HomeMy WebLinkAboutReso 2018-062RESOLUTION NO. 2018-062
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
CHULA VISTA APPROVING AN ECONOMIC
DEVELOPMENT SUBSIDY TO RIDA CHULA VISTA, LLC,
FOR A HOTEL-CONVENTION CENTER PROJECT (CHULA
VISTA BAYFRONT MASTER PLAN PARCEL H-3) AND
MAKING CERTAIN FINDINGS IN CONNECTION
THEREWITH
WHEREAS, the City of Chula Vista (City) is a California municipal corporation and
charter city; and
WHEREAS, the City and the San Diego Unified Port District (District), began a
collaborative planning process with the community to develop a comprehensive Chula Vista
Bayfront Master Plan (CVBMP) in 2002; and
WHEREAS, on May 18, 2010, the District, as Lead Agency (as such term is defined in
California Public Resources Code Section 21067), certified a Final Environmental Impact Report
for the CVBMP and Port Master Plan Amendment (UPD No. 83356-EIR-658; SCH
No. 2005081077) (District Clerk No. 56562) (FEIR); and
WHEREAS, the City is a Responsible Agency (as such term is defined in California
Public Resources Code Section 21069); and
WHEREAS, the CVBMP is the project described in the FEIR; and
WHEREAS, on May 18, 2010, the City, as a Responsible Agency after having
considered and relying on the FEIR, pursuant to the California Environmental Quality Act
(Public Resources Code Section 21000, et seq.) (CEQA), made certain Findings of Fact; adopted
a Statement of Overriding Considerations and adopted a Mitigation Monitoring and Reporting
Program for the CVBMP; and
WHEREAS, the first step in implementing the CVBMP was the adoption of the Chula
Vista Bayfront Master Plan Financing Agreement, which was approved by the City Council via
Resolution 2012-078; and
WHEREAS, an Amended and Restated Chula Vista Bayfront Financing Agreement,
reflecting updated contributions and commitments was approved by the City Council via
Resolution 2016-241; and
WHEREAS, the District’s Board of Commissioners approved an Exclusive Negotiating
Agreement (ENA) with RIDA for the construction of a hotel and convention center project
(Project) on CVBMP Parcel H-3 on February 10, 2015; and
WHEREAS, on June 20, 2017, at a joint meeting of the City Council and the District’s
Board of Commissioners, the District’s Board of Commissioners approved the Amended and
Restated Chula Vista Bayfront Financing Agreement, as adopted b y the City Council via
Resolution 2016-241; and
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WHEREAS, at the June 20, 2017 joint meeting, the District’s Board of Commissioners
and the City Council approved a non-binding Letter of Intent (LOI) with RIDA Chula Vista,
LLC (Developer) to facilitate the negotiation of a future Disposition and Development
Agreement (DDA) for the Project (City Council Resolution 2017-104); and
WHEREAS, representatives of the District, City and Developer have negotiated the terms
of a DDA for the Project, addressing all business terms and commitments by all parties through
the close of escrow for the Project, to be considered at today’s joint meeting of the District and
the City; and
WHEREAS, staff of the District and City recommend that the City Council and District
Board of Commissioners approve the DDA; and
WHEREAS, representatives of the District and the City have negotiated and recommend
approving a Revenue Sharing Agreement between the District and the City to be considered at
today’s joint meeting of the District and the City, addressing funding commitments of each
agency; application of residual Project revenues after payment of Project debt including
reimbursements to each agency; operating and maintenance responsibility for Project related
infrastructure; and allocation of twenty percent (20%) of Net Operating Income generated by the
Project above an eleven percent (11%) Developer Return on Investment, to be paid by Developer
to the District for Lease Year 1 through Lease Year 37 (Additional Rent); and
WHEREAS, the City wishes to contribute those specific revenues identified in the
Financing Agreement, the DDA, and the Revenue Sharing Agreement incorporated herein by
reference as if set forth in full (the “Project Subsidy”) to the Project as an Economic
Development Subsidy, as defined in California Government Code Section 53083(g)(1); and
WHEREAS, Developer is a Delaware limited liability company qualified to do business
in the State of California; and
WHEREAS, an Economic Development Subsidy Report for the Project has been
prepared by Keyser Marsten Associates, Inc., provided as Exhibit 1, attached hereto and
incorporated herein by reference as if set forth in full; and
WHEREAS, operation of the Project will provide the following benefits to the City and
the community:
1. The development of the Project is estimated to generate 130 full time
(temporary) construction jobs and 3,300 permanent full time jobs in the City of Chula Vista; and
2. Pursuant to the Revenue Sharing Agreement, the City will receive fifty
percent (50%) of residual Project revenues after payment of specified expenses and
reimbursements to the City and District; and
3. Pursuant to the Revenue Sharing Agreement, the City will receive fifty
percent (50%) of Additional Rent to be paid to District by the Developer; and
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4. The development of the site and the operation of the Project is anticipated
to increase property values and revitalize the CVBMP project area by drawing visitors,
consumers, and employees to the area, thereby stimulating the local economy; and
5. The City anticipates that the operation of the Project will help to foster a
business and civic environment that will attract additional businesses and investment in the
community due to the increased public and private services resulting from the generation of jobs,
tax revenues, and consumers in the City and the area surrounding the Project site; and
6. The operation of the Project will serve the City and the surrounding
community by providing commercial facilities that are not currently available in the community.
