HomeMy WebLinkAboutR20-Redevelopment Agency
ReQ".. OFUENt AGENCY.~ST FOR ~_ISSION/COUNCIL A~ION
From:
CPt:
Glenda Saul, Executive Director
Subject:
SET WORKSHOP - MARKET FEASIBILITY
STUDY 1985 SINGLE FAMILY BOND ISSUE
Redevelopment Agency
Date: November 25, 1985
Synopsis of Previous Commission/Council action:
12/17/84 Resolution 84-552 authorized submission of an application for an
allocation for Single Family Bonds 1985
9/85 State approved allocation of$36,000,000
10/85 Resolution 4802 authorized entering into an agreement with Empire
economics for a Market Feasibility Study for the 1985 Single Family Issue
Recommended motion:
MAYOR AND COMMON COUMCIL
c
MOVE THAT A WORKSHOP MEETING BE SET FOR
DISCUSS THE MARKET FEASIBILITY STUDY PREPARED BY
CITY'S 1985 SINGLE FAMILY BOND ISSUE.
AT a.m./p.m. to
EMPIRE ECONOMICS RELATIVE TO THE
~~J
Signature
Contact person:
GLENDA SAUL
Phone: 383-5081
Supporting data attached:
YES
Ward:
FUNDING REQUIREMENTS:
Amount: $
N/A
Project:
No adverse I mpact on City:
Date:
December 2, 1985
f""'.,cil Notes:
.........
1.,',../(.'T
Agenda Item Nof2-Z 0
CIl:: OF SAN BERNARDI(:O - REQUOT FOR COUNCIL AC~N
-.
L-
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75-0264
STAFF REPORT
In October, the Commission approved a Market Feasibility Report for our pending 1985
Single Family Issue. This report is necessary to issue the 1985 Bonds.
Attached is a copy of the report prepared by Empire Economics. Staff recommends that
a workshop meeting be held in order that Dr. Joseph Janczyk can review the report in
detail with the Commission.
l21G/OJ
12-2-85
EMPIRE ECONOMICS-...
MORTGAGE REVENUE BOND PROGRAM
MARKET/FEASIBILITY STUDY
CITY OF SAN BERNARDINO
SUMMARY AND CONCLUSIONS
Prepared
for
San Bernardino City
by
E.pire Econo.ics
Joseph T. Janczyk, Ph.D.
300 East State Street, Suite 502
Redlands, California 92373
Nove.ber 1985
c
o
o
EMPIRE ECONOMICS
:)
SUMMARY AND CONCLUSIONS
PREFACE
The "Summary and Conclusions" has a dual purpose:
. First, to provide you with a synthesis of the
comprehensive market/feasibility study, including the
following:
+ The methodology underlying the market/
feasibility study.
+ The primary findings on the demographic/
economic trends and housing market
demand/supply conditions in the market
area.
+ The competitiveness of the candidate
projects relative to other comparable
projects.
+ The estimated absorption schedules for
the candidate projects.
+ The feasibility of the candidate
projects in the mortgage revenue bond
program for the most probable as well
as other potential economic/financial
scenarios that may materialize when the
projects are being marketed.
. Secondly, to provide you with timely information on the
impacts of changes in the candidate projects and/or
market demand/financial conditions that have occurred
since the original market/feasibility study.
While the "Summary and Conclusions" should provide you with
a timely synthesis on the characteristics and feasibility of
the candidate projects,it is meant to be only a summary and
so we strongly recommend that you review the comprehensive
market/feasibility study.
EMPIRE ECONOMICS
c
INTRODUCTION
!!ckl!~!!!!!!
The City of San Bernardino, based upon its concerns about the
adverse iepacts that hizh eortzage rates are havinz upon the
affordability of its housinz, is authorizing the issuance of mortgage
revenue bonds to provide a~slstance to qualified households. Since the
interest paid on the bonds is exeept froe federal and state taxes, in
the opinion of Bond Counsel, the eortzage rate for households in the
prozraa is expected to be significantly lower than either FHA/VA or
conventional earket rates. Consequently. eany households that are
presently excluded froe the housinz earket will qualify for loans under
this prozrae and thus be able to becoee hoeeowners. Furthereore. the
developeent of these projects will generate eeployeent opportunities
that will benefit other citizens in San Bernardino as well.
For a description of the expected econoeic benefits of San Bernardino's
Mortgaze Revenue Bond Prograe, refer to Chart A.
D..cr!2!!2n 2! !!! ~!11
San Bernardino's recent population and econoeic growth is reflected
by the following statistics:
Tiee Period
Population
Housinz Coeeercial Industrial
five-year averages)
1970
1975
1980
1985
106,869 (000) (000)
102,100 544 $9,502 $239
118,794 957 $12,712 $2.399
134,700 1,163 $30.205 $2,109
(zrowth rates) ( ratios )
3.27% per year 1.76 1.34 10.03
2.68% per year 1.21 2.38 0.88
1980/1975
1985/1980
San Bernardino's future growth potential is expected to reflect the
recent population and econoeic trends in the city as well as those of
the earket region, in general: these will be discussed coeprehensively
in the deeand section of the study.
For further inforeation on the San Bernardino's recent population and
econoeic trends. refer to Chart B.
~!!~!!2!!~!!! ~! !h. ~!!!!!!!!!! ~!~1!~!!
For each of the candidate projects in the proposed eortgage revenue
bond prograe, inforeation was coepiled on the following factors:
age 1
EMPIRE ECONOMICS
.
.
.
.
.
.
.
