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Home My WebLink About05-09-11 Board PacketOTAY WATER DISTRICT SPECIAL MEETING OF THE BOARD OF DIRECTORS DISTRICT BOARDROOM 2554 SWEETWATER SPRINGS BOULEVARD SPRING VALLEY,CALIFORNIA MONDAY May 9,2011 3:30 P.M. AGENDA 1.ROLL CALL 2.PLEDGE OF ALLEGIANCE 3.APPROVAL OF AGENDA 4.PUBLIC PARTICIPATION -OPPORTUNITY FOR MEMBERS OF THE PUBLIC TO SPEAK TO THE BOARD ON ANY SUBJECT MATTER WITHIN THE BOARD'S JURISDICTION BUT NOT AN ITEM ON TODAY'S AGENDA INFORMATIONAL ITEM 5.REPORT AND DISCUSSION OF THE ECONOMIC OUTLOOK FOR THE DIS- TRICT AND THE EXPECTED HOUSING GROWTH RATE THROUGH 2040 (ALAN NIVEN) 6.ADJOURNMENT 1 All items appearing on this agenda,whether or not expressly listed for action,may be deliberated and may be subject to action by the Board. The Agenda,and any attachments containing written information,are available at the District's website at www.otaywater.gov.Written changes to any items to be considered at the open meeting,or to any attachments,will be posted on the District's website.Copies of the Agenda and all attachments are also available through the District Secretary by contacting her at (619)670-2280. If you have any disability which would require accommodation in order to enable you to participate in this meeting,please call the District Secretary at 670-2280 at least 24 hours prior to the meeting. Certification of Posting I certify that on May 6,2011,I posted a copy of the foregoing agenda near the regu- lar meeting place of the Board of Directors of Otay Water District,said time being at least 24 hours in advance of the special meeting of the Board of Directors (Government Code Section §54954.2). Executed at Spring Valley,California on May 6,2011. 2 AGENDA ITEM 5 STAFF REPORT TYPE MEETING:Special Board Meeting SUBMITTED BY:JOSep~hem, Chief Financial Officer MEETING DATE:May 9,2011 W.O.lG.F.NO:DIV.NO.All APPROVED BY: (Chief) APPROVED BY:German Alv~yQ~Assistant General Manager,Finance and (Asst.GM):~ Administration SUWECT:Informational Item Regarding the Economic Outlook Study by MarketPointe Realty Advisors GENERAL MANAGER'S RECOMMENDATION: This is an informational item regarding the economic outlook for Otay Water District and the expected growth rate for housing for three timeframes:2012 through 2017,through 2030,and through year 2040. COMMITTEE ACTION: None. PURPOSE: To present to the Board the economic outlook study by Alan Nevin,Director of Economic Research,MarketPointe Realty Advisors. ANALYSIS: Each year in the District's budgeting and rate model process, the Engineering staff develops a growth projection which is a key element in the setting of rates.This estimate is based upon the District's Master Plan,developer input including Subarea Master Plans,SANDAG projections,and the City of Chula Vista's growth estimates. This year because of the economic uncertainty,staff hired an Advisor to provide an economic outlook study and assist in the estimation of potential growth within the District.The District hired Alan Nevin,Director of Economic Research for MarketPointe Realty Advisors. The Engineering staff used the findings of this economic outlook study to develop the growth estimates used in the budgeting and rate model process for the Fiscal Year 2012 Operating and CIP budgets. The Engineering staff used the economist's report to project meter sales estimates for the next six fiscal years.The meter sales projections for each fiscal year correspond very well with the single-family,multi-residential,office,retail, industrial,and hotel projections contained in the economist's report. The purpose of this meeting is to present the findings of this report which consists of the economic outlook of the nation,the state,and the region,including the positive influences of Baja California on the local economy. FISCAL IMPACT~~ None.