No luxury, AAA Four Diamond (or similar) hotel currently operates in the City. Further, the
City currently lacks large, luxury conference facilities similar to the Convention Center
component of the proposed Project that will accommodate community events and gatherings
such as high school dances, meetings of local trade organizations, fundraisers and other
community events. The nature of the Project as a high -end, luxury resort is expected to bring a
demand for additional luxury facilities and services in the community, encouraging related
investment and development in the City and immediately surrounding areas; and
WHEREAS, the City desires to approve the Project Subsidy as an Economic
Development Subsidy, pursuant to Government Code Section 53083; and
WHEREAS, the City (i) made the information required by Government Code
Section 53083(a) available to the public in written form and on the City’s website and (ii) held a
noticed public hearing regarding the Economic Development Subsidy as required by
Government Code Section 53083(b); and
WHEREAS, the City has duly considered all terms and conditions of the proposed
Project Subsidy and believes that the development and operation of the Project is in the vital and
best interest of the City and the health, safety, morals, and welfare of its residents, and in accord
with the public purposes and provisions of applicable requirements of State and local law.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Chula
Vista, as follows:
1. The City Council hereby finds and determines that the recitals set forth above are true
and correct and are incorporated herein by reference as if set forth in full.
2. The City Council hereby finds and determines, based upon substantial evidence provided
in the record before it, that (a) the Project Subsidy will promote the public peace, health,
safety, and welfare of the City of Chula Vista and its residents; and (b) the Project
Subsidy is reasonably necessary to induce and ensure the development and operation of
the Project.
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3. The City Council hereby finds and determines, based upon substantial evidence provided
in the record before it, that the City has complied with the applicable requirements of the
California Environmental Quality Act (CEQA) with respect to approval of the Project
Subsidy. The environmental impacts of the Project were evaluated in the Final
Environmental Impact Report (FEIR) for the CVBMP. No additional CEQA review is
required at this time because the Project Subsidy does not approve any specific
development, but rather is a government funding mechanism and fiscal activity that in
and of itself does not result in a potentially significant physical impact on the
environment with the meaning of Section 15378(b)(4) of the CEQA Guidelines,
Chapter 3 of Title 14 of the California Code of Regulations; therefore approval of the
Project Subsidy does not constitute approval of a “project” under CEQA. The
development of the Project will be subject to compliance with all federal, state, and local
laws, including the Chula Vista Municipal Code and CEQA, prior to issuance of permits
by the City.
4. The City Council hereby finds and determines, based upon substantial evidence provided
in the record before it, that the development, opening, and operation of the Project will be
of material benefit to the City and to the citizens of, and property owners in, the City and
surrounding areas, because construction and operation of the Project will encourage and
foster the economic revitalization of the City for the people in the area an d the general
public as a whole; provide commercial facilities and services not currently available in
the City; increase tax revenues available to the City and other taxing agencies; increase
sales tax revenues available to the City; increase Transient Occupancy Tax revenues
available to the City; generate Additional Rent to the City; and create jobs within the
City.
5. The City Council hereby approves the Project Subsidy as an Economic Development
Subsidy to RIDA Chula Vista, LLC, for the Project. The City Council further authorizes
and directs the City Manager and his authorized designees to take such actions as may be
necessary or appropriate to implement the Economic Development Subsidy, including,
but not limited to, further instruments and agreements, issuing warrants, and taking other
appropriate actions to perform obligations and exercise the rights of the City.
[SIGNATURES ON FOLLOWING PAGE]
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Presented by Approved as to form by
Gary Halbert Glen R. Googins
City Manager City Attorney
PASSED, APPROVED, and ADOPTED by the City Council of the City of Chula Vista,
California, this 24th day of April 2018 by the following vote:
AYES: Councilmembers: Aguilar, Diaz, McCann, Padilla, and Salas
NAYS: Councilmembers: None
ABSENT: Councilmembers: None
Mary Salas, Mayor
ATTEST:
Kerry K. Bigelow, MMC, City Clerk
STATE OF CALIFORNIA )
COUNTY OF SAN DIEGO )
CITY OF CHULA VISTA )
I, Kerry K. Bigelow, City Clerk of Chula Vista, California, do hereby certify that the foregoing
Resolution No. 2018-062 was duly passed, approved, and adopted by the City Council at a
regular meeting of the Chula Vista City Council held on the 24th day of April 2018.
Executed this 24th day of April 2018.
