Methods & Analysis

Under construction

In this section I start with some background information: 1) a project description, and 2) a baseline from which the economic benefits can be measured for the primary proponent (UCD) and the Oak Park neighborhood where the project is to be developed. This is followed with a review, by asset class, of the types of public and private economic benefits which are typically associated with major development projects. As I step through each element of the project, I indicate what economic benefits could be shared with the community, and what information was shared with the public during the hearings on the project.

I’m taking the position for the analysis that all potentially shareable economic benefits could be included in the CBA. The alternative would be to potentially carve out a portion of the shareable economic benefits and return them to the project proponent to ensure the financial feasibility of the project. Feasibility analyses can be extremely complex, and for the Aggie Square project, there would be multiple feasibility studies – one for each use within the project (i.e., housing, office, retail, innovation, etc.). UCD and the City of Sacramento did not publish their feasibility studies. Based on the data that was released to the public and the documents released by UCD and the City in response to my requests, I found no evidence that feasibility studies justified the shareable economic benefits which were eventually retained by UCD (see the appendix for how UCD possibly gamed the feasibility studies).

The Aggie Square Project

The Aggie Square project was introduced to the public in December 2017 by the Chancellor of UCD and the Mayor of the City of Sacramento with the announcement that a site selection committee was being formed to identify a suitable location for what was billed as an “innovation center.” In April 2018 the pair again came together to announce that UCD’s Oak Park campus was selected as the location for the project. The first details of the building program for Aggie Square were presented to the UC Board of Regents one year later in May 2019 and then to the Sacramento City Council over another year later in October 2020. Between the time the project was announced in 2018 and when it was heard by the City Council in 2020, several meetings with select community members and the public were held to discuss the project and its impacts, and several reports were issued to promote approval of the project. After the lengthy process to develop and promote the project a final public version of first phase of the building program was published in concert with one of the public financing mechanisms used to distribute a portion of the shareable economic benefits to UCD.

Aggie Square Phase IRentable Square FootagePrivate Square FootagePublic Square FootageValue
West Lab Building235,542235,5420$211,045,632
East Lab Building280,898122,898158,000$220,084,608
Lifelong Learning Building267,811104,848162,963$173,849,510
Alice Waters Institute35,510035,51016,637,554
Other Commercial15,790015,7907,398,112
Residential (190 units)137,72081,65256,06867,724,755
Kindred Rehab Hospital53,00053,000060,600,000
Garage (1)360,400360,400050,456,000
 1,986,6711,358,340628,331$807,796,171
Source: EPS Tables A-2 and D-3, 2/25/2021 Note: (1) Garage serves both phases of project.

The project as originally conceived had four distinct components. The first two support the academic mission of the university: space for teaching and research and housing for faculty and students. The teaching and research space is funded by the university and the housing component is funded by a public-private partnership. The third component is innovation space funded and managed by a private third party. After the project was announced, two additional components were added. In January 2020 the Alice Waters Institute was added to the mix, and to capture more tax revenue to support the project, the Kindred Rehabilitation Center, already under construction, was drawn into the project boundaries.

While the ownership structure for each of the six components is different, all share one common element – the land upon which each operates is to be leased from UCD. These leases are unsubordinated to other financing, so if any component is financed with debt, and the owner fails to repay the loans, the lenders have no ability to foreclose on the land underneath the buildings – they can only assume the building assets for the remaining term of the ground lease with UCD. In general terms, this approach typically increases the cost of financing for project developers. UCD has the option to reduce or eliminate the ground lease payments to improve the financial feasibility of the various project elements, but the only component that possibly received this treatment was the luxury apartment targeted for faculty, fellows and students.

Only the first phase of the Aggie Square was recently approved ($808 million), so that portion of the project is the focus of this study.