~ STRATEGIC GOAL: Ensure financial health through formalized policies,long-term financial planning,and efficient operations. LEGAL IMPACT: General Manager Attachments: A)Economic Outlook Study B)Presentation Attachment A MarketPointe REALTY ADVISORS April 29,2011 Board of Directors Otay Water District 2554 Sweetwater Springs Blvd. Spring Valley,CA 91978 Re:Economic Outlook Study,Otay Water District,San Diego County Dear Board of Directors: MarketPointe Realty Advisors has undertaken and now completed an Economic Outlook Study for both San Diego County and the area served by the Otay Water District. The study concentrates on three timeframes:2011-2017,2030 and 2040.The six-year MarketPointe projections (2011-2017)correlate with the District's timeframe for its own projections. The study analyzes a wide span of economic factors.Initially,we look at the international situation and the multitude of economic and political factors that will have an effect on the United States (and,of course,San Diego County)over the next six years.We do not think it realistic to go beyond the six-year timeframe in determining international factors. Next,we analyzed the trends in the United States.San Diego County typically represents 1.0%of the Nation in terms of output,employment,housing and other factors. The County also represents about 10.0%of the state of California for those same economic factors. Finally,we analyzed San Diego County from the standpoint of demographics,housing supply and demand,and the commercial space market.We also considered the influence of Baja California,in terms of its commercial activity and cross-border demands for housing,as well as other factors. 9201 Spectrum Center Blvd,Suite 110,San Diego.California 92123 619.233.3781 marketpointe.com -w'i'········gl'···11 As a result of our study,we have been able to offer projections on the County's future for the timeframes noted above. The research sources have been numerous and are typically identified on each table or graph.The historic data on new housing construction (both sale and rental)are from MarketPointe's Residential Trends,Landtracker and Rental Trends databases.The Residential Trends database is compiled quarterly by in-person visits to each new project offered for sale in the County. Summary tables and graphs are typically embedded in the report with the balance of the tables and graphs in the Appendix. The study is segmented into seven sections: ~Section 1:Otay Water District Overview ~Section 2:Global Economic Conditions ~Section 3:Domestic Economic Conditions ~Section 4:California Economic Conditions ~Section 5:The San Diego Economy ~Section 6:South San Diego County ~Section 7:Projections for the Economy of San Diego County and the Otay Water District service area. Otay Water District 2 4/29/2011 ·te··,··········'1'·1;" Section 1:Otay Water District Overview The Otay Water District is made up of 125.5 square miles in Southern San Diego County,primarily encompassing Eastern Chula Vista,Eastern Otay Mesa,Southern Spring Valley and Jamul.The area represents 3%of the total county land area. As the District does not solely lie within one or two municipalities,our data comprises the entire area that the District encompasses.This is significant because past projections have largely relied solely on City of Chula Vista data. he District reports 61,914 residential dwellings are served and we have computed a total resident population of 198,125,a figure that represents 6.4%of the countywide population.83%of the residential meters serve single-family residences. The District covers a largely residential area and,to date,has been void of dense urban neighborhoods. The South Bay,in general,has grown substantially over the past quarter century and the District itself grew by approximately 30%in the 1990s and nearly 45%in the 2000's. Otay Water District 3 4/29/2011 -nte,.,.........•.,....,. 1.35 POPULATIONCHANGE CHULA VISTA,SAN DIEGO COUNTYAND CALIFORNIA 2001-2010 (LEFTCOLUMN IN MILLIONS) 1.30 1.25 .-ChulaVista -San Diego Cn!y. -California 1.20 1.15 1.10 1.05 1.00 2001 2002 2003 2004 2005 2006 2007 2008 W09 2010 Water conservation programs have been successful and water usage in the District is down by 30%from its peak in 2007.2011 projections call for 13,012,500 HCF (hundred cubic feet)of water usage sold.Separating the residential,master meters and irrigation subtotals,the share of total water sold for each District resident is 10,784 gallons per month. The decline in water usage results from a combination of conservation,an increase in the number of vacant residences (due to higher apartment vacancy rates and vacant foreclosed homes)and a major increase in vacancy rates in commercial/industrial space. 