Kerry K. Bigelow, MMC, City Clerk
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RESORT HOTEL AND CONVENTION CENTER PROJECT
(CHULA VISTA BAYFRONT MASTER PLAN PARCEL H-3)
CHULA VISTA, CALIFORNIA
ECONOMIC DEVELOPMENT SUBSIDY REPORT
California Government Code
Section 53083
PURSUANT TO THE DISPOSITION AND DEVELOPMENT AGREEMENT
BETWEEN
THE SAN DIEGO UNIFIED PORT DISTRICT,
THE CITY OF CHULA VISTA,
AND
RIDA CHULA VISTA, LLC
A DELAWARE LIMITED LIABILITY COMPANY
City of Chula Vista, California
April 2018
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TABLE OF CONTENTS
I. Introduction ........................................................................................................................................ 1
II. Name and Address of Business Entity Receiving Subsidy ................................................................... 7
III. Description of Economic Subsidy ........................................................................................................ 8
IV. Start and End Dates of Subsidy ......................................................................................................... 10
V. Public Purpose of Subsidy ................................................................................................................. 11
VI. Projected Revenue to City Resulting from the Subsidy .................................................................... 13
VII. Estimated Number of Jobs Created by the Subsidy .......................................................................... 15
VIII. Limiting Conditions............................................................................................................................ 16
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I. INTRODUCTION
A. Purpose of Report
This Economic Development Subsidy Report (Report) was prepared in accordance with Section 53083 of
the California Government Code in order to inform the City Council of the City of Chula Vista (City) and
the public of the Economic Development Subsidy proposed to be provided to RIDA Chula Vista, LLC
(Developer) for development of the Resort Hotel and Convention Center project (RHCC Project). The
Developer intends to develop a 1,570- to 1,600-room resort hotel and approximately 275,000 net
rentable square feet (SF) of convention space on a 36.5-acre site (Project Site) within the Chula Vista
Bayfront (CVB). The Project Site is currently held in trust by the San Diego Unified Port District (District).
The proposed Economic Development Subsidy is more particularly described in the proposed Disposition
and Development Agreement (Agreement) between the City, District, and Developer. Additional key
terms are contained in the JEPA Plan of Finance (Agreement Attachment 8), the Form of Ground
Lease/Key Terms (Agreement Attachment 9), and the Revenue Sharing Agreement between the City and
District.
The Agreement specifies the financial contributions provided by the City and District toward the design,
development, and construction of the RHCC Project. The City requested that Keyser Marston
Associates, Inc. (KMA) analyze the terms of the Economic Development Subsidy contained in the
Agreement.
This Report describes and specifies:
(1) The name and address of the business entity that is the beneficiary of the Economic Development
Subsidy;
(2) The subsidy and the estimated total amount of the expenditure of public funds as result of the
Economic Development Subsidy;
(3) The start and end dates of the Economic Development Subsidy;
(4) The public purpose of the Economic Development Subsidy;
(5) The projected tax revenue to the City as a result of the Economic Development Subsidy to the
RHCC Project; and
(6) The estimated number of jobs created by the Economic Development Subsidy to the RHCC Project.
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B. Summary of Findings
The principal KMA conclusions are summarized below.
• Under the terms of the Agreement, the City and District will provide an Economic Development
Subsidy to the Developer totaling $573 million (present value). As shown in Section III, Table III-1,
the Economic Development Subsidy will fund Parcel H-3 site preparation costs, land contribution,
parking improvements, and the convention center.
• The RHCC Project is expected to generate annual tax revenue in the amount of $23.7 million (upon
stabilization) to the City consisting of transient occupancy tax (TOT), Community Facilities District
(CFD) special taxes, property tax and property tax in lieu of Vehicle License Fees (VLF), and sales tax.
• The Economic Development Subsidy contribution assists the City in achieving its economic
development goals and objectives for development of the Chula Vista Bayfront.
• The RHCC Project is expected to generate a total of 120 temporary jobs for businesses based in the
City and an estimated 2,200 temporary jobs in the County during a 48-month construction period.
At buildout, an estimated 4,470 jobs permanent full-time jobs will be created Countywide with
3,300 located in the City.
C. Description of Property and Proposed Project
The City and District created a master plan for the 535-acre Chula Vista Bayfront located on the
southeastern edge of San Diego Bay in the City of Chula Vista Bayfront Master Plan (CVBMP). The City
and District have selected 36.5 acres of the CVBMP, known as Parcel H-3, for development of the RHCC
Project. The RHCC Project is anticipated to be the development catalyst for the CVBMP. Table I-1 below
provides a summary of the physical characteristics of the proposed RHCC Project.
Table I-1: Project Description
Total Site Area 36.5 Acres
Number of Hotel Rooms 1,570 to 1,600 Rooms
Convention Center (net useable) 275,000 SF
Parking 1,200 to 1,600 Spaces
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D. Proposed Transaction Terms
This section summarizes the salient aspects of the business terms contained in the draft Agreement
under review as of March 28, 2018, the draft Ground Lease under review as of March 30, 2018, and the
draft Conceptual Outline of Joint Exercise Powers Authority (JEPA) Plan of Finance under review as of
April 6, 2018.
(1) Overview of Agreement
Developer Responsibilities
• The Developer will construct a resort hotel with no less than 1,570 rooms and no more than 1,600
rooms under the Gaylord Hotels brand and 275,000 net useable SF of convention and meeting
space.
