Professional Documents
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Prepared for:
CB RE CO NSULT I NG
CB RE CO NSULT I NG
355 South Grand Avenue, Suite 1200 Los Angeles, CA 90071-1549 T 213 613 3750 F 213 613 3780 www.cbre.com
Mr. Brian P. McGowan, Economic Development Agency Administrator Economic Development Agency 215 North D. Street, Suite 202 San Bernardino, CA 92415-0043 Re: Highest and Best Use & Economic Development Strategy Chino Airport Dear Mr. McGowan:
CBRE Consulting (CBRE) is pleased to submit our report to San Bernardino County, which evaluates the current uses and income potential from the existing real estate assets and determines the development potential of surplus land surrounding the Chino Airport. Our findings confirm that there is strong regional demand for aviation uses at the airport and reinforces the importance of the airport to the regional economy to increase employment and tax revenues to the local communities and the County.
CBRE Consulting has analyzed the financial returns from various development alternatives, and made recommendations for land use designations within the surrounding airport area to maximize the overall return to the airport and local governments. CBRE believes that coordinated planning of a new Airport Layout Plan (ALP), together with initiating an FAA de-obligation process for up to 100 acres of commercial/industrial land can accommodate the future aviation growth and provide tremendous economic development opportunities for the County and the cities of Chino and Ontario: Provide noise buffers to new residential development Increase educational and workforce training opportunities Increase airport revenues Improve airport services Increase skilled employment opportunities Increase the local tax base
Our analysis is presented in detail in the attached report. We appreciated the opportunity to assist the County with this important issue. Sincerely,
TABLE OF CONTENTS
I. INTRODUCTION .........................................................................................................................1 BACKGROUND .................................................................................................................................... 1 DATA SOURCES ................................................................................................................................... 2 FAA ASSURANCE 25 ............................................................................................................................ 2 FAA LAND RELEASE REQUIREMENTS ......................................................................................................... 2 EXISTING CONDITIONS ......................................................................................................................... 4 II. EXECUTIVE SUMMARY ...............................................................................................................9 INDUSTRIAL TRENDS ............................................................................................................................. 9 AVIATION TRENDS................................................................................................................................ 9 ATTRACTING NEW INDUSTRIAL/OFFICE DEVELOPMENT ................................................................................. 9 ECONOMIC BENEFITS OF ALTERNATIVE USES ............................................................................................ 10 FAA RULES....................................................................................................................................... 11 RELEASING LAND FOR NON-AERONAUTICAL USE ...................................................................................... 11 PRIVATIZATION OPPORTUNITY ............................................................................................................... 12 RECOMMENDATIONS .......................................................................................................................... 12 III. REGIONAL ECONOMIC GROWTH ..........................................................................................15 INTRODUCTION ................................................................................................................................ 15 RETAIL MARKET TRENDS ....................................................................................................................... 15 INDUSTRIAL MARKET TRENDS ................................................................................................................ 17 MANUFACTURING TRENDS ................................................................................................................... 17 FUTURE INDUSTRIAL TRENDS ................................................................................................................. 18 COMPETITIVE SUPPLY OF INDUSTRIAL BUILDINGS........................................................................................ 19 INDUSTRIAL LAND VALUES .................................................................................................................... 23 MANUFACTURING EMPLOYMENT TRENDS ............................................................................................... 26 IV. AIRPORT DEVELOPMENT: CASE STUDIES ...............................................................................28 OVERVIEW........................................................................................................................................ 28 MONROE AIRPORT, CHARLOTTE, NORTH CAROLINA.................................................................................. 28 SCOTTSDALE AIRPARK: SCOTTSDALE, AZ ................................................................................................. 28 WILLIAMS GATEWAY AIRPORT, MESA, AZ ................................................................................................ 29 VAN NUYS AIRPORT, VAN NUYS, CA ..................................................................................................... 30 V. GENERAL AVIATION TRENDS ..................................................................................................32
CHINO AIRPORT ECONOMIC STRATEGY AUGUST 2007
BACKGROUND .................................................................................................................................. 32 VI. SOUTHERN CALIFORNIA REGIONAL AIRPORTS SURVEY........................................................38 REGIONAL AIRPORTS .......................................................................................................................... 38 AIRPORT GROUND LEASE POLICIES ........................................................................................................ 42 VII. COMPARATIVE LOCATION ANALYSIS ...................................................................................46 WORKFORCE .................................................................................................................................... 46 QUALITY OF LIFE ............................................................................................................................... 46 REAL ESTATE COSTS ........................................................................................................................... 49 COST OF DOING BUSINESS ................................................................................................................. 50 CONCLUSIONS ................................................................................................................................. 52 VIII. LONG-TERM ECONOMIC BENEFITS .....................................................................................54 OVERVIEW........................................................................................................................................ 54 REVENUE COMPARISON OF AIRCRAFT FACILITIES VS. INDUSTRIAL DEVELOPMENT ............................................... 54 CITY ECONOMIC BENEFIT.................................................................................................................... 54 CONCLUSION .................................................................................................................................. 55 IX. CNO REAL ESTATE ASSETS .....................................................................................................56 CHINO AIRPORT LEASES ...................................................................................................................... 56 CHINO AIRPORT MASTER PLAN ............................................................................................................. 56 X. STRATEGIC PLAN & RECOMMENDATIONS ..............................................................................59
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I. INTRODUCTION
BACKGROUND
San Bernardino County, which owns Chino Airport (CNO), has recently adopted the Airport Master Plan prepared by Coffman Associates, Inc. in Dec. 2003, and CNO has received dozens of unsolicited proposals to develop various aviation facilities throughout the Airport. The overall goal of this study is to development strategies to increase revenues for the airport, as well as tax revenues for the County and job creation for the entire Inland Empire. The specific tasks to be addressed included: 1. Examine regional economic growth Historic supply of industrial bldgs / absorption / vacancy Comparative industrial land values Survey brokers for corporate clients benefit from nearby corporate jet service 2. Case studies of other municipal airports in U.S. Types of tenants at general aviation airports success stories 3. Survey Southern California regional airports Inventory number of aircraft and other business based at airport Gather ground lease rates/policy Determine typical rents for hangar space Opportunity to capture overflow demand 4. Project Growth in General Aviation Demand Review 2003 Chino Master Plan projections Look at transfer potential from Rialto and other airport closures How much land is needed to support general aviation over next 25 years? 5. Analyze CNO estate assets Inventory land and buildings at CNO Review tenant proposals to determine which are critical for airport operations 6. Chino area economic development assessment for attracting new industries Quality of life/education/work force Tax rates/real estate costs 7. Prepare Strategic plan for attracting target industries/tenants and increasing revenue Determine amount of surplus land that may be available within the fence Recommend potential tenants for on-airport land and immediately adjacent land Suggest policies for establishing ground rent for new lessees Recommend criteria for selecting developer/tenants
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DATA SOURCES
For this study, CBRE Consulting toured the airport facilities, interviewed San Bernardino County and Chino airport officials, airport tenants, as well as industrial real estate brokers familiar with the Inland Empire and areas surrounding other Los Angels and Orange County airports. Among the reports and publication reviewed were: December 2003 Airport Master Plan for Chino Airport FAA Assurance 25 Federal Register Policy and Procedures Concerning Use of Airport Revenues California Budget Project: Policy Points January 2007 UCLA Anderson Forecast December 2006 Rose Institute/Kosmont Cost of Doing Business Survey 2005 July 2006 Ventura County Rent and Fee Schedule Department of Airports Economy.com CB Richard Ellis Market Snapshots
FAA ASSURANCE 25
In the FAA Authorization Act of 1994 and the Aviation Reauthorization Act of 1996, Congress adopted Assurance 25 to ensure that airport users are not burdened with hidden taxation for unrelated local services. Per the FAA, using fees, charges or other payments received by the airport for purposes other than capital and operating costs of the airport or local facilities operated by the airport is unlawful. The FAA also prohibits free land for aeronautical purposes, as well as land rental for nonaeronautical purposes at less than fair market value.
Land Release Request: For the FAA to consider a request, the owner must provide details on the circumstances and intents for the use of the property. These include, among others, answers to the following questions: What agreement(s) with the United States are involved? What specifically is being requested (long-term lease, release, transfer, sale, etc.)? Why the release, modification, amendment or other action is requested? What facts and circumstances justify the request? What requirements of the state or local law should be provided for in the language of a FAA issued document if the request is consented to or granted? What property or facilities are involved? How the property was acquired or obtained by the airport owner? What present use is made of any property or facilities involved? What use or disposition will be made of the property or facilities? What is the Fair Market Value (FMV) of the property or facilities? What proceeds are expected from the use or disposition of the property and what will be done with any net revenues derived? Provide a comparison of the relative advantage or benefit to the airport from the sale or other disposition as opposed to retention for rental income. Provide a plan identifying the intangible benefits if any, accruing to the airport, the amount attributed to the intangible benefits of the merit of their application as an offset against the FMV of the property to be released. The plan should also include as a minimum, o A statement of the airport's source and application of funds for the proceeding 3 years, A statement of future sources and application of funds needed for the continued operation and maintenance of the airport, A financial statement of financial capabilities and intent to accomplish the airport development included in the current NPIAS, and Must be shown to be in accordance with the ALP.
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After receiving public comment, if the FAA determines that the land is not needed for present or foreseeable airport purposes the FAA could consent to the release subject to various restrictions outlined in the sample deed of release. Leasing of airport land not needed for aeronautical use is preferred to the sale of the land since it provides continuous income for airport purposes and will preserve the property for future aeronautical usage. Airport property, which is not needed to accommodate an aeronautical use, can be leased for a nonaeronautical use, which is compatible with airport operations. The exception is land transferred by a quitclaim deed under Section 16/23, which contains provisions precluding all non-aeronautical activities. If not used for aeronautical purposes it will revert to the conveying agency. The lease shall be established at the fair market rental rate to maximize the revenue for the airport. The fair market rental rate shall be determined by obtaining a competent independent appraisal and/or by direct comparison with prevailing rentals of comparable property. The airport sponsor must submit to the Airports District Office (ADO) the request for to change the ALP and Exhibit A to using the property for non-aeronautical use. Should the ADO determine that the request can be approved it will be done so via a letter of approval for long term leases nonaeronautical use on airport dedicated property with no option to buy.