2011 Budget201020092008 IwArERUSAGE (IN CUBIC FEET): !OTAV WATER DISTRICT I I 11006-2011 ~.• r--!l~~~ers Public/Commercial Irrigation Temporary /Other 18,000,000 •• Residential 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 2006 2007 Otay Water District 4 4/29/2011 inte.. Section 2:Global Economic Conditions As part of this assignment,MarketPointe has been asked to present a brief synopsis of the current and recent global and domestic economic conditions and present the short and mid-term implications coinciding with the District's six-year projections. International Conditio s The international equity markets have recently completed a decade of tremendous growth and profitability.Compared with the domestic equity markets which experienced a "lost decade"with very little net appreciation,the international markets truly came into their own. The financial crisis of 2008-9 proved to be a wake-up call for many investors when the global economy was subject to the same economic contagion as the U.S.markets. The synchronization of the world's economies provides a new set of opportunities and challenges for the future. Leading the way for the past ten years,and almost certainly poised to lead the way for the next 10 years,the four dominant emerging market nations,knows as the BRIC economies (Brazil,Russia,India and China),opened the door to the 21 5t century. Growth in these nations helped drive multinational corporate growth and opened the way to increased margins via cheap labor,a thirst to join the developed world and an abundance of natural resources. The Global Dow Stock Index ODOW- D2 04 t -+ \--+- f I ~L -k-=t.- 07--os 3K 2.9 K 2.I5K UK -[- 1.I5K 1.4K I 1.2K I I K I 900 lIOOOIl1011 The first three quarters of the decade saw a dominant strength in the newly founded European Economic Community and the Euro trounced the dollar throughout the decade.When the economic crisis struck,the house of cards collapsed on Europe as many of the less advanced economies crumbled causing the rest of the EU to catch them. In the words of Warren Buffet,"it's only when the tide goes out that we discover who has been swimming naked",and such words never rang truer.Many of the European Otay Water District 5 4/29/2011 Ma -nte'i'········I."'..·I' countries were supporting debt laden,pension burdened and over-regulated economies that could not stand the test of time (not unlike California). The major faults lie with a group of countries,ostensibly known as the PUGS.Portugal, Ireland,Italy,Greece,and Spain are the "poster children"of Western Europe in terms of over-leveraging economies that lacked sustainable substance. As the height of the economic crisis proved,the dollar is still the currency to be reckoned with (although it has struggled to keep face with the euro,yen and increasingly the yuan). The dollar has been subject to significant volatility in large part due to the follies of its major trading partners,but seems to be in a better situation now than it was at certain other points in the last decade.Due to the reliance on import/export commerce,the dollar's fate globally is paramount to continued economic progress. 120.00 115.00 110.00 105.00 100.00 95.00 90.00 85.00 80.00 10.05 07.05 04104 01101 10101 07.01 04107 011O!5 10105 07104 04m 01,08 1010120022004200ll20092010 We identify three major issues that will define the next phase of the global economy: ~Inflation ~Commodity pricing ~Strength of the U.S.economy To respond to the economic crisis,central banks were pushed to lower interest rates to near zero rates and as the global economies have recovered,inflation is now the word that everyone fears. The larger developed economies have been able to temper inflation well thus far,but the emerging markets are having a more difficult time and management of their Otay Water District 6 4/29/2011 