• The Developer will construct a portion of the infrastructure improvements including E Street (G
Street to H Street), G Street connection, H Street (Bay Boulevard to Street A), H Street (Marina
Parkway to E Street), and Harbor Park (initial).
• The Developer’s private investment (debt and equity) in the RHCC Project is currently estimated at
$785 million (Developer’s Contribution).
• The Developer will be responsible for all operating and maintenance costs incurred with respect to
the RHCC Project.
City and District Responsibilities
• The City and the District will contribute $63.23 million toward infrastructure costs including streets,
parks, building pads, and utilities (Phase 1A Infrastructure Costs). Of this total, $6.0 million is
allocated for Parcel H-3 site preparation costs.
• The City and District will be responsible for all operating and maintenance costs incurred with
respect to off-site infrastructure.
• The City and District will contribute up to $240 million (Project Public Investment) toward
development of the convention center improvements.
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• The District will provide an annual contribution toward bond debt service to support its portion of
the Project Public Investment. As presented in Table I-2, the District contribution will not exceed
the following schedule of amounts during Lease Years 5 through 38.
Table I-2: District Annual Support Payments
Lease Year Support Payments
Years 1-4 $0
Years 5-14 $5.0 M
Years 15-19 $6.0 M
Years 20-24 $3.0 M
Years 25-38 $3.5 M
• The City will pay for the construction of the required sewer and fire service improvements to enable
development of the RHCC Project.
• The District will enter into a lease for the development of a new RV Park on Parcel S-1. The new RV
Park will replace the existing RV Park, currently located on a portion of the Project Site. The existing
RV Park lease is set to expire on March 4, 2019.
• The Agreement will have a term of up to four (4) years with up to three (3) one-year conditional
extensions. In total, the Developer may have a maximum of seven (7) years to close escrow and
commence construction of the RHCC Project.
• If there is a close of escrow, the City and District will reimburse the Developer for any funds actually
expended by the Developer prior to the close of escrow for pre-development design, architecture,
engineering, and other professional services attributed to the Developer’s portion of Phase 1A
Infrastructure Costs.
• Prior to the close of escrow, the District will provide for the completion of 30% design drawings for
the Phase 1A Infrastructure Improvements in an amount not to exceed $1.7 million; after the close
of escrow, the District will also pay for the cost of Parcel H-3 site preparation in an amount not to
exceed $10.0 million. If the District is able to provide at least 130,000 cubic yards of imported soil to
the Project Site, the estimated cost will be decreased to $6.0 million. If the District provides less
than 130,000 cubic yards, the cost will be prorated.
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• The District will provide, on a temporary basis, and at no cost to the Developer, up to 15 acres of
land on Parcel H-23 to house construction trailers, construction materials, equipment staging, and
parking during construction of the RHCC Project.
(2) Construction and Operation of Parking Improvements
• A portion of Parcel H-3 will be reserved by the District for parking (Parking Improvements).
• If the District elects to proceed with the Parking Improvements, the cost of the Parking
Improvements will be financed by the District in an amount not to exceed $40 million. Additional
costs of up to $44 million will be covered by the Developer.
• The District will own the Parking Improvements.
• The Developer will operate the Parking Improvements and be responsible for the all maintenance
and repair except for non-routine repair or replacement of the Parking Improvements.
• The Developer will pay percentage parking rent to the District during Lease Years 1-66 for the
Parking Improvements as shown in Table I-3.
Table I-3: Developer Annual Parking Rent Payments – Years 1 - 66
Lease Year Years 1-38 Years 39-66
% of Gross Parking Revenues 12.5% 15.0%
• If there is a sale or assignment of the lease, parking rent will increase to 15.0% during Lease Years 1-
38 and to 20.0% during Lease Years 39-66.
• The Developer and District will enter into an Offsite Parking Land Lease to allow for the Developer’s
use of Surface Parking Improvements at a percentage rent of 3.0% of gross surface parking
revenues.
(3) Proposed Ground Lease
• The District and the Developer will enter into a 66-year ground lease agreement.
• The Developer will pay ground lease payments to the District during Lease Years 1-38 as shown in
Table I-4.
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Table I-4: Developer Annual Ground Lease Payments – Years 1 - 38
Lease Year Years 1-19 Years 20 - 24 Years 25-38
Annual Ground Lease Payment $0 $3.0 M $3.5 M
• Beginning in Year 39, the proposed rent structure for the RHCC Project will be in line with the
District’s standard percentage rent categories, as shown in Table I-5 below.
Table I-5: Developer Annual Ground Lease Payments – Years 39 - 66
Lease Year Years 39-48 Years 49-66
Room Revenue 8% 9%
Banquet Revenue 6% 7%
Food Revenue 4% 5%
Beverage Revenue 6% 7%
Gift Shop 5% 5%
Health Club 5% 5%
Recreation Center 10% 10%
Various Other Revenues (1) 0.5% - 20% 0.5% - 20%
(1) Reflects additional categories itemized in proposed Ground Lease.