Short-Term Lease (Less than 3 Yrs.)
A request to lease airport land for non-aeronautical use for a period less than 3 years is considered an interim use and undergoes a less formal approval process. The request for an interim use should contain the information requested under Land Release Request except that an appraisal of fair market rental value is not required. A discussion of how a fair rental value was determined should be included. Approval of the interim use will also be made by via letter in lieu of the Deed of Release.
EXISTING CONDITIONS
Chino Airport was developed in the 1940s as a flight school for military personnel. In 1948 ownership of the 860-acre airport was transferred to San Bernardino County. In 1960 the airport was opened to the public. Since 1982 over $57 million has been invested by the FAA through the Airport Improvement Program. The airport has three runways, Runway 3-21 at 4,919 feet, Runway 8L-26R at 4,838 feet and Runway 8R26L at 7,000 feet, which is long enough to accommodate the largest private jets. Runway 26R has a precision instrument landing system. There are approximately 45 hangar buildings on the airport totaling 1.3 million square feet 25 Conventional hangar buildings 475,000 square feet plus 173,000 in museum space 25 T-hangar/executive hangars total 702,000 square feet 66 Port-a-Port hangars encompass 60,000 square feet
The Airport currently houses approximately 1,000 planes, a 50 percent increase from 1980 levels. This includes approximately 300 vintage planes housed in museums. Despite the increase in planes
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housed at CNO, the annual flight operations have decreased by one-third since 1990, as shown in the table below. CNO Annual Flight Operations
Itinerant Operations 1990 1995 2000 2006 Est.
Source: FAA Traffic Activity, CNO Airport
The Airport Master Plan which was recently adopted, has identified the facilities required to accommodate the forecasted future demand from growth in aeronautical operations and activity at Chino. The Master Plan has also identified land that is not expected to be needed for those new aeronautical facilities. The airport land that is not expected to be needed for new facilities that would accommodate increases in airport operations and activities is designated as Aviation Related Commercial Industrial uses. Aeronautical Facilities Requirements Estimating the amount and nature of future aeronautical facilities required begins with a projection of the increase in airport operations and activities. Key aspects of the operations and activities that will have a bearing on facilities requirements are the total number and type of aircraft based at Chino. Table 2J in the Master Plan presents a forecast of aircraft that are expected to be based at Chino by 2025. The forecast used in the Master Plan to determine additional facilities needs estimated 1,375 aircraft will be based at Chino by 2025, which represents a 38% increase over current levels. The high-end forecast projected 1,484 aircraft or almost 50% growth. Turbojet aircraft based at Chino were projected to increase from 64 in 2001 to 112 in 2025, representing a 75% growth rate. Those larger aircraft require both larger hanger space than general aviation aircraft and extensive ground support services. Based on the projections of additional aircraft, Table 3G in the Master Plan presents the number of new hanger space and tie-downs that would be required. It is estimated that an additional 333 hanger spaces and seven new tie-downs would be required. The land necessary to construct those new facilities is incorporated into the Master Plan.
An aerial view of the Airport is on the next page, followed by local and regional maps.
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Ontario
Chino Airport
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INDUSTRIAL TRENDS
The Los Angeles metro area is the largest industrial market in the U.S. With over 1.2 billion square feet of inventory and continued demand for large warehouse/distribution centers by retailers importing goods through the L.A./Long Beach Ports, almost all available industrial land has been developed outside of the higher elevation Antelope Valley and Victorville areas. As a result, land values have risen dramatically in L.A. and Orange Counties to as much as $2 million per acre. Unfortunately, these massive warehouse buildings, which range from 100,000 to 1 million square feet in size, generate little in the way of jobs and tax revenues.
AVIATION TRENDS
Although use of corporate and private jets have seen a tremendous increase since Sept. 11th 2001, private ownership of general aviation aircraft statewide have been flat to downward trending in the past 15 years. However, the Inland Empire has seen steady growth in registered aviation ownership, along with its population growth. Corporate jets, charter services and fractional ownership are seeing significant growth, as busy executives/indivduals avoid security delays at commercial airports. Because of airport capacity and noise issues at John Wayne, Fullerton, LAX, Santa Monica and Van Nuys airports, CNO is well positioned to capture an increasing share of the regional growth. Interviews with more than a half dozen lessees indicated strong demand for high-end jet hangars at CNO from existing facilities at John Wayne Airport and others.
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163.0 0.61
Industrial
250,000 $50 million $125,000 $500,000 $625,000
T-hangars
250,000 $20 million $50,000 $100,000 $150,000
City of Chino
The City will benefit in many ways from the implementation of the economic development strategy outlined in this report. It will benefit through its share of real and personal property taxes, and sales taxes on fuel purchases from various airport developments as shown below. Annual Revenue to Chino Hypothetical 10 Acres
Total Assessed Value City Property taxes @ 10% Sales Taxes Total Revenues Source: CBRE Consulting
Industrial
$50 million $50,000 4,000 $ 5,000
T-hangars
$20 million $20,000 2,000 $22,000
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By encouraging more aviationrelated business park/light industrial and commercial development on undeveloped land adjacent to the airport, the City can receive significantly greater economic benefits from manufacturing and R&D and their indirect spending impacts, than from typical large warehouse/distribution uses than are dominating the development pipeline, as shown below. City of Chino Economic Benefits Warehouse vs. Industrial Uses Hypothetical 100 Acres
Permanent Jobs Total Assessed Value City Property Taxes @ 10% Business Sales Taxes /1 Employee Retail Sales Taxes Total City Revenues Warehouse 400 $130 million $130,000 200,000 40,000 $370,000 Manufacturing 5,000 $300 million $300,000 1,000,000 500,000 $1,800,000 R&D 10,000 $520 million $520,000 500,000 1,000,000 $2,020,000
/1 Reflects manufacturing/warehouse site as point of sale for retail sales taxes Source: CBRE Consulting
FAA RULES
Because significant airport improvements were financed with FAA funds, there are restrictions on San Bernardino Countys ability to utilize the revenues from the airport for any non-aeronautical purpose. The FAA also limits the ability to allow non-aeronautical development within the fence of airport property, unless it can be shown that there is sufficient land to accommodate current and future aeronautical needs. The County will need to undergo an update to the Airport Layout Plan (ALP) for the FAA and initiate a de-obligation process for the commercial/industrial parcels to facilitate the broader economic development objectives.
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The 2004 CNO Master Plan projects growth of approximately 375 CNO based planes and 64,000 more flight operations by 2025. Based on this forecast, the plan identifies the location of sufficient hangar space to accommodate the growth in demand and also identifies four specific land areas totaling approximately 140 acres that could be developed for non-aeronautical uses. Non-Aeronautical Land Available at CNO
Active Planes Growth Rate Master Plan Baseline Alt #1 Alt #2 Alt #3 Alt #4
Source: CBRE Consulting
Excess Land Available 140 acres 135 acres 115 acres 85 acres 35 acres
It is estimated that if the growth in active aircraft based at Chino is as much as 75 percent, it would leave approximately 85 acres of land for potential commercial/industrial use.
PRIVATIZATION OPPORTUNITY
Major Wall Street firms are investing massively in public infrastructure projects across the U.S. on long-term leases that generate billions of dollars for public agencies and improve service to the public through low-cost capital and improved operating efficiencies. Companies have been acquiring airports, with over 100 privatizations since the landmark 1987 sale of the British Airport Authority. The City of Chicago is now considering the lease of Midway Airport to raise money to fund needed improvements at OHare. With a proper master plan CNO can be an attractive asset to the investment community and provide millions of dollars in unrestricted funds to the County, under a long-term lease.
RECOMMENDATIONS
Through proper planning that encourages light industrial, manufacturing and R&D development, the Chino Airport (CNO) and surrounding undeveloped land will be a valuable asset for Chino, Ontario and all of San Bernardino County. The Airport, if improved with quality FBOs and large jet hangars will provide significant employment opportunities and substantially increasing tax revenues. Our case study research found that Scottsdale Airport in Arizona has developed into a national model for airport-based business parks, having been achieved through the efforts of community leaders, access to a sizeable regional employment base and the Citys zoning of the surrounding area. Scottsdale Airport/Airpark is headquarters for over 25 national and regional corporations; home to more than 2,200 businesses; and a workplace for more than 42,000 employees.
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CNO Airport With current land lease rates at $0.02 per square foot per month, it is imperative that the County update the leasehold appraisals, before soliciting/accepting new lease proposals. With current market rates for land, the airport would likely realize over $1 million in increased annual revenue from just the new lease proposals in hand. CBRE recommends the County take a proactive approach to encouraging new hangar and FBO development oriented toward high-end jets that are currently located in L.A. and Orange County. These jets, which are typically owned by large businesses, will provide the County substantial tax revenues and employment growth. By developing new facilities for 100-200 high-end jets, the County and local jurisdictions could receive in excess of $10 million in annual property taxes. With new housing available in Chino and Chino Hills, and development of light industrial and R&D buildings in the area, there is the potential to attract thousands of new industrial/office jobs. The Master Plan designates approximately 140 acres of land for non-aeronautical commercial or industrial uses, based on having identified the amount of land that would be necessary to accommodate the projected increase in aircraft operations based at Chino by 2025. This land could be made available to commercial or industrial users via market rate ground leases. Given the Airports mandate to provide for growth in aeronautical needs for the long-term, it is prudent to anticipate even greater growth in aeronautical demand, especially from the high-end corporate jets that are being squeezed out of Los Angeles and Orange County airports. Even allowing for as much as 75 percent growth in active aircraft at CNO, CBRE believes that it would be prudent to develop a commercial/industrial leasing program the focuses on the approximately 70 acres of the commercial/industrial designated land located on the western end of the Airport that is least suitable for aeronautical use. Since the future development opportunities are hard to predict, it may be prudent to initially release only 30-40 acres for immediate development of an industrial business park. While the CNO Master Plan accommodates the implementation of the majority of our economic development initiatives, CBRE recommends that the Master Plan undergo some minor adjustments to develop non-aeronautical uses along Kimball Avenue and relocate existing and future hangars and FBOs from the south side to minimize future problems with the burgeoning residential development. As part of the Plan update, it may also make sense to relocate the vintage aircraft museums from their home off Merrill Avenue and relocate them to the southeast quadrant of the airport where current aviation aircraft activity presents problems with the new residential community. Chino and Ontario Adjacent Undeveloped Land The land adjacent to the airport is subject to State mandated airport land use planning requirements, as well as numerous planning efforts which have been initiated (i.e. New Model Colony and The Preserve). CBRE recommends that the cities of Chino and Ontario and the County co-ordinate broad planning guidelines encompassing the Airport and the surrounding +/-1,000 acres of undeveloped land that will encourage retail, office business park uses and light industrial / R&D development and discourage big box warehouse distribution centers on increasingly scarce industrial-
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zoned land, except in runway approach zones, where number of employees is restricted, to minimize truck traffic and increase employment and tax revenue opportunities. With the tremendous development occurring in the area, Euclid Avenue is becoming a major commercial thoroughfare. With the new housing and growth in airport activity, additional retail and lodging facilities will be needed to serve both the airport and the community. For non-aeronautical land uses, the Cities and the County should establish minimum guidelines for job creation and private investment to prevent large distribution centers or other types of warehouses from taking the valuable industrial land. CBRE suggests a minimum threshold of 1.5 employees per 1,000 square feet of building and a private investment target of $3 million per acre. An exception could be made for large warehouse users that are large point of sale retail sales tax generators. With the development of a new 100-acre Chaffey College campus in Chino just a few miles west of the airport, and the new University Hall in downtown Chino, there is an opportunity to create various aviation related training programs to encourage the growth of the industry in the County.
