Lincoln High School Redevelopment - Portland State University

Lincoln High School RedevelopmentDeal Structure Residential:The residential structures which will be built above the eastern garage will begeared toward workforce housing, and so will have a more simple finish level.The structures themselves are fairly straightforward: large rectangular floor plateswith no abnormal design features. Because these structures will be built in amore traditional fashion and will not have to deal with some of the constraintsthe western residential structures faced (namely being built effectively on 20’columns), we expect the costs PSF to be lower. These structures will be steel andconcrete above a post tensioned garage. The funding for this project must comefrom a variety of sources, some of them rather unique. The primary purposeof this development is providing new and adequate facilities for a public highschool, while simultaneously capitalizing on its urban location. This project isfirst and foremost a school, and thus has to be funded as such. The residentialportion of the development will be capable of funding itself, but the cost of theschool alone is what seems to be the greatest obstacle. In order to construct aschool similar to the one we have designed, we need to provide approximately$64 million.PPS benefits from a number of factors associated with this development. First,they own the site outright. This aids the financial models substantially by nothaving to account for land acquisition costs. Second, because PPS is a publicentity, it is exempt from property taxes, which substantially reduces the operatingexpenses of both the publicly-owned residential, retail and public garage components.Finally, PPS is able to secure substantial financing through the issuanceof bonds. As LHS is a non-income generating component, other than throughits tax base, this is both a necessary and helpful element as the overall total bondamount can be adjusted to accommodate the funding necessary to construct thepublic parking facilities which will then generate long term income.The development is divided into two components, each with its own source offinancing:1) LHS, public parking facilities, and associated retail/commercialspace;2) residential.LHS/ParkingPrimary funding for the new school structure will come from PPS bonds. LHSis in dire need of repair or replacement, and whether or not that change comes inthe form of major (both in terms of scope and cost) renovations, or a completelynew structure, PPS should already be well on its way to making this happen. Weestimate that a bond of $130 million dollars will be necessary to cover the cost ofthe school (estimated at approximately $65 million) and the public garages.Public general obligation bonds will require a vote and for the taxpayers to buyinto the vision of the new LHS site. However, when considered on the whole, theprojections show the creation of nearly $30 million in additional present valuethat would otherwise not exist, in addition to giving PPS a brand new, mixedusefacility that will generate income over the long term. Various local, state, andfederal grants will be sought to help reduce the total amount of the bond, butin order to provide enough financing to complete what the design, $130 millionwill be the projected bond amount.The bond payments will be covered by general tax revenues raised through approvedtax levies and supplemented by revenues generated by the retail and publicgarage. Though this may be a difficult task to accomplish, the public shouldrecognize what they are receiving both in terms of facilities and future values andthus be amenable to the tax levies.Its possible that in the interim new or expanded Urban Renewal Areas maybe able to provide portions of the necessary financing. For the purposes of ourmodels, we have elected not to assume any URA funds due to the lengthy andcomplex process associated with changing and/or creating new URAs.Because our intent is for PPS to develop and own the entire project, therebyeliminating taxes to the project, we cannot include any funding which wouldbe a result of additional property tax increment financing, outright sale, or landlease revenues.44Center for Real Estate • BOMA Development Workshop • Summer 2009