• The Developer will pay Additional Rent to the City/District equal to annual NOI in excess of 11.0% of
the Developer’s Contribution during Lease Years 1-38, as shown in Table I-6. The Developer’s
Contribution is currently estimated at $785 million; therefore, the 11.0% threshold translates to
$86.4 million.
Table I-6: Allocation of NOI after Developer Target Return of 11.0% on
Developer’s Contribution
Lease Year
Years 1-38 80% to Developer / 20% to City/District
Years 39-66 100% to Developer
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II. NAME AND ADDRESS OF BUSINESS ENTITY RECEIVING SUBSIDY
The Economic Development Subsidy provided under the Agreement will be paid to the Developer, under
the name:
RIDA Chula Vista, LLC
c/o RIDA Development Corporation
1777 Walker Street, Suite 501
Houston, TX 77010
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III. DESCRIPTION OF ECONOMIC DEVELOPMENT SUBSIDY
Under the terms of the Agreement, the City and District will commit a variety of funds and revenue
streams, including both existing revenue streams and new revenues generated by the RHCC Project.
The City and District have created the Chula Vista Bayfront Financing Authority (Authority) and expect to
issue taxable and tax-exempt bonds to the fund the Economic Development Subsidy. The bonds will be
secured by committed revenues from the City and District, and pledged funding from a CFD and, as
currently proposed, an EIFD formed to serve the Chula Vista Bayfront. The City and District will also
provide one-time contributions toward the development of public improvements.
Table III-1 below presents the total estimated Economic Development Subsidy amount that the City and
District will contribute to the RHCC Project.
Table III-1: Estimate of City/District Economic Development Subsidy
Present Value (1)
Parcel H-3 Site Preparation Costs (2) $10 M
Public Improvements (3) $51 M
Land Contribution (4) $245 M
Parking Improvements (5) $27 M
Convention Center $240 M
Total Economic Development Subsidy $573 M
(1) Present value at Lease Year 1 assuming a discount rate of 8.0%.
(2) Maximum contribution not to exceed $10.0 M. The estimated cost for Parcel H-3 site preparation will
be decreased to $6.0 million if 130,000 cubic yards of soil is imported to the Project Site prior to the
close of escrow. If less than 130,000 cubic yards are imported, the cost will be prorated.
(3) Reflects both a direct subsidy to the RHCC Project ($40.17 million), as well as indirect subsidy. The
indirect subsidy includes specific public improvements necessary for the construction of a new RV
Park, to be funded via the previously discussed bond financing ($10.62 million). Construction of the
new RV Park and removal of the existing RV Park are required for the construction of the RHCC
Project.
(4) Reflects an estimate of the District’s foregone ground lease revenues during Lease Years 1-38. Refer
to Table 1.
(5) Reflects maximum parking garage cost of $40 M less anticipated parking revenues received by the
District over term of the lease. Refer to Table 2.
Of the above subsidy amounts, the District will be solely responsible for Parcel H-3 Site Preparation,
Land Contribution, and Parking Improvements. The City and District together will fund the Project Public
Investment, specifically the Public Improvements at $50.79 million and the Convention Center at a cost
not to exceed $240 million. It is anticipated that the City and District may fund the Project Public
Investment using bond financing. As detailed in Sections I and VI of this Report, the City and District
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propose to commit or pledge various annual revenues toward debt service on a potential bond to fund
the Project Public Investment. These revenues include existing revenues, RHCC Project-generated
revenues, and the District’s Annual Support Payments. The approximate ratio of City vs. District annual
revenues contributed toward bond debt service in the stabilized year of hotel operations is estimated to
be 75%/25%. (The City and District may also utilize other one-time revenue sources available to fund
the Project Public Investment.)
The total cost to the City and District may be higher than the above figures, depending on the ultimate
method of financing utilized. For example, if the City, District, and/or Authority use bond financing to
fund the proposed contributions, then the issuing party(ies) will likely incur bond issuance costs in
excess of the proposed contribution amounts cited in Table III-1.
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IV. START AND END DATES OF SUBSIDY
The Economic Development Subsidy will commence upon the execution of the Agreement in April 2018.
The Economic Development Subsidy will end for the District when the ground lease term expires in
2091. The City’s share of the Economic Development Subsidy will end once the bonds issued by the
Authority are paid off. Table IV-1 below presents a summary of when the Economic Development
Subsidy is distributed to the Developer.
