ITEM NO DATE OF MEETING 7a-Attach 5 8/02/2011 Terminal 91 Today 2 Guiding Principles Driven by Century Agenda Guidelines  Attract expansion of "core mission" customers  Attract "broader types of economic activity" that comply with the existing industrial zoning  Incorporate revenue streams expected from full, fair market value leases into the financial analysis in order to test the financial sustainability of total site development  Explore models of sustainable growth 3 Policy Questions • What is the appropriate level of Port investment in new infrastructure? • What is the optimal balance between:  Economic vitality/Jobs  Environmental stewardship  Financial goals • How should any new investment be funded? 4 Completed Work  Identification of existing core mission tenant needs  Industrial market assessment  Site planning of Development Zones and Options  Construction cost estimates for anticipated Port projects  Financial analysis  Economic benefits analysis 5 Planning Strategy • Six zones • Accommodate existing tenants expressed expansion needs • Consolidate footprints and/or relocate activity south of the bridge • Free up land available for new tenants 6 Utility improvements north of bridge  New road network  Integrated storm water system  Upgraded electrical  Water and Sewer  Other Cost: $20 - $24 million 7 Zone Review North of Bridge  Key Messages  Investments in utilities at best break even  Tank Farm is not ideal for new buildings  Positive NPV results from Port constructed industrial buildings are unlikely  Ground leasing as alternative means to meet existing tenant expansion should be considered 8 Zone Review North of Bridge - Continued  Key Messages  Investments in utilities cannot be recovered  A garage may be worthy of consideration to efficiently use land and maximize economic benefits  Key Issues  Expected financial targets?  Seek public partners for cost sharing of utilities?  Invest in utilities or leave this to a 3rd party developer?  Timing of investments? 9 Zone Review South of Bridge - West Yard  Key Messages  Demand for new office space not anticipated for several years  Non-accessory office development requires zoning modification  Ground leasing may provide a positive NPV  Key Issue  Exploring potential land swap and CSO placement with City / County 10 Zone Review South of Bridge - Shortfill Key Messages  The existing use and configuration provides a positive NPV  Opening up additional land north of the bridge for new tenants by investing south of the bridge may be costly to pursue 11 Zone Review South of Bridge - Pier 90  Key Messages  Positive NPV results from Port constructed industrial buildings are unlikely  Rebuilding berths 6 / 8 has significantly negative impact on financial results  Key Issue  Consider berth construction as an asset management investment and remove from financial results 12 Option #1 Economic Benefits Option 1 Jobs Direct 388 Induced 323 Indirect 218 Total 929 Income ($1000) Direct $22,797 Induced $11,676 Indirect $9,947 Total $44,420 Direct Business Revenue ($1000) $75,064 State and Local Taxes ($1000) $4,131 13 Option #2 Economic Benefits Option 2 Jobs Direct 506 Induced 437 Indirect 295 Total 1,238 Income ($1000) Direct $30,746 Induced $15,804 Indirect $13,568 Total $60,118 Direct Business Revenue ($1000) $103,049 State and Local Taxes ($1000) $5,591 14 Option #3 Economic Benefits Option 3 Jobs Direct 783 Induced 648 Indirect 458 Total 1,890 Income ($1000) Direct $44,367 Induced $23,431 Indirect $21,351 Total $89,149 Direct Business Revenue ($1000) $157,231 State and Local Taxes ($1000) $8,291 15 Option #4 Economic Benefits Option 4 Jobs Direct 3,198 Induced 3,936 Indirect 3,050 Total 10,185 Income ($1000) Direct $241,422 Induced $142,611 Indirect $159,580 Total $543,613 Direct Business Revenue ($1000) $1,191,319 State and Local Taxes ($1000) $50,556 16 FINANCIAL RESULTS Zone Option 1 Option 2 Option 3 Option 4 Pier 90 Scenario Port Investment NPV Berth & Buildings $73.9 ($40.4) Berth & Buildings $73.9 ($40.4) Berth & Buildings $73.9 ($40.4) Berth & Buildings $73.9 ($40.4) Shortfill Scenario Port Investment NPV Yard with No Fill $0.0 $3.3 Yard with No Fill $0.0 $3.3 Apron Extension - Notches $8.8 ($4.3) Full Apron with Garage $111.3 ($67.8) NW Yard Scenario Port Investment NPV Existing Cruise Parking $0.4 $2.6 Existing Cruise Parking $0.4 $2.6 Garage & Leases $33.6 $0.8 Development & Yard $0.5 $10.1 Tank Farm Scenario Port Investment NPV Warehouse $22.0 ($9.7) Warehouse & Office $26.7 ($10.4) Warehouse & Office $26.7 ($10.4) Warehouse $22.0 ($9.7) West Yard Scenario Port Investment NPV Development & Yard $0.5 $3.3 Development & Yard $0.5 $3.3 Development & Yard $0.5 $3.3 Development & Yard $0.5 $3.3 Uplands Scenario Port Investment NPV Development & Yard $0.9 $15.1 Development & Yard $0.9 $15.1 Development $0.9 $13.4 Development $0.9 $13.4 Utilities Scenario Port Investment NPV $22.7 ($17.4) $23.4 ($17.9) $25.3 ($19.4) $26.6 ($20.4) Port Investment NPV IRR $120.4 ($43.2) 5.8% $125.8 ($44.4) 6.0% $169.7 ($56.9) 6.5% $235.6 ($111.5) 4.5% Total Note: $ (000,000's) 17 Status Quo  Key Messages  Investments in berth reconstruction and storm water management systems are likely to be needed  Removing estimated asset management costs significantly improves financial results but projected return remains negative  If no significant investment is authorized, staff will likely seek longer term leases for open storage  Key Issue: What is optimal balance between economic benefits and financial goals? 18 FINANCIAL RESULTS - Continued • The financial results excluding costs associated with asset management issues are shown below. Though results improve significantly, all options retain a negative NPV. Total (excluding Berth & Stormwater costs) Port Investment NPV IRR Option 1 Option 2 Option 3 Option 4 $68.0 ($4.5) 10.3% $73.4 ($5.6) 10.1% $117.7 ($18.5) 9.0% $183.8 ($73.3) 5.8% Note: $ (000,000's) 19 NEXT STEPS  Outreach to current tenants and the public  Additional analysis  Prepare recommended development option  Commission briefing this fall on recommended option 20