In response to comments and inquiries on what is the City’s return on its investment in the Americana at Brand, the following information is provided. This is in addition to the information provided in staff’s Nov. 2017 memo examining the financial arrangement of the Americana at Brand.
Recently, there has been misinformation circulating about the Americana at Brand, the agreements surrounding the project, and its economic impact. Provided below is factual information outlining project objectives, costs, and economic benefits.
NOTE: information is based on data available through November 2017.
x The Glendale community does not reap any benefits from the Americana.
✔ The facts is... Unlike the private sector, where a primary objective is to maximize return on investment, redevelopment projects often had multiple public policy goals, many of which inherently conflicted with the private sector goal of generating sufficient financial return to warrant risking private dollars. This “trade off” of public policy objectives over revenue recovery was a fundamental characteristic of many redevelopment projects.
The Americana at Brand was conceived as more than a mixed-use retail center with housing. The Agency envisioned an extraordinary project that not only generated tax revenues but was distinctive, vibrant, created a sense of place, and implemented particular urban design principles. With its completion, the Americana successfully achieved the desired public goals including:
The elimination of blighted properties;
Generation of new public revenue;
Diversifying the community’s retail base and housing stock;
Creation of new public open space; and
Creation of new jobs.
Indirectly, the downtown has benefitted from the positive effects of the Americana at Brand promoting hundreds of millions of dollars in other, private investment most notably from General Growth Properties and their improvement of the Glendale Galleria, new housing and hotel development, restaurant/entertainment venues and the attraction of Class A office users.
x The City spent $77 million to purchase the land, but by the time it was given to the Americana, the value had grown to over $300 Million.
✔ The facts is... Glendale’s Redevelopment Agency estimated the total cost of the project to be $77.1 million. This was based on appraisals and estimates prepared before project approval in 2003. At the conclusion of all project-based activities in 2011, the final cost was $88.4 million. This represented a 14.6% increase in costs due mainly to appreciation in land value, unforeseen site conditions (soil/water contamination and clean-up) and litigation expenses for challenges to the Agency’s ability to acquire and environmental review; the Agency was successful on every challenge to its activity.
The current value of the land is based mainly on the improvements financed by the Developer.
x The Americana does not provide any financial benefits to the City of Glendale.
✔ The fact is... When the project was approved in 2004, it was assumed the former Agency would receive 80% of net project property tax revenues (after statutory tax sharing payments) through 2015 (Central Project expiration date), and at least 10-years beyond that to pay off project area indebtedness. The remaining 20% went to the Glendale Housing Authority to develop affordable housing throughout the City.
The Agency was dissolved in February 2012, and the Agency’s responsibilities, assets and liabilities were transferred to the Successor Agency. With the elimination of redevelopment, the manner in which tax increment is allocated has been radically changed. The Successor Agency now receives only the amount of tax increment necessary to meet its enforceable obligations. Tracking the actual Americana property tax amounts distributed to the GSA and City is difficult due to County accounting methods and manner in which property tax revenues are distributed. Eventually, when the entire Agency debt is retired in 2024, the property tax will be distributed to all the taxing entities. At that point, the City will receive 13.57% of Americana generated property tax, with LA County and Glendale Unified School District receiving 36.13% and 20.25% respectively. Using the FY 16/17 value, the City’s portion would translate into $801,580 annually to the General Fund.
When redevelopment was dissolved by the State legislature in 2012, set-aside funding for affordable housing (20% of net property tax revenue) was also eliminated completely.
As noted, staff cannot specifically identify the amount of Americana property tax that is distributed to the Successor Agency. For analysis purposes only, using an approximation based on the percentage of former project area assessed value attributable to the Americana, staff estimates the Americana would have generated an estimated $7.2M in annual direct financial benefit for the last reported period (Sales and Property Tax). An additional $1.2 million would have been generated in Affordable Housing funding.
This is based on the latest data in the following categories:
Sales Tax: For the latest one-year period available (April 2016 to March 2017), the Americana generated $2.523M. The Americana has consistently outperformed the sales tax estimates since opening in 2008.
Property Tax: After Disney and the Galleria, the Americana is the third largest property tax payer in the City. Property tax data for each fiscal year is reported by the County of Los Angeles in late August. The Americana’s assessed value for FY 16/17 is $590.7M, which generates approximately $5.907M in property tax.
As noted, the Successor Agency does not receive the full allocation of property tax increment; however, because enforceable obligations remain (most notably bond repayments), the Successor Agency currently collects a significant portion of the property tax. Also, Americana property tax is part of the pool of revenue used to repay the Agency loan to the City. In FY 16/17, the Americana assessed value (inclusive of the condos) represented approximately 11.8% of total assessed value in the former project areas. Applying that percentage to the County distribution and loan repayment ($23.315M) for the last two ROPS periods, staff approximates the Americana generated $2.75M in property tax. In addition, the City received $2.037M in residual distributions, of which $240,000 could be attributed to the Americana.
In actuality, once the Agency’s obligations are paid, the City can expect to generate approximately $3.5 million from Sales and Property Taxes or almost half of what would have been realized prior to the dissolution of redevelopment. There is no dedicated funding generated for affordable housing.
To view the latest quarterly sales tax updates, click here.
x The Americana is not maintaining the green space as negotiated. The City of Glendale is paying for the maintenance costs.
✔ The fact is... As negotiated in the original agreement, Caruso Affiliated was obligated to operate and maintain the public open space, which they have. This annual cost has ranged from $350,000 to almost $700,000 over the years.
x The parking contract with the Americana was re-negotiated to allow Caruso affiliated 100% of profits.
✔ The facts is... Per the terms of the Parking Structure Ground Lease, the Agency was entitled to a percentage rent equal to 50% of parking revenue net of collection cost. In 2011, the parking garage generated $435,051 of net revenue after expenses; the Agency received $217,525 in accordance with the Lease Agreement.
With redevelopment’s dissolution, the Successor Agency was obligated to terminate or renegotiate any agreements to reduce liabilities and increase new revenues to the taxing entities. Per this mandate, in March 2015, the Successor Agency approved the sale of the ground lease parcel to the Americana in the amount of $2.75M. As a result of the elimination of Redevelopment and the requirement to sell the lease, the community no longer receives parking revenue from the Americana garage as originally negotiated by the Redevelopment Agency in 2004. The City was entitled to approximately $450,000 of one-time funds as part of the dissolution formula for distributing assets.
x Billboards were not supposed to be allowed at the Americana.
✔ The fact is... Provisions were built into the code (Advertising Signage Overlay Zone or ASOZ) for special signage to occur at the Americana at Brand and the Galleria. All advertising at the Americana at Brand must be for services and goods sold or produced on the premises or within the ASOZ.