currency has proved to be a hornets'nest to deal with.The chart below displays the warning signs of inflation in the BRIG countries. Brazil 4.9% Canada 1.6% China 5.0%t Fra ce 1.5% Germany 1.1% India 11.7%t Japan -0.7% Mexico 4.1% Russia 6.7% United Kingdom 3.3% U ited States 1.7% It generally seems that consumers in the developed world tend not to notice the nuances of volatility in the commodity market until oil prices begin to flux.Many of food staple commodities have been highly volatile,and the net effect on the developing world is tremendous.The true inflation that half a billion residents of a third world country endures when wheat prices double in six months is immense. The two commodities at the forefront of every investor's mind (albeit for less than altruistic reasons)are oil and gold.Since the beginning of the financial crisis,gold prices have nearly doubled and the amount of capital inflows to gold funds has been phenomenal.Initially an inflation hedge tactic,the bandwagon investing by many prominent investors has reached a feverish pitch and many fear an asset bubble is well in the making. Oil prices,particularly in light of the recent political unrest in the Middle East,have the world on edge.The effect of oil price shock on the global economies is very significant and could single-handedly stop the incipient recovery in its tracks. 14~ 1400 I~ 1300 12~ 1200 JIIJf::--_;~J..~11~J~1100 .r ~~r'~~~~1050 1000 9SO 900 ~ 800 7~ """&.o:~'-"~"""'~-~~-~700 100 90 Oil Prices /bbl Left,Gold Price /Ounce (Right) 3/28.'11 1:lO 140 130 120 110 80 70 60 ~4.....:J~~~~~~~~:lO Otay Water District 7 4/29/2011 The last major tenet of global economic health is that the U.S.must maintain a smooth course on the recovery.In terms of the global economy,the financial crisis proved more than anything that if the U.S.is having problems economically -every country is having problems economically. 20 United States GDP and Government Spending •U.S.GOPFederalOutlays 4 o 1930 1934 1938 1942 1946 1950 1954 1958 1962 1966 1970 1974 19781982 1986 1990 191M 1998 2002 2006 2010 2014 16 The ability of the United States to: ~Manage the obnoxious federal debt that has accumulated; ~Manage inflation; ~Jump start the job market (and replace the 8,000,000 jobs lost);and ~Revitalize the new home and apartment market. will be the prominent factors in this prolonged and painful recovery. In the meantime,the world,including the United States,will struggle with these factors, among others: Otay Water District 8 4/29/2011 Ma -nle iii.l••••.••••"••." Economic Event Impact on United States Near-Term Future Category Current Near Future Positive /Negative for U.S. Instability,Continued All-encompassing Economic Oil Prices Rising Increases Impact Potential for Asset Sign ificant Consu me r Gold Prices Historical Highs Bubble Wealth May Be Lost Food Based Commodities Historical Highs,Volatile Continued Volatility Minimal Stable in Developed Significant Consumer Inflation World Potential for Global In Impact Interest Rates Low Will need to rise May Halt Real Estate Market Multiple Areas of Severe Investor Uncertainty, Political Unrest Continued Volatility Military Action Loss of Life,Economic Terrorism Erratic Erratic Disruption Implications of climate Interruptions in change and erratic Recent tragedies in international supply chain, weather patterns Japan,Turkey,Thailand Unknown human toll Average to Continued Strength of Dollar Underperforming Unde rpe rformance Handicapped Trade Balance MARKETPOINTE REALTY ADVISORS 4.11 Otay Water District 9 4/29/2011 Section 3:Domestic Economic Conditions Demographic Trends To a major degree,demographics drive a nation.As can be seen in the demographic trends of Russia and Japan,a shrinking population will have devastating economic results in the next few decades. With the release of the preliminary data for the 2010 U.S.census,we now have a picture of what the last three decades have meant towards the demographic composition of the U.S.As the table below shows,the mass is moving south and west, as it has since the first census in 1790.Trends are a difficult thing to change. The