DATE: December 11, 2018
SUBJECT:
Title
PRESENTATION ON THE ECONOMIC CONSIDERATIONS RELATED TO TIDELANDS REAL ESTATE DEVELOPMENT AND CAUSES AND IMPACTS OF PROJECT DELAYS
Body
EXECUTIVE SUMMARY:
At the November 6, 2018 Board meeting, staff was asked to prepare an economic analysis of risks to development projects. As more fully discussed below, staff has analyzed and attempted to quantify these into three primary risks for discussion by the Board: schedule delays, cost increases, and performance failures. The analysis covers policy considerations and concludes with staff's observations as to characteristics of projects that effectively mitigate risk.
This analysis assumes the San Diego Unified Port District (District) continues to fund its operations with capital invested by private entities into development projects through public-private partnerships, primarily via commercial and industrial ground leases and maritime trade. Thus, mitigating development risk is critical to ensuring that the District has enough revenue to fulfill its many missions under the Port Act. The District currently employs several risk mitigation strategies. This analysis identifies additional measures that may be useful to further mitigate risk associated with development. As staff's analysis shows, development projects with broad stakeholder support and flexibility reduce development risk because they include project features important to stakeholders, which may require more time initially to identify and incorporate into a proposed project - ideally before the entitlement process begins - but which ultimately reduce subsequent challenges and shorten the overall development timeline.
Shorter development timelines bring more revenue to the District sooner. As a result, projects which successfully mitigate risk and come to market sooner are an integral part of the District's success in its public mission. For the purpose of the Board's discussion, staff's analysis is organized as...
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