fails or refuses to furnish the City with required proof that insurance has been procured
and is in force and paid for, the City shall have the right, at the City's election, to forthwith
terminate this Agreement. Such termination shall not effect Consultant's right to be paid for its
time and materials expended prior to notification of termination. Consultant waives the right to
receive compensation and agrees to indemnify the City for any work performed prior to approval
of insurance by the City.
7. INDEMNIFICATION
Consultant agrees to and shall indemnify and hold harmless the City, its officers, agents,
employees, consultants, special counsel, and representatives from liability for personal injury,
damages, just compensation, restitution, judicial or equitable relief arising out of claims for
personal injury, including health, and claims for property damage, which may arise from the acts,
errors or omissions of the Consultant or its contractors, subcontractors, agents, employees, or
other persons acting on their behalf which relates to the services described in section I of this
Agreement. The Consultant further agrees to indemnify, hold harmless, and pay all costs for the
defense of the City, including fees and costs for special counsel to be selected by the City,
regarding any action by a third party challenging the validity of this Agreement, or asserting that
personal injury, damages, just compensation, restitution, judicial or equitable relief due to
personal or property rights arises by reason of the terms of, or effects arising from this
Agreement. City may make all reasonable decisions with respect to its representation in any
legal proceeding.
8. CONFIDENTIALITY
If Consultant receives from the City information which due to the nature of such
information is reasonably understood to be confidential and/or proprietary, Consultant agrees
that it shall not use or disclose such information except in the performance of this Agreement,
and further agrees to exercise the same degree of care it uses to protect its own information of
like importance, but in no event less than reasonable care. "Confidential Information" shall
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include all nonpublic information. Confidential information includes not only written
information, but also information transferred orally, visually, electronically, or by other means.
Confidential information disclosed to either party by any subsidiary and/or agent of the other
party is covered by this Agreement. The foregoing obligations of non-use and nondisclosure
shall not apply to any information that (a) has been disclosed in publicly available sources; (b) is,
through no fault of the Consultant disclosed in a publicly available source; (c) is in rightful
possession of the Consultant without an obligation of confidentiality; (d) is required to be
disclosed by operation oflaw; or (e) is independently developed by the Consultant without
reference to information disclosed by the City.
9. CONFLICT OF INTEREST CLAUSE
Consultant covenants that it presently has no interests and shall not have interests, direct
or indirect, which would conflict in any manner with performance of services specified under
this Agreement.
10. NOTICE
Any notice, tender, demand, delivery, or other communication pursuant to this
Agreement shall be in writing and shall be deemed to be properly given if delivered in person or
mailed by first class or certified mail, postage prepaid, or sent by telefacsimile or other
telegraphic communication in the manner provided in this Section, to the following persons:
To City:
Clerk of the City Council
City of Santa Ana
20 Civic Center Plaza (M-30)
P.O. Box 1988
Santa Ana, CA 92702-1988
telefacsimile (714) 647-6956
With courtesy copies to:
Deputy City Manager for Development Services
City of Santa Ana
20 Civic Center Plaza (M-31)
P.O. Box 1988
Santa Ana, California 92702
telefacsimile (714) 647-6954
and
City Attorney
City of Santa Ana
20 Civic Center Plaza (M-29)
P.O. Box 1988
Santa Ana, California 92702
telefacsimile (714) 647-6515
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To Consultant:
Empire Economics, Inc.
Joseph T. Janczyk
35505 Camino Capistrano, Suite 200
Capistrano Beach, California 92624
telefacsimile (949) 661-8763
A party may change its address by giving notice in writing to the other party. If sent by
mail, communication shall be effective or deemed to have been given three (3) days after it has
been deposited in the United States mail, duly registered or certified, with postage prepaid, and
addressed as set forth above. If sent by telefacsimile, communication shall be effective or
deemed to have been given twenty-four (24) hours after the time set forth on the transmission
report issued by the transmitting facsimile machine, addressed as set forth above. For purposes
of calculating these time frames, weekends, federal, state, County or City holidays shall be
excluded.
11. EXCLUSIVITY AND AMENDMENT
This Agreement represents the complete and exclusive statement between the City and
Consultant, and supersedes any and all other agreements, oral or written, between the parties. In
the event of a conflict between the terms of this Agreement and any attachments hereto, the
terms of this Agreement shall prevail. This Agreement may not be modified except by written
instrument signed by the City and by an authorized representative of Consultant. The parties
agree that any terms or conditions of any purchase order or other instrument that are inconsistent
with, or in addition to, the terms and conditions hereof, shall not bind or obligate Consultant nor
the City. Each party to this Agreement acknowledges that no representations, inducements,
promises or agreements, orally or otherwise, have been made by any party, or anyone acting on
behalf of any party, which are not embodied herein.
12. ASSIGNMENT
Inasmuch as this Agreement is intended to secure the specialized services of Consultant,
Consultant may not assign, transfer, delegate, or subcontract any interest herein without the prior
written consent of the City and any such assignment, transfer, delegation or subcontract without
the City's prior written consent shall be considered null and void. Nothing in this Agreement
shall be construed to limit the City's ability to have any of the services which are the subject to
this Agreement performed by City personnel or by other consultants retained by City.