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1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: REIS 2007; and CBRE Consulting 1) The West County Retail Submarket includes the cities of Chino, Chino Hills, Ontario, Rancho Cucamonga, and Upland.
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MANUFACTURING TRENDS
The December 2006 UCLA Anderson Economic Forecast contained a special report on the transformation of manufacturing in southern California, stating the following: In the 1960s Los Angeles County was a major industrial center with four automobile factories and half dozen aircraft manufacturing plants. Manufacturing jobs represented 31 percent of all personal income. L.A. lost the auto and aircraft jobs in the 1970s and 1980s, and other nondurable manufacturing jobs have been lost in the past decade as clothing and other manufacturers have moved offshore. Today manufacturing jobs represent only 10 percent of personal income. Manufacturing employment in the U.S. has declined by 5 million since 1990 (~20 percent). Los Angeles has lost 500,000 jobs (~40 percent) in the same time period due to high cost of living and incentives offered by other states to attract companies. Although continued job loss is expected in many manufacturing areas, UCLA is optimistic for the future in the knowledge-based component i.e. the front-end of the manufacturing process. While machine operator jobs have continued to decline at a rate of 5-10 percent per year in Los Angeles since 2001, fashion and industrial design and engineering jobs have grown 50 percent since 2002. Aggressive economic development initiatives and land use planning for CNO and the surrounding commercial industrial areas can attract those small to medium sized business that can not afford to remain in Los Angeles or Orange County.
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These manufacturing job trends are summarized in the table below. Exhibit III-2 California Diversified Manufacturing Jobs 1994 2015 (In Thousands)
Type Wood Products (except Sawmills) Primary Metal Products Fabricated Metal Products Machinery Electrical Equipment & Appliance Transportation Equip. (exc. Aerospace) Furniture & Related Products Medical Equipment & Supplies Other Miscellaneous Manufacturing Beverage Products Textiles Apparel Paper Products Chemicals (except Pharmaceuticals) Plastics & Rubber Products Leather Products Diversified Manufacturing 1994 29.1 27.7 139.3 90.7 37.3 54.9 58.4 41.6 40.9 27.9 31.7 123.9 35.9 42.3 65.3 8.7 855.4 2000 35.5 30.9 173.3 108.5 44.1 62.7 76.7 51.8 51.5 33.0 37.6 122.6 35.4 43.7 73.1 7.0 987.8 2005 31.5 25.2 140.7 82.7 33.1 56.4 60.3 47.7 40.6 37.9 29.4 80.7 28.1 40.0 56.6 4.1 794.7 2015 Est. 36.7 20.5 136.6 72.7 27.4 59.2 62.7 50.5 38.3 37.3 21.2 36.5 29.7 38.3 52.1 0.1 723.0 19942000 6.4 3.2 34 17.8 6.8 7.8 18.3 10.2 10.6 5.1 5.9 -1.3 -0.5 1.4 7.8 -1.7 132.4 20002005 -4.0 -5.7 -32.6 -25.8 -11.0 -6.3 -16.4 -4.1 -10.9 4.9 -8.2 -41.9 -7.3 -3.7 -16.5 -2.9 -193.1 20052015 5.2 -4.7 -4.1 -10.0 -5.7 2.8 2.4 2.8 -2.3 -0.6 -8.2 -44.2 1.6 -1.7 -4.5 -0.9 -71.7
Source: 1994-2005 -- EDD; 2015 -- Center for Continuing Study of the California Economy (CCSCE)
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Exhibit III-3 Industrial Market Trends (Including Manufacturing, Warehouse, and R& D Space) City of Chino and Inland Empire West 1
INVENTORY Total Inventory SF (000) Completions (000) 1,490 17,355 18,392 18,860 21,653 23,388 26,031 27,684 28,810 31,048 32,579 33,652 96 1,037 468 2,793 1,735 2,643 1,653 1,126 2,238 1,531 1,073 10,693 4,868 7,794 6,864 13,119 18,734 13,675 9,229 7,936 10,626 8,538 16,239 8.7 9.3 9.5 9.7 8.9 11.0 10.6 9.4 8.3 5.6 6.3 4,077 6,906 6,801 11,101 18,250 6,352 10,724 10,757 11,075 12,736 13,998 7.9 9.0 8.9 9.9 7.8 13.7 9.6 9.0 12.2 7.4 4.5 179 951 682 2,033 1,290 1,248 3,027 468 1,491 3,438 1,077 ACTIVITY Availability Rate Net Absorption % SF (000)
Year
City of Chino 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Inland Empire West 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Inland Empire 1 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 196,233 205,764 214,433 229,544 251,082 270,118 283,817 296,616 312,746 330,943 360,795 122,086 129,880 136,744 149,863 168,597 182,272 191,501 199,437 210,063 218,601 234,840
5,447 9,531 8,669 15,111 21,538 19,036 13,699 12,799 16,130 18,197 29,852
8.7 9.0 9.8 9.8 8.6 10.0 9.9 8.9 7.3 5.5 7.0
4,046 9,345 7,149 13,021 22,527 10,154 15,064 16,363 19,154 19,633 21,168
Inland Empire West includes the cities of Chino, Fontana, Mira Loma, Ontario, Rancho Cucamonga, and Rialto.
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Even with a recent construction boom in the eastern portion of the Inland Empire, the Inland Empire West seems to provide more versatility with 22 percent of its existing buildings being over 100,000 square feet, compared to only 12 percent of the existing buildings in the Inland Empire East being over 100,000 square feet. With industrial development trend in the Inland Empire leaning heavily towards warehouse and distribution structures, growth in manufacturing space has slowed in recent years (exhibit III-4). This has made availability rates for manufacturing space the lowest among industrial its industrial counterparts, both within the City of Chino as well as in the larger Inland Empire (exhibit III-5). In the last quarter of 2006, manufacturing availability rates in Chino and the Inland Empire were 4.8 percent and 7.7 percent, respectively, as compared with general industrial availability rates of 5.6 percent and 7.9 percent.
Exhibit III-4 Industrial Inventory Trends Manufacturing and R& D Space Inland Empire West and the City of Chino 1996 2006
40.0 35.0 30.0 25.0 Mi l l i on S F 20.0 15.0 10.0 5.0 0.0 Inland Empire West CIty of Chino
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Source: CBRE Inland Empire Industrial MarketView, 3Q 2006 Includes all existing industrial buildings, 10,000 SF or greater in size. 1 Vacancy rate is vacant SF in existing buildings divided by total GLA of existing buildings. 2 Availability rate is available SF in existing buldings divided by total GLA of existing buildings. 3 Under Construction SF includes in escrow to users or pre-leased buildings which totals 5.2 million SF
Vacancy rates for smaller sized industrial buildings (10,000 - 30,000 sf) in the Inland Empire West, were 3.7 percent, slightly higher than the overall vacancy rates for the entire region. However, the following exhibit shows that availability rates for manufacturing space, which tend to be smaller in size, dropped from 7.7 percent to 5.5 percent, between the last two quarters of 2006. This is well below vacancy rates for warehouse space. Exhibit III-6 Inland Empire West Industrial Availability Rates 2006: Q3 and Q4
Total Current Last Qtr Qtr 5.6 13.4 6.4 1.2 6.8 6.2 3.3 6.3 7.9 3.7 10.9 6.3 3.9 6.3 5.1 5.1 5.9 6.7 Availability Rates Manufacturing Warehouse Current Last Current Last Qtr Qtr Qtr Qtr 4.8 0.0 9.4 4.0 14.0 3.3 0.0 7.6 7.7 4.8 0.0 5.5 2.9 7.9 3.3 4.2 5.1 5.5 5.5 13.9 6.4 0.4 5.7 6.5 3.4 6.0 7.8 3.2 11.5 6.5 4.3 6.0 5.2 5.1 5.9 6.8 R&D Current Last Qtr Qtr 40.5 na 0.0 0.0 6.4 17.2 n/a 10.3 11.5 40.5 na 0.0 0.0 8.9 17.2 n/a 11.6 12.8
Submarket Chino Fontana North Fontana South Mira Loma Ontario Rancho Cucamonga Rialto Subtotal: Inland Empire West INLAND EMPIRE TOTAL
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Rental Rates In terms of pricing, the Inland Empire has experienced a consistent rise in asking net lease rates with the exception of a few fluctuations from quarter to quarter. At the close of the third quarter of 2006, average asking net lease rates were at $0.43 per sq. ft. Higher rates are seen in the 10,00049,999 SF range for both the East and West with respective rates of $0.53 per sq. ft. and $0.49 per sq. ft.. In contrast, the lower respective rates for buildings with 100,000 SF or greater of availability were $0.40 per sq. ft. and $0.39 per sq. ft.