Na.e of the Developer
Project Na.e
Location of the Project
Housing Product Types and the Product Mix
Land-use Density
Develop.ent Status
Total Units and their Status: Sold. Built.
Construction. Planned.etc.
Mortgage Request and Units in the Bond Progra.
Special Features and A.enities
.
.
In su..ary. the candidate projects in the .ortgage revenue bond progra.
have the following characteristics:
Project Characteristics
Total
Average
Project Sizes-Units
Units Built
Units Sold
Request for Bond Funds
Units in Bond Progra.
Housing Prices
Unit Sizes
Ti.e Until Sales Co..ence
782
111
o
$31.26 .illion
424
65
9
o
$2.60
35
$81.807
1.259
3.50
sq.. ft.
.onths
.il11on
For a su..ary of the pri.ary characteristics of the candidate projects.
refer to Exhibit A.
CO!2~~!!! ~! She !~!~!!~ !~~!!
E.pire Econo.ics utilized a forecasting-si.ulation housing .odel to
esti.ate the .arket de.and for the candidate project as well as the
feasibility of the .ortgage revenue bond progra.; this analysis was
conducted for the .ost probable as well as alternative financial
scenarios that .ay e.erge in the future. Specifically. the housing
.odel represents the integration of the econo.ic/financial concepts
underlying real estate develop.ent, in general. with the actual
population. econo.ic. and housing .arket trends and patterns in San
Bernardino County and the Market Region, in particular. Thus. the
.arket de.and\feasibility study syste.atically proceeds from the
general de.ographic, econoaic and financial .arket conditions to the
absorption schedules for the candidate projects in the San Bernardino
Mortgage Revenue Bond Progra..
For a co.prehensive description of the .ethodology underlying the
.ortgage revenue bond progra.. refer to Chart C.
!!!:~!S Areu
Based upon a
.arket factors
projects in the
following .arket
consideration of the de.ographic. econo.ic and housing
that will influence the success of the candidate
San Bernardino Mortgage Revenue Bond Program. the
areas have delineated:
Page 2
o
0-- EMPIRE ECONOMICS
Los Angeles Metropolitan Area: This encollpasses the Southern
California econollY, including Los Angeles. Orange, San Diego, San
Bernardino, Riverside, and Ventura counties. While 1I0St of the
deaographic, econoaic, and construction activity was originally
concentrated in Los Angeles County, there has been a substantial
spillover of such activity to the other counties during the past
decade.
San Bernardino County: San Bernardino County includes all of the
various cities and coaaunities within its boundaries.
Regional Markets:
regions, due to its
conditions for the San
cOllprehensively:
San Bernardino is partitioned into various
size, so that the relevant housing lIarket
Bernardino Mortgage Bond Prograll can be analyzed
West Region
Ontario, Rancho Cucallonga and other cities
Central Region:
San Bernardino. Rialto. Colton and Redlands
East Region
Victorville. Adelanto and Hesperia
For additional inforaation on the boundaries of the various aarket
areas, refer to Map A.
SECTION I
THE POTENTIAL HOUSING DEMAND
FOR THE CANDIDATE PROJECTS
The delland for housing in the Central Region of San Bernardino
County, as a whole, and the deaand for the candidate projects, in
particular, is now deter.ined through a systeaatic analysis of the
following factors: First. the dellographic, ellploYllent and construction
activity inter-relationships aaong the Los Angeles Metropolitan Area,
San Bernardino County. and the Central Market Region are analyzed.
Secondly. ellploYllent, population and housing de.and are forecasted for
San Bernardino County's Central Region. Third. the cOllposition of
demand by va.rious price ranges and housing product types is derived.
Fourth. the housing de.and for the candidate projects is 1I0dified for
the various federal and state criteria that the purchasers must
fulfill. Thus, the result of the analysis is the potential housing
demand by qualified purchasers for the candidate projects in the
1I0rtgage revenue bond prograll.
~!!~lr!2hl~~ !!21~I!!!! !!& Q~!~!~!l~! AC!l!l!I
!!~!!! !r!!&~ !!& f!!!!r!!
Page 3
EMPIRE ECONOMICS
The l'elationships between the Los Angeles Metl'opolitan Al'ea, San
Bel'nardino County and the Centl'al Market Region al'e now established,
thl'ough a co.pal'ative analysis of theil' l'ecent de.ogl'aphic, e.ploy.ent
and construction activity trends and patterns; theil' results al'e as
follows:
Econo.ic
Indicatol's
Population:
1985
E.ploy.ent:
1985
Residential
Units/yr:
1970. . .1975
1976.. .1980
1981. . .1985
Co..el'cial
Construction/yl':
1970. . .1975
1976.. .1980
1981...1985
Industrial
Construction/yr:
1970. . .1975
1976.. .1980
1981. . .1985
Su..al'Y:
Los Angeles
Metl'opolitan Al'ea
San Bernardino
County
Centl'al
Mal'ket Region
14.563.1111on
1.054 .1111on
404,100
6.385 .1111on
0.377 .1111on
N/A
106,923 /yeal' 6,636 /yeal' 1,342 /yeal'
114,598 /yeal' 14.087 /yeal' 4,015 /year
90.123 /yeal' 11 ,823 /year 3,514 /yeal'
( 000,000 ) ( 000,000 ) ( 000 )
$784 /yeal' $26 /yeal' $1 Z , 690 /yeal'
$1.437 /yeal' $78 /yeal' $30.152 /yeal'
$2,988 /yeal' $161 /yeal' $50,947 /yeal'
( 000.000 ) ( 000,000 ) ( 000 )
$294 /yeal' $14 /yeal' $1.445 /yeal'
$755 /year $38 /year $7,861 /yeal'
$773 /yeal' $102 /yeal' $8,464 /yeal'
The compal'ative analysis of
constl'uction activity tl'ends and
Metropolitan Region. San Bel'nardino
Region l'evealed the following:
the demogl'aphic, e.ployaent and
pattel'ns in the Los Angeles
County and the Centl'al Mal'ket
Econo.ic
Indicatol's
Population
E.ployaent
Residential
Co..el'cial
Industrial
c
Growth Co.parison:
San Bel'nal'dino
to the LAM Al'ea
Gl'owth Co.pal'ison:
Mal'ket Region
to the LAM Al'ea
-------------------
.uch faster
.uch fastel'
faster l'ate
fastel' l'ate
auch fastel'
faster
N/A
faster
slowel'
fastel'
l'ate
l'ate
rate
l'ate
l'ate
l'ate
l'ate
Pat{e 4
EMPIRE ECONOMICS
f~2!lationL !!ploy.en! ~nd !~~~!nl t2~~~~~
!g~ !~ Centr!! !~~! !~I!~n
The forecasts for population and eaployaent growth as well as the
deaand for housing that these households generate are now derived,
these are based upon the expected growth paths of the local econoay as
well as the characteristics of the households in the econoaic bases;
the results are as follows.
