Hermosa Beach Self Storage Worth Approx. $7M ($180K Annual Tax Revenue)
City Yard in Hermosa Beach Worth Approx. $15M ($0 Tax Revenue). Are we just giving E&B a $15M property? Here is why it might be more expensive to vote yes. $3.5M loan repayment + $15M Property for voting Yes = $18.5M vs 17.5M for Voting No.
Noble Park in Hermosa Beach Worth Approx. $20M ($0 Tax Revenue)
Hermosa Beach Breezeway Lot Worth Approx. $1.5M+ ($12K Tax Revenue)
Old Prospect Ave School Building Lot Worth Approx. $800K (No Tax Revenue)
Public Parking Facility Worth Approx. $20M ($360K Annual Revenue)
The biggest question that voters need to understand when going to the polls is how is Hermosa Beach going to pay for the $17.5M upon a "No" vote. There has been some speculation that the vote might not happen until 2013 or 2014 which doesn't surprise me. In the contract, it states that E&B can ask the city to put the measure on the ballot at any time and the city has 6 months to do it. When do you think it will be in the best interest of E&B to put the measure on the ballot?
I think Hermosa Beach should be financially prepared for another recession and have the cash in the bank or a bond measure approved to pay for $17.5M NOW! Current macroeconomic headlines could easily affect our ability to finance a bond offering or sell real estate in the coming years: 1) inflated bond market, 2) massive U.S. government debt and 3) European Union debt restructuring recession. Its been over 4 years since the 2008 financial crisis and you never know when the next downward cycle will hit our economy.
The City of Hermosa Beach has plenty of liquid and semi-liquid assets that it can use to cover the costs. There is no need to do a parcel tax or an assessment on residents. There is no need to believe the oil propaganda and rumors about the going bankrupt over the oil settlement. We can afford to pay it and it won't affect our budgets or our valuable schools. The City owns a lot of valuable property and the last time I checked we are not in the "property management" business. The City has a number of assets that do not generate any tax revenue for the city and should be considered for sale.
The City of Hermosa Beach likely owns over $100+ million in real estate assets and has over $25+ million in working capital in the bank available to pay for the settlement. The City also has the ability to get a $10M "Judgement Bond" from the State of California at 3% and service loan which will cost the city $300,000 per year which is nothing out of the budget. Why not also float another bond for $7.5M as well since boring money is so cheap these days. So there are lots of ways we can solve the problem of paying for the settlement if we have to.
The Storage facility was purchased by the City years ago for around $4M. Its likely worth about $7M today if you put 14 multifamily units on the lot and zone if for residential purposes. It generates $180K per year for a property the city paid $4M. Is rent revenue worth the annual yield for tax payers? The City is not in the property management business and thus we should sell it. See lease agreement.
The City Public Works Yard on 6th Street has 8-10 employees and unfortunately they would have to relocate if oil drilling came into town. The city could outsource the public works functions to a private company which would save money on employee salaries and pensions, etc. This lot is likely worth $10M zoned as commercial and might be close to $15M as residential. 17-20 multifamily units could likely fit onto this lot if a developer buy it. Also, has the city has not factored into the E&B Oil drilling deal that the we are practically giving E&B oil a $15M property. So in reality, it might be cheaper to pay the $17.5M and vote NO vs paying $3M+ giving a $15M property to E&B for voting Yes.
The City owns 13 parks some of them are more useful than others. I am not proposing to go around the City to sell parks but if you compare a price per square foot and the lack of tax revenue to the city. Noble Park is probably the most valuable asset we have that could be sold. The Beach House next door to this large lot pays Hermosa Beach $800,000 per year in bed tax revenue. I know there are a lot of people that use the park to walk their dogs but that is a debate for a separate discussion. However, most people would not let their kids play in the grass because of the amount of dog waste. You might be able to classify this as one of the most valuable dog walking park in the U.S. It might be worth $25M depending on the zoning.
The Fat Face Fenner's breezeway is likely worth $1.5M. Currently the city leases the above air space for $1K per month for the right to have a restaurant above the walkway space. $12K per year is not a lot that is worth $1.5. I don't know many people who currently use the walkway and don't know how much value it has to lower pier any longer. A full scale Fat Face Fenner's restaurant might make sense here if constructed from the ground up.
The Old Prospect School is next to the Fort Lots of Fun park might be worth $800K. It has been a storage facility for old city lights for years and does not serve as a tax generator for the City.
The City of Hermosa Beach has parking garage which it shares revenue with LA County on a 50/50 split. What is a property like this worth that generates $300,000 per year? Could it be worth $20M and is it worth it to sell half of our stake for $10M? Again we are not in the property management business and it might be in our best interest to divest this property. See LA County agreement & annual parking structure revenue / expense financial statement.
As you can see, we have lots of choices of assets that the City can sell. Its up to the citizens to come up with a plan to sell one or a few smaller parcels because we know our officials wont take the initiative. Just look at what Redondo Beach City Council is doing to their residents if you need any proof. Real estate has recovered from the 2008 lows and it looks like another good time to sell some assets. I hope this makes everyone more comfortable about voting "NO".
This is work in progress and we would like your feedback on our theoretical pricing. If you have commercial real estate experience please contact us or comment below. Please check back frequently for changes. I apologize for any errors. Please send changes and suggestions to firstname.lastname@example.org.