13. TERMINATION
This Agreement may be terminated by the either party upon thirty (30) days written
notice of termination. In such event, Consultant shall be entitled to receive and the City shall pay
Consultant compensation for all services performed by Consultant prior to receipt of such notice of
termination, subject to the following conditions:
a. As a condition of such payment, the Executive Director may require Consultant to deliver
to the City all work product completed as of such date, and in such case such work product shall be
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the property of the City unless prohibited by law, and Consultant consents to the City's use thereof
for such purposes as the City deems appropriate.
b. Payment need not be made for work which fails to meet the standard of performance
specified in the Recitals of this Agreement.
14. DISCRIMINATION
Consultant shall not discriminate because of race, color, creed, religion, sex, marital
status, sexual orientation, age, national origin, ancestry, or disability, as defined and prohibited
by applicable law, in the recruitment, selection, training, utilization, promotion, termination or
other employment related activities. Consultant affirms that it is an equal opportunity employer
and shall comply with all applicable federal, state and local laws and regulations.
15. JURISDICTION - VENUE
This Agreement has been executed and delivered in the State of California and the
validity, interpretation, performance, and enforcement of any of the clauses of this Agreement
shall be determined and governed by the laws of the State of California. Both parties further
agree that Orange County, California, shall be the venue for any action or proceeding that may
be brought or arise out of, in connection with or by reason of this Agreement.
16. PROFESSIONAL LICENSES
Consultant shall, throughout the term of this Agreement, maintain all necessary licenses,
permits, approvals, waivers, and exemptions necessary for the provision of the services
hereunder and required by the laws and regulations of the United States, the State of California,
the City of Santa Ana and all other governmental agencies. Consultant shall notify the City
immediately and in writing of its inability to obtain or maintain such permits, licenses, approvals,
waivers, and exemptions. Said inability shall be cause for termination of this Agreement.
17. MISCELLANEOUS PROVISIONS
a. Each undersigned represents and warrants that its signature hereinbelow has the power,
authority and right to bind their respective parties to each of the terms of this Agreement, and shall
indemnifY City fully, including reasonable costs and attorney's fees, for any injuries or damages to
City in the event that such authority or power is not, in fact, held by the signatory or is withdrawn.
b. All Exhibits referenced herein and attached hereto shall be incorporated as iffully set
forth in the body of this Agreement.
II
II
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement the date and year
first above written.
ATTEST:
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.p A TRICIA E. HEALY
Clerk of the Council
CITY OF S~TA ANA
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DAVIDN. REAM
City Manager
APPROVED AS TO FORM:
JOSEPH W. FLETCHER
City Attorney
By: 'l,: ...t. ':.J ,.
Laura'Sheedy
Assistant City Attorney
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CONSULTANT
EMPIRE ECONOMICS, INC.
33-0C\9IttlL
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SCOPE OF SERVICES
PRICE POINT ANALYSIS
AND
MARKET ABSORPTION STUDY
CITY OF SANTA ANA - MACARTHUR PLACE SOUTH
Prepared
for
City of Santa Ana
Attention: Mr. Steve Harding
Prepared by:
Joseph T. Janczyk, Ph.D.
Empire Economics, Inc.
35505 Camino Capistrano, Suite 200
Capistrano Beach, CA 92624
July 7, 2005
EXHIBIT A
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EMPIRE ECONOMICS, INC.
Economic-Real Estate Consultants
Joseph T. Janczyk, Ph.D.
35505 Camino Capistrano, Suite 200
Capistrano Beach, CA 92624
Phone: (949) 661-7012
Fax: (949) 661-8763
E-Mail: joe@empireeconomics.com
July 7, 2005
Mr. Steve Harding
Executive Director of Planning & Building Agency
City of Santa Ana
20 Civic Center Plaza M-20
P.O. Box 1988
Santa Ana, CA 92701
Re: Scope of Service: Community Facilities District No. 2005-01
City of Santa Ana: MacArthur Place South
Price Point Analysis and Market Absorption Study
Dear Mr. Harding:
Pursuant to my conversation with Mr. Jim Fabian, I am pleased to provide you with a Scope of Services for the
Price Point Analysis and Market Absorption Study for City of Santa Ana Community Facilities District No.
2005-01, also referred to as MacArthur Place South, located near Main Street and MacArthur Boulevard in the
City of Santa Ana, California; this is hereafterreferred to as CFD No. 2005-01.
1. EmDire Economics' EXDerience with Market Studies for MuniciDal Financinl!s
Empire Economics is an economic and real estate consulting firm that specializes in conducting market
absorption studies on behalf of public entities for residential, commercial, and industrial projects located
throughout California, with an emphasis on Master Planned Communities, Business Parks and Retail Centers
situated in Southem California, including Orange County, in particular.
Empire Economics' experience with municipal tax-exempt issues during the past twenty years has been as
follows:
J;> Mortgage Revenue Bond Financings: Over fifty issues with bonds amounting to more than $1.7 billion.