Market Period
Eaployaent Growth
Annually
....=.......~....=
Share
..........-=--...
Priaary Sector
Support Sector
Total
1,359
2,171
3,530
Population Growth
..._a............
Priaary Sector
Support Sector
Total
3,058
4,885
7,942
Housing Deaand
-----...:..------
Priaary Sector
Support Sector
1,124
1,656
2,780
Sumaary
38.50~
61.50~
100.00~
38.50~
61 . 50~
100.00%
40.44%
59.56%
100.00%
The accuracy and reliability of the population and housing demand
forecasts can now be assessed by coaparing thea to their recent trends
Recent Ratio of
Trends Forecasts Forecast/Recent
....==.. ..=:-.... :ESIE_===========
Population 9,249 7,942 0.859
Housing 3,245 2,780 0.857
Thus, the forecast for population is slightly lower than its recent
trends while the housing deaand forecast is also lower as well.
For additional inforaation on the housing aarket's recent trends and
forecast, refer to Graph A.
~~!2~~!!!~n ~! Ho~!nl ~!!~n~ !n !!~ f~!~al !!~~~! !~I!~n
f!!~! !~I!~ ~n~ !~~!!nl fr~~~~ !X2!!
The characteristics of the ~eaand for housing in the Central Region
during the aarket tiae period are now analyzed, including its
coaposition by various price ranges as well as housing product types.
Page 5
De.and by Price Ran~es
EMPIRE ECONOMICS
The de.and for housing by various price ranges is esti.ated using
the income distribution of households and the proportion of income that
they allocate to housing as well as the various loan underwriting
criteria that lenders typically utilize.
Allocation of Income.......
Basic Mort~age Rate........
Downpayment............... .
Term of Loan...............
30.00~
12.00~
5.00~
30
These loan
both the
program as
underwriting criteria are
lenders/private mortgage
well as the modifications
subject to change, depending upon
insurance companies in the bond
that they may make in the future.
for principal/interest
fixed rate
years
Price Ranges
Housin~ Demand
Market Region
Minimum
Maximum
Annually
$0
$55,000
$69.000
$89,000
$128.000
$205.000
$55,000
$69.000
$89,000
$128,000
$205.000
1.014
290
545
568
260
102
+++
To t a I . . . . . . . . . . . . . . . . . . . .
2,780
Demand by Housin~ Product Types
Share
36.49~
10.42~
19.62~
20.45~
9.36~
3.67~
100.00~
The demand for housin~ can also be presented according to the types
of housin~ products that the households in the various economic bases
can afford. rental or ownership. as well as their preferences for the
the various types of housing products, attached or detached.
Market Segment
Product Type
Local Industry
Support Sector
Attached
(Ownership
a Rental)
Detached
Local Industry
Support Sector
Co.muters Detached
Retirees Attached
Resort Households Attached
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
rat~c fi
Market Oemand
Annually Share
1.199
43.14%
973
34.99%
552
56
o
2.780
19.87~
2.00~
0.00%
100.00~
EMPIRE ECONOMICS
.od!!~~tlon. ~ ~2Y!!nI Demand
Federal ~ State !~gulrem~
The federal and state le~islation that authorizes the issuance of
.ort~age revenue bonds requires that the housing units in the program
as well as the purchasers of the units fulfill certain requirements.
Accordin~ly, the above forecasts of housing demand are now adjusted for
these criteria in order to arrive at a .ore accurate esti.ate of the
housing de.and for the candidate projects in the .ortgage revenue bond
progra..
Federal Criteria
According to federal le~islation, the housing units and purchasers
in the bond progra. .ust fulfill the followin~ require.ents:
*
The price of the housing units .ust be below a designated
.axi.u..
Avera~e
Price
Maxi.u.
Price
Targeted
Area-Max
New Housin~............ .$117,100
Existin~ Housin.g....... . $107,900
( Note: These prices are subject to
$128,810
$118 , 690
change on an annual
$140,520
$129,480
basis. )
*
The purchasers .ay not have
three years and .ust have
the housing unit for the next
owned a house during the prior
the intention of occupying
two years.
Applyin~ the above criteria to the housin~ de.and forecasts results
in the .odified de.and for the .ortgage revenue bond program:
Gross Housin~ De.and/yr..........
2,780
Adjusted Housing De.and/yr.......