United States continues to grow by almost 3,000,000 persons annually because of its relatively youthful profile.And that youthful profile is due mostly to the nation's young Hispanic population. The midwest and northeast portions of the country are slowly cascading as industrial economies dry up and the population heads to warmer environs with more high quality employment opportunities and more habitable lifestyles. Percentage Change in Population by State and Decade:Percentage 25.0 or more 10.0 to 24.9o0.0 to 9.9olessthan0.0 2000-20101990-20001980-1990 U.S.change -9.8 U.S.change -13.2 u.s.change-9.7 SOUKe:U.S.Census Bureau This 30-year picture of the growth trends in the United States basically tells the story of ten states that account for two thirds of the growth of the United States since 1980.In the past decade,of the Nation's 27 million population gain,two thirds was in the states of California,Florida,Texas,Arizona,Colorado,Georgia,Nevada,North Carolina, Virginia and Washington. Otay Water District 10 4/29/2011 POPULATION TRENDS UNITED STATES 1980-2010 DECADE:1980-1990 199(}2000 2000-2010 1980-2010 I BIG 10 GROWTH STATES 17,130,881 19,337,583 17,926,893 54,395,357 UNITED STATES 22,164,068 32,712,033 27,323,632 82,199,733 BIG 10 AS %OF U.S.77.30%59.10%6S.6()OA»66.20010 SOURCE:U.S.CENSUS 1 I -MARKETPOINTE REALTY ADVISORS 3.2011 The same three strongest population gain states continue to excel in population gain; however,California has been growing at a slower pace in each of the last three decades.In this past decade,Texas was the clear winner in the population gain race adding almost one million persons more than California.That said,California's annual average population gain in the past decade was 338,000 persons. POPULATION CHANGE CALIFORNIA,FLORIDA AND TEXAS 1980-2010 DECADE 1980-1990 1990-2000 2000-2010 1980-2010 CALIFORNIA 6,092,119 4,111,627 3,382,308 13,586,054 FLORIDA 3,191,602 3,044,452 2,818,932 9,054,986 TEXAS 2,757,319 3,865,310 4,293,741 10,916,370 TOTAL 12,041,040 11,021,389 10,494,981 33,557,410 %OF TOTAL 54.30%33.70%38.40%41.0% L I rSOURCE:U.S.CENSUS I The Financial Market In lieu of posting a table displaying the lackluster decade in the Dow Jones Industrial Average,a better table to display the last decade in the domestic economy is the table below displaying the yield of the 10 Year U.S.Treasury.The reason is two-fold: First,the table shows the decade-long trend of decreasing yield /interest rate.This trend of cheap credit (both for the federal government and the consumer)is what drove the previous decade. Otay Water District 11 4/29/2011 Mal'll -nte•.••.••••.•.,•••.•;1 ' Yield -10 Year U.S.Treasur 03 4.e 2.5 11 2 Second,as the primary driver of the 30 year mortgage rate,the fact that the 10-year yield was sub-SOlo for the majority of the last decade,means that mortgage rates hovered around historical lows for the last decade.This easy credit drove the housing boom (and fall)of the 2000's. 30 Year Fixed Mortgage Rate (Conventional) 9.0 .,.----------------------------- 8.528.5 +--.---------------------------- +rnTTTTlrrrrTTTTT1rTTTTrrrTl,.,.,..,.,rTTTTTTTn'TTTTrrTTTTTTTl-nT1'T"n1""T"T"JIiii 'j Iiiiiiiii i I IIIi Iij i IiIiiJIi i " " " "II ii"iiii Iiill'i i Iii II 11 4.5 4.0 .....'"en .....'"en .....'"~.....'"en .....'"a a a a a '"a '"a '"a a a666,c;,c;.....N '"N M (Y)M ~3aa a a a a a a 8 a a aa a a a a a a a a a a a'"'"'"'"'"'"'"'"'"'"'"'"'"'" 5.0 +-----------------------------'-+-f--~_IVt________:: 6.0 +-----------'~-t_'k____f_t_______::_--f------___lhd'--"+_----- 7.0 +------'''V--\---fb''t----------------------- 5.5 +--------~I+_-V_-----------_f_--~-- 8.0 +-~r---------------------------- 6.5 +-------\:-----------1--\---+-\-------- The lingering handicap from the financial crisis for the U.S.is the lagging employment rate.After flirting with a rate of 10%for the better part of a year,it has started to recede but maintains a figure of approximately 9%- a level of unemployment that is not conducive to economic health or acceptable to an economy that must grow in order to reduce its governmental deficits. Otay Water District 12 4/29/2011 Federal Unem 10 ment Rate 4 I--......