J;> Socioeconomic ForecastlMarket Studies for the $2,750,000,000+ refunding of the San Joaquin Hills and
FoothiII/Eastern Transportation Corridors' Toll Roads located in southern Orange County; the latter was
designated as the Municipal Bond Issue of the Year for 1999.
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)> Mello-Roos/Assessment District Financings in which bonds have been sold: Over two hundred issues with
bonds amounting to more than $2.5 billion. Empire Economics' Market Studies are typically for Planned
Communities and Business Parks which have 500-5,000+ housing units and/or 100-150 commercial-
industrial acres. With respect to the County of Orange, in particular, Empire has conducted numerous
Market Studies for Mello-Roos Districts including Ladera Ranch, Newport Coast, Aliso Viejo, Mission
Viejo, Rancho Santa Margarita, Las Flores, Ladera, and Coto de Caza and Talega as well as Central Park, a
forthcoming high-rise residential towerlocated near Jamboree and Interstate 405.
)> Mello-Roos/Assessment District Financings that are presently in their formative stages: over thirty Bond
Issues that have forthcoming bonds amounting to $500+ million.
EMPIRE ECONOMICS - MUNICIPAL BOND ISSUES
( $ BILLIONS)
Bonds-
Forthcoming, .$0.50
Mort.~~geReyeni.1e
'Bonds, $1 do
Mello
Roos/Assessment
Bonds, $2.50
Socioeconomic,
$2.75
Furthermore, Empire Economics actively participates in numerous municipal bond industry events, including
the following:
)> UCLA Municipal Bond Financing Seminars: Featured Luncheon Speaker
)> Municipal Bond Industry Association - Panelist
)> Best Practices for Continuing Disclosure - Panelist
)> Appraisal Standards for Land Secured Financing by CDIAC - Panelist/Contributor
)> Rating Agency and Bond Insurer Presentations - More than IS Trips to New York City
)> Meetings with Municipal Bond Funds:
* Mello-Roos Bond Issues - Site Tours
* San Joaquin Hills and Foothill Eastern Corridors:
+ Ten Presentations in New York, Boston, and Chicago to Fifty+ Bond Funds
Consequently, the Municipal Bond Funds are familiar with Empire Economics and also the Market Studies that
it has conducted for Planned Communities, Business Parks and Retail Centers in Southern California, in general,
and Orange County, in particular. This is beneficial to the forthcoming Bond Issue for CFD No. 2005-01 since
these Market Studies have enabled Empire Economics to establish a high degree of credibility with the
municipal Bond Funds and Rating Agencies.
For further information on the California Debt and Investment Advisory Commission (CDIAC) guidelines for
Market Studies and the Qualifications of the firms performing such studies, please refer to the chart on pages 9-
10.
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2. Overview of the Credit Structure and the Role of Empire Economics' Research
Empire Economics' Market Research for CFD No. 2005-0 I will include a Price Point Analysis and also a
Market Absorption Study; accordingly, the primary components are as follows:
Type of Study:
Price Point Analysis
Market Absorption
Purpose
Estimate Current Base Prices
for each of the Residential Products
Estimate AbsorptionlEscrow Closings
for each of the Residential Projects
Special Tax Analyst
Set Special Taxes to Conform to the
Maximum Tax Burden - City Policy
Amount of Special Taxes paid by
DeveloperslBuilders vs. Homeowners
Appraiser
Consider Product Prices for
Estimating Land Values
Absorption-Discounted Cash Flow
So, Empire Economics will perform a Price Point Analysis and also a Market Absorption Study, and these are
then utilized by the Special Tax Analyst as well as the Appraiser in formulating a credit structure underlying the
CFD No. 2005-01 Bond Issue that is consistent with current/expected market conditions.
3. Methodolol!v Underlvinl! Price Point Analvsis
Empire Economics will perform a competitive market analysis of the proposed prices/values for the forthcoming
residential projects/products in CFD No. 2005-01 so that the Special Taxes as set-forth by the Rate and Method
are in conformance with the City of Santa Ana's tax burden policies.
With regards to the forthcoming residential for-sale products, some 791 condominiums/town homes/live-work
units in MacArthur Place South and also some 278 condominiums/Iofts in Geneva Commons, Empire
Economics will perform a Price Point Analysis based upon a systematic analysis of the following factors:
>- Expected Characteristics of the Forthcoming Residential ProjectslProducts in CFD No. 2005-01
>- Identification of Comparable Projects and Market Surveys
>- Description of the Methodology Underlying the Analysis of Housing Prices
>- Statistical Analysis of Housing Prices and Value Ratios
>- Empire Economics' Price Recommendations
The Price Point Analysis will be distributed via E-Mail in PDF format to the Financing Team.
4. Methodolol!v Underlvinl! the Market Absorption Study
Based upon Empire Economics' experience in conducting more than three hundred fifty Market Studies during
the past twenty years, the macroeconomic factors are regarded as being significant determinants of the actual
performance of Planned Communities, Business Parks and Retail Centers, in the marketplace, and, as such, they
represent a critical component of the Market Absorption Study. With respect to the economic and real estate
conditions underlying the market demand for the forthcoming products in CFD No. 2005-01, Empire Economics
will discuss the Southern California and Orange County economies and real estate markets; this is regarded as
being a critical component of the Market Study, since it provides prospective bond purchasers with a more
accurate understanding of the market conditions underlying in CFD No. 2005-01.
