Agenda Item AGENDA STAFF REPORT ASR Control 18-000944
MEETING DATE:	09/25/18
legal entity taking action:	Board of Supervisors
board of supervisors district(s):	1
SUBMITTING Agency/Department:	OC Public Works (Approved)
Department contact person(s):	Shane Silsby (714) 667-9700
	Thomas (Mat) Miller (714) 834-6019

Subject: Civic Center Facilities Strategic Plan Revision and Building 14

ceo CONCUR

County Counsel Review

Clerk of the Board

Concur

Approved Ordinance to Form

Public Hearing

3 Votes Board Majority

Budgeted: N/A

Current Year Cost: See Financial Impact Section

Annual Cost: See Financial Impact Section

Staffing Impact:

No

# of Positions:

Sole Source: N/A

Current Fiscal Year Revenue: N/A

Funding Source: See Financial Impact Section

County Audit in last 3 years: No

Prior Board Action: 6/26/2018 #75, 4/25/2017 #40, 4/23/2013 #37, 8/21/2012 #37

RECOMMENDED ACTION(S):

1.	Find that Final Environmental Impact Report No. 626, previously certified by the Board of Supervisors on April 25, 2017, together with Addendum No. 1 reflect the independent judgment of the County of Orange and satisfy the requirements of CEQA for the County of Orange Civic Center Facilities Strategic Plan Revision No. 1, which is a necessarily included element contemplated as part of the whole of the action.
2.	Find that the circumstances of the County of Orange Civic Center Facilities Strategic Plan Revision No. 1 are substantially the same and that Final Environmental Impact Report No. 626 and Addendum No. 1 have adequately addressed the effects of the proposed project. No substantial changes have been made in the project; no substantial changes have occurred in the circumstances under which the project is being undertaken; and no new information of substantial importance to the project, which was not known or could not have been known when the previous Environmental Impact Report No. 626 was certified have become known; therefore no further environmental review is required.
3.	All mitigation measures are fully enforceable pursuant to CEQA (Public Resources Code) Section 21081.6(b) and have either been adopted as conditions, incorporated as part of the project design, or included in the procedures of project implementation.
4.	Approve the County of Orange Civic Center Facilities Strategic Plan Revision No. 1 and approve the construction of Building 14 consistent with the County of Orange Civic Center Facilities Strategic Plan Revision No. 1.
5.	Authorize the Chief Real Estate Officer or designee to execute documents necessary for construction of Building 14, including, but not limited to, metes-and-bounds survey and necessary permits from the City of Santa Ana or the County.
6.	Read the title of the Ordinance "An Ordinance of the Board of Supervisors of the County of Orange Authorizing the Execution and Delivery of a Facility Lease, a Ground Lease and Other Documents and Matters Related Thereto".
7.	Order further reading of the Ordinance to be waived.
8.	Conduct a Public Hearing.
9.	Consider the matter.
10.	Direct Ordinance to be placed on the agenda of the next regularly scheduled Board of Supervisors meeting for adoption.
11.	At the next regularly scheduled meeting, consider the matter and adopt the Ordinance.

SUMMARY:

Adoption of the Recommended Actions will allow for full completion of Civic Center Facilities Strategic Plan Phase 2B and approves the continuance of Phase 2A design services and construction of Building 14, the lease and leaseback of the Building 14 property and reinstitution of a nonprofit corporation as it relates to the financing of Building 14 and the Civic Center Facilities Strategic Plan.

BACKGROUND INFORMATION:

On August 21, 2012, the Board of Supervisors (Board) selected Griffin Structures Inc. (Griffin) as the potential primary developer of the Building 16 and Building 14 sites. On April 23, 2013, the Board approved Ordinance 13-003 which authorized a partnership with Related/Griffin, now organized as Griffin to complete a comprehensive Civic Center Facilities Strategic Plan (Civic Center FSP) and, based upon the recommendations, to develop the Building 16 site, with an option to develop the Building 14 site. The Civic Center FSP includes the construction of a new Building 16 as part of Phase 1 and the construction of a new Building 14 as part of Phase 2. On April 25, 2017, the Board certified the Final Environmental Impact Report No. 626 (Final EIR No. 626) for the Civic Center FSP and approved actions required for public financing of Phase 1B the construction of the new Building 16 and Building 18. The construction of Buildings 16 and 18 are ongoing and currently on schedule. On June 26, 2018, the Board approved an agreement with Griffin for program management and initial design phase services for Phase 2A, which is the planning and design of the new Building 14.

Phase 2B of the Civic Center FSP, as amended, will include the demolition of existing Buildings 11, 12 and 14 of the County Civic Center Superblock and the construction of a new Building 14, which will replace the current County Hall of Administration.

The actions presented for consideration at this time would: (1) adopt Addendum No. 1 to Final EIR No. 626; (2) approve the Civic Center FSP Revision No. 1; and (3) take actions required for the public financing of the new Building 14 by the Corporation and repayment of that financing through a lease agreement with the County.

