Tuesday, April 3, 2007
Airport pact inching along City expecting $26 million profit from Renaissance Rialto
By Jason Pesick
The San Bernardino (CA) Sun
RIALTO – To make way for Renaissance Rialto, the city and the project developer must pay $49.5 million to San Bernardino International Airport, under a proposed agreement. Rialto officials had expected to pay closer to $30 million and some said they were not thrilled with the new price tag.
The amount was a result of the negotiating parties’ agreement that the airport is worth $120 million, not an appraised price. That’s nearly twice the $66 million the city will receive for the property.
But in the complicated exchange, Rialto is guaranteed a profit of $26 million, but officials had hoped for more.
“It bothers me, but we’ve also got to make this work for SBIA,” Councilman Ed Scott said of the difference.
The agreement between SBIA, Rialto and Lewis-Hillwood Rialto Company LLC – the project developer – was to be voted on tonight, but City Council members asked to postpone the matter.
Scott said he was still waiting to review a final version of the agreement before voting.
The goal of the project is a 1,500-acre master-planned area of housing, retail, schools and mixed use.
Lewis-Hillwood, a joint venture of the Lewis Group of Companies and the Texas-based developer Hillwood, and the city want to close the Rialto airport to make way for Renaissance Rialto, a massive mixed-use development.
The project will be located along the soon-to-be-completed Interstate 210 extension. Renaissance is an aggressive stab at boosting the city’s economy and improving its image.
In 2005, Congress passed legislation allowing Rialto to close the airport. For years, Rialto had attempted to close the airport but could not obtain permission from the Federal Aviation Administration.
The legislation allowed for the airport to close as long as SBIA was paid 45 percent of the fair market value of the airport property. The negotiated value of the property was $120 million, but $10 million of that will be deducted to pay for preparing the site for development.
That means the city and Lewis-Hillwood will have to pay $49.5 million.
Even though the parties agreed on the $120 million number, Rialto and Lewis-Hillwood previously agreed that the value of the airport property was about $66 million. The value on which Rialto now is basing its payment to SBIA is almost twice as high as the amount Lewis-Hillwood will have to pay the city for the property.
The difference is because the city estimated the property’s value as of March 2005, Scott said.
The $120 million number was the result of negotiations between the parties, said Redevelopment Manager Greg Lantz.
In order to complete the Renaissance project, Lewis-Hillwood must buy Rialto’s airport from the city. After all the money changes hands in the complex deal, Rialto is guaranteed to make $26 million.
Plans for the project should come before the council late this year.
SBIA will spend $4 million to improve its infrastructure and $10 million to accommodate tenants from Rialto’s airport.
The relocation of the tenants from Rialto’s airport should begin later this year, said Robb Steel, the city’s economic development director.
Businesses at the Rialto Municipal Airport pay rents below market value, he said, because the city froze rents.
In order to help them cope with increased rents in their new locations, Rialto will give them assistance paying the increased rents for two years.
A relocation plan released by the city last month spells out the assistance the airport tenants will receive, including moving costs and the cost of setting up shop at the new location.
In addition to the influx of money, SBIA stands to gain more tenants when the Rialto airport closes.
“This will help us significantly,” said Mike Burrows, SBIA’s assistant director. SBIA’s commission is likely to vote on the agreement at its next meeting on April 11, he said.
In addition to considering the closure agreement, the council was scheduled to consider other changes to the deal with Lewis-Hillwood.
One would be that the city’s redevelopment agency would provide the financing for much of the cost of the sale of a 53-acre property next to the airport. Lewis-Hillwood would repay that price, estimated at $16 million, with interest.
Other revisions to the contract between Rialto and Lewis-Hillwood would result in the city receiving $5.6 to $6.5 million less from the developer.
Councilman Joe Baca Jr. said Monday he had some questions about what the council was scheduled to vote on. He said he wants to find out exactly why the city’s estimated value of the airport is so much lower than $120 million.
But, he said, his main concern is what Renaissance Rialto eventually has to offer.
“I’m excited about it, but I’m still concerned about the content.”
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