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The Market Absorption Study starts with the identification of the expected product mix, and then proceeds to
arrive at an estimate of the products' absorption, based upon a systematic analysis of the expected
macroeconomic and microeconomic conditions; additionally, the sensitivity of the residential absorption to
changes in mortgage rates is also discussed.
);> Identification of the Proposed Prodnct Mix
The expected number of future housing units as well as the commercial-office/retail products in CFD No. 2005-
01 will be identified based upon the planning approvals for the properties as well as the development/marketing
strategies of the property owner; the expected composition of the product types in CFD No. 2005-0 I is as
follows:
);> MacArthur Place:
);> 791 condominiums: 276 integral, IS cinema loft, ISO cinema tower
and 350 lake towers.
);> Commercial: 14,703 sq.ft.
);> Office: 10,000 sq.ft.
);> Geneva Commons:
);> 278 condominiums/lofts: 84 condominium lofts and 194 high-rise units
);> Commercial: 13,000 sq. ft.
The product mixes represented above are subject to confirmation by the Planning Department and the Property
OwnerslBuilders.
);> Macroeconomics Components
· To arrive at long-term employment forecasts, Empire Economics compiles information from
economic forecasts that are available for the Southern California Market Region and its
counties, including Data Resources Institute (DR!) and the University of California Los Angeles
(UCLA) as well as regional forecasters such as the Los Angeles Economic Development
Department as well as California State University Long Beach. The use of a Consensus
Employment Forecast for the Market Region is substantiated by a comprehensive study of
forecasts that was conducted by the Federal Reserve Bank of New York which concluded that
Consensus Forecasts, defined as combining the forecasts of several firms or agencies, were
found to have a consistently higher degree of accuracy and reliability than any particular
forecaster. Empire Economics then uses these employment forecasts to derive estimates of the
Southern California's future demand for housing and commercial-industrial products during the
foreseeable future.
· Next the proportion of Southern Califomia's future employment, residential, and
commercial-industrial growth that is expected to be captured by the Market Area for CFD No.
2005-01 is estimated. Southern California (Se), as a whole, essentially represents a self-
contained equilibrium with respect to employment and housing because the vast majority of
households employed in SC also have their primary residences in SC. For specific market
areas, such as the City of Santa Ana however, there are employment/housing dis-equilibriums
because the members of many households live in one area but work in another area. With
regards to the City of Santa Ana, it is regarded as being a very strong employment center, and
so most of the demand for the residential products is expected to generated by local
employment growth.
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· Empire Economics will also discuss the desirability that prospective homeowners have to reside
in the City of Santa Ana due to the high caliber of its development and its strong economic base
which provides a attractive employment opportunities.
~ Microeconomics Components
· The microeconomic analysis focuses upon the competitiveness of the forthcoming residential,
retail and office projects/properties in CFD No. 2005-01 as compared to the competing
residential, retail, and office projects in the Market Area. The analysis deals with various
regional factors as well as the specific features/attributes of the forthcoming projects in CFD
No. 2005-01.
· The competitiveness of CFD No. 2005-01's residential, retail and office products is evaluated
by performing a systematic analysis of the expected characteristics of the forthcoming projects
in the District with the comparable/competing projects in the Competitive Market Area.
Specifically, this involves a consideration of their respective locations, prices, lot sizes, living
areas, Special Taxes/Assessments, amenities, and other factors. The result of this analysis is the
competitiveness, and hence the capture rate, for CFD No. 2005-01's products in the
marketplace.
~ Estimated Absorption Schedules
· The market absorption schedules for the forthcoming residential projects/products in CFD No.
2005-01 are presented in the following manner:
· Aggregate Absorption Schedules for CFD No. 2005-01: This analyzes the
market demand and supply conditions for all of the product types located in CFD
No. 2005-01.
. Absorption Schedules for CFD No. 2005-01 by Product Types and Project:
This analyzes the market demand and supply conditions for each of product
types: condominiums, townhomes and live-work as well as retail and office, and
provides a separate absorption schedule for each of these. These absorption
schedules by product type provide the relevant absorption information to the
Appraiser and Special Tax Analyst.
Therefore, the Market Absorption Study systematically proceeds from the macroeconomic analysis of the
Southern California Market Region's future employment, population, and housing growth to the microeconomic
analysis of the competitiveness of its projects, and then arrives at the absorption schedules for each of the
product types/projects in CFD No. 2005-01.
~ Residential Absorption Schedules - Sensitivity Analvsis
· The most probable market absorption schedules for the forthcoming residential units in CFD
No. 2005-01, as set-forth above, are then analyzed according to the following sensitivity
scenario:
· Potential Increase in Mortgage Rates for Homebuyers in CFD No. 2005-
01: This analyzes how a 100 basis point (I %) increase in interest rates would
influence the expected absorption for the forthcoming projects in CFD No.
2005-0 I.