Exhibit III-7 Average Asking Lease Rates Inland Empire Q4 2003 Q3 2006
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Recent Land Sales Cities of Chino and Chino Hills: 2003 - 2007 YTD 1
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Greater Los Angeles Basin Industrial Land Values PSF: Fourth Quarter 2006
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According to a recent report published by the California Budget Project, in the past decade and a half, California has experienced a shift of its employment base to inland areas. Inland counties contributed 54.4 percent to the states job growth between 1990 and 2005, compared to just one in five California jobs having been located inland in 1990. More than half of the states job growth in trade, transportation, and utilities; public administration and natural resources, mining, and construction took place in inland counties. In addition, nearly half of the states job growth in financial activities occurred inland. Growth in the number of jobs within inland counties has been larger than the population growth. In fact, while Los Angeles County lost 2.9 percent of its jobs between 1990 and 2005, Riverside and San Bernardino Counties experienced sizable job growth in the fifteen year timeframe, growing nearly 90 percent and 60 percent, respectively. Specifically, as California has lost hundreds of thousands of manufacturing jobs in recent decades, manufacturing has expanded in inland counties. Between 1990 and 2005, the number of manufacturing jobs in inland counties increased by nearly 50,000 (19.4 percent), reaching more than 300,000 jobs in 2005. The greatest gains in inland manufacturing jobs occurred in Riverside County, which added 18,400 jobs (55.3 percent), and San Bernardino County, which added 23,900 jobs (53.6 percent). Moodys Economy.com notes that the Riverside-San Bernardino Metro Area (which includes Riverside and San Bernardino Counties) is one of the few California metro areas in which manufacturing forms a foundation for long-term growth. It is the one area where plentiful land is available, where labor costs are reasonable and where the local policy environment is favorable for manufacturing. Rising wages represent a shift in manufacturing toward more higher-value goods such as aerospace components.
Sources: California Budget Project: Policy Points January 2007, by Alissa Anderson Garcia; Moodys Economy.com, December 2006; Torto Wheaton Research
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Exhibit III-8 Non-farm Employment Trends and Forecast by Industry Sector Inland Empire 1990 - 2012
1990 Construction Manufacturing Wholesale and Retail Trade Transportation, Warehousing and Utilities Finance, Insurance and Real Estate Services Government Total 63,000 78,700 120,000 23,500 33,000 239,100 149,100 706,400 1990-00 Construction Manufacturing Wholesale and Retail Trade Transportation, Warehousing and Utilities Finance, Insurance and Real Estate Services Government Total 18.6% 49.7% 33.2% 99.6% 6.7% 45.6% 29.8% 38.2% Historic 2000 74,700 117,800 159,800 46,900 35,200 348,100 193,500 976,000 2000-05 55.4% 2.6% 31.0% 26.0% 36.6% 23.4% 15.3% 23.6% 2005 116,100 120,900 209,300 59,100 48,100 429,700 223,200 1,206,400 % Growth 1990-05 84.3% 53.6% 74.4% 151.5% 45.8% 79.7% 49.7% 70.8% Projections 2007 129,300 124,900 230,400 66,000 53,300 469,000 232,700 1,305,600 2005-07 11.4% 3.3% 10.1% 11.7% 10.8% 9.1% 4.3% 8.2% 2012 147,404 129,445 263,003 76,519 58,366 532,445 255,709 1,462,890 2007-12 14.0% 3.6% 14.2% 15.9% 9.5% 13.5% 9.9% 12.0%
According to Economy.com, the Riverside-San Bernardino Metros economy is expanding, supported the manufacturing industrys continued job growth in transportation and business and professional services. Expansion of commercial and defense-related aerospace manufacturing and maintenance, and expansion of rail capacity to accommodate international trade through the region, also continue to drive the economy. This growth in industrial employment will slow in acceleration however continue to expand at 2.4 percent per year over the next six years, according to Torto Wheaton Research. According to the United States Census data, there was a near 50 percent increase in total employment in the Inland Empire between 1990 and 2006, compared to a 22 percent growth in manufacturing employment within the same timeframe.
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contributed to the success of the Scottsdale Airport/Airpark - it is headquarters for over 25 national and regional corporations; home to more than 2,200 small to medium-sized businesses; with easy airport access and seven miles of taxiway access. Currently, Scottsdale Airpark boundaries are the Loop 101 Pima Freeway to the North, Thunderbird Road to the South, 90th and 96th streets to the East and 64th Street to the West. Of the Airparks approximately 2,900 acres, 2,580 acres are currently developed, with 2,554 companies in 110 business categories, employing approximately 50,450 people, in 788 buildings. Office buildings make up 35 percent of these, office/warehouse structures another 41 percent, 20 percent are retail/hotels, and about 4 percent are used as hangars. Zoning within the Scottsdale Airpark boundaries consists of Commercial Office, Light Industry, Hotel, and Commercial Retail. According to Jim Keeley of Colliers International in Scottsdale and Scott Gray, the Airports Manager, about 5% of the businesses are actually tied to the airport. These businesses are located on 300 acres of privately owned land, and include the corporate flight facilities of companies such as Discount Tire/Giant Industries, a Real Estate company, and a furniture manufacturing company. These types of companies use corporate jets from as much as several times a week to several times per month, with appropriate fees to the airport. General aviation aircraft usage includes employee travel by companies such as these, as well as charter flights. On another 300 acres owned by the airport, aviation related tenants include flight schools, fixed base operators (FBO), and aircraft storage, maintenance, and leasing companies. One of the most significant aspects of Scottsdale Airport is the major economic stimulus that it provides to the City of Scottsdale and the north Valley region. A recent study indicated that the airport generates more than $182 million annually in revenue to the region's economy and the combined annual impact of the airport/airpark is approximately $2.5 to 3.0 billion. The City of Scottsdale is known throughout the country as a community where quality of life and economic progress are synonymous. The outstanding facilities of the Airport and the life and amenities of the Scottsdale area have attracted a large number of businesses that desire to locate on or near the Airport. These same facilities and amenities draw general aviation and corporate business travelers from all over the country to visit Scottsdale for business and recreational purposes.
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Williams Air Force Base was closed in 1993 and created a loss of more than 3,800 jobs and $300 million in annual economic activity. The state and communities began work immediately to redevelop the base after the announcement of closure in 1991. The Governor's Economic Reuse Advisory Board was appointed to coordinate reuse efforts. The Williams Air Force Base Economic Reuse Plan was spearheaded by the Reuse Advisory Board and approved by the Governor of Arizona in 1992. The plan determined the base be developed as an aerospace center and an educational, research and training facility with the airport serving as a reliever to Phoenix Sky Harbor International Airport. Aeronautical uses identified included commercial passenger service, aircraft manufacturing, maintenance, modification, air cargo operations and flight training. To work toward ownership and operation of the airport, an Intergovernmental Agreement Group (IGA) was established in 1992, which also created the Williams Gateway Airport Authority (WGAA). The airport officially opened in March 1994 and the WGAA was established in May 1994; this allowed the IGA to be dissolved. Today, the WGAA Board consists of the mayors from the City of Mesa and Towns of Gilbert and Queen Creek and the Governor of the Gila River Indian Community. Cooperation among the various jurisdictions surrounding Williams Gateway Airport, the campus and the business community, coupled with innovative planning efforts has set the stage for successful development of Williams Gateway Airport for civilian use. Williams Gateway Airport has become a reliever to Phoenix Sky Harbor International Airport and serves a variety of aircraft including corporate, cargo, general aviation and military. The airport has three runways (10,401, 10,201, and 9,301 feet) which allow for access for aircraft operation from a single-engine Cessna to the Boeing 747-400. The Airport is also developing as an international aerospace center with aircraft manufacturing, maintenance, modification, testing and pilot training. Currently, more than 20 aeronautical companies operate on the facility, and the remaining 1,000 acres available for aeronautical company locations is in high demand. In access to the area's skilled labor force, year-round flying weather and access to international markets have made it a good location for global-minded companies. Businesses at the Williams Gateway Airport include Boeing, whose aircraft refurbishing and testing operations occupy approximately 130,000 square feet. Most of its buildings are generally less than 22,000 square feet each. Native American Ambulance (aka Native Air Service) is an emergency care provider, which flies its aircraft out of the Williams Gateway airport and occupies a 30,000 square feet building. Other businesses include Cessna, whose aircraft maintenance and service centers occupy 100,000 square feet, and Embraer, with 60,000 square feet for aircraft maintenance and service center.
aeronautical needs, while in the process providing vital aeronautical services, enhancing efficiency at the regions commercial airports, creating jobs, promoting business and serving as a community resource. Located in the heart of the San Fernando Valley, Van Nuys Airport ranks as the world's busiest general aviation airport. Dedicated to noncommercial air travel, Van Nuys Airport averages nearly half a million takeoffs and landings annually. Business travelers and tourists using private, corporate and charter aircraft benefit from the airport's convenient proximity to city business and entertainment centers. Business activity has continually grown at the airport. According to an economic study, Van Nuys Airport contributes more than $1 billion annually to the Southern California economy, supports over 10,000 jobs, generates an annual earnings impact of approximately $273 million and produces $73 million in state and local tax revenue by leasing space to a variety of tenants. More than 800 aircraft are based at Van Nuys Airport. The airport supports and attracts both aeronautical and non-aeronautical businesses in the San Fernando Valley area. The airport is home to over 100 businesses, including six fixed-base operators and numerous aeronautical companies. Van Nuys Airport also provides facilities for fire, police, air ambulance, search and rescue, and news media aircraft that serve the region. The airports property itself houses a major home improvement store, hotel, golf course complex and restaurants. Examples of the companies at Van Nuys Airport include six major fixed-base operators (FBOs): BaseNet, Clay Lacy Aviation, Maguire Aviation Group, Million Air, Raytheon Aircraft Services and Skytrails Aviation. These operators provide aircraft storage and parking, aviation fuel, aircraft sales, flight instruction, aircraft charter and aircraft maintenance. Some of the FBOs also serve as major leaseholders of airport property, subletting land and buildings to other airport tenants. In addition, Van Nuys Airport serves as home to numerous companies that provide aviation support activities such as aircraft repairs, avionics, interior work. Other businesses included air tour services including Heli USA and Orbic Helicopter; aircraft sellers Classic Air, Elite Aviation, and Jet Set Aircraft; corporate flight operators such as Air Shamrock, Castle & Cooke Aviation Services, Dole Foods Flight Operations, Inc., Pacific Holding Company, Paramount Corp. Aviation, and Thornton Aircraft; as well as others including Duncan Avionics, Pacific Forecasting and Superior Industries. In 2000, Los Angeles World Airports, governing agency of the Van Nuys Airport, took a step to further address noise concerns by initiating a residential soundproofing program.