----,--~-__r--..,...__-__,_--..,...__-__r--r__-_r' 01101 01102 01103 01104 01/05 01/06 01107 01108 01109 01/10 01/11 Month The Job Market It is true that America has lost 8,000,000 jobs since the beginning of the recession; however,two industries suffered the brunt:manufacturing and construction. Manufacturing In the past decade,the United States has lost 1/3rd of its total manufacturing jobs,total massive and probably irreversible 5,739,000 jobs.From 1980 through 2000, manufacturing jobs were relatively stable,but this past decade has been disastrous. Traditionally,the manufacturing sector has been among the highest paying fields and the backbone of our nation. WAGE AND SAlARY EMPLOYMENT UNITED STATES 1990-2010 YEAR 2000 2010 1990-2000 2000-2010 TOTAL 110,995,000 107,337,000 19,293,000 (3,658,000) CONSTRUCTION 6,787,000 5,526,000 1,524,000 (1,261,000) MANUFACTURING 17,263,000 11,524,000 (432,000){S,739,OOOI I US %GAIN/LOSS TOTAL 21.0%-3.3% CONSTRUCTION 29.0%-18.6% MANUFACTURING -2.4%-33.2% !-SOURCE:BUREAU OF LABOR STATISTICS MARKETPOINTE REALlY ADVISORS 3.2011 Admittedly,much of that manufacturing went abroad,but much of the loss was the result of major gains in productivity.The unusually slow economic recovery is,in large part,due to the non-recovery of the manufacturing sector. Otay Water District 13 4/29/2011 -nle,.,•.••••.•.••".•·1' The Housing Market Along with manufacturing,recovery of the housing market is a keystone to the strength of the domestic recovery.As can be seen in the previous table,the construction industry in the past decade lost more than a million and a quarter jobs. Residential construction units permitted fell to an all-time low,declining 73%from top to bottom. The importance of the homebuilding industry relates not only to its primary task of providing housing,but it is also a driving force in the economy.The residential construction industry has twice the multiplier effect of any other industry in the United States.Because of that,housing typically drives the Nation's economic recovery. RESIDENTIAL CONSTRUCTION UNITED STATES 2000-2010 SINGLE-MULTI- YEAR TOTAL FAMILY FAMILY I I I 2000 1,592,300 1,198,100 394,200 2001 1,636,700 1,235,600 401,100 2002 1,747,700 1,332,600 415,100 2003 1,889,200 1,460,900 428,300 2004 2,070,100 1,613,400 456,700 2005 2,155,530 1,682,000 473,530 2006 1,838,900 1,378,200 460,700 2007 1,398,400 979,900 418,500 2008 905400 575,600 329,800 2009 583,000 441,100 141,900 2010 598,000 446,600 151,400 I DECLINE FROM TOP TO BOTTOM 73.O"h 73.8%70.0% I 1SOURCE:CENSUS.GOV MARKETPOINTE REALTY ADVISORS 3.2011 The recovery in general has been characterized by a lackluster flatness of home prices and a slow absorption of distressed transactions.The foreclosure and distressed sales have been more abundant than at any time in the past 50 years. In tandem with the residential construction industry,the resale housing industry has seen its totals nationally fade from a booming 7.0 million units sold in 2005 to 4.0 million in 2010. Otay Water District 14 4/29/2011 The residential meltdown has been paralleled by the commercial property construction industry where construction is also down 70+%nationwide.Most affected have been the hotel,retail and office industries. Median and Average Sales Pr'ces of New Homes Sold in the U.S. 1963-2010 Monthly Data $350,000 $300,000 ~$250,000 ;:) ~ .5 $200,000 GI'".~$150,000Q. litGI~$100,000 $50,000 $0 j,fUl ~rr'"~~,,.f'1r",~~j ~ ~rf/tfJ IJI" .Jt iJ-I... t:~.....t-- ,.r -...-,.~-Medhln ./"r""'" ~V I---- .-'~-Averllle ...&--- ".-~ Year Soum!:u.s.Census Bureau New Sola While the resale housing market slowly rights itself,the new home construction industry is moribund.New housing starts are a fraction of what they were just four years ago and this segment of the economy does not appea.to have any near-term strength.Until there is a more sustained stability to absorption and price increases,large builders are very hesitant to start putting shovels in the ground. Otay Water District 15 4/29/2011 Ma -nbi.·,•.••••.•.•'.1',.