Booklet #2 (1/14/14)

How will the City pay for the lease?

The developer has worked closely with the Mayor’s Office to structure the lease payments so that the City could move forward with executing the lease while still having flexibility to fund other future projects and City needs. This was done mainly by utilizing the following:

Removing Municipal Courts from the original plan which reduces the amount of leased space by nearly 100,000 sq.ft.

The Landlord will provide Tenant with a Tenant improvement allowance of $37.00 per rentable square foot or a total of$9,762,561 for the 263,853 sf. This amount may be used for design and architectural fees, construction, furniture and fixtures, data and telephone cabling as Tenant desires. This allowance will permit the City to build out its space without having to allocate any current funds.

Abating all base rent until 2019; The City would only pay O&M of roughly $1.3M, which is essentially a pass-through cost to cover utilities and daily operations, similar to what the City already pays.

The lease is structured so the base rent payments do not begin until 2019 primarily for 2 reasons:

1. The City has identified some needs that may need to be addressed in 2017

2. The City’s current debt service obligations are set to decrease annually. The table on the following page shows that the City would have over $19M less in debt service obligations in 2019 and an average of $38M less over the next 24 years.

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Current City Debt Service Schedule

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2013 $55,632,896 $55,632,896 $0

2014 $55,632,896 $53,073,429 $2,559,467

2015 $55,632,896 $48,821,161 $6,811,735

2016 $55,632,896 $46,657,286 $8,975,610

2017 $55,632,896 $40,941,971 $14,690,925

2018 $55,632,896 $45,844,040 $9,788,856

2019 $55,632,896 $36,632,176 $19,000,720

2020 $55,632,896 $29,720,429 $25,912,467

2021 $55,632,896 $27,032,282 $28,600,614

2022 $55,632,896 $25,523,858 $30,109,038

2023 $55,632,896 $27,125,385 $28,507,511

2024 $55,632,896 $24,357,821 $31,275,075

2025 $55,632,896 $24,301,639 $31,331,257

2026 $55,632,896 $26,810,574 $28,822,322

2027 $55,632,896 $25,277,102 $30,355,794

2028 $55,632,896 $25,305,357 $30,327,539

2029 $55,632,896 $25,346,540 $30,286,356

2030 $55,632,896 $25,392,041 $30,240,855

2031 $55,632,896 $23,500,759 $32,132,137

2032 $55,632,896 $23,554,588 $32,078,308

2033 $55,632,896 $23,601,375 $32,031,521

2034 $55,632,896 $8,449,097 $47,183,799

2035 $55,632,896 $8,444,673 $47,188,223

2036 $55,632,896 $8,458,694 $47,174,202

2037 $55,632,896 $8,454,723 $47,178,173

2038 $55,632,896 $8,458,010 $47,174,886

2039 $55,632,896 $8,450,055 $47,182,841

2040 $55,632,896 $8,453,135 $47,179,761

2041 $55,632,896 $5,836,000 $49,796,896

2042 $55,632,896 $5,848,500 $49,784,396

2043 $55,632,896 $5,848,500 $49,784,396

Current Debt

Service in 2013

Anticipated

Requirement Excess

Letters of Support and History

• Letter from Governor of Alabama

• Letter from the Head of Department of Human

Resources

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Why should the City consider a

Public Safety Center?The evaluation, which has been conducted revealed that the Birmingham Police Department (“BPD”) and The Birmingham Fire Department (“BFD”) would greatly benefit from the consolidation of its services and the relocation of others into a common Public Safety Center. The leadership of the BPD and the BFD have determined that such a facility will provide for unprecedented operational improvements for these important governmental functions, including:

Adequate space and functionality. Existing Police Department facilities are currently located in aging buildings, many designed for other purposes. The existing Fire Administrative facilities are not user-friendly and are inadequately sized for efficient and comfortable use. A fundamental goal of this project is to design space that is well suited for the needs of the BPD and BFD today, and well into the future.

Streamlining of facilities management and maintenance. With a single efficient location for administrative functions, and on-site professional management, personnel from the Police and Fire Departments and related operations will be allowed to focus on their work rather than the management and maintenance of the building.

Efficiency of operations. Greater efficiency of operations will result from the consolidation of multiple functions located across the City into a single Public Safety Center. In addition, communication between the various departments and operational details of Police and Fire Administration will benefit from sharing a single, well-planned and adequately sized headquarters.

