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A new city hall and port headquarters anchored by a 73,000ft2 civic plaza. A revitalised public park and spacious public library. Reconnected streets and a pedestrian path connecting to regional transit. Long Beach is getting a major makeover – and it’s all been made possible by a public-private-procurement (P3) deal acquired with our help.
Built in 1972, the building was outdated, energy-inefficient, and had a backlog of maintenance jobs. When a 2013 study found it would be very expensive to retrofit the seismically unsafe facilities, the City sought our advice on structuring a potential partnership with a developer to create a new complex that would deliver new facilities for the same US$12.6m the City was spending annually to maintain the existing complex.
Project Summary
580,000 square feet of public buildings
496parking spaces
8,000new jobs during construction
Six years later, the new Civic Center opens its doors
The $520m Civic Center project comprises a city hall, public library, a revitalised Lincoln Park, and port headquarters. It is sited at the location of the old courthouse that was recently rebuilt nearby by the State of California using a P3 model (we were the lender’s technical advisor on that project). The new facilities are far superior — energy efficient, seismically resilient, and cheaper to maintain. Plus, the new Civic Center will receive adequate, regular funding over the 40-year term, all without new taxes.
What does a public-private-procurement mean for the project?
Unlike more traditional means for building a public project, a public-private partnership, or P3, places the responsibility of designing, building, financing, operating, and maintaining a project on the developer. In return, the public agency makes performance-based payments to the developer over a set term, after which the facility O&M is handed back to the public in a state of good repair. We helped Long Beach shift construction cost and schedule risk, financing risk, and long-term facility performance risk onto a private conglomerate, speeding up delivery, improving management, and increasing innovation.
A P3 partnership offers major financial benefits
The City was able to transfer all this risk through the use of private financing — the “F” in DBFOM — that was secured and taken out by the private developer, Plenary Properties Long Beach LLC. While the financing was non-recourse to the City, meaning the City was not contractually obligated to pay the debt, the interest rate on the private placement notes was no more than the rates on municipal revenue bonds or certificates of participation — the two public financing options being considered that would have required a debt repayment covenant by the City to the lenders.
As well as transferring risk away from the city, no new taxes or fees had to be paid by Long Beach residents or businesses to create the complex. Further, the sale of City land for private development, including the five acres where the old City Hall stands, created a significant source of additional funds for the public facilities. Once developed, the private development generates tax revenues for the City while also contributing to the City’s objective of creating a mixed-use, vibrant, 18-hour district.
Our P3 specialists were up to the challenge
Despite the complexity of the deal, we were able to carry out the procurement process and selection of the winning bidder in under a year. Next, we carried out financial and design negotiations and reached close within two years. All in all, we were able to reduce the planning, entitlement, and procurement process to two years, down from the traditional three-to-five years. This has resulted in big savings for all stakeholders — and more money to invest in transforming downtown Long Beach.
Building a better Long Beach
The overwhelming support for this project indicates that the new Civic Center is just the start of the story for Long Beach. The facility’s redevelopment has been a catalyst for other real estate projects and private investment in the city’s core — three years after executing the P3 contract the City is booming. The entitled development adjacent to the new Civic Center on the old City Hall site is slated to bring more than 1,000 new residents to downtown with 850 residential units plus 47,000 gross square feet of retail.
This successful P3 deal is likely to lead to more public-private partnerships in California and beyond, demonstrating how municipalities and other public agencies all over the region can replace outmoded public buildings and infrastructure with vibrant community spaces.
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