·'. Section 4:California Economic Conditions With more than 37,000,000 citizens and an economy that is larger than Russia's or Brazil's,the State of California continues to be the economic hub for the United States. With only V2 percent of the world's population,the economic output of California is equivalent to 3.0%of the world's GOP.The population of California has doubled since 1970. California Population 40,000,000 ,.-----------------~~~~ 35,000,000 30,000,000 25,000,000 20,000,000 15,000,000 10,000,000 5,000,000 1970 1980 1990 2000 2010 The population growth in California (chart below left)has been largely focused in the southern half of the state and the Central Valley. PercentUnemployed. 7.8%1010.7% IO.3'A>10 12.M!> 12.4'.410 15.5% 15.6%10 19.5% 19.~to 27.1% Statewide:12.3% Otay Water District 16 4/29/2011 Ma •tli The Economy of California Unemployment in California has been significant and is still about 2.5%higher than the federal rate.There has been minimal shrinkage of this figure since the financial crisis began.Imperial County lays claim to having the highest unemployment rate in the country. The chart above displays unemployment rates by county and shows many similarities to the population growth chart (unemployment is high in the Central Valley and southeast part of the state). Unemploymentrate The percentofthel..bor force thm i.unemployed.notHhooallvadju$led. 12.3% F.~2011 1 0%'-,-1~-,-~~~. 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002~2003 2004 2005 2006 '2001 2008 '2009 F,b2011 Data source US BureauoflaborSliMti.;:s .lastupdated~l.lr2S 2011 Similar to the country as a whole,much of California's employment woes are tied to the construction industry.As the chart below shows,after a decade long climb,2009 and 2010 produced construction at early 1990s levels.Particularly painful is the drop in residential construction,which fueled the economic strengths of the early part of the 2000's. New Construction in California,b Valuation $70,000 $60,000 •Res •Non Res $50,000 +----------------f11JH $40,000 f---------------I $30,000 $20,000 $10,000 $- 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 p{ Otay Water District 17 4/29/2011 California's losses mirror those of the Nation in most categories of employment,but are far more severe in the loss of construction jobs. We do not want to overlook,however,the loss of 640,700 manufacturing jobs in California in the past decade.Those losses represent 11 %of the Nation's loss of manufacturing jobs. WAGE AND SALARY EMPLOYMENT CALIFORNIA 1~2010 YEAR 2000 2010 1990-2000 20<10-2010 I TOTAL 14,896,000 14,278,000 2,032,600 (618,000) CONSTRUCTION 733,400 559,800 88,500 (173,600) MANUFACTURING 1,882,700 1,242,000 (81,700)(640,700) CA %GAIN/LOSS TOTAL 15.8%-4.1% CONSTRUCTION 13.7%-23.7% MANUFACTURING -4.2%-34.0% SOURCE:BUREAU OF LABOR STATISTICS MARKETPOINTE REALTY ADVISORS 3.2011 State Government Much has been made of the woes of the state government fiscal situation.The inability to pass a timely balanced budget has become the norm instead of the exception. Unlike many other fiscally challenged municipalities,the State of California's budget woes cannot solely be tied to expenditures.The revenue side of the budget faces significant volatility and the impact of decreasing sales tax revenues and uncertain federal subsidies is severe. Truth be told,expenditures by the State are down by nearly 17%from their 2007 peak. 2010 expenditures are at the lowest level since 2004.Approximately two thirds of all expenditures go to social programs and K-12 education. Also contrary to popular belief,California has the second lowest number of state and local government employees per capita in the country.More than one third of all employees work in the higher education system and another quarter work in hospitals or corrections. Otay Water District 18 4/29/2011 MarketPointe,.,•.•••••.•'.".1;" 110,000 ,---------------------------------- State Budget Expenditures 100,000 -l------------------------ 90,000 -l----------------------- 80,000 -l--------------------- 70,000 -l--------------- 60,000 .,-------------- 50,000 -l----------== 40,000 30,000 20,000 Otay Water District 19 4/29/2011 Ma -nteIli·,·······8I'I'·I;" Section 5:San Diego Economic Conditions In this Section we discuss the historic trends in County population,employment and housing. Population Change San Diego County for the twenty years has remained a stable 8.3-8.4%share of the state's population. 