Table IV-1: Start and End Dates of Economic Development Subsidy
Lease
Years
Type of Economic
Development Subsidy Comment
0 Site Preparation Costs Fund costs of Parcel H-3 site preparation, estimated
at $6.0 M
1 – 4 Public Improvements/
Convention Center/
Parking Improvements
Fund contribution to Public Improvements, not to
exceed $50.79 M
Fund contribution to Convention Center, not to
exceed $240 M
Fund cost of Parking Improvements, not to exceed
$40 M
1 – 19 Land Contribution Forego 100% of ground lease payments
20-38 Land Contribution Forego standard ground lease payments in exchange
for stipulated fixed payments of $3.0 M during Years
20-24 and $3.5 M during years 25-38
5-66 Parking Improvements Receive offsetting ground rent payments in the form
of participation in parking garage revenues (12.5%
during Years 5-38; 15.0% during Years 39-66)
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V. PUBLIC PURPOSE OF SUBSIDY
Implementation of the proposed Agreement, allowing for the Economic Development Subsidy, can be
expected to assist the City in achieving their economic development goals and objectives for
development of the Chula Vista Bayfront. But for the Economic Development Subsidy, the RHCC Project
would be infeasible and the Developer would be unlikely to proceed. The Economic Development
Subsidy as proposed will enhance the RHCC Project’s feasibility, but in a manner and amount that is
projected not to generate an excessive return for the Developer.
In addition, the RHCC Project will generate substantial benefits to the local and regional community in
the form of increased tax and land lease revenues, permanent and temporary jobs, and the provision of
significant public amenities and public infrastructure. The RHCC Project is also anticipated to be the
development catalyst for the CVBMP and is consistent with the policies outlined in the City’s Economic
Development Element of the General Plan in order to achieve its economic development goals and
objectives. These policies include:
• Promote economic development that fosters job availability, economic revitalization, and tax
revenues.
• Pursue actions to support development of tourism in the City.
• Develop and promote various portions of the City, such as the Chula Vista Bayfront, as regional
visitor destinations that could include hotels, meeting spaces, and conference facilities.
• Encourage the opportunity for employment of local residents.
The operation of the RHCC Project will serve the City and the surrounding community by providing
commercial facilities that are not currently available in the community. No luxury, AAA Four Diamond
(or similar) hotel currently operates in the City. Further, the City currently lacks large, luxury conference
facilities similar to the Convention Center component of the proposed Project that will accommodate
community events and gatherings such as high school dances, meetings of local trade organizations,
fundraisers, and other community events. The nature of the RHCC Project as a high-end, luxury resort is
expected to bring a demand for additional luxury facilities and services in the community, encouraging
related investment and development in the City and surrounding areas. The development, opening, and
operation of the RHCC Project will be of material benefit to the City and to the citizens of, and property
owners in, the City and surrounding areas, because construction and operation of the Project will
encourage and foster the economic revitalization of the City for the people in the area and the general
public as a whole; provide commercial facilities and services not currently available in the City; increase
tax revenues available to the City and other taxing agencies; increase sales tax revenues available to the
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City; increase Transient Occupancy Tax revenues available to the City; generate Additional Rent to the
City; and create jobs within the City.
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VI. PROJECTED REVENUE TO CITY RESULTING FROM THE SUBSIDY
A. Projected Tax Revenue to City
KMA has estimated the projected tax revenues based on a detailed financial evaluation of the RHCC
Project. Project-generated revenues to the City consist of TOT revenues, CFD special taxes, property tax
and property tax in lieu of Vehicle License Fee (VLF), and sales tax, as detailed below.
• Transient Occupancy Tax (TOT) Revenues
o RHCC Project – The RHCC Project will generate TOT revenues to the City. The City will provide
an amount equivalent to the TOT revenue generated from the RHCC Project to support debt
service payments on the bonds.
o RV Park – The new RV Park will generate TOT revenue to the City. The City will provide an
amount equivalent to the TOT revenue generated from the new RV Park to support debt service
payments on the bonds.
• Community Facilities District (CFD) Special Taxes – The City will form a CFD for the purpose of
levying and collecting special tax revenues generated by the RHCC Project. CFD Special Taxes at
least equal to 5% of room revenue will be used to support debt service payments on the bonds.
• Property Tax and Property Tax In Lieu of Vehicle License Fee Revenue – The City may form an
Enhanced Infrastructure Financing District (EIFD) for the purpose of applying incremental tax
revenues to fund the cost of RHCC Project public improvements or other RHCC Project public
investments. In the event the EIFD is not formed, an amount equal to incremental property tax and
property tax in lieu of VLF generated by the RHCC Project to the City will be committed by the City to
support debt service payments.
• Sales Tax Revenues – The City will provide an amount equivalent to the sales tax revenue generated
from the RHCC Project to support debt service payments on the bonds.
Table VI-1 provides a summary of the estimated annual tax revenue to the City during the Stabilized
Year of RHCC Project operations as a result of the Economic Development Subsidy.
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Table VI-1: Estimated Stabilized Annual Tax Revenues to City
Annual Tax Revenue (1)
Transient Occupancy Tax (2) $13.8 M
Community Facilities District (3) $6.9 M
Property Tax and Property Tax In Lieu of VLF (4) $1.8 M
Sales Tax $1.3 M
Total Annual Tax Revenues to City $23.7 M
(1) Reflects annual tax revenues to the City in the stabilized year (Lease Year 9).
(2) Based upon 10% of RHCC Project room revenue.
(3) Based upon 5% of RHCC Project room revenue.
(4) Based upon City portion of annual tax revenue and property tax in lieu of VLF.
