THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF LOS ANGELES, CALIFORNIA M E M O R A N D U M DATE: MAY 21, 2009 CI2140

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1 THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF LOS ANGELES, CALIFORNIA M E M O R A N D U M 13 DATE: MAY 21, 2009 CI2140 TO: FROM: RESPONSIBLE PARTIES: SUBJECT: CRA/LA BOARD OF COMMISSIONERS CECILIA V. ESTOLANO, CHIEF EXECUTIVE OFFICER DAVID RICCITIELLO, REGIONAL ADMINISTRATOR CALVIN HOLLIS, DEPUTY CHIEF OF OPERATIONS REAL ESTATE LEN BETZ, PROJECT MANAGER EXCLUSIVE NEGOTIATION AGREEMENT WITH ANSALDOBREDA INC. FOR THE POTENTIAL GROUND LEASE AND REDEVELOPMENT OF A PORTION OF THE CLEANTECH MANUFACTURING CENTER (CTMC) SITE LOCATED AT EAST WASHINGTON BOULEVARD IN THE CENTRAL INDUSTRIAL REDEVELOPMENT PROJECT AREA. DOWNTOWN REGION (CD 14) RECOMMENDATION That the CRA/LA Board of Commissioners, subject to City Council review and approval, authorize the Chief Executive Officer or designee to enter into an Exclusive Negotiation Agreement with AnsaldoBreda Inc. for a potential ground lease and redevelopment of a portion of the CleanTech Manufacturing Center Site located at East Washington Boulevard in the Central Industrial Redevelopment Project Area. SUMMARY This recommended action will authorize the Chief Executive Officer ( CEO ) or designee to execute an Exclusive Negotiation Agreement ( ENA ) with AnsaldoBreda Inc. for the potential ground lease and redevelopment of a portion of the CleanTech Manufacturing Center ( CTMC ) Site, formerly known as the Crown Coach Brownfield Demonstration Site, located at East Washington Boulevard (the Site ) in the Central Industrial Redevelopment Project Area (see Site Map, Attachment A ). The ENA provides for a sixty day exclusive negotiation period during which the parties will negotiate the terms of a Disposition and Development Agreement ( DDA ) and Ground Lease for a portion of the CTMC Site. The ENA provides for reimbursement of CRA/LA third party consultant and legal services costs by AnsaldoBreda, as well as a $1,000,000 Security Commitment Letter of Credit that may be drawn upon by the CRA/LA under certain conditions if agreement is not reached on the DDA and Ground Lease. The ENA contains negotiating parameters framing the proposed DDA which sets forth the guidelines for such issues as use limitations consistent with the CleanTech objectives for the Site, employment creation requirements in terms of number of jobs, quality of jobs and access to jobs by the local community, and enhanced sustainability requirements for development of the Site. The ENA delineates the CRA/LA policies applicable to development of the Site, a minimum scope of

2 CTMC ENA WITH ANSALDOBREDA INC. 2 development, and required developer deposits or security under the DDA that would be collected by the CRA/LA under certain conditions if development does not go forward. The ENA also establishes a framework for the DDA and non-subordinated Ground Lease to be negotiated during the ENA period. This framework includes a $5 million letter of credit and $30 million corporate guarantee, each to act as a performance deposit to ensure development of the Site, a base lease term of 50 years, $15.1 million prepayment of a portion of the base ground rent with credits against a portion of the future annual ground rent, provisions for rent escalations and reappraisals, and strict limitations on assignments among other guidelines for negotiations. The framework also provides for the right of the CRA/LA to repurchase the leasehold and to terminate the lease if AnsaldoBreda ceases operation for 24 consecutive months The ENA, and proposed DDA and Ground Lease, will be conditioned by both parties upon the Los Angeles Metropolitan Transit Authority exercising its option with AnsaldoBreda for the purchase of additional rail cars. RE May 3, 2007 and June 19, 2007 CRA/LA Board and City Council authorization, respectively, for the exercise of a Purchase Option to acquire the Crown Coach Site from the State Department of General Services ( DGS ). SOURCE OF FUNDS No CRA/LA funds are required for this action. PROGRAM AND BUDGET IMPACT There is currently no fiscal impact to the City s General Fund or the CRA/LA Budget and Work Program as a result of the recommended action. Labor costs for ongoing negotiations with AnsaldoBreda Inc. and continuing brownfields remediation and related issues at the Site are contained in Objectives CI2140 and CN3320, respectively. ENVIRONMENTAL REVIEW The proposed action does not constitute a project according to the California Environmental Quality Act (CEQA). If a DDA and Ground Lease result from the proposed ENA, appropriate site-specific environmental review documents meeting CEQA requirements will be compiled or completed for CRA/LA Board of Commissioners review and action prior to entering into any formal agreements committing the CRA/LA to the development. BACKGROUND A leading supplier of passenger trains for intercity, regional/commuter, and transit/metro applications, AnsaldoBreda Inc. is a Delaware corporation and a wholly owned subsidiary of AnsaldoBreda, SPA. In 2001, AnsaldoBreda, SPA, was created by the merger of two leading Italian companies, Ansaldo Trasporti and Breda Costruzioni Ferroviarie, and is currently a wholly owned subsidiary of Finmeccanica, SPA. AnsaldoBreda Inc. has operated throughout North America, Europe and other parts of the world providing state-of-the-art heavy and light rail transit vehicles since 1978 with sales of more than