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In performing the sensitivity analysis, Empire Economics will utilize a special model that it has
designed for such pUlJloses, referred to as the Monthly Payment Model. Specifically, from the
perspective of a prospective home purchaser, the household's income level, along with the bank's
qualifYing criteria, determine what the household can afford. The monthly payment, in turn, is based
upon the mortgage for the home (80% of the price) along with the mortgage rate as well as the ad
Valorem and Special Assessments/Taxes. Thus, the Monthly Payment Model can be utilized to
evaluate the potential impact of the higher mortgage rates.
5. Personnel Assi!med to the Studv
The principal consultant for the Market Absorption Study is Dr. Joseph T. Janczyk. He will design the economic
real estate model for CFD No. 2005-0 I and present the conclusions to the City of Santa Ana and the Financing
Team. Additionally, he will be assisted by his staff which will be responsible for the compilation of the
economic and real estate data required for the research and also conduct market field surveys. Furthermore, Dr.
Janczyk will provide the key results in a convenient format to each of the other professionals, and will discuss
these with them, including the Special Tax Analyst, Appraiser, Financial Advisor and the Underwriter:
· Appraiser: Empire Economics will provide the Appraiser with absorption schedules for each of
the product types, with respect to the number of units/acres absorbed each year, from market-
entry to build-out.
· Special Tax Analvst: Empire Economics will also provide the Special Tax Analyst with the
estimated absorption schedules by various product types, so that the amount of Special
Assessments that are expected to be paid by the developerlbuilder (as compared to the rmal-
users/homeowners) can be calculated.
· Finance Team: Empire Economics will provide copies of the Market Absorption Study to the
members of the finance team in the Bond Issue and furnish a "Summary and Conclusions" of
the Market Absorption Study for use in the Official Statement.
Finally, the Market Absorption Study, Sununary and Delivery Letter will be distributed via E-Mail in PDF
format to facilitate its distribution and also its use in the Official Statement.
6. No Contractual Relationships with the Developer/Builder
Empire Economics conducts market absorption studies onlv for governmental entities, and this has provided
numerous public entities with a high level of comfort. By comparison, other firms that provide services to
developerslbuilders may encounter "conflicts of interest" in trying to represent both the private and public
sectors. Empire Economics' approach of representing the public sector also enhances the credibility of the study
in the municipal marketplace.
Specifically, Empire Economics has not had any past contractual relationship with the owner/developerlbuilder
in CFD No. 2005-01:
>- Empire Economics has not performed any consulting services for the CFD's property owners nor
the developerlbuilder during at least the past five+ years.
>- Empire Economics will not perform any consulting services for the CFD's property owners nor the
developerlbuilder during at least the next three years.
6
."
7. Time ReQuired to Complete the Studv
Since Empire Economics has a background in performing Market Absorption Studies for Community Facilities
Districts, the proposed time schedule allows for an interaction with the financing team, so that the final study is
utilized in a timely and effective manner. Accordingly, Empire Economics will deliver the Market Absorption
Study for CFD No. 2005-01 according to the following time schedule:
Price Point Analysis. . . . . . . . . . .. . . . ... . two weeks - Performed at District Formation
Final Market Absorption Study. . . . . . . . . . five weeks - Performed near Bond-Sale
8. Factors Underlvine: the Consultine: Fee
Empire Economics' fee schedule is based upon the costs of providing consulting services for a Market
Absorption Study that is appropriate for a Municipal Bond Financing. Specifically, the comprehensiveness and
scope of these consulting services are formulated through discussions with prospective bond purchasers, the
Bond Funds. Empire Economics maintains contact with the Bond Funds through seminars, meetings, and
telephone conversations. Accordingly, the consulting fee covers all of the service listed below:
)> Price Point Analysis (PDF Format)
)> Comprehensive Market Absorption Study (PDF Format)
)> Summary of Market Absorption Study (PDF Format) for Official Statement
)> Synopsis/Presentation of the Market Study: Color Graphs, Maps and Charts
)> Discussion of Prices/Absorption with Special Tax Analyst
)> Discussion of Absorption with Appraiser
)> Certification to Use Market Study Summary for Bond Offering
)> Discussion of Market Study with the Underwriter to Facilitate Marketing Bonds
)> General Liability and Errors/Omissions Insurance
)> Promptly Respond to Queries from Prospective Bond Purchasers
This includes the detailed absorption schedules by product type in order to provide the relevant absorption
information to the Appraiser and Special Tax Analyst.
The consulting fees set-forth below reflect the cost efficiencies that Empire Economics can pass on to the City
of Santa Ana, based upon its prior experience in performing research on behalf of the City of Irvine for the
Central Park Project which included a high-rise tower.
Price Point Analysis: Residential: $7,250
Market Absorption Study: Residential and also Retail-Office $22,750
So, the total consulting fee for the Price Point Analysis as well as the Market Absorption Study is estimated to
be $30,000.
7
Closing Remarks
Accordingly, Empire Economics is well suited to perform the Market Absorption Study for CFD No. 2005-01
based upon the following:
~ Strong professional credentials.
~ Extensive experience with land-secured financings.
