Cheap land for new jobs: Officials say about 3,000 people currently work at the airport, which is about 10 percent built-out

Jul. 24--VICTORVILLE -- Improved industrial land near the former George Air Force Base is worth about $4 per square foot. But the city of Victorville has agreed to sell 344 acres there for just over two cents a foot.

That equates to about $60 million in land for $304,480, plus a small share of future land sales revenues for the city.

Stirling Capital Investments, the city-selected master developer of Southern California Logistics Airport, has acquired the lion's share of future sales revenues from public land worth tens of millions of dollars.

City officials say their strategy for SCLA's development is simple: Draw industry to the airport with low development costs in order to achieve the primary goal of generating local jobs.

"This is not a deal for fast profit on land speculation. It is a once-in-a-lifetime opportunity for job creation and economic enhancement for the Victor Valley," said Victorville Mayor Terry Caldwell.

The SCLA Authority -- comprised of the city and redevelopment agency -- is underwriting millions of dollars in water, sewer and power lines, utilities, streets and other improvements, according to documents obtained by the Daily Press.

A combination of tax increment revenues from the airport and about $9.2 million in federal grants pay for the infrastructure. The city has waived development impact fees for Stirling at SCLA.

"We are supplying the infrastructure (at SCLA), making the pads ready for construction, bringing in the necessary utilities, and basically trying to make the site a turn-key, ready-to-go operation. Then private investment will build the vertical structures," Caldwell said at a recent meeting of the High Desert Hispanic Chamber of Commerce.

City officials insist the agreements with Stirling, which were originally signed several years ago, are reasonable in light of the anticipated generation of more than 10,000 new jobs and millions of dollars in tax revenues that will help fund the infrastructure improvements at SCLA over the next two to three years. Officials say about 3,000 people currently work at the airport, which is about 10 percent built-out.

"We are committed to developing roughly 6.5 million square feet of industrial facilities at a cost of $350 million in phase one, for which we have outlined a goal of 30 months," said Dougall Agan, a principal of Stirling.

Construction is already under way on 250,000 square feet of speculative industrial buildings at SCLA, with another 300,000 square feet in the pipeline.

"The public-private partnership that we established in 1998 was a long-term relationship to create an environment to attract jobs and generate tax increment revenues. You have to have private investment to create the tax increment to pay for the infrastructure," Agan said.

But the subsidized infrastructure at SCLA contrasts with the Meridian Business Park at the March Air Reserve Base near Riverside, which is being developed by LNR Property Corp. Unlike Stirling, LNR is paying for most of the infrastructure improvements at Meridian, estimated at more than $100 million.

Market conditions, however, are different at SCLA and Meridian, analysts said.

"Every Air Force base is distinctive and the value is based less on the fact that it was a base than on the economic circumstances of the surrounding community," said Erik Pages, president of Entreworks Consulting in Arlington, Va., a firm specializing in military base reuse.

"In a community that needs to be aggressive in pursuing economic development, it is normal for the municipality or authority to prepare the property for development by making it shovel-ready and getting it hooked up with utilities. That sort of subsidy may not be required in a community that has a booming commercial real estate market," Pages said.

Closed in 1992, George Air Force Base was purchased by the Authority from the U.S. Air Force for $1.67 million in 1997, according to city officials.

In addition to infrastructure improvements, the Authority is also paying for the demolition and removal of existing structures at SCLA, while the Air Force is responsible for the remediation of environmental problems arising from its use of the base.

City officials emphasize the benefits obtained by the community from the deal with Stirling. The Authority reserves the right to approve all projects according to its primary goal of generating employment.

"Our motive is completely different from private sector motives, which are driven by the bottom line. For us, the controlling driver is job creation." Caldwell said.

"We recognize that ultimately there needs to be vertical development. We also realize that we as a city are ill-equipped to get into that business. So we need a private sector partner who understands the development business and who has access to the capital to build the vertical structures, some on a speculative basis and some for end users," he explained.

The marketing and development expertise that Stirling brings to the project more than compensates for the terms of the agreement, said Jon Roberts, city manager of Victorville.

"The Master Development Agreement with Stirling took this project to a level that none of us envisioned would ever be achieved," Roberts said. "Because of Stirling's vision and effort, we now have a memorandum of understanding with BNSF railroad to develop one of the largest intermodal rail facilities in the nation. Stirling has exceeded our expectations exponentially."

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