Revision No.1 County of Orange Civic Center FSP

The approved Civic Center FSP involves the +/- 11-acre County “superblock” (bounded by Ross Street, Civic Center Drive, Broadway and Santa Ana Boulevard), as well as County satellite buildings within the vicinity of the Civic Center. Key goals of the Civic Center FSP are to improve the delivery of County services to the community by grouping similar and related services; to improve efficiencies through these departmental adjacencies; reduce energy costs by capitalizing on the Central Utilities Facility; and to improve space usage which will result in lower long-term operating and maintenance costs for the County. To accomplish these goals, the Civic Center FSP anticipates the renovation of several existing facilities and the replacement of several older facilities with new construction. These activities would result in the replacement of older facilities with approximately 700,000 square feet of newly constructed government office uses within the Civic Center FSP area. The Civic Center FSP also anticipates the sale of several County owned buildings, which would result in a net decrease of 400,000 square feet of older owned properties in the Civic Center. Implementation would occur in four phases over approximately 18 years. Phase 1 activity spans from 2016 to 2020 and includes replacement of the existing Building 16 with new facilities, construction of a County conference and events center Building 18 and renovation of the H.G. Osborne Building. Phase 2 activity spans from 2020 to 2023 and includes the replacement of existing Building 14 with new facilities, demolition of Buildings 10, 11, 12 and 14. Building 10 and 12 sites become interim public use surface parking. Through the planning process for Buildings 14, 16 and 18 and the ongoing construction of Building 16 and 18, certain revision to the Civic Center FSP have become necessary. Those revisions are set forth in the attached Civic Center FSP Revision No. 1 and include a reduction of 36,201 net new building square feet within Phases 1 and 2 of the Civic Center FSP (including new Buildings 14, 16 and 18), total renovation reduction of 43,160 square feet, demolition increase of 38,420 square feet and new construction increase of 2,219 square feet.

Building 14 Implementation

Building 14 is proposed as a six-story, approximately 254,000-square foot office building located on Ross Street north of Santa Ana Boulevard. The building will include a new Board hearing room. With approval of the actions presented, construction is targeted to begin in spring 2020, with completion slated for August 2022 and public use surface parking completion in early 2023. The building will be constructed by Griffin pursuant to a Development Agreement with the Corporation, who will lease the property from the County and lease the building back to the County.

Public Financing – Lease Revenue Bonds

The Corporation was formed as part of the financing and construction of Building 16 and is a nonprofit public benefit corporation for the purpose of facilitating financings, acquisitions of property and other financial and property related transactions, by or for the benefit of the County. The Corporation is governed by a three member Board of Directors consisting of the County Executive Officer, Chief Real Estate Officer and Director of OC Public Works. Since the County owns the land on which Building 14 will be constructed, the County will enter into a Ground Lease with the Corporation. In order to finance the Building 14 project, the California Municipal Finance Authority (of which the County is a member), will issue tax-exempt bonds, to be designated as the “California Municipal Finance Authority Lease Revenue Bonds, Series 2018A (Orange County Civic Center Infrastructure Improvement Program – Phase II).” The California Municipal Finance Authority will loan the bond proceeds, which will be utilized to construct Building 14, to the Corporation pursuant to a Loan Agreement.

The Corporation will enter into a Facility Lease with the County in which the Corporation will undertake the Building 14 project and lease the new Building 14 to the County. The base rental payments by the County under the Facility Lease will be used to repay the loan to the California Municipal Finance Authority, which pays the debt service on the Bonds to the bank trustee.

The Development Agreement is between Griffin, the developer and the Corporation for the actual construction of the new building. The Corporation will oversee the financing and construction of the Building 14 project.

The estimated par amount of the proposed California Municipal Finance Authority Lease Revenue Bonds, Series 2018A (Orange County Civic Center Infrastructure Improvement Program – Phase II) Bonds (Bonds) is $198.2 million.

Sources and uses of bond proceeds are estimated as follows:

Sources:	Par Amount	$198,220,000
	Premium	$16,529,573
	Investment Earnings-project fund	$12,398,375
	Total Sources:	$227,147,948
Uses:	Project Fund	$185,788,613
	Capitalized Interest Fund	$39,570,637
	Cost of Bond Issuance	$1,783,980
	Contingency	$4,718
	Total Uses:	$227,147,948

Public Finance staff recommends a 30-year debt service schedule, with an optional redemption provision after 10 years. The true interest cost is estimated to be 4.4%. Estimated annual base rental payments/debt service is $13.8 million, for a total cost of $393 million. An estimated $39.6 million in interest cost will be capitalized through June 1, 2023, six months beyond the expected construction period. Base rental payments will commence once the County takes occupancy of the building and the Certificate of Substantial Completion is accepted. Current year estimated $1.8 million cost of bond issuance will be paid from bond proceeds.

Credit Ratings

Presentations to Standard and Poor’s Global Ratings and Fitch Ratings are scheduled for late October 2018, with formal ratings to be received prior to issuance in December 2018.

Financing Documents

Following is a description of the financing documents attached.

Ordinance of the Board of Supervisors – Ordinance to be adopted by the Board, which identifies the legal authority for the issuance of bonds, authorizes the maximum amount of bonds to be issued by the authority, approves the Ground Lease, the Facility Lease and Appendix A of the Preliminary Official Statement. Adoption of the Ordinance by the Board will also form the Corporation.