~ No consulting services for developerlbuilder.
~ Credibility with rating agencieslbond funds.
~ Competitive fee structure.
~ Capability of completing the Study in a timely manner.
If you bave any additional comments or considerations, please contact me as I would be pleased to respond to
them.
I certainly appreciate the opportunity of assisting the City of Santa Ana with the Bond Financing for CFD No.
2005-01.
nczyk, Ph.D.
onsultant
cc: Mr. Jim Fabian
8
,"
CDIAC Recommended Guidelines and Empire Economics Credentials
The principal consultant for the Market Absorption Study is Dr. Joseph T. Janczyk. He will design the economic real estate
model for CFD No. 2005-01 and present the conclusions to the City of Santa Ana and the Financing Team. Additionally,
he will be assisted by his staff, which will be responsible for the compilation of the economic and real estate data required
for the research and also conduct market field surveys. Furthermore, Dr. Janczyk will provide the key results in a
convenient format to each of the other professionals, and will discuss these with them, including the Special Tax
Consultant, the Appraiser and the Underwriter. Finally, the Market Absorption Study, Summary and Delivery Letter will
be distributed via E-Mail in PDF format to facilitate its distribution and also its use in the Official Statement.
In 1994, with the input of municipal finance professionals, the California Debt and Investment Advisory Commission
(CDIAC), of which the State Treasurer serves as chair, published the Appraisal Standards for Land-Secured Financings
(CDIAC Standards). Since that time, many California issuers have recognized the CDIAC Standards as a basis for the
conduct of appraisals under the Mello-Roos Act, as well as providing standards for market absorption studies. Empire
Economics meets the minimum recommended qualifications as proposed by CDIAC for market absOlption studies, with
respect to three key aspects: independence, qualifications and experience, and types of projects.
CDIAC Recommendations
I. Avoid Conflicts of Interest: Knowing that
developers and builders may influence the outcome
of a market absorption study, market absorption
analysts should describe their business relations with
developers and builders during the past three years in
the market absorption study.
Empire Economics
Independence
I. Empire Economics conducts market absorption studies onlv for
govemmental entities, and this has provided numerons public entities
with a high level of comfort. By comparison, other firms that provide
services to developers/builders may encounter "conflicts of interest" in
trying to represent both the private and pnblic sectors.
2. Empire Economics, as part of the Market Study, will sign a
Certification ofIndependence which includes the next two points.
· Empire Economics has not performed any consulting services for the
District's property owners nor the developers/builders during at least the
past five+ years.
· Empire Economics will not perform any consulting services for the
District's property owners nor developers/builders during at least the
next three years.
QualijlcauonsandExperience
I. Educational Qualifications: The market absorption
analysts should possess at least a Bachelors degree but
preferably an advanced degree with courses in real
estate and economics.
2. Experience with Land-Secured Financings: The
market absorption analysts should possess a minimum
of five years of experience in performing market
studies for land-secured fmancings. Additionally, they
should be well versed in analyzing economic and real
estate data that relates to the pricing and absorption of
properties contained within a CFD and through this
experience be capable of addressing issues unique to
land-secured financing, including the use of Price
Points in the Rate and Method of Apportionment.
I. During the past twenty years, Dr. Joseph T. Janczyk, president of
Empire Economics, has prepared market absorption studies for more
than three hundred and fifty Plarmed Communities and Business Parks,
providing the comfort level required for numerous California counties,
cities, school districts, water districts and other special districts to
fmance over twelve billion dollars worth of capital improvement
projects.
2. Dr. Janczyk received his Doctorate in Economics from the University
of California. As a tenured Economics Professor at California State
University, he taught courses in microeconomics, macroeconomics,
regional economics, and computer modeling. Dr. Janczyk has been a
featured speaker at numerous seminars including the Municipal Bond
Analysts, California Debt Advisory Commission, and California
Association of Realtors, and Moody's Investor Services amongst others.
9
, .
Types of Projects
I. Moderate to large number of residential units (i.e.
500 to 1000+), assuming a diverse mix of product
types, or master planned communities.
2. Proj ects that are not expected to conunence escrow
closings to homeowners for a year or more.
3. Projects that represent a uniqne market offering.
4. Projects located in rural areas at the fringe of
development
L Empire Economics concurs that issuers should have market absorption
studies prepared for projects that meet the criteria set forth by the CDIAC.
Furthermore, based upon recent marketing conditions, there has been a
significant amount of housing price appreciation since 2002, due primarily to
[mancial factors, as compared to the traditional factor of employment
growth. Empire Economics strongly reconunends that Issuers have the
Market Absorption Study discuss the potential impacts of higher mortgage
rates.
2. For conunercial-industrial projects, there has only been moderate rates of
employment growth in recent years.
10
EXHIBIT B
ADDITIONAL INSURED ENDORSEMENT
FOR COMMERCIAL GENERAL LIABILITY POLICY
Insurance Company
This endorsement modifies such insurance as is afforded by the provisions of Policy
# relating to the following:
I. The City of Santa Ana, 20 Civic Center Plaza, Santa Ana, California 9270 I; its
officers, employees, agents, volunteers and representatives are named as additional insureds
("additional insureds") with regard to liability and defense of suits arising from the operations
and uses performed by or on behalf of the named insured.