Each source of revenue committed by the City and District will be used to pay debt service on the bonds
issued by the Authority. Remaining surplus cash flow will be distributed through a priority “waterfall”
sequence, as outlined in the proposed Revenue Sharing Agreement between the City and the District.
After the “waterfall” distributions, any remaining surplus cash flow will be distributed equally between
the City and the District.
B. City/District Participation in NOI
In addition to ground lease payments paid to the District, the Developer will pay the City and District an
annual participation payment based on surplus Net Operating Income (NOI) from the RHCC Project.
Specifically, the City and District will receive 20% of surplus NOI above an 11% ROI threshold on the
Developer’s Contribution during Lease Years 5-38. KMA has prepared a preliminary projection of this
potential future revenue stream, which is summarized in Table VI-2.
Table VI-2: Projected Annual NOI Participation Payments to the City/District
Lease Year
Estimated Annual
NOI Participation Payment
to City and District
Years 1-4 – Construction N/A
Years 5-8 $0
Year 9 $0.1 M
Year 20 $3.5 M
Year 30 $9.7 M
Year 38 $16.2 M
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VII. ESTIMATED NUMBER OF JOBS CREATED BY THE SUBSIDY
Development of the RHCC Project will create both temporary and permanent employment in the City
and the County. KMA prepared a detailed Economic Impact Analysis (EIA) to estimate the employment
generated by development of the RHCC Project during construction and on a permanent (recurring
annual) basis. The EIA estimates the portion of economic output that is paid out in wages, the average
wage by type of employment, and the resulting total construction employment and permanent
employment.
Table VII-1 presents KMA’s estimate of jobs created by the Economic Development Subsidy.
Table VII-1: Estimated Number of Jobs Created by the Economic Development Subsidy (1)
County of San Diego City of Chula Vista (2)
Temporary Jobs (3) 2,200 120
Permanent Jobs 4,470 3,300
(1) Reflects direct, indirect, and induced jobs generated by the RHCC Project.
(2) City figures are included within County figures.
(3) Reflects average annual employment over a 48-month construction period, based on location of business.
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VIII. LIMITING CONDITIONS
1. The KMA analysis is based, in part, on data provided by secondary sources such as state and local
governments, planning agencies, real estate brokers, and other third parties. While KMA believes
that these sources are reliable, we cannot guarantee their accuracy.
2. The projections and analyses contained herein are based on estimates and assumptions which
were developed using currently available economic data, project-specific data and other relevant
information. It is the nature of forecasting, however, that some assumptions may not materialize
and unanticipated events and circumstances may occur. Such changes are likely to be material to
the projections and conclusions herein and, if they occur, require review or revision of this
document.
3. Any estimates of revenue or cost projections are based on the best project-specific and fiscal data
available at this time as well as experience with comparable projects. They are not intended to be
projections of actual future performance of any specific project. Any changes to costs,
development program, or project performance may render the conclusions contained herein
invalid.
4. KMA assumes that all applicable laws and governmental regulations in place as of the date of this
document will remain unchanged throughout the projection period of our analysis. In the event
that this does not hold true, i.e., if any tax rates change, the analysis would need to be revised.
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TABLE 1
ESTIMATE OF DISTRICT LAND CONTRIBUTION ($000's)
ECONOMIC DEVELOPMENT SUBIDY REPORT
CHULA VISTA BAYFRONT
Foregone (Less)
Ground Lease Ground Lease Net
Revenues (1)Payments District Land
Year 6.5%to District (3)Contribution
1 $7,868 (2)$0 $7,868
2 $7,868 (2)$0 $7,868
3 $7,868 (2)$0 $7,868
4 $7,868 (2)$0 $7,868
5 $15,166 $0 $15,166
6 $17,161 $0 $17,161
7 $18,642 $0 $18,642
8 $19,913 $0 $19,913
9 $20,982 $0 $20,982
10 $21,401 $0 $21,401
11 $21,829 $0 $21,829
12 $22,266 $0 $22,266
13 $22,711 $0 $22,711
14 $23,166 $0 $23,166
15 $23,861 $0 $23,861
16 $24,576 $0 $24,576
17 $25,314 $0 $25,314
18 $26,073 $0 $26,073
19 $26,855 $0 $26,855
20 $27,661 ($3,000)$24,661
21 $28,491 ($3,000)$25,491
22 $29,346 ($3,000)$26,346
23 $30,226 ($3,000)$27,226
24 $31,133 ($3,000)$28,133
25 $32,067 ($3,500)$28,567
26 $33,029 ($3,500)$29,529
27 $34,020 ($3,500)$30,520
28 $35,040 ($3,500)$31,540
29 $36,091 ($3,500)$32,591
30 $37,174 ($3,500)$33,674
31 $38,289 ($3,500)$34,789
32 $39,438 ($3,500)$35,938
33 $40,621 ($3,500)$37,121
34 $41,840 ($3,500)$38,340
35 $43,095 ($3,500)$39,595
36 $44,388 ($3,500)$40,888
37 $45,719 ($3,500)$42,219
38 $47,091 ($3,500)$43,591
Net Present Value @ 8.0%$299,000 ($54,000)$245,000
(1) Assumes standard ground lease rent at 6.5% of total income. Ground lease rate of 6.5% reflects blended rate based on
room revenue at 8%-9%, banquet and alcoholic drink sales at 6%-7%, food and beverage sales at 4%-5%, spa services at
5%, retail sales at 5%, and miscellaneous sales at 10%.