More recently developed is a partnership between Los Angeles Unified School Districts Monroe High School, and San Fernando Valley Economic Alliance (SFVEA) to have aeronautical companies work directly with its students, to gain experience for future jobs. As a part of this partnership, Van Nuys Airport has been home the Aviation Career Day. Approximately 1400 students and 70 exhibitors attended the second annual event, in order to pursue and offer internships and career opportunities for high school students. Companies such as Syncro Aviation Inc., which remodels the interiors of airplanes, and Chatsworth-based Global Aerospace Technology Corporation (GATC), were some of the exhibitioners in attendance. According to Steve Cormier, chief executive of GATC, though his company pays workers very well, it has a dire need for skilled workers. He has had so much difficulty hiring workers that he has considered moving his firm east.
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However, according to general aircraft registration figures from the California Board of Equalization, growth in general aviation ownership in the Inland Empire has averaged about 2 percent annually. In 1998, the region made up about 12 percent of the states total general aviation aircraft ownership. By 2006, this number has grown to nearly 14.5 percent of the States total.
SCAG includes the six-county area of Los Angeles, Orange, Riverside, San Bernardino, Ventura, and Imperial Counties.
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Exhibit V-2 Number of Registered General Aviation Aircraft Inland Empire: 1998 2006
3,400 15.0%
3,200
14.0%
3,000
13.0%
2,800
12.0%
2,600
11.0%
2,400 1998 1999 2000 2001 2002 2003 2004 2005 2006 Inland Empire Inland Empire as a % of CA
10.0%
According to the FAA, the nations total general aviation fleet is forecast to grow 1.8 percent annually, between 2006 and 2010, over double its growth rate in the past six years. Longer term growth is expected to average about 1.4 percent annually. Exhibit V-3 Total General Aviation Fleet (U.S) Historical Trends and Projections: 1990 - 2020
300,000
250,000
200,000
P r oje cted Ave r age Annual G r owth: 2000 2006 2010 2006 2006 2010 2020 2020 : : : : 0 .7 % 1 .8 % 1 .3 % 1 .4 %
150,000
100,000
20 08 20 10 20 04 20 02 20 06 19 98 20 00 19 94 19 92 19 96 19 90 20 14 20 18 20 20 20 12 20 16
T O T A L GE N E R A L A VIA T I O N F LE E T
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P e r ce nt of T ot al Hour s F l ow n
80.0%
20.0%
Personal
Defined as On Demand FAR Part 135 Uses, this set of regulations applies to general aviation aircraft used for commercial purposes, which includes most chartered jet services.
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According to the Aircraft Owners and Pilots Association (AOPA), the private jet manufacturing industry has experienced tremendous aircraft development and sales growth. Due to the size and complexity of the product, manufacturing is closely tied with pre-orders for aircraft, making aircraft sales numbers closely aligned with the number of aircraft manufactured. In February of 2007 leaders of the General Aviation Manufacturers Association (GAMA) announced that shipments of every type of general aviation airplane increased in 2006 and the strong numbers have led to another record high in industry billings. The Los Angeles Times recently published an article in which it claimed that sales in the private-jet industry are expected to reach a record $17.6 billion this year, up from $15 billion in 2006.
Another sign of growth is in how the past five years have seen the purchase of many of the nations leading FBOs and FBO chains by larger companies seeking growth in the private aviation market. These companies recognize the opportunities created by a rapidly expanding private jet fleet and the limited airport space available for FBOs. An FBO is essentially a refueling facility for aircraft that offers a variety of aviation-related services. Scheduled new aircraft deliveries will further stretch the capacity of the nations FBOs.
One example is Million Air Interlink, Inc., a Houston-based private jet chartering company. Million Air operates as a franchise through a chain of 31 separate franchises across the US, Canada and the Caribbean, and now expanding into Europe. Its most recent operation is located at the Hawthorne Airport (named Million Air Los Angeles), which has historically been a piston engine, GA airport. Century Aviation Holdings, LLC, an investment and development organization, saw an opportunity to make Hawthorne Airport the New Los Angeles Executive airport, an airport of choice for corporate jet and turboprop activity. Million Air negotiated 50-year ground lease on the entire airport, less runway and taxiways. Its plan is to reach out to the areas entrepreneurs and private individuals. Million Air Los Angeles expects that the high level of corporate traffic driven by the entertainment industry and downtown businesses will welcome the new LA Executive FBO at Hawthorne. Trans-Exec Air Service, whose high-end executive jets is based at Van Nuys Airport, is also rapidly expanding its fleet. These jets include amenities such as dual lavatories, gourmet kitchens and luxury sleeping accommodations. The company has taken much advantage of its popular executive jet and fractional ownership programs. These flat-fee programs were first introduced in the early 1990s and their popularity has given Trans-Exec double digit profit margins for more than a decade. Berkshire Hathaway Co. is one of the industrys largest jet charter companies, with a fleet of approximately 600 planes, and offers fractional ownership and rental of its jets. Fractional ownership starts at one sixteenth of a plane, and gives the fractional owner about 50 hours of flying time per year. AvJet Corp., of Burbank, and Blue Star Jets Inc. are two more major jet charter operators in the Los Angeles market. These, however, operate like a country club, where membership is limited to about 30 or 40 members who sign on with annual fees ranging from $600,000 to $2.5 million based on use. According to several industry sources, owners of private jets are usually entrepreneurs with dynamic new business ventures spanning various industries. They include Gordan Stewart, founder of Sandals Resorts; and Elon Musk, founder of PayPal and Space Exploration Technologies. According to Sonia Woo of Million Air Los Angeles, the FBO has seen similar patterns in owners of private jets, who are mostly individuals and aviation related LLCs.
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Transfer Potential from Rialto Airport In examining the potential impact from the closure of the Rialto Municipal Airport, CBRE Consulting contacted Epic Land Solutions, Inc., the consulting group behind the Rialto Airport Relocation Plan, 2007. According to Shannon Winder, the airports closing date was originally set for December of 2008, however depending on negotiations between the city and developer, Lewis-Hillwood Rialto LLC, tenants may be eligible to move out as early as April of 2007. The Airports aircraft tenants were originally promised that they could all move to San Bernardino International, however they will be moved to various airports, including Bracket and Chino airports, among others. Currently, only about 10 aircraft tenants have expressed interest in relocating to Chino, with some of them already on the airports waiting list. These are generally small planes such as Cessnas, with the smallest hangar space requirement at 800 sq. ft. and the largest at about 6,500 sq. ft. Rialto Municipal Airport is within 20 miles of 10 other General Aviation airports, including the former Norton Air Force Base, now known as San Bernardino International Airport (KBSD). The former Norton AFB, closed during a wave of base realignments in the early 1990s, still has military sized ramps, taxiways and buildings, including several hangars. There are 35 aircraft based there now. The map on the following page shows the airports which are located within a 20 mile radius of Chino Airport.
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REGIONAL AIRPORTS
A review of the airports in the Los Angeles metro area has been made to identify and distinguish the type of air service provided. Information pertaining to each airport was obtained from FAA records. Corona Municipal Airport Corona Municipal Airport is located approximately 6 miles south of Chino Airport. The airport has a single, 3,200-by-60-foot runway and is uncontrolled. Corona Municipal is strictly a recreational airport. It is located on Army Corps of Engineers land, and is under the jurisdiction of the Parks and Community Services Department. The airport is operated with revenue generated from rental fees and state grants. The 15 businesses located at the airport offer a full range of general aviation services. Currently, there are 414 based aircraft at Corona Municipal Airport. Of these, 373 are single engine airplanes, 25 are multi engine airplanes and 10 are helicopters. The airport averages 186 flights per day, or about 60,000 annual operations. Approximately 74 percent are local aviation operations and 26 percent are transient general aviation operations. Currently all hangar space is occupied and there is a waiting list of approximately 300.
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Ontario International Airport Ontario International Airport is located approximately 6 miles north-north east of Chino Airport. The airport is a member of the Los Angeles World Airports system and is owned and operated by the City of Los Angeles. Although the airports primary role is to provide commercial air service to the area, the airport also serves general aviation activity. Founded in 1923 as Latimer Field, the City of Ontario purchased the 30-acre tract in the southwest corner of the present airport and named it Ontario Municipal Airport. By 1967 it was already the origination point of transpacific cargo flights as well as commercial service and became a part of the Los Angeles regional airport system. In 1993, the Los Angeles Board of Airport Commissioners approved final plans and specifications for a $270 million terminal expansion project and the "new" Ontario International Airport opened September 27, 1998. Ontario International Airport is a medium-hub, fullservice airport with commercial jet service to major U.S. cities and through service to many international destinations. Passenger traffic at Ontario International Airport has been increasing steadily for the past 10 years. In 2005, 7.2 million passengers used the airport and 561,756 tons of air freight was shipped. Ontario Internationals 224 daily flights provide service to every major city in the U.S., on airlines including AeroMexico, Alaska, American, Continental, Delta, Jet Blue, Lineas Aereas Azteca, Southwest, United, and US Airways. Ontario International is also the center of a rapidly developing freight movement system that includes the airport, two railroads, four major freeways, and an expanding network of freight forwarders. Ontario International is served by 9 major U.S. air freight carriers including Airborne Express, Ameriflight, DHL, Empire Airways, Express Net, Federal Express, West Air, Union Flights, and United Parcel Service. Los Angeles World Airports is in the process of developing a new master plan for the Ontario International Airport. This master plan will help guide the development of the airport through the year 2030. Ontario International Airports role will be to serve the future aeronautical needs of the Inland Empire and the southern California region for both cargo and passengers. Demand for air transportation will be created by the Inland Empire's rapid population growth as well as its growth as a manufacturing and distribution center. Furthermore, with limited potential for future expansion of LAX and other regional airports beyond their current capacities, Ontario International can be expected to play a vital role in fulfilling the future aviation needs of the Southern California region. The Southern California Association of Governments (SCAG) 2004 Regional Transportation Plan (RTP) predicts that regional passenger demand will double by 2030, and that air cargo demand will more than triple. Cable Airport Cable Airport is a privately-owned, public-use airport located approximately 10 miles northwest of Chino Airport in Upland, California.