2. With respect to claims arising out of the operations and uses performed by or on
behalf of the named insured, such insurance as is afforded by this policy is primary and is not
additional to or contributing with any other insurance carried by or for the benefit of the
additional insureds.
3. This insurance applies separately to each insured against whom claim is made or
suit is brought except with respect to the company's limits of liability. The inclusion of any
person or organization as an insured shall not affect any right which such person or organization
would have as a claimant if not so included.
4. With respect to the additional insureds, this insurance shall not be cancelled, or
materially reduced in coverage or limits except after thirty (30) days written notice has been
given to the City of Santa Ana, 20 Civic Center Plaza, Santa Ana, California 9270 I.
(Completion of the following, including countersignature, is required to make this endorsement
effective.)
Effective
Policy #
Issued to
, this endorsement form as a part of
Named Insured
Countersigned by
Authorized Representative
8
09/0712005
ACORD..
15:57
5305252539
ISU ATWOOD AGENCY
PAGE
02/03
PROOUl:l!R
CERTIFICATE OF LIABILITY INSURANCE
THIS CERTIFICATE IS ISSUED AS A MATTE~ OF INFORMATION
ONLY ANO CONFERS NO RIGHTS UPON THE CERTIFICATE:
HOLDER THIS CERtiFICATE DOES NOT AMEND, EXTEND OR
ALTER llfE COVERAGE AFFORDED BY THE POlICIES BELOW.
INSURERS AFFORDING COVERAGE
leu Ins ServiceS-Atwood
800 Pacific St.
P~aC!ervi~1e, CA 95667
530-626-253.3.
Ift8UAED
I\g&ncy
Empire Economics, Inc.
35505 Camdno Capistrano '200
Capistrano Beach, CA 92624
"SlJR~.." M"'Ylan<L.C.as.Ual~.Q._{ZJ.l.2:.tJ:lhL
INSURER B;
1N$lI~c: tJni.:t.Ead gtat~.abi1ity TY}.S.._C
~RE:R:O:
INSURER E:
COVERAGES
TKO POlICIES OF INS~ USTeO BELow HAVE BEEN ISSUED TO THE INSl.OlED NAMED AIlO\/E FOR THE POLICY PERIOD INDICATED. NOlWlTHSTANDfNlJ
I'Nf ReQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOClNENT Wrnl RESPEcT TO WHICH 1>1IS CERTFICATE ....Y 8E ISSUED OR
.....Y PERT_, THE INSURANCe AFFoRDED ey TliE POLICIES DESCR,,",D HEREIN IS SUIlJECT TO All THE TeRMs, EXClUSION$I\NO CONDITIONS OF SUCH
POUCIES. AG"'lEGATe L",",S SHOWN....Y IlAIIE REN REDUCED BYPAID ct.AIMs. _
1m TYl'eOl'INSURA"". -. p,,'-'Cyou...... . POLICY"~I~ . LIMITS'
OEN......LIA.IUTY ."^CH~..,e 'i Q!'n nnn
r; C"",",EROIALGENE"'IJAlllUlY ~~.~'M.ce(Any_.~~1 '.L.D.O.O. 000
I CLAIMSMAOE CiJ oeCUR ~(^nyOMperstJl'l) S 10.000
PAS 39816088 01/08/05 01/08/06 _SllNAL'~'2'''NJlJRY 'Ex-ot............
GENERAL A(;GReGA", '2....QQQ.,J)"O.0
PROCUCTS.COMPIOPAGO , "_ 000.000
A
-= .
~'LAGGREGATE UMrr A~~S PER
" I POWCY 51; I I lOO
~TOMOBIt..E L1A81l,1.....
ANY AUTO
r-
r- ALL OWNED AUTOs
r- SCH~UlED AllTOS
A~ HIRBlAUiOS
..x, NON-owNEO AtJT'OS
COMBINeD SINGLE LlMrr
(Eaaecidtlnt)
, 1,000,000
PAS 39816088
01/08/05 01/08/06
BOOIlYINJUFlY
(Perpllf8OR)
_...
eOOlly INJURY
CPeraccldl!lRt)
$
,
n~UABfUTY
I A,t'('f AlITO
~~lIABa.ITY
----1OCCllR 0 ClAIMS MADE
hl:E)l,.lCTlBlE
H R:eTCN'T1oN $
WCRt(~$ COMPEl.tSATION AND
EMPLOYlZA8' IJABIlTTV
PRClPFi!i~ DAMAGE
(PerllClCWel'llJ
.
OTHJ!R n-IAN
AUTO ONlY:
Auto ONL V . EA ACcIDENT S
CA ACe $
"013 S
.
$
,
.
.
^r~n
I.,
)\>--<~) ~:', 'l"() 1-01\iv1
EACH OCCtJRRecE
AOOREGA~
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,,/ ~,.,. '. .'- L: ) ~:CL)
A:'::'J~t;;,H Cily'A lur'.n'
-..