(2) Reflects construction period ground rent based on 50% of ground lease rent at 6.5% of 75% of total income at stabilization.
(3) Reflects Developer's stipulated ground lease payments during Lease Years 20-38.Construction OperationsPrepared by: Keyser Marston Associates, Inc.
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TABLE 2
ESTIMATE OF DISTRICT PARKING IMPROVEMENTS CONTRIBUTION ($000's)
ECONOMIC DEVELOPMENT SUBIDY REPORT
CHULA VISTA BAYFRONT
(Less)Net Parking
Parking Operating Parking Revenues Improvements
Year Improvements (1)Expenses (2)to District (3)Contribution
1 $40,000 $0 $0 $40,000
2 $0 $0 $0 $0
3 $0 $0 $0 $0
4 $0 $0 $0 $0
5 $0 $0 ($731)($731)
6 $0 $0 ($803)($803)
7 $0 $0 ($865)($865)
8 $0 $0 ($917)($917)
9 $0 $0 ($960)($960)
10 $0 $0 ($979)($979)
11 $0 $0 ($998)($998)
12 $0 $0 ($1,018)($1,018)
13 $0 $0 ($1,039)($1,039)
14 $0 $0 ($1,060)($1,060)
15 $0 $0 ($1,091)($1,091)
16 $0 $0 ($1,124)($1,124)
17 $0 $0 ($1,158)($1,158)
18 $0 $0 ($1,193)($1,193)
19 $0 $0 ($1,228)($1,228)
20 $0 $0 ($1,265)($1,265)
21 $0 $0 ($1,303)($1,303)
22 $0 $0 ($1,342)($1,342)
23 $0 $0 ($1,382)($1,382)
24 $0 $0 ($1,424)($1,424)
25 $0 $0 ($1,467)($1,467)
26 $0 $0 ($1,511)($1,511)
27 $0 $0 ($1,556)($1,556)
28 $0 $0 ($1,603)($1,603)
29 $0 $0 ($1,651)($1,651)
30 $0 $0 ($1,700)($1,700)
31 $0 $0 ($1,751)($1,751)
32 $0 $0 ($1,804)($1,804)
33 $0 $0 ($1,858)($1,858)
34 $0 $0 ($1,914)($1,914)
35 $0 $0 ($1,971)($1,971)
36 $0 $0 ($2,030)($2,030)
37 $0 $0 ($2,091)($2,091)
38 $0 $0 ($2,154)($2,154)
39 $0 $0 ($2,662)($2,662)
40 $0 $0 ($2,742)($2,742)
41 $0 $0 ($2,824)($2,824)
42 $0 $0 ($2,909)($2,909)
43 $0 $0 ($2,996)($2,996)
44 $0 $0 ($3,086)($3,086)
45 $0 $0 ($3,179)($3,179)
46 $0 $0 ($3,274)($3,274)
47 $0 $0 ($3,372)($3,372)
48 $0 $0 ($3,473)($3,473)
49 $0 $0 ($3,578)($3,578)
50 $0 $0 ($3,685)($3,685)
51 $0 $0 ($3,796)($3,796)
District Costs
Construction OperationsPrepared by: Keyser Marston Associates, Inc.
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TABLE 2
ESTIMATE OF DISTRICT PARKING IMPROVEMENTS CONTRIBUTION ($000's)
ECONOMIC DEVELOPMENT SUBIDY REPORT
CHULA VISTA BAYFRONT
(Less)Net Parking
Parking Operating Parking Revenues Improvements
Year Improvements (1)Expenses (2)to District (3)Contribution
District Costs
52 $0 $0 ($3,909)($3,909)
53 $0 $0 ($4,027)($4,027)
54 $0 $0 ($4,148)($4,148)
55 $0 $0 ($4,272)($4,272)
56 $0 $0 ($4,400)($4,400)
57 $0 $0 ($4,532)($4,532)
58 $0 $0 ($4,668)($4,668)
59 $0 $0 ($4,808)($4,808)
60 $0 $0 ($4,952)($4,952)
61 $0 $0 ($5,101)($5,101)
62 $0 $0 ($5,254)($5,254)
63 $0 $0 ($5,412)($5,412)
64 $0 $0 ($5,574)($5,574)
65 $0 $0 ($5,741)($5,741)
66 $0 $0 ($5,913)($5,913)
Net Present Value @ 8.0%$40,000 $0 ($13,000)$27,000
(1) Cost of Parking Improvements.
(2) Assumes the Developer is responsible for parking operating expenses. Per RIDA, December 7, 2017.
(3) Reflects 12.5% of gross parking revenues to the District during Lease Years 1-38 and 15.0% of gross parking revenues
to the District during Lease Years 39-66.OperationsPrepared by: Keyser Marston Associates, Inc.
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