761
State Criteria
The .ortgage bonds .ay be issued under either .Senate Bill *99 or
Asse.bly Bill *1355; the latter has .ore restrictive incoae limits on
purchasers than the foraer. These incoae liaits will, in turn,
determine the "incoae windows" for the projects in the program.
According to the Asse.bly and Senate Bills. the aaxiaua incoae limits
for the purchasers in the prograa. for entitleaent and suppleaental
funds, are as follows:
Maximum
Incoae
Entitleaent
Funds
Suppleaental
Funds
$31.750
$47,625
(Assembly Bill
Only)
$38,100
Page 7
EMPIRE ECONOMICS
:)
Project Inco.e Windows: The inco.e .windows. for the candidate projects
represent the difference between the .ini.u. inco.e that purchasers
need to qualify for the .ortgage loan and the .axi.u. inco.e that they
are allowed to have under the progra.'s state inco.e li.its. The
.ini.u. inco.e required depends upon the loan underwriting criteria
that are utilized. While the criteria stated below represent the
current situation. they are subject to change over ti.e:
Fixed-Rate
Buy-Down
Mortgage Rate. .(Bond Prog).
Downpay.en t. . . . . . . . . . . . . . . .
Inco.e Allocation..........
(Principal' Interest)
Private Mortg. Insurance...
10.00%
5.00%
30.00%
7.25%
5.00%
27.00%
0.80%
1.00%
The project inco.e .windows. can now be esti.ated
underwriting criteria along with the .axi.u.
purchasers: the results are as follows:
by using the current
inco.e li.its for
Fixed-Rate
Buy-Down
Entitl. Suppl. Entitl. Suppl.
Maxi.u. Housing Price........... .$142.813 $114.251 $165.347 $132.278
Project Windows:
Mini.u. Window............
Window -Average............
Maxi.u. Window............
$480
$17,318
$28.473
($5.870)
$8.587
$18.948
$6.169
$21.542
$31.369
($181)
$12.810
$21.844
SECTION II
COMPETITIVENESS OF THE CANDIDATE PROJECTS
AND THEIR CAPTURE RATES
The .arket/feasibility study now turns to an analysis of the
co.petitiveness of the candidate projects in the San Bernardino
.ortgage revenue bond progra. as co.pared to the other projects that
are on the .arket presently, so that their capture rates can be
esti.ated: this involves a consideration of the following factors:
First. the nu.ber of comparable projects that are on the market
presently; these are identified through .arket surveys. Secondly, the
co.petitiveness of the candidate projects relative to the co.parable
projects: this is acco.piished using statistical techniques that
analyze their prices. product types and aarket segments. a.ong other
factors. Finally. the financing co.petitiveness of the projects in the
prior and current .ortgage revenue bond progra.s are taken into
consideration.
Page 8
EMPIRE ECONOMICS
c'
Coa2!!!ble Proje~!! in She Q!!!!!l !!!ke! ReEion
Market Surveys
Empire Econoaics's field surveys of the residential projects in the
Central Region of San Bernardino involved the compilation of
information on the primary characteristics of the projects, including
the following: project developer, project naae, total units in the
project, total sales to date, land-use density, housing product plans
along with their prices and sizes of living areas; and the aarket
segment(s) to which the project is oriented. To provide a aeasure of
the competitiveness of the various projects, a statistics hereafter
referred to as the "Value Ratio" was calculated for each of the
projects, using the following foraula:
Annual Mortgage Payments
(Price and Mortg. Rate)
Value Ratio Foraula:
Size of Living Area
Finally, the special amenities of the various project
evaluated, based upon the quality of their neighborhoods as
project's common areas and recreational facilities.
were also
well as the
Coaparable Projects
The projects which are considered to be comparable with the
candidate projects are those which have units that are priced below the
designated maximum price limit as well as housing products that are
oriented towards relevant market segaents: local industry, support
sector and commuters: so there are 50 relevant projects on the market.
Accordingly, these projects were partitioned into two Eroups, according
to their housing product types: then, statistics were computed for the
projects in each of the Eroups.
Q~!2!!1!!!!!!!! !ud Ca2!~ !!!!1 21 !~! Q!!~1da!! f!2i!~!!
The estimation of the aost probable capture rates for the candidate
projects involves an analysis of their coapetitiveness relative to the
comparable projects that are on the market presently. First. the
pro-rata capture rates for the candidate projects are estiaated.
Secondly, these are modified for the specifiC characteristics of each
of the projects. to arrive at an estiaate of their most probable
capture rates.
Pro-Rata Capture Rates
The pro-rata capture rates are based upon the assumption that each
of the candidate projects captures its proportionate share of the
market deaand. This is determined directly according to the number of
coaparable projects that are on the market presently:
Page 9
EMPIRE ECONOMICS -
Attached
Products
Detached
Products
Nuaber of Projects
Pro-rata Capture Rates
9
11.11~
41
. 2.44~
Thus, the pro-rata
aarket shares. based
saae characteristics
capture rates serve
upon the assuaption
and features,
as an approxiaation of the
that all the projects have the
Modified Capture Rates
The pro-rata capture rates for the candidate projects are now adjusted
by coaputing their "Modified Value Ratios" and then coaparing these to
the Value Ratios of the coaparable projects.
The aodified value ratios for the candidate projects are coaputed using
the following algorithan: First. the housing prices of the projects are
adjusted according to their distances froa the urban core. relative to
the other coaparable projects in the aarket region. Secondly, the
candidate project's prices are adjusted for any special features that
they have which aay enhance their aarketability. again. relative to the
other projects in the aarket region. Then. the aodified value ratios
are coaputed for each of the candidate projects.