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E.I." lEACH ACCIDeNT $
~:LOISEASE..EA~MF'L.OYJ:: $
EL DISEASE - POUCY LIMIT $
"-
C Professional
T' _,-.,.
DISClRfPtloN OF: OPERA OCAT1ONa"IEHIClBSIEXCLUSIONSAOC/IED BY ENDOR8EMENmiPEcIAL. PROWofONS
Certificate holder is listed as an AdditionaJ. Insured with rEtapects
insureds cOnJSuJ.ting operations per form CG20~0 10/01 attached.
SP~001190C
02/05/05 02/05/06 $1,000,000
to the
City of Santa Ana
ExecutiVOl Director of Finance
20 Civic CentElr P~a"a
PO Box 1988
Santa Ana, CA 92702
,,,..... . ""- "',....
ACORD 2&-& (7$7)
*Exoept 10 day notice of cance~1ation for nonpayment of premium.
CERTIFICATE HOLDER . I x I All""",,,AL INSUIm>; INllUR... LElTSI'-1lo C,4\NCELLATJQN
SffOULD ANY OF,.... Aeove ~IBS) fta.lCII!ti ~CANel!'LlED B&"ORBTHI; ~PlRATIC
M~ lJI'EMDF, ntE ISS~ INSURER WILl. ENDEA,VOft: TO MAII.i3Q DA.YS WRrtTI!N
NDnCEro lMI!!OER1lFJCATEi: HOLD~ NAMeD TO THIE,U;Ft, BUT I'AILURETu DOSOSIiAu..
lMPOSI!! NO oal'GAT'lQN OR l..I.flBILITY OF ANY KRtm uPoN nG; "~BR. ITS AOENTS OR
REPRESeNTA11VE5. ./
AUT~'_EsE>/r~-e:RIC-f, ~j.cb/x.a--
I .. ACORO CORPORATION 18..
09/07/2005 15:57
5305252539
ISU ATWOOD AGENCY
PAGE 03/03
POLICY NUMBER:
COMMERCIAL GENERAL L1ABIUlY
CG20101D01
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
ADDITIONAL INSURED - OWNERS, LESSEES OR
CONTRACTORS - SCHEDULED PERSON OR
ORGANIZATION
This endorsemellt modifies insurance provided under the follOWing;
COMMERCIAL GENERAL LIABILITY COVERAGE PART
SCHEDULE
Name of Person or Organization:
City of Santa ADa
20 Civic Center Plaza, Santa Ana, CA 92702
(If no entry appears above, information required to complete this elldorsemellt will be shown in the Declarations
as applicable to this elldorsement.)
A. Section II - Who Is An Insured is amended to
inclUde as an inSured the person or organization
shown in the Schedule, but only with respect to
liability arising out of your ongoing operations
performed for that Insured.
B. With respect to the insurance afforded to these
additional inSureds, the fOllowing eXClusion is
added:
2. ElO;Clusions
This insurance does not apply to .bodlly in-
JUry" or .property damage" occurring after:
(1) All work. Including materials, parts
or equipment furnished in
connection with such work, on the
project (other than service, mainte-
nance or repairs) to be performed
by or on behalf of the additional in-
SUred(s) at the site of the covered
Operations has been completed; or
(2) That portion of "your work" out of
which the Injury or damage arises
has been put to its intended use by
any person or organization other
than another contractor or subcon-
tractor engaged in performing op-
erations for a principal as a part of
the same project.
\.
L,",_ '
.'--'-
.], t
CG 20 10 fO Of
(llISO Properties. Ine.. 2000
PaOli 1 of 1
05/07/2005 15:57
5305252535
Phone: (949) 661-7012 ./
Fax: (949) 661-41763 j../
Fax
To:
NIt-r1 ~ Tap~ho..
!Ut..eA (' .-e.d-, ~~ "..+t>:
,
~ prcl~~"s;o",~
530 - b.;l~ -~5.?:.g
*,.,.,
P........, 53tl - tJJ;l.lA -;J- S.3 3
Re (\~ ~r~~
o For __ ,0 Pl.."" Commant
(1-" 74fr ~ ~ -tJ -
PI eA-.e. '2- S -e-n. <l
ISU ATWOOD AGENCY
PAGE 01/03
--
EMPIRE ecoNOMics, INe..
35505 Camino Capistrano , ##200
c:..p;strano B_ch, CA 92624
~r:::.'1 "/nA Le r~'
Fronu JO$IlIlll T. Jllnozyk, Ph,D.
~r ~.--ro r-s ~ (),'1-1. H.S-u'W'I s:
J-.,'n. I,., ~ 1 ,'+-'"1 ::en ~ t.< reA t"\ce
......., ~
Date: q LW.o.S"
cc=
l
o PI....se CaR Me
o Iteply ASAP
io'
Mr. F......."" Gullwnlz,
ExecuGve 0Ireclllt of Flll8llCe
C:~ofS"'" Ana
ZO CI1/lc Cooter _ P.O. B... 1918
S..tJ\ AM, CA 92702
F",,: 714-847-S414 ~
ct.O~ ~ ~ 0.. C'11 -tvdcut
~ #V- u~6
~