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MEMORANDUM

TO: Mayor William Bell

FROM: The Franklin Haney Company

DATE: August 5, 2013

RE: Proposal for Development of a City of Birmingham Public Safety Center

TERM SHEET

Landlord: LFH, LLC, its successors and assigns.

Tenant: The City of Birmingham, Alabama

Leased Premises: 263,853 rentable square feet of office space in the

building (“Building”) located at 2001 12th Avenue

North, Birmingham, Alabama (“Leased Premises”).

Landlord’s space planner will demise the Leased

Premises for the Police and Fire Department on full,

contiguous floors in the Building.

Term of Lease: The term of the lease (the “Term”) will be for a period

of thirty years, commencing on the earlier of the date

that Tenant commences beneficial use of the Leased

Premises or the date that is one year after execution of

the Lease.

Operation & Maintenance: Operation and Maintenance is not a new expense and is

currently being paid at existing facilities. Operation

and Maintenance will be paid directly by the City every

year from the beginning of Occupancy. First year

O&M expenses are projected to be $5.01 per square

foot or $1,321,904 which is not included in the base

rent.

Base Rent: (O&M expenses not included)

Base Rent equals $11.20 per square feet or

$2,955,154 per year beginning in 2019 with no

escalations.

A Tenant Improvement allowance of $37 per

square feet or $9,762,561 can be added by

increase the above base rent by approximately

$1 million or $3.80 per square feet. This

allowance is what we have priced out for the

existing design of the Police and Fire

Departments. This number can be reduced by

the City contributing funds or changes to the

Fire and Police Department’s Design.

Total Base Rent Including Tenant Improvement

is $3,957,795 per year beginning in 2019.

Base Rent starts in 2019 when City Warrants are

sufficient to pay lease.

All Base Rent prior to 2019 are abated

Total Rents:

Gross Rent is the sum of O&M expenses and Base Rent.

Landlord’s Work: Prior to commencement of the Term, Landlord will at

its cost bring the Building into compliance with

applicable legal requirements and will perform repairs

and upgrades to the elevators and base building systems

in the Building.

Tenant will reimburse Landlord for its share of future

capital expenditures for the Building incurred after

commencement of the Term.

Parking Spaces: Tenant shall be entitled to 3 parking spaces in the

parking deck of the Building for each 1,000 square feet

of the Leased Premises or 792 dedicated spaces. Such

parking spaces shall be included in the base rent.

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Pricing Comps

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Alternatives- AmSouth OperationsAt the request of the City, we evaluated several alternatives to the proposed project including the old AmSouth Operations Building. In our professional opinion, that site is not feasible for several reasons listed below. This information was also shared with the City’s Finance and Engineering Departments.

The space is inadequate. AmSouth operations only has 189,000 sq. ft, while the needed space to accommodate both the Police and Fire Departments is 263,000 sq. ft.; therefore, to meet the needs of both departments, 74,000 sq.ft. would have to be added.

Location. In comparison to the proposed lease, AmSouth simply does not have the superior location that the Social Security Building has. The Social Security Building is an exact match for the BPD’s current needs. The location is great and will be in the heart of the newly developed entertainment district. This location is accessible to all of the City’s major highways and is centrally located to the airport and the City’s North, South, East and West sides.

Cost. The cost to acquire, renovate and add the needed square footage is roughly $58M; Since the City could not pay for the project with funds on hand, the total costs for the project over 30 years would be $169M or $5.8M annually. Complete details on the construction costs and financing are located on the following pages.

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Sources and Uses of Funds

City of Birmingham

AmSouth Project

Sources:

Bond Proceeds:

Par Amount 58,415,000.00

58,415,000.00

Uses:

Project Fund Deposits:

Construction and Acquisition Fund 42,881,465.00

Other Fund Deposits:

Capitalized Interest Fund 14,948,548.80

Delivery Date Expenses:

Cost of Issuance 584,150.00

Other Uses of Funds:

Additional Proceeds 836.20

58,415,000.00

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Period

Ending Principal Coupon Interest Debt Service

Operation and

Maintenance Total

7/1/2014 1,460,375 1,460,375 $1,321,904 $2,782,279

7/1/2015 3,504,900 3,504,900 $1,321,904 $4,826,804

7/1/2016 3,504,900 3,504,900 $1,321,904 $4,826,804

7/1/2017 3,504,900 3,504,900 $1,321,904 $4,826,804

7/1/2018 3,504,900 3,504,900 $1,321,904 $4,826,804

7/1/2019 1,065,000 6.000% 3,504,900 4,569,900 $1,321,904 $5,891,804

7/1/2020 1,130,000 6.000% 3,441,000 4,571,000 $1,321,904 $5,892,904

7/1/2021 1,195,000 6.000% 3,373,200 4,568,200 $1,321,904 $5,890,104

7/1/2022 1,270,000 6.000% 3,301,500 4,571,500 $1,321,904 $5,893,404

7/1/2023 1,345,000 6.000% 3,225,300 4,570,300 $1,321,904 $5,892,204

7/1/2024 1,425,000 6.000% 3,144,600 4,569,600 $1,321,904 $5,891,504

7/1/2025 1,510,000 6.000% 3,059,100 4,569,100 $1,321,904 $5,891,004

7/1/2026 1,600,000 6.000% 2,968,500 4,568,500 $1,321,904 $5,890,404

7/1/2027 1,695,000 6.000% 2,872,500 4,567,500 $1,321,904 $5,889,404

7/1/2028 1,800,000 6.000% 2,770,800 4,570,800 $1,321,904 $5,892,704

7/1/2029 1,905,000 6.000% 2,662,800 4,567,800 $1,321,904 $5,889,704

7/1/2030 2,020,000 6.000% 2,548,500 4,568,500 $1,321,904 $5,890,404

7/1/2031 2,145,000 6.000% 2,427,300 4,572,300 $1,321,904 $5,894,204

7/1/2032 2,270,000 6.000% 2,298,600 4,568,600 $1,321,904 $5,890,504

7/1/2033 2,410,000 6.000% 2,162,400 4,572,400 $1,321,904 $5,894,304

7/1/2034 2,550,000 6.000% 2,017,800 4,567,800 $1,321,904 $5,889,704

7/1/2035 2,705,000 6.000% 1,864,800 4,569,800 $1,321,904 $5,891,704

7/1/2036 2,870,000 6.000% 1,702,500 4,572,500 $1,321,904 $5,894,404

7/1/2037 3,040,000 6.000% 1,530,300 4,570,300 $1,321,904 $5,892,204

7/1/2038 3,220,000 6.000% 1,347,900 4,567,900 $1,321,904 $5,889,804

7/1/2039 3,415,000 6.000% 1,154,700 4,569,700 $1,321,904 $5,891,604

7/1/2040 3,620,000 6.000% 949,800 4,569,800 $1,321,904 $5,891,704

7/1/2041 3,835,000 6.000% 732,600 4,567,600 $1,321,904 $5,889,504

7/1/2042 4,065,000 6.000% 502,500 4,567,500 $1,321,904 $5,889,404

7/1/2043 4,310,000 6.000% 258,600 4,568,600 $1,321,904 $5,890,504

58,415,000 71,302,475 129,717,475 $39,657,120 $169,374,595

City of Birmingham

AmSouth Project

Summary of All Options

Proposed Project Alternatives

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Lease- financed through annual appropriation via City’s general Fund over 30 years.

Average annual cost over first 5 years- $1.3M

Average annual cost after first 5 years- $5.3M

Defined, ready to go project with expandable space and great location in City Center.

Purchase- which would require bond issue or private loan over 30 years.

Average annual cost over first 5 years- $4-10M

Average annual cost after first 5 years- $6-13M

No defined project.

Conclusion: Haney lease is the most economical option and a defined project, unlike the

other options

Executive Summary

Space needs analysis as well as physical inspections have determined that there is a

serious need for quality, expanded, improved, consolidated space for the BPD and

the BFD. Both the Police and Fire Chiefs have echoed this need to help with efficiency

and effectiveness of daily such and that such a facility will provide for unprecedented

operational improvements for these important governmental functions

Our location suits the needs of both departments and offers space for future

expansion if needed. The location is accessible to all of the City’s major highways and

is centrally located to the airport and the City’s North, South, East and West sides.

The lease has been tailored to fit meet the financial needs of City such that no upfront

funds for build-out would be needed and so that rental payments do not begin until

2019, when the City is expected to have a decreased debt service load.

Lease alternatives have been evaluated and this proposal is the most economical

option. The proposed rental rate is lower than any other available Class A space with

the City Center.

Purchase and Build/Renovate alternatives have been evaluated and not only are

those options not defined projects but they would require the City to issue debt over

$50M which would cost the City over $160M over the life of that debt.

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