3 CTMC ENA WITH ANSALDOBREDA INC. 3 $2.5 billion. With current fleets operating in Washington DC, Atlanta, Boston, Cleveland, Los Angeles, and San Francisco, AnsaldoBreda is the largest modern day supplier of transit rail cars in the United States outside the New York metropolitan area. AnsaldoBreda Inc. currently holds a contract for the manufacture of 50 rail cars with the Los Angeles County Metropolitan Transit Authority ( Metro ) for the Gold Line, with options to build 100 more rail cars and refurbish 36. During the negotiations process between Metro and AnsaldoBreda regarding the exercise of these rail car contract options, AnsaldoBreda approached CRA/LA and expressed interest in building a rail car manufacturing facility at the CTMC Site, as it is centrally located, in close proximity to the Metro maintenance facility, and currently zoned M-3 for heavy industrial uses. On March 26, 2009, the Metro Board acted to extend the rail car option period till May 31, 2009, by which time it is expected a decision will be made regarding the exercise of contract options with AnsaldoBreda. AnsaldoBreda is currently manufacturing light rail cars for the MTA contract in Italy and assembling light rail cars in their plant in Pittsburg California, but will manufacture and assemble future MTA cars at the CTMC Site. AnsaldoBreda's strategy is to secure contracts from other transit authorities that are in the process of purchasing rail cars including high speed opportunities and manufacture those vehicles at the Los Angeles facility. This will be their first manufacturing facility outside Italy, having had several final assembly facilities across the United States. Proposed Project For the ENA, AnsaldoBreda has described a proposed development that could consist of a ±240,000 square-foot light rail car manufacturing facility plus 472 parking stalls on a 14.3 acre portion of the 20 acre CTMC Site (see Attachment B ). In future phases of the project s development, all surface parking could be consolidated into a parking structure serving the entire CleanTech manufacturing Center, resulting in Area A and Area B, initially used for parking, vacated by AnsaldoBreda. All new construction on the site will achieve the highest practicable standards of green building, with a minimum of LEED Silver certification, and AnsaldoBreda will additionally demonstrate good faith efforts in achieving LEED Gold or Platinum certification. As estimated in an economic impact study (see Attachment C ) completed by the Los Angeles County Economic Development Corporation (LAEDC), a potential development of this scale could result in 535 direct full-time equivalent (FTE) permanent jobs relative to manufacturing, 126 direct FTE permanent jobs relative to American corporate headquarters operations, and a one-time impact of 440 direct FTE construction jobs. The LAEDC study further estimates at least $8 million in annual tax revenues to be generated from ongoing AnsaldoBreda operations. CRA/LA will require a permanent jobs hiring program to ensure that local people, especially those with barriers to employment, have priority access to training and job opportunities. CRA/LA will facilitate the creation of partnerships between the employer and local community based organizations, labor unions, and the LA Community College District to implement the program in an effective way. As noted previously, the purpose of the ENA is to define the definitive parameters for a project. Redevelopment Goals The Site is located within the Central Industrial Redevelopment Project Area. Redevelopment of the Site will meet several goals and objectives of the Central Industrial Redevelopment Plan adopted by the City Council on November 15, 2002, as follows: (i) fostering a healthy industrial environment and attracting new private investment to increase job opportunities, property values, and tax revenues; (ii) encouraging sustainable development in a manner that utilizes