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A single 3,865 foot runway is available for use and the airport is uncontrolled. Approximately 360 aircraft are based at Cable Airport. Of these, 328 are single engine airplanes, 28 are multi engine airplanes, and 4 are helicopters. The airport averages 252 aircraft operations per day, or about 100,000 per year, of which 80 percent are local general aviation operations and 20 percent are transient general aviation operations. Currently, all of the airports 252 hangars and 70 shadeports are occupied, and there is a waiting list of about 30 aircraft, equating to a one and a half year wait for hangar space at the airport. Cable Airport is planning to add a large office hangar complex on the north side of the entrance road which will have eight hangars each with attached office space. The Southern California Association of Governments (SCAG) has forecast commercial activity at Ontario to increase five-fold through 2030. With that increase, there will be market and operational pressure for propeller powered aircraft to not operate at Ontario. Cables one runway is too short for most business jets, but adequate for many piston aircraft. According to SCAG, activity at Cable Airport is forecast to increase to 140,000 operations by 2030. Riverside Municipal Airport Riverside Municipal Airport is located approximately 12 miles southeast of Chino Airport. It is owned and operated by the City of Riverside. Aeronautical activity at the airport has significantly increased since 1999, with much of the increase being from business jet operations. The airport has a 5,401-by-100-foot runway and a 2851-by-48-foot runway. It averages approximately 280 aircraft operations per day, or about 102,000 per year. These consist equally of local and transient general aviation operations. There are approximately 246 aircraft based at the airport, including 203 single engine airplanes, 35 multi engine airplanes, 2 jet airplanes and 6 helicopters. The airports 189 hangars are completely full. According to SCAG, the airport is forecast to reach nearly 185,000 operations per year, with a demand for 523 based aircraft. The airport has the ability to expand within its existing boundaries to support additional based aircraft. Brackett Field Brackett Field is located approximately 12 miles northwest of Chino Airport, near the Los Angeles County Fairgrounds, in La Verne, California. The airport is owned and operated by Los Angeles County. Brackett Field provides a parallel runway system, with one runway at 4,639 feet in length and the other 3,661 feet. Approximately 485 aircraft are based at Brackett Field, including 420 single engine airplanes, 48 multi engine airplanes, and 17 helicopters. Aircraft operations average 461 per day, or nearly 170,000 per year, of which 46 percent are local general aviation operations, 54 percent are transient aviation operations and 0.2 percent are air taxi operations. Tenants include NAI Aircraft Services, an aircraft maintenance service, and Blue Diamond Aviation, which offers flight training and aircraft rental services, and American Airports Corp, an FBO. Brackett has approximately 400 rental hangars and 100 tie downs, with some hangar space available. The Federal Aviation Administration (FAA) and SCAG forecast that the airport will be host to 436,000 aircraft operations and 600 based aircraft by 2030.
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Flabob Airport Flabob Airport is privately-owned public-use airport located approximately 13 miles east of Chino Airport and, built in 1925, is one of the older airports in America. Since 2000 it has been owned by a non-profit corporation dedicated to historic aviation preservation and aviation education. The airport is 81 acres in size and supports only small recreational aircraft due to the limited length of its runway. Flabob Airport has a single 3,200-foot runway and does not have control tower. There are approximately 202 aircraft based at the airport, comprised of 190 single engine airplanes and 12 multi engine airplanes, with a waiting list for hangar space. Aircraft operations average 110 daily, or about 40,000 annually. Flabob airport is developing a business park on a recently purchased 10-acre plot of land bordering the airport to develop general aviation and light sport aircraft businesses, as well as a light industrial park. The airport also plans to develop offices, shops and hangars of various sizes, most of which will have direct taxiway access. The additional planned hangar space is planned in anticipation of an increasing number of aircraft moving to the airport as a result of congestion, higher rental rates and closures at other airports. The hangars will be available for lease or sale. The airport is also building an aviationfriendly neighborhood called Skypark at Flabob on off-airport property. Rialto Municipal Airport Micro Field Rialto Municipal Airport is located approximately 17 miles northeast of Chino Airport, and is owned by the City of Rialto. The airport has an intersecting runway configuration, with runways which are 4,500 feet and 2,650 feet in length. The airport has no control tower. Approximately 251 aircraft are based at the airport, of which 215 are single engine airplanes, 10 are multi engine airplanes and 25 are helicopters. Aircraft operations at the airport average 82 per day, or about 30,000 per year. Of these, 73 percent are local general aviation operations and 27 percent are transient general aviation operations. Since 2006, the City of Rialto has planned for the near-term closure of the Rialto Airport. Tenants have already begun relocating to other regional airports. Fullerton Municipal Airport Fullerton Municipal Airport is located approximately 21 miles west-southwest of Chino Airport and is owned by the City of Fullerton. The airport has a single 3,121-foot runway. Approximately 385 aircraft are based at Fullerton Municipal Airport, including 341 single engine airplanes, 34 multi engine airplanes and 10 helicopters. Aircraft operations at the airport average 222 per day, or about 30,000 per year. Of these, approximately 38 percent are local general aviation operations, 62 percent are transient general aviation operations, and less than one percent are air taxi operations. Fullerton is at capacity from a facility standpoint. As of 2004, all hangars were 100 percent occupied and tie-downs were 50 percent occupied. The airport is also in a built-out urban environment. Santa Monica Municipal Airport Santa Monica Municipal Airport is located 50 miles west of Chino Airport and is owned by the City of Santa Monica. The airport has a single 4973-by-150-foot runway. The airport is home to about 408
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based aircraft, including 345 single engine airplanes, 53 multi engine airplanes, 7 jet airplanes and 3 helicopters. Aircraft operations average 452 per day, or nearly 165,000 annually, of which 61 percent are transient general aviation uses, 30 percent are local general aviation uses and 7 percent are air taxi uses. Due to the heavy concentration of corporate and entertainment executives, fractional jet ownership operations have significantly increased at Santa Monica Municipal. A recent article in the L.A. Times dated 4-22-07 highlighted the challenges that private operators have in an urban location. Hundreds of vocal residents have expressed concerns about pollution, safety and noise. The local Assemblyman has introduced legislation to study pollution impacts from jets and turboprops at Santa Monica airport. John Wayne - Orange County Airport John Wayne Airport is located about 30 miles southwest of Chino Airport. The airport is owned by Orange County and is a commercial airport with a thriving corporate and general aviation base. Its two runways measure 5701-by-150 feet and 2887-by-75 feet. Aircraft based at the airport total 589, with 437 single engine airplanes, 84 multi engine airplanes, 60 jet airplanes and 8 helicopters. Aircraft operations average 959 per day, or about 350,000 per year. Of these, 38 percent are transient general aviation operations, 33 percent are local general aviation operations, 25 percent are commercial operations and 5 percent are air taxi operations. Presently there is no hangar space nor tie downs available, and there is a $150 deposit required to be placed on the waiting list for hangar space. Many major corporations throughout Orange County depend on the airport for private, corporate and commercial flight needs. Its general aviation activity is mainly driven by businesses. Because of the small physical size of the airfield, it is now necessary to close the general aviation runway so that it can be used as a taxiway for the commercial aircraft.
For aeronautical use land, ground rents ranged from a low of $400 to $500 per acre per month to a high in excess of $2,000 per acre per month. Many fell in the $1,000 to $1,500 per acre per month. The higher rents prevail at airports which have the runway capacity to accommodate larger aircraft. There tends to be little variance in the ground rent rates at different locations at an individual airport. The value of land for non-aeronautical uses varies widely based on the particular real estate market in which an airport is located. In addition, land for non-aeronautical uses can also vary widely based on where it is located at a particular airport. In a very high value real estate market, the Santa Barbara Airport leases 95 acres of land designated for non-aeronautical uses, at rates from $6,100 per acre per month to $9,200 per acre per month. The average rent is approximately $7,400 per acre per month. The leases range from short term (month to month) materials storage agreements to long term (up to 50 years) agreements for industrial building sites. Camarillo Airport has 30 acres of non-aeronautical use land in what is designated an industrial park, that is leased at approximately $2,400 per acre per month. Rent Adjustments All of the leases that are longer than one year in duration have specified periodic rent adjustments. For aeronautical use leases, the most common adjustment is an annual consumer price index (CPI) adjustment. For non-aeronautical use leases, the interval between adjustments is often longer than one year. In those cases, three to five-year intervals between adjustments are more common. It is also common for non-aeronautical use leases to have minimum and maximum CPI adjustment amounts (often referred to as a collar). These provisions provide more stability and predictability for the lessee. In addition to CPI adjustments, it is also common to have periodic adjustments to the non-aeronautical use rents based on reappraisal. This type of adjustment usually occurs at a longer interval. The interval for reappraisal adjustments usually ranges from 10 to 30 years. Lease Term The most important factors in determining the duration of a ground lease are the amount of investment, if any, required on the part of the lessee and the time over which the cost of any such investment must be amortized. The general rule is that the greater the investment required on the part of the lessee, the longer the duration of the lease. Leases in excess of 30 years duration were found when lessees were leasing the land as a site for an industrial building or facility. Leases of that duration or longer are usually required by institutional lenders who finance the improvements of such projects. Leasing Process No dominant process was found by which airport-owned land is leased. For larger tracts of land, a request for proposals (RFP) will be utilized. The RFP process involves a formal broadcast solicitation of proposals that usually include both uses and terms for the lease.