The pro-rata capture rate for each of the candidate projects is
adjusted in the following aanner: If the aodified value ratio for the
candidate project is below the value ratio for the aarket coaparable
projects, then its capture rate is increased above the pre-rata rate.
Conversely. if the aodified value ratio for the candidate project is
above that of the coaparable projects. then its capture rate is
decreased below the pro-rata rate. In both cases. the specific aaount
of the adjust.ent is based upon the differential between the value
ratios of the candidate and the coaparable aarket projects relative to
the stan~ard deviation of the value ratio for coaparable projects. The
result of this analysis is a capture rate of 6.75 ~ . on the average.
Pinancia! Coapetitiveness of ~2~!~ 1~ !h~
Prior and ~2R2~~g !2~g f~2i~~~~
Since the California Mortgage Bond Allocation Coamittee allocates
the state's aortgage revenue bond funds aaongst the cities and counties
in the state, the bonds that have been issued as well as those that are'
proposed to be issued can be deterained.
Prior Bond Issues:
In the Central Region of San Bernardino County, the aortgage revenue
bonds that have been issued so far are as follows
Total Nuaber of Units in Prograas.........
Units Marketed Thusfar.... (estiaated).....
Reaaining Units With Bond Financing.......
805
345
460
units
units
units
Pag" 10
EMPIRE ECONOMICS
P~oposed Bond Issues:
In the Cent~al Region of San Be~na~dino County, the ao~tgage ~evenue
bond issues that a~e planned fo~ the futu~e a~e as follows:
P~oposed Mo~tgage Bond P~og~aas.........
200
units
SBCTION III
FBASIBILITY OF THB MORTGAGE REVENUE BOND PROGRAM
The feasibility of San Be~na~dino's Mo~tgage Revenue Bond P~og~a.
can now be dete~ained, based upon a conside~ation of the aa~ket
deaand-supply conditions, the potential financial .a~ket conditions,
and the cha~acte~istics of the p~ojects in the bond p~og~aa.
!~qulred Q!Ptu~ Ra!~~
The feasibility of the San Be~na~dino Mo~tgage Revenue Bond P~og~aa
depends upon whethe~ o~ not the housing units in the candidate p~ojects
can be abso~bed within the loan o~igination ti.e pe~iod of soae th~ee
yea~s. Specifically, the~e a~e two types of captu~e ~ates: Fi~st, fo~
the candidate p~ojects, as a whole, and secondly, fo~ each of the
candidate p~ojects, in pa~ticula~: acco~dingly, each of these is now
analyzed.
Po~folio of P~ojects:
The ~equi~ed captu~e ~ates fo~ the candidate p~ojects, as a whole, a~e
estiaated by coapa~ing the nuabe~ of thei~ housing units with the
va~ious levels of housing deaand: the ~esults a~e as follows:
Measu~es of Housing Deaand:
Housing De.and
( 3-yea~s)
Requi~ed
Captu~e Rate
G~oss Housing Deaand
(All housing units)
8,340
5.08%
De.and by Qualified Households
(Adjusted fo~ bond
p~og~a. c~ite~ia)
2,283
18.56%
Net Housing De.and
(Also adjusted fo~ housing
in othe~ bond p~og~aas)
1,938
21.86%
Thus. the candidate p~ojects, as a whole, need to captu~e of 21.86%
the net adjusted de.and by qualified buye~s to be abso~bed within the
age
c
c
EMPIRE ECONOMICS
:)
. loan ori~ination tiae period of soae three years.
.
Specific Candidate Projects
The capture rates for each of the candidate projects in particular
deteraines whether or not the units that it has in the aort~age revenue
bond prograa can be absorbed during the designated loan origination
period. Specifically, the capture rate for each of the projects is
derived by considering the nuaber of units that the project is expected
to have absorbed by the aarket each year (its capture rate of the net
adjusted aarket deaand) along with the nuaber of units it has in the
aortga~e bond prograa. The analysis reveals that it is 1.9 years
on the average, for the candidate projects to be absorbed.
Additionally, the total aaount of aort~a~e revenue bond funds that the
candidate projects could use within the three-year loan origination
tiae period was estiaated: this aaounts to $41.802 aillion.
For additional inforaation on the expected absorption tiaes for the
candidate projects, refer to Tables 1 and 2.
r...l~!!!!I ~~ !1!!ncia! !!L~!l Condition!
While the above estiaates of the expected absorption schedules for
the candidate projects has been based upon a coaprehensive analysis of
all the relevant aarket deaand and supply conditions, a critical
underlying assuaption has been that the current relationship between
the aort~age revenue bond and aarket interest rates will not chan~e
si~nificantly during the loan ori~ination tiae period. However,
considering the tiae span of the loan origination period, some three
years, it is worthwhile to perfora an analysis of the potential iapacts
of a change in this relationship. Accordingly, a sensitiVity analysis
of the tiae required to absorb the candidate projects was conducted,
and the results are as follows:
Conventional Market Rates
12.00~ 13.00~ 14.00~ 15.00~
Time to Market Units/yrs..
0.76
0.38
1. 38
1.18
Consequently, if the aarket rates rise relative to the aortgage rate
for the projects in the bond prograa, then the candidate projects will
experience a faster rate of absorption. Conversely, if aarket rates
decline relative to the bond prograa rate, then the candidate projects
would require a lon~er tiae period for their absorption, if they
continued to used the aortgage revenue bond program funds.
Consequently, under such a scenario, it is likely that the projects
would switch to conventional aarket and/or FHA/VA fi~ancing, and
thereby not use the mort~age revenue bond pro~raa funds.
