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Monday, May 20, 2024

Orange County Leader Board

The Power of P3s: Public-Private Partnerships in the OC

As many readers may know, the long-awaited $400 million revitalization of the historic Dana Point Harbor is set to begin this summer.

But what many may not understand is the unique yet highly successful funding formula behind it: a 66-year public-private partnership (P3) among the County of Orange, Dana Point Harbor Partners LLC (DPHP) and DPHP Drystack LLC. Both DPHP entities are comprised of Burnham Ward Properties, which will revitalize the restaurants, retail, and public spaces; Bellwether Financial Group, which will revitalize The Marina at Dana Point; and R.D. Olson Development, which will create two world-class hotels.

Under this legally binding P3 agreement, the County of Orange retains ownership of all Dana Point Harbor land, while entering long-term leases with DPHP and Drystack, which in turn invest their own capital to design, develop, operate, and maintain the land and improvements for the full duration of the lease. The long-term lease structure requires DPHP to pay rent to the county, all of which goes into the Tidelands Fund to support critical programs and services in and around Dana Point Harbor.

At the time the County Board of Supervisors approved the leases in 2018, anticipated revenue to the county’s Tidelands Fund totaled in excess of $700 million over the 66-year lease term. Due to the structure of the lease, it is required that the property is professionally operated and managed to fair market conditions. This ensures that the property reaches its highest potential and best use, with the main goal being to benefit all county residents.What makes this P3 lease unusual is that unlike most ground leases with fixed rental rates, this is a percentage lease where the greater revenue on the property, the greater the rent to the county. The long-term rising ground rent enables the county to fund more programs and services for the community thus benefiting all county residents without the financial burden of having to fund redevelopment costs and ongoing operational expenses.

These kinds of partnerships have been around for years and have been very successful in enabling public entities to leverage the experience and expertise of the private sector to develop world-class facilities through an open, transparent and accountable process.

In addition to the county not incurring any public debt, the timeline to complete the project is significantly decreased due to private sector resources and funding. Once construction commences later this year, DPHP anticipates completing the project in 5-7 years whereas the county would have a much longer time frame.

When the revitalization project is complete, we are confident that Dana Point Harbor will be considered a prime example of how Orange County taxpayers can enjoy lasting benefits from a public-private partnership.

The History of P3s in Orange County

Orange County is no stranger to P3s, the more traditional example of which involves infrastructure improvements such as roads and bridges. Local public-private partnerships have been beta tested, completed on time and under budget, and were ready to be replicated elsewhere.

Locally, construction of the County of Orange Civic CenterCounty Administration South, developed by Griffin Structures/Swinerton, is an example of a successful P3. The $180 million, 250,000-square-foot, six-story office building sits over two levels of underground parking and serves as a hub of the County’s Public Works, Waste and Recycling, Treasurer-Tax Collector, Auditor-Controller, and Clerk-Recorder departments. The facility also features 6,600 square feet of conference and events space. The first phase of a larger plan, the project was delivered five months ahead of schedule—in true P3 form.

The Laguna Niguel City Center (LNCC) is another Orange County P3. Led by Laguna Niguel Town Center Partners, a partnership between Burnham Ward Properties and Sares Regis Group, the LNCC project will feature approximately 175,000 square feet of vibrant mixed-use commercial space, 275 much-needed apartment homes, and a new state-of-the art public county library, along with a series of public open spaces to create long-awaited gathering places for local residents.

We’ve seen many other public-private partnerships methods being employed throughout California, including a new Civic Center for Long Beach; academic buildings, recreational facilities and student housing at the University of California, Merced; and a people mover and rental car facility at the Los Angeles International Airport.

County Asset

Dana Point Harbor was officially dedicated on July 31, 1971. While some longtime residents still bemoan the breakwater construction that saw the loss of “Killer Dana,” the legendary 12-foot waves that rolled in from the sea, the harbor has become one of Orange County and Southern California’s greatest gems.

Nestled in a prime location between San Diego and Los Angeles, Dana Point Harbor is a local, national, and international visitor favorite. Recently trademarked as the Dolphin and Whale Watching Capital of the World, Dana Point celebrated the 51st annual Festival of the Whales earlier this year in March. Numerous sport fishing, private and commercial excursions, including the Catalina Express depart from The Marina at Dana Point daily, creating jobs and tourism for the local community. Dana Point Harbor not only offers access to the ocean for recreation through The Marina at Dana Point, but is also a multi-day visitor destination with restaurants, shops and hotel accommodations for those interested in more than a day trip.

Fifty years of year-round activity in the Harbor has taken a toll; its aging infrastructure is in dire need of revitalization and replacement. Due to its age and the elements, the restaurants, shops, and the marina can no longer be refurbished to an acceptable standard.

Understanding this need, the community welcomed the revitalization and provided extensive and highly valuable input throughout the project’s planning and design process. Public comment on proposed design aesthetics and construction details through resident surveys, focus groups, workshops and meetings allowed Dana Point Harbor Partners to incorporate the feedback in the project’s final design. With this vital community input, we’re confident that DPHP’s design will be world-class and fully aligned with the community’s vision for the area. Burnham Ward Properties will lead the revitalization of the retail, restaurant, and public spaces within the Harbor.

Environmental Impact

Also important to the community was mitigating environmental impact. To this end, The Marina at Dana Point will be state-of-the-art with sustainable design and materials, improved water quality, energy efficient utilities and green standards. In addition to the world-class technology being used, wood and other ferrous materials will be eliminated, creating a more sustainable and long-lasting marina. The marina team, led by Bellwether Financial, is also focused on mitigating any disturbances to the local marina life population, employing biologists to protect marine life throughout the course of the project.

In addition to being a destination for leisure gatherings of friends and families, Dana Point Harbor has also always been a place for learning. Thus far, DPHP has supported local nonprofits including the Boys & Girls Club, Dana Point Surf Club, and Monarch Beach Sunrise Rotary, and have plans to partner with nonprofits such as the Surfrider Foundation, YMCA and Big Brothers Big Sisters to introduce a first-of-its-kind environmental education program that aims to expose nearly 1,000 young people from inland communities each year to ocean education programs, sailing, and other water activities.

While much of the construction lies ahead of us, we’re excited to announce that some improvements have already been made within the Harbor—again, without incurring any public debt—including rebuilt pergolas and picnic areas with new barbeques, refreshed buildings, parking areas, signage, increased community events, and Wi-Fi installed in the marina.

As you can see, it is possible to bring incredible improvements to a cherished public asset in a way that brings long-lasting benefits to local taxpayers without any undue tax burden. That is exactly what is offered through this proven public-private partnership model and why Dana Point Harbor will continue to be an Orange County gem for the next 50 years and beyond!

Editor’s Note: Bryon Ward is president and partner at Burnham Ward Properties, which has developed area projects such as SOCO, The OC Mix and The Hangar at LBX. Lisa Bartlett, who was first elected to the Dana Point City Council in 2006, has been a county supervisor since 2014, representing 650,000 residents in South Orange County. The Business Journal’s Commercial Development Special Report starts on page 23.

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