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Rent Adjustment Method CPI Reappraisal CPI Reappraisal CPI: 3% - 5% CPI: 3% - 5% 120 % of CPI Reappraisal Reappraisal
Rent Adjustment Interval 2.5 years 10 years 2.5 years 10 years Annual Annual Annual 5 years 5 years
Key Tenants Crown Air Aviation, National Air College Corporate Helicopters of San Diego San Diego Jet Center, First Flight
Brown Field
$0.23 2
40 - 50 years
Great American Aircraft, South Bay Aviation Aviation Facilities Inc., Funoutside Aviation Academy Mercury Air Centers, Million Air
40 years
CPI --
Negotiated interval --
5 Years 7 --
Maintenance, repair, and overhaul businesses Mercury Air Centers, Santa Barbara Flight Academy
Source: Airport Directors, Managers and Staff; and CBRE Consulting (1) Rent per square foot, per month (2) Rent based on appraisal of "market value" in aeronautical use (3) Up to 40 years in exceptional cases (4) Rent will be marked to market rate, through appraisal, when improvements are completed (5) Rents for aeronautical uses are currently $0.42 per square foot, per month. These are equal to 10% return the on aeronautical use FMV (6) Fair Market Value (7) With three 5-year options to extend
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Acres Leased --
Number of Leases --
Rent Amount 1 Business Park: 10% Annual Appraised Value Other: Higher of Minimum Rent or 5-8% of Gross Revenue n/a Based on FMV 2 Non-retail: 8% Annually Retail: 10% - 12% of Gross Rent n/a Based on FMV $0.66; Based on FMV 10% Annually n/a Based on FMV 10% Annually
4
Brown Field
0 acres
None
n/a
n/a
n/a
Torrance
147 acres
--
CPI: 3% - 5% Reappraisal 3
Annual 10 Years
30 - 50 years
Source: Airport Directors, Managers and Staff; and CBRE Consulting (1) Rent per square foot, per month (2) Fair Market Value (3) With 150% max from prior market setting (4) Rent for aeronautical uses are currently $0.66 per square foot, per month. These are equal to 10% return the on non-aeronautical use Fair Market Value (5) Non-Aeronautical land formerly part of Air Force Base. Currently, there is enough land available at for 65 million SF of improvements, which is listed for lease. The Master Developer is Sterling Airports International (6) Reappraisal if rent "falls behind market rent" (7) On unimproved land, the lease term can range from month to month up to five years. On improved leases, terms periods are as required to amortize any tenant investment in improvements but not for longer than 50 years.
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WORKFORCE
A key location factor for a prospective employer is the availability of skilled labor force in the relevant industry sector. CBRE compiled statistics that compares the adult population with at least Bachelors degree and the share of workforce in Service and FIRE sectors in each of the 6 areas. Exhibit VII-1 Comparison of Education Attainment and Workforce Concentration
Santa Monica Education Attainment % with at least Bachelors Degree Workforce Concentration Share of Workforce in FIRE & Services Industry Long Beach Fullerton Van Nuys El Segundo Chino & Ontario 11.4%
54.3%
23.4%
30.7%
19.8%
41.0%
59.8%
49.3%
46.0%
46.1%
52.5%
30.1%
Our analysis reveals that Santa Monica has the most educated workforce among the 6 cities, and has the highest share of employees in Services sector employment. Chino/Ontario lags behind the other cities on both the parameters.
QUALITY OF LIFE
Employee decisions to locate in particular cities are based on quality of living in those areas. The quality of life parameters profiled in this analysis relate to education, crime, transit amenities, the general cost of living, and housing affordability.
Education
CBRE examined the performance of the respective local school districts as assessed by their 2006 API scores, and the college preparedness of its graduating students based on their 2004-05 SAT scores.
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The weighted API score of combined Chino/Ontario school districts is equal to statewide averages, while the SAT scores of the graduating class are slightly below the state average.
Crime
Exhibit V-3 below compares the instances of violent and property crimes, as reported by the state Department of Justice for 2005. Exhibit VII-3 Comparison of Crime Rates
California Rate/100,000 People Violent Crimes Property Crimes 526 3,323 623 3,955 709 2,815 290 3,413 821 3,030 253 4,168 434 3,747 Santa Monica Long Beach Fullerton Van Nuys El Segundo Chino & Ontario
Chino/Ontario rate of violent crime per 100,000 of population was well below the statewide figure, and those of Van Nuys, Long Beach, and Santa Monica. However, instances of property crime in Chino/Ontario are greater than the state average, though still below El Segundo and Santa Monica levels.
Transit
Proximity to a regional passenger airport as an important parameter for business. Ontario International Airport is less than 10 miles from Chino.
Cost of Living
One of the most important location factors relates to the cost of living and average wages. Exhibit V-4 compare the cost of living and salary indices for the 6 cities as benchmarked against the state average of 100%.
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1 12.3% 10 3.0%
111 .9%
91.3%
Chino/Ontario offers the lowest cost of living among the selected cities, and is the only place that has both the indices below the state average of 100%. Exhibit VII-5 Salary Index
104.0% 102.0% 100.0% 98.0% 96.0% 94.0% Santa Monica Long Beach Fullerton Van Nuys El Segundo Chino & Ont. 100.9% 100.1% 98.0% 102.8 % 101.8%
102 .3%
Chino/Ontario offers the lowest cost of living among the target geographies, and is the only place that has both the indices below the state average.
Housing Affordability
Employee location decisions are influenced by the quality and affordability of the local housing market. CBRE has profiled the sales prices of single-family homes and condominium units, as well as rental rates for apartments in each community. Not surprisingly, Santa Monica has the highest home prices and rental rates. Chino/Ontario, on the other hand, is the most affordable location, as shown below.
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$1,586,255 739,495
Industrial Use Inland Empire industrial market is strong owing to the supply constraints in the nearby Los Angeles market. Accordingly, it has the lowest industrial space lease rates among the 6 locations. Also, the sales price for industrial land and property are lowest in the region. Exhibit VII-8 Comparison of Office Use Lease and Sales Rates
Average Price/Rate Annual Lease Rate - $/SF Land Price - $/Land SF Property Price - $/Building SF Santa Monica $22.31 257 Long Beach $9.14 18 125 Fullerton $6.26 105 Van Nuys $8.99 44 142 El Segundo $13.25 36 193 Chino & Ontario $4.90 10 90
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Wages
CBRE Consulting compiled the wages for a representative set of occupation titles at various levels of organization in an office and industrial establishment. We then derived average wages based on suitable mix of various occupations as relevant to office and industrial uses. These averages are then weighted against the Chino/Ontario figures to derive a comparative wage index. For office workers, a few representative occupation titles by function include managers for marketing, HR, IT, PR, and engineering (managerial function); buying agents, analysts, researchers, engineers, and programmers (professionals); and, sales representative, administrative assistant, operators, clerks, and service representatives (sales & support). For industrial workers, the representative titles and categorization includes plant manager, supervisor, and mechanical engineer (skilled workers); technician, foreman, welders and mechanics (semi-skilled); and, shipper, maintenance, assembler, and laborer (unskilled). Exhibit V-8 profiles the salaries of few representative occupation titles for office and industrial workers. Exhibit VII-9 Select Office and Industrial Workers Wages
Santa Monica OFFICE WORKERS Managers Financial Purchasing Professionals Financial Analyst Accountant Support Administrative Assistant Office Clerk INDUSTRIAL WORKERS Skilled Plant Manager Mechanical Engineer Semi-Skilled Foreman Quality Control Inspector Un-Skilled Assembler - Office Production Worker 41,609 25,547 41,965 25,556 42,159 25,525 42,026 25,785 41,244 25,395 41,293 25,291 50,568 37,832 51,197 38,082 51,199 38,341 51,076 38,213 50,051 37,524 50,128 37,573 135,072 79,821 136,949 80,926 136,230 80,014 135,918 80,322 134,174 79,260 128,618 77,453 44,991 25,635 45,404 25,644 45,836 26,185 45,441 25,876 44,585 25,482 43,948 25,153 71,343 53,788 72,312 54,483 71,675 54,326 71,859 54,317 70,780 53,239 68,309 51,699 $102,941 84,652 $104,347 85,806 $103,814 85,402 $103,576 85,174 $102,249 84,071 $97,962 80,523 Long Beach Fullerton Van Nuys El Segundo Chino & Ontario
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The following exhibit calculates a normative wage index for the competitive cities relative to Chino/Ontario area. Exhibit VII-10 Comparison of Office and Industrial Workers Wage Index
Santa Monica Office Worker Wage Index Relative to Chino/Ontario Industrial Worker Wage Index Relative to Chino/Ontario 101.9 102.2 103.2 102.8 101.0 100.0
Source: Economics Research Institute (ERI), 1Q 2007; and, CBRE Consulting
Fullerton 104.4
El Segundo 101.6
103.4
We find that Chino/Ontario has the lowest office wages, but given the healthy industrial market, the industrial wages are highest among the 6 areas.