Pag.. 12
c
o
o
EMPIRE ECONOMICS
:J
c
Q~!!!..!!.!!.!.!
Therefore. based upon the expected demographic-econoaic trends, the
housing market demand-supply conditions and the designated financial
aarket conditions, we conclude that the candidate projects in the San
Bernardino Mortgage Revenue Bond Prograa can use the Mortgage funds
within the three year loan origination tiae period.
/
~.
Ph.D.
c
Page 13
EMPIRE ECONOMICS
CHART A
ECONOMIC BENEFITS OF THE MORTGAGE REVENUE BOND PROGRAM
City of San Bernardino
---------------------------------------------------------------
Co.parison of a Typical vs Bond Program Purchase
---------------------------------------------
Bond
Typical Program Comparison
------- ------- --------
Pr i ce. . . . . . . . . . 579,000 579,000 50
Downpayment...... . 53,950 53.950 50
Loan. . .. .. . .. . .. . 575,050 575,050 50
Mortgage Rate. . . . . 13.00llo 10.00llo 3.00llo
Monthly Pay.ent. . . 5834.37 5663.44 5170.93
Required Income. . . 533,341 526,511 -20.49%
Mortgage pay.ent Savings
---------------------------------------------
Per Unit
All Uni ts
Monthly........... 5171
572,401
Annually.......... 52,051
50.87 million
Loan: 30 yrs...... 561,537
526.06 million
Ellployment [mpacts
---------------------------------------------
Value of Housing Units..... 526.146 million
Price-avg.......581,807
Nu.ber of Units. 320 (excluding existing)
Employment Positions....... 2,255
Primary Sector..
525,000 per year
784
Secondary Sector
520.000 per year
1,471
---------------------------------------------------------------
EMPIRE ECONOMICS
:;;
CHART B
D8IOGRAPHIC, ECOllOllIC, AHO COIISTRUCTlOII TREHDS IN THE
Sin Blrnardino
---- -----------------------------------------
POPULATION
( Calif. Dept. of Finance) RESIOENTIAL-UNITS COIIIERCIAL INOUSTRIAL
--- ------- -------------------- ------------------
YEAR LEVEL C1tANGE LEVEL TREllO LEVEL TREND LEVEL TREHO
-- ---- -- --- ----- --------- ---------- ----------
($ ODD) ($ ODD) ($ 000) ($ 000)
1910 106,869 T84 $13,126 S551
1911 101,500 0.59\ 866 $22,813 S'09
1912 101,000 -o.m 90S U,218 $235
19T3 106,300 -un m $1,931 saz
1914 103,600 -2.54' 88 S6,859 S54
1915 102,100 -US, 120 5U Sl,401 $9, 502 SU S239
1916 10'-'00 2.84' 362 m S5,34S S8,105 S5.5 S238
1911 108,100 3.15' m m $8,361 S5,691 S3.656 S119
1918 111,300 2.96% 1,611 601 S16,380 $1,114 S5,221 S1,610
1919 115,300 3.59\ 1,355 lU $20,891 $9,m sua S2,339
1980 118,194 3.0" 1,361 951 $23,884 S12,112 $415 S2,399
19B1 123,500 3.96% m 1,061 S18,200 S15,511 $1,110 S2,511
1982 126,500 2.m m 1,056 S19,186 S11,918 $4,249 $3,IU
1983 128,900 1.90' 115 1,031 U5,511 S24,110 SU89 S3.266
1984 131,400 un 1,993 l,OU S21,798 S26,013 Sl,556 S2.655
19B5 13',100 2.m 1,165 1,163 U6,054 $30,205 $1,238 S2,109
PRICE DISTRIBUTION OF THE HOUSING
ONNERSHIP HOUSING ONLY
---------------------------------
HOUSING MARKET STOCK: 1985 1980 CEHSUS DATA
VICiIley HOUSING PRICES HOUSING STOCK
Units Rate (1985) (1980)
--- ---- ---------- -----------
Single-Flaily ...... 42,1n UO, $0 S24,OOO I,m
Nultiple-Falily .... 14,181 4.10' m,ooo SU,OOO 2,m
Mobile Heals........ 2,489 $42,000 S60,OOO S,311
Total.............. 59,423 3.60' $60,000 $96,000 8,nS
$96,000 $120,000 1,451
S120,000 S180,000 811
S180,OOO S240,OOO 235
sm,ooo $999,000+ 1.,
EMPIRE ECONOMICS
~
ElCIIIIIT A
atAbCTOISTlCS Of llIE C.IIlDIDATE PROJECTS (NllIE NDlTGAGE REVENUE BCIlD PtlO6INI
City of Sin ~ino
DEVELOPER
AID
PROJ ECT IWlE
PROJECT HClUSINS IIIfTS
DD PflO6R.UI
HOUSINS PRICES HOUSINS SIZES
TDT Al
BUilT
SOlD
REQUEST UNITS
'"i 1 1ICIIlI)
NINllIIUIl AVERAGE !lAXlMUN ~INlMUN "AXlIllUN
"mOll NaadI 0... II 0 0 15. ODD 53 $13.99D 113, S1S m,990 920 l.m
~ll1dte
Ilu TICII o...lGtl11'1 5. 0 0 IUSD 5. 111.900 lit. 11& 195.90D 1,1&6 1,456
TIw Pirie
Ilu TICII 0...101111'S 13 a a I3.lSD .. 155.500 s,o,m S",500 lID 1.136
TIw P..k