4 CTMC ENA WITH ANSALDOBREDA INC. 4 precepts of energy efficiency, renewable energy, water resource conservation and reuse, and waste/urban runoff management; and (iii) eliminating conditions of blight through the remediation of toxics and contaminated soils in order to provide sites for redevelopment. Additionally, by attracting a clean technology company and generating a significant number of family-supporting jobs with related community benefits such as workforce job training, the proposed project will support the following objectives of the CRA/LA Strategic Plan: 1.1.1, Create 40,000 construction career-path jobs; 1.1.2, Invest in projects and programs to provide 2,000 family supporting permanent jobs; 1.2.2, Assist 300 businesses a year through façade programs, marketing permit expediting, public improvements, equipment purchases and other methods; 1.3.1, Retain and grow employment in each region s key sectors and 1.4.2, Complete environmental documents for Central Industrial / CleanTech Manufacturing Center, Crenshaw Corridor and 1 st / Mission Design for Development to reduce entitlement costs and processing time for new development. Standard CRA/LA policies will apply to any project resulting from this ENA, including Prevailing Wage, Living Wage, Construction Careers and Project Stabilization, and Healthy Neighborhoods. A permanent jobs hiring program that connects employers to pre-qualified local workforce recruitment and training resources to facilitate local and at-risk hiring goals will also be required. Site Description The approximately 20.6 acre (gross) CTMC Site is located at the intersection of 15th Street and Washington Boulevard in the downtown industrial core at the northern terminus of the Alameda Corridor Improvement Project. It consists of a net buildable acre northern parcel and a net buildable 1.3-acre southern parcel. In addition, there are two remnant parcels on the west side of 15th Street, totaling approximately 0.6 acres that are included as part of the Site. New industrial-standard streets have been installed by the Alameda Corridor Transportation Authority ( ACTA ) adjacent to and through the Site, providing excellent surface access to and through the Site. The Site was originally developed as a rail yard and contained various industrial uses over the years. In 1988, the Site was purchased by the State Department of Corrections and, over the next four years, the State conducted a series of environmental investigations and demolition activities in preparation for constructing a prison on the Site. However, due to extreme community opposition, the prison construction was stopped and the State deemed the Site as surplus property in Environmental Status On October 15, 1997, the City Council approved the City Brownfields Executive Team s recommendation to designate the Site as a City Brownfields Demonstration Site. This designation resulted in the CRA/LA executing an Option Agreement with DGS to purchase the Site and an Environmental Oversight Agreement with DTSC to oversee the environmental investigation and cleanup of the Site. Since the Site s brownfields designation, CRA/LA has undertaken a long series of environmental investigations and conducted clean up activities at the CTMC Site, resulting in a closure letter from DTSC for the shallow soil contamination (i.e. the upper 30 feet of soil). The remaining deep soil gases have been thoroughly characterized and a long-term remediation

5 CTMC ENA WITH ANSALDOBREDA INC. 5 plan that will allow development to proceed has been approved by DTSC through a Project Environmental Oversight Agreement with the CRA/LA. An environmental remediation using Soil Vapor Extraction and Dual Phase Extraction ( SVE/DPE ) is currently being performed by the CRA/LA under the terms of that certain Project Environmental Oversight Agreement for the Crown Coach Industrial Redevelopment Project (CRA/LA Agreement Number / DTSC Agreement Number 06-T3185) dated January 8, 2007 ( PEOA ) with the California Department of Toxic Substances Control ( DTSC ). The terms of the PEOA specify the conditions under which DTSC will clear the Site for immediate redevelopment. DTSC will require that the SVE/DPE system continue to operate until the treatment goals are achieved, and that certain prescribed measures be taken to manage any potential vapor intrusion into structures on the Site. The CRA/LA s activities at the Site have been and will continue to be undertaken under the provisions of the Polanco Redevelopment Act, which will provide certain State liability immunities to the CRA/LA for additional remediation actions at the Site. CRA/LA s immunities for past contamination may be passed on to future lessees of the Site. Cecilia V. Estolano Chief Executive Officer By Glenn F. Wasserman Chief Operating Officer There is no conflict of interest known to me which exists with regard to any CRA/LA officer or employee concerning this action. Attachments: A Location Map B Site Plan C LAEDC Study: Economic Impact of AnsaldoBreda in Los Angeles