Local Taxes
Local taxes include utility, property, sales, documentary transfer, transient occupancy, business and other taxes. From an occupier perspective, business and utility taxes form a significant portion of their cost of doing business. Exhibit V-10 compares the business tax for a representative first $10 million in receipts for businesses located in these six locations. We find that the business taxes in Chino/Ontario are among the lowest within the 6 areas for office uses, and lowest for industrial manufacturing uses. Exhibit VII-11
Comparison of Business Tax by Use and Location
$58,509 20,000
Office Manufacturing
$13,048 $11,682 $13,048
$12,500
15,000
10,000
$2,050
$12,500
$1,250
Santa Monica Long Beach Fullerton Van Nuys El Segundo Ontario Chino
Source: Rose Institute/Kosmont Cost of Doing Business Survey, 2006; and, CBRE Consulting
Economic Incentives
Local governments establish special business development zones or incentives to attract and retain businesses in their jurisdictions. These become additional incentives that help ease the cost of doing business for various establishments. The incentives may be in the form of construction/infrastructure subsidies, tax discounts, waivers or reimbursements, or other financial assistances. CBRE Consulting has
CHINO AIRPORT ECONOMIC STRATEGY 51 AUGUST 2007
$250
compared the presence of such special zones and economic incentives in each of the six target geographies to ascertain the most business friendly location. The following table summarizes whether the local public agency is likely (Yes) or unlikely (X) to offer such incentives. Exhibit VII-12 Comparison of Economic Incentives and Special Zones
Santa Monica Economic Incentives Business Retention/Attraction Program Industrial Development Bonds Land, Acquisition or Construction Subsidies Lease or Tenant Improvement Subsidies Offsite Infrastructure Subsidies Business License Tax Waiver or Reductions Permit or Fee Waivers or Reductions Property Tax Reimbursements or Abatement Utility Tax Discounts Financial Relocation Assistance Special Zones Business Improvement Districts Other Non-Residential Assessment/Tax Districts State Enterprise Zones Recycling Market Development Zone Foreign Trade Zone Other Special Business or Incentive Zone Redevelopment Project Areas Yes Yes X X X X Yes Yes Yes Yes Yes Yes Yes Yes X Yes X X X X Yes Yes Yes Yes Yes Yes Yes Yes X X X X X X X Yes Yes X X Yes X Yes X Yes X Yes X X Yes Yes X X X X X X X X X Yes Yes Yes Yes Yes Yes Yes X Yes Yes Yes Yes Yes Yes X X X X X X Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes X X X Yes Yes Yes X X X Yes Yes Yes Yes Yes X Yes Yes n/a Yes Yes Yes Yes Yes Yes X X Yes X Yes Long Beach Fullerton Van Nuys El Segundo Ontario Chino
Source: Rose Institute/Kosmont Cost of Doing Business Survey, 2006; and, CBRE Consulting
CONCLUSIONS
Each of the six locations was ranked for each economic or demographic factor discussed in this section. The attributes were assigned weights based on what a typical business will likely deem as most important location criteria. The weighted average rankings were aggregated to derive a composite score for each community. Exhibit V-13 gives the rankings of individual parameters for each of the cities, and the respective weights assigned to each. Our analysis reveals that Santa Monica has the most educated workforce among the 6 cities, and also the highest share of employees in Services sector employment. On quality of life parameters, El Segundo has the best performing school district based on API scores and is also the least crime prone city. The Chino/Ontario salaries meet the California state average. The Chino/Ontario area is ahead of the other cities on housing affordability. Its real estate occupancy costs are also the lowest. The cost of doing business, influenced by economic incentives and the business taxes, are the also lowest in Chino/Ontario. The Preserve housing development with its wide variety of workforce and executive housing at reasonable prices (~$200/sf) is a significant benefit to corporate relocations. However, the proximity of such housing to the airport boundaries present challenges to growth of flight operations due to noise issues.
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Weight
Santa Monica
Long Beach
Fullerton
Source: Claritas; CA DOE; US DOJ; ERI; Costar; Rose Institute/Kosmont Cost of Doing Business; DQ News; RealFacts; and CBRE Consulting. (1) The indices are ranked relative to the most favorable location among the 6 cities. A rank of 5 represents most favorable location, and 1 the least.
Overall, we find that Chino/Ontario has the highest weighted average rankings across the location parameters, as shown in table below (each City is expressed as a ratio relative to Chino/Ontario score). Exhibit VII-14 Composite Rank Score and Index
Santa Monica Composite Score Weighted Total Score Composite Index Relative to Chino/Ontario
Source: CBRE Consulting
163.0 0.61
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Industrial
250,000 $150 $10 million $50 million $125,000 $500,000 $625,000
T-hangars
250,000 $40 $10 million $20 million $50,000 $100,000 $150,000
The table shows that industrial development on excess airport land will generate five times greater ground lease revenues than any aeronautical use. However, due to the high value of corporate jets, the property tax revenues to the County from high-end jet aeronautical uses will exceed most industrial uses.
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Exhibit VIII-2 Economic Benefits Warehouse vs. Industrial Use (2007$) Hypothetical 100 Acres
Building area Assessed Value per Bldg Sq.Ft. Assessed value of Equipment Total Assessed Value City Property Taxes @ 10% Permanent Jobs Business Sales Taxes /1 Retail Spending @ $10,000/job Retail Sales Taxes Total City Revenues Warehouse 2,000,000 40 $50 million $130 million $130,000 400 $200,000 4,000,000 $40,000 $370,000 Manufacturing 2,500,000 60 $150 million $300 million $300,000 5,000 $1,000,000 5,000,000 $500,000 $1,800,000 R&D 3,000,000 150 $75 million $520 million $520,000 10,000 $500,000 $100,000,000 $1,000,000 $2,020,000
/1 Reflects manufacturing site as point of sale for retail sales taxes Source: CBRE Consulting
The table above illustrates that with zoning restrictions to limit warehouse development in the Chino Airport area, the City stands to gain an additional $1.5 million every year in tax revenues.
CONCLUSION
Industrial employment is important to any regional economy. Chino Airport area is well positioned to capture a significant share of this demand, spurring $millions of new commercial/industrial development and creating thousands of new jobs for a wide range of educational and skill levels.
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An integral part of the plan examined the long-term demand trends for aeronautical use locally, regionally and nationwide. Estimating the amount and nature of future aeronautical facilities required begins with a projection of the increase in airport operations and activities. Key aspects of the operations that will have a bearing on facilities requirements are the total number and type of aircraft based at Chino. Table 2J in the Master Plan presents a range of forecasts of the number of aircraft that are expected to be based at Chino by 2025. As of today, there are approximately 1,000 aircraft based at Chino, of which approximately 200 are vintage planes in the museums. The baseline forecast used in the Master Plan estimated that 1,375 aircraft will be based at Chino by 2025. That represents an increase of 375 aircraft or 45 percent growth of non-vintage planes. The highest forecast estimated an increase of 480 aircraft or
CHINO AIRPORT ECONOMIC STRATEGY 56 AUGUST 2007
60% growth by 2025. The Master Plan also forecast that jet and turbo prop aircraft based at Chino would increase from 64 in 2001 to 112 in 2025. That represents an increase of 48 aircraft or 75% growth. Those larger aircraft require both larger hanger space than smaller general aviation aircraft and also more extensive ground support services. Based on the projection of additional aircraft hangar demand, The Master Plan identifies the amount of new hanger space and tie-downs that would be required. It was estimated that an additional 333 hanger spaces and seven new tie-downs would be required, and the land necessary to construct those new facilities was identified in the Master Plan. Discussions were held with Bill Ingraham, Airport Manager and Erect-A-Tube, one of the nations largest manufacturers of pre-engineered steel aircraft hangers, regarding how many aircraft could be accommodated in standard size Erect-A-Tube hangers. It is estimated that four to five large jets or approximately a dozen smaller general aviation aircraft can be accommodated for every 40,000 square foot hangar. Allowing for runway access and other circulation, and considering the strong demand by large jets, it was conservatively estimated that the Airport would need to set-aside one acre of land for every four planes to be permanently housed. Because of the restrictions on jet operations at Santa Monica Airport and the lack of any available hangar space at most general aviation airports in Los Angeles and Orange County, CBRE has prepared a series of very optimistic projections of CNO-based aircraft demand to determine if there is still land available for aviation-related commercial/industrial uses. Exhibit IX-1 CNO Non-Aeronautical Land Availability
Active Planes Growth Rate Master Plan Baseline Alt #1 Alt #2 Alt #3 Alt #4
Source: CBRE Consulting
Excess Land Available 140 acres 135 acres 115 acres 85 acres 35 acres
The analysis shows that allowing for an optimistic growth rate of 75 percent will still allow development of approximately 85 acres for aviation-related commercial and industrial development based on the ratio that every 4 planes require one acre of land for hangar space and runway access. It is important to note that the Master Plan defines aviation related commercial/industrial uses as land that has no airfield access and thus can be used for alternative uses which enhance airport operating revenues, and which can include manufacturing, warehouse, office and retail uses. The aviation-related commercial land area currently identified is shown on the Master Plan aerial on the following page.
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As part of the Plan update, it may make sense to relocate the two aircraft museums from the north side to the southeastern section to provide a significant buffer from the immediately adjacent homes. RECOMMENDATION #4 Update CNO ALP With up to 100 Acres of Commercial/Industrial Land The Master Plan designates approximately 140 acres of land for commercial or industrial uses, based on having identified the amount of land that would be necessary to accommodate the projected increase in aircraft operations based at Chino by 2025. This land could be made available to commercial or industrial users via market rate ground leases, once the ALP is updated and an FAA de-obligation process has been completed. Given the Airports mandate to provide for growth in aeronautical needs for the long-term, it is prudent to anticipate even greater growth in aeronautical demand, especially from the high-end corporate jets that are being squeezed out of Los Angeles and Orange County airports. Even allowing for as much as 75 percent growth in active aircraft at CNO, CBRE believes that it would be prudent to develop a commercial/industrial leasing program the focuses on the approximately 70 acres of the commercial/industrial designated land located on the western end of the Airport that is least suitable for aeronautical use. Since the future development opportunities are hard to predict, it may be prudent to initially release only 30-40 acres for immediate development of a light industrial business park along Kimball Avenue. A neighborhood 10-acre retail center would be a likely candidate for the intersection of Euclid and Kimball. For such non-aeronautical ground leases, the County should coordinate planning and marketing with the City of Chino Economic Development department to avoid competing for similar uses and to incorporate any economic incentives available to potential developers/tenants. RECOMMENDATION #5 - Develop RFP Protocols for Soliciting Development at CNO For all major leases on the airport, CBRE recommends CNO develop Request for Proposals (RFP) to solicit the most qualified developers and financially advantageous lessees for development and to focus development proposals in specific geographic areas that can be served efficiently from existing infrastructure systems. For non-aeronautical land uses, the cities and the County should establish minimum guidelines for job creation, private investment and tax revenues to prevent large distribution centers or other types of warehouses from taking the valuable industrial land for low value uses. CBRE would suggest a minimum threshold of 1.5 employees per 1,000 square feet of building area and a private investment target of $3 million per acre. An exception could be made for large warehouse users that are large point of sale retail sales tax generators (i.e. in excess of $50 million in annual sales). Attached on the following page is an illustrative example of such a planned developer solicitation that was prepared for surplus land at the Ontario Airport. .
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