SIIIdOlI NIIdOlIa ltd 13T a a ".SOD I SIl . 9DD SIT.IOD m.9OO 1.363 1,121
SIIIdOlI llelclaos
Security Plcif1c I 7 7 a ".31D 5 $13.5DO 11S.IU 111.000 1,232 1.512
IIarpIIIIllClI'
liddl. 0...1apeent lDI a 0 U.5aa '21 lIuaa S95.21D IU.9aD 1,011 1.490
South Poinu V
liddll 0...1_ 111 a a 12.5aa 21 StUDD 1102.11' SlD',9DO 1.251 1,530
South Point. VII
SIn ....... City IltlA 4a a a 12.000 31 15D.000 $51.000 $12.000 900 1.100
Inff11 ltauIillCJ
Sin ....... City RDA 40 a a 12.0ao 35 S50,0DO 110.000 11D.DOD 900 1.100
IleIlIb-Reael111CJ
ExiftillCJ ltauIina 10 10 0 luao 10 IID.DDO 11D.'" 110. ODD 1 ,000 1.200
P.i..: S&o-.o.oao
ExiftillCJ HclusillCJ 35 35 0 S3 . DaD 35 lIa.ooo StO.521 S100,OOO 1.200 1,400
P.iCl: 110-100.000
ExistillCJ Hau.ina 9 9 a Il.Oao 9 S100,OOO S11O.m $120.000 1.400 1,600
,.i..: 1100-120,000
5tlt'sticIJ Su"''Y
Tal:ll........ .. 712 111 a 131.210 421
Alii.......... &5 9 a S2 .105 35 S14.312 "'.101 SII,924 1,101 1.41&
'"";_........ 1 a 0 SUID 5 S5D,OOO 15&.000 $12, ODD !6D 1,100
Ilaxi.......... . 111 10 a S5.000 .. $100.000 S110.729 S120,OOD 1,400 1,121
. TIw ..... of unit. in tho band 1I/'G9'- 101' _h IlI'Oject f. lI1:illud usina its .-tDIIl. .......t
11anq with tho -19. ,.i.. of its hausina Il/'Oducts IIld an ..... ~~t of 5'.
CHART C
EMPIRE ECONOMICS
METHODOLOCY mlDERLII8C THE MARKET/FEASIBILITY STUDI
.................................... tlTRODUCTIOI .............................................
... ...
... DESCRIPTIO. or TRE CITY/COmlTI DESCRIPTIO. or THE CABDIDarE PROJECT ...
... ...
... · aeolat D..ocnpblc Growtb I P1'"Ojeot &ad l)e.llope.. ...
... · Realat Coaltruct1oa &atlYlty I D...lo~t Statu.: Conltruat./Market1ul ...
... · SOUll1ne Stock I 'aun07 Rat.. · Pl'OCIllOt tU..z: 'rlo.. . t,lY1D1 ,...... ...
I.. . Typ.. ot looa~a ..... . 'utUNa a AMaltl.. ...
... ...
...................................................................................................
..................... ICOIONIC lSSaMPTIOIS/PllAMlTlII UlDlILtIIG tOl1C4STS .....................
... ...
... aaSIC ASSmMPTIO.S PUWDAKIITaL P,iAMI1IIS ...
... ...
... · Growtb 'atbl toP. !cotlo.alo Ia... · Co.po.ttton or tbe lcionOll1o .... ...
... · Most Probable Mo~t.~ lat. (lndu.trfj C~...., Retiree. . Tourl..) ...
... . Rac. ot Boualac 'ppr.o1at10D . Iaplo,...t/'opulat10a/Roualnl ~ltlpliers ...
... · Rate ot lallation. · Mark.t !bare. or Detaoaed/Attaobed H6aes ...
... ...
...................................................................................................
..... . '
...
.
......................................................................
..... .....
... I'.
. .
............................................... .................................................
. .
. ROOSIBO SOPPLf ABD CAPTVIII HATIS .
· rOI TO C&IIDIDaTl PIOJICT .
. .
. · SUrYe, ot tbe Actlye ae.14.atlal Project. .
1A tbe Market Re,ioD .
· Coaparabl. Projects 1n the Market a.C10n: .
Mark.t S....nt., Price. . -Pro4uct typ.. .
· Pro-Rata Capture Rat.. tor Projeota with
D.taabed add Attaobe4 Roualel Product.
· Co.petltlyeae.. ot Co. parable Projects
Acoordial to their a.al Annual Pa,aent.:
(&anual Mort,a.. Pa~.nts/L1vin. Ar.a.)
I Adjuated Capture aat.. ot th. Can4i4ate
Project :
..al Annual Pa,..nta tor tb. Can4i4ate
..1atiY. to tb. Co.parable Project.
- Proz181t, at tae Projeot to a 're.var
- Maater Planned Co..unity ".nit1e.
ROOSI80 DEHa.D af OOaLIFIED POIci&sERS
rOR THI CA.DIDATI PIOJICT
. a.o.at D.~.raph1o, la,lo,...t and
Construation Aotivit, Treads
. roreaa.ta tor Eaplo,..at, Population
aa4 Roua1DI D.....4 " ..'
· Coapar1aoa ot 'or.c..t. vltb.llOeDt
Rou.iDI Tr.nd. _ .
. Co.position at Rovaia. De8aDd by. Pric.
Raac.., Mark.t S....nt. and Roualn.
Product Tn..
. Moditication ot HousiDC D..... top Ion4
Proer.. Crlt.rla:
Maxiaua Pric.
Ftrat-ti.. Buy.r
Ow.r Occupancy
. Inca.. Wia40wa tor CaDdldat. Projeot
Quallt,in. lncoa.:Pric./Mort,ace lAt.