Ground Lease – An agreement between the County of Orange and the Corporation, which sets forth the terms and conditions relating to the lease of the Building 14 site between the County of Orange and the Corporation.

Facility Lease – An agreement between the County of Orange and the Corporation, which sets forth the terms and conditions of the use of certain real property, improvements and facilities to be to be constructed, acquired and equipped by the Corporation, including Building 14.

Development Agreement– An agreement between the Corporation and Griffin whereby Griffin is engaged to develop, administer and manage the design, permitting and construction of the Building 14 project, including pursuant to a guaranteed maximum construction price, approved construction drawings and an approved project schedule.

Articles of Incorporation – Document that establishes the Corporation.

Bylaws of the Corporation – Document that describes the purpose and directors of the Corporation and sets forth its governance.

Loan Agreement – An agreement between the California Municipal Finance Authority, as issuer, and the Corporation, which sets forth the general terms and conditions of the loan financing, loan repayment and construction draws.

Indenture – An agreement between the California Municipal Finance Authority, as issuer, and Trustee (Zions Bank) pursuant to which the bonds will be issued and which sets forth the general terms and conditions and requirements governing the Bonds.

Preliminary Official Statement (POS) – Discloses material information pertaining to the issuance of the Bonds, including purpose, collateralization, repayment process, financial, economic and demographic characteristics of the County. The POS provides potential investors an opportunity to review data about the County (Appendix A) to determine the credit quality of the Bonds.

Continuing Disclosure Certificate – Provides documentation to bondholders and credit rating agencies of County certification that it will report material events that may affect the rating or payment of the Bonds and contents required in the Continuing Disclosure Annual Report.

Bond Purchase Agreement – An agreement that defines the terms and conditions under which the underwriters will purchase the Bonds. The agreement states the principal amount of the Bonds, the interest rate and maturity dates.

Compliance with CEQA: The Project is a necessarily included element of the project considered in Final EIR No. 626, which was certified by the Board on April 25, 2017, together with Addendum No. 1, which adequately addressed the effects of the proposed project. No substantial changes have been made in the project, no substantial changes have occurred in the circumstances under which the project is being undertaken and no new information of substantial importance to the project which not know or could not have been known when the Final EIR No. 626 was certified have become known; therefore no further environmental review is required.

FINANCIAL IMPACT:

Issuing the California Municipal Finance Authority, Lease Revenue Bonds, Series 2018A, (Orange County Infrastructure Improvement Program – Phase II) in the amount of $198.2 million for 30 years will cost approximately $13.8 million annual base rental payments/debt service, for a total cost of $393 million. The financing allows for an optional redemption after 10 years, and execution of this option will be evaluated during the County's annual Strategic Financial Planning process.

The source of base rental payments/debt service will be the occupant County departments including those identified in the table below. The allocation of base rental payments/debt service, by department, will be based upon square foot usage and is expected to be approximately 51% paid from non-general fund (NGF) sources.

The table below illustrates the anticipated user department rent allocation and general fund (GF) share.

Annual Base Rental Payment/Debt Service

$13,792,750

County Department - Occupant	Square Foot	Percent	Base Rent Allocation
Health Care Agency - NGF	76,800	30	$4,166,568
OC Community Resources - NGF	28,560	11	1,549,442
To Be Determined - NGF	15,260	6	827,889
CEO/Risk Management - NGF	8,320	3	451,378
Board of Supervisors - GF	32,036	13	1,738,023
County Counsel - GF	23,140	9	1,255,396
Human Resource Services - GF	19,240	8	1,043,812
County Executive Office - GF	18,460	7	1,001,495
Clerk of the Board - GF	7,280	3	394,956
OIR/Perf Audit/TBD - GF	3,640	1	197,478
Board Meeting Room - GF	21,498	9	1,166,313
Total Allocation	254,234	100.00%	$13,792,750
Non-General Fund Allocation	128,940	51	6,995,277
General Fund Allocation	125,294	49	6,797,473
Total Allocation	254,234	100.00%	$13,792,750

Numbers may not foot due to rounding. Actual occupancy may change during the programming process.

STAFFING IMPACT:

N/A

ATTACHMENT(S):

Attachment A - Addendum No. 1 to Final EIR No. 626
Attachment B - Final EIR No. 626 March 2017
Attachment C - Civic Center Facilities Strategic Plan April 2017
Attachment D - Civic Center Facilities Strategic Plan Revision No. 1
Attachment E - Ordinance of the Board of Supervisors
Attachment F - Ground Lease Agreement
Attachment G - Facility Lease Agreement
Attachment H - Development Agreement with Exhibits A-T
Attachment I - Capital Facilities Development Corporation Articles of Incorporation
Attachment J - Capital Facilities Development Corporation Bylaws
Attachment K - Loan Agreement
Attachment L - Indenture
Attachment M - Preliminary Official Statement
Attachment N - Appendix A
Attachment O - Continuing Disclosure Certificate
Attachment P - Bond Purchase Agreement
Attachment Q - Public Resources Code Section 21081.6(b)