Maxi.ua Iaco.. tor Purobaae~
Suppl..ental : 1201 ot Meda1a
EDtltl".Dt : 1501 ar MedalD
Inca.. Wla4ova: Max~ YI Qualir,inl
.
.
.
· · coapetlt~Y.n'ls ot Can4idat. Project due
. to their Spea1al Finanains Rat..
. · co.pet1ti..n..s at Projects in Prior
. Mort.... R.v.aut Bon4 Procr...
. .
................................................ .........~........................................
..... .....
... ...
. .
...............................................~~.y............
.....
...
.
........................... FEASIBILITY or tHE BONn PRoalAM .............................
... ...
... . lati..te4 ADnual Ab.or~tloD Rat.. tor the Can414at. Proj.ct ...
... - D...n4.tor Bou.la. by Qualitie4 PurChas.r. ...
... - Exp.cted Captur. Rat.s tor the Can4idat. '",jeat ...
... ...
... . Can41dat. Proj.ct I s Bou.in, Onit. in the BoDd Pro.r.. ...
... ...
... · 'U.e aequlre4 tor tbe Can41date Project to be Ab.orbed ...
... ( Not.: It th. uzia,. ti.e periOd ot 3 rears 1. not ...
... tult111e4, th.n the desr.. ot project's partic1pation ...
... in bon4 prosr.. say be reduced ooamensurat.ly.) ...
... ...
..........................................................................................
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EMPIRE ECONOMICS
TABLE
IIllRTGAGE REVEIlUE BOlO IWlllET OEIWIO STUOY: SUIllARY OF COIlCLUSlONS AND FEASI81LITY
Cfty of SIn 8ernlrdino
P.....-d IIlIrtOag. Rat.: 10.00\
. . * * * * * . . . * * <<
INTRODUCTION · · · · · · · · · · · · ·
Reclllt Growth Trlllds . Locll A.....
HausinO Stock - Loc.l ArtI
-- 1970 to 1985 --
Population 6rowch/Yr.........
Residllltill I'weiU/Yr.......
CoIIercill Canstr/Yr...fll...
Industrill Canstr/yr...fll...
Product
Units
Vlclncy
R.u
3040\
4.10\
3.50\
1,155
905
$18.01
$1.15
Sino 1.. ....
!lIltipl... .
Tou1......
42,147
14,m
59,123
. . . . .. . . * .
ECONOIUC ASSUIIPTlOIIS UNDERLYING FORECASTS
. * . . . .. * . . . .
8ttfc ~Oag. Rat......... 12.00\ Housino Appreci.tfon...... 5.00\
Inflltion Rat............. &.00\ Cost Inflatfon............ 5.00\
· · · · · 09WI0 FOIl HOOSlNG . . . . . . . HOUSING SUPPLY COIlOITIONS . . ·
IIIIlrkat Rtoion ForICl.ts COIQIr.bl. Projects
Att.chtd Projtcts.......... 9
~fc R8clllt llettchtd Projects.......... 41
IndiCltlll'S Trlftds Fortcttts
VII... Ratios:
Housino Units/yr 3,127 2,780 AttlChtd Projects.......... $7.94
Eap lov-t /Yr..... 3,530 OetlChtd Projects.......... $7 .57
Populltion /Yr.. 10,910 7,9U (Annull Norto.o. P.yoent/LivinO Ar..)
Proor.. Criterfl Clptu.. Rat.. for Candidlte Projects
lItxi.,. Hausino PriclS Pro-Ratl Clotur. Rat..
New HottI............. $128,110 Attlchtd Product.......... 11. 11\
Existino H............ $111,&90 Ott.chtd Products......... 2,44\
l!Ixi... Purchtsll' lnc.... ~ified V.lu. R.tios.......... $5.19
A_ag........ ........ $31,750
Entitl_t.......... . $n,525 Clptur. Rat. for the
SUppl_ul.......... $31,100 Projects.Annu.IIV..... 5.m
. . . . .. . . . .. . . . . .
FEASI81LiTY OF THE 8ONO P1lO6IW1
Units............ 424
. . . . . .
Cltago"Y of HousinO Olund
3-Y..r PlI'iod
Captu.. Rau
Roquired
Annu.lly (3-y.."')
Gross Olund for HousinO..............
1,340
2.780
5.08\
Olund Adjusted for HousinO Pric. &
Purche.1I' Roquir_ts................
2,283
751
II.m
Otund Adjusted for Projects In
Prior & PrOQDIed 80nd Proor...........
1,938
64&
21.85\
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EMPIRE ECONOMICS
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ASSUMPTIONS ANO QUALIFICATIONS
The aethodology underlying this study has been designed to take into
account all of the various deaographic. econo.ic and housing aarket
factors that will influence the success of the various projects in San
Bernardino City's Bond Prograa. Specifically. the data used in the
analysis have been gathered fro. sources that are regarded as being
reliable. Furtheraore. the econoaic and housing deaand forecasts are
based upon the aost probable assuaptions regarding the .arket
conditions that are likely to prevail in the future.
c
While a high degree of conscientiousness has been exercised. we
nevertheless take special care to state the assuaptlons and
qualifications underlying the aarket deaand feasibility study.
Specifically. there are several factors that are beyond the scope of
the aarket - feasibility study that aay have a substantial iapact upon
the bond prograa. First. there are various aarket factors that can
influence conventional aortgage interest rates as well as e.ploy.ent
conditions. Secondly. there are other factors infiuencing the projects
that will affect there sales rates, such as their .arketing prograas.
Consequently, the purchaser of the bonds should take these factors into
consideration as well.