9.0% 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 8.4%8.3%8.3% ~ /7.9% /' ~.8% i i i 1970 1980 1990 2000 2010 The population of San Diego County has now passed 3,000,000 people.Thus,one in twelve residents of California now lives in San Diego County. San Diego County Population (Source:Dept of Finance) 3,500,000 3,095,313 .. ~.:,. :.::.l.I I :'I Ir--I I I III I I II I I I I500,000 1,000,000 3,000,000 1,500,000 -!-&.rWc.J..,O...........- 2,000,000 +--------L,CllU~J- 2,500,000 +-------- 1970 1980 1990 2000 2010 Otay Water District 20 4/29/2011 Ma -nte .'••.••••.••11.'••1;" In analyzing the growth of San Diego County,we looked at the three traditional components of population change;natural increase (births over deaths);net foreign migration and net domestic migration. The most stable component is natural increase which is typically 25,000-26,000 persons annually.The other category is divided into foreign and domestic in-migration.The domestic in-migration is inevitably subject to cyclical swings in the local economy.Thus, in 2006-2010 there was an out-migration of domestic residents. COMPONENTS OF POPULATION CHANGE SAN DIEGO COUNTY 2~2010 AVG.NATURAL VRS.CHANGE INCREASE IN-MIGRATION 200D-2005 32,122 25,051 7,071 2006-2010 32,373 26,809 5,564 2000-2010 32,247 25,850 13,361 I SOURCE:CALIFORNIA DEPARTMENT OF FINANCE, DEMOGRAPHIC DIVISION Employment Trends San Diego has long been blessed by a diversified employment sector and has enjoyed lower unemployment than California for the past two decades.Particularly noteworthy, since the financial crisis of 2008-2009,San Diego has not had near as severe a climb in unemployment as has had the State. Further,it should be noted that the unemployment rate quoted in the media is a civilian unemployment rate.It ignores the 120,000 uniformed military in the County and also ignores the 30,000 Mexicans who cross the border each day and who are employed. We should also note that the unemployment survey is based on calls to 370 households in the County that have hard-wired phones,thus ignoring those with only cell phones. Although we are unable to be precise in this statistic,we believe that the unemployment rate in the County (including the military and cross-border workers)is at least 1.0% below that which is reported.Thus,the local employment rate is most probably in the 8.0-8.5%range,not that far removed from a very acceptable 6.0%norm. Otay Water District 21 4/29/2011 -ate11·········.'1'·1;" Unemoloyment Rate 15% -San Diego -Califomia -U-S. 12% 9% 6% Ci\i'i1~~._....Soun:e:S\al<tofCaI;ronlia.ErnpIoynNntDevel~~l 3% ~~co ~en 9 en i ~S?C)S?q ~q ";"~,...">-co ~C>t..,.'"...'"'"'"'"....::;;«:z ....::;;«:z ....::;;«:z .... Total Nonfarm Job Growth:12-Month %Change 4% -San Diego -California -U.S. -6%C~~~~""",Source:u.s.Deo3I1mentofLabor.BureauoflaborStatistics LaborDept -a% l')l')~~on on CD ~r-.......co co 0)0)0 0 ~9 9 9 9 9 9 9 ~9 ~9 ~-1;(P)I en&1 Dl .a Cl &1 Dl &1 Dl .a Cl l:II Cl .aG)~G)~G)~<II ~Ql ~<II ~<II ~<II ~<IIU.U.U.U.U.U.U.u.«u. Indicators of Economic Health The nominal Gross Domestic Product of San Diego County is approximately $171.4 billion and ranks 16th in the United States.This figure is up from 2006,when the figure was $159.9 billion.In the past four years,there has only been one year when the GDP declined and that was 2009. INFLATION ADJUSTEDGDP ($2005) SAN DIEGO COUNTY YEAR GDP (real) 2006 $154,930,000,000 2007 $157,499,000,000 2008 $159,733,000,000 2009 $155,850,000,000 Source:San Diego County MARKETPOINTE REAL1Y ADVISORS 4.11 Otay Water District 22 4/29/2011 MarketPointe Retail sales tax collections are a key indicator of the health of the economy.Starting in 2008,collections declined and continued downward through 2009.In 2010, collections started to climb upward and are moving in a positive direction so far in 2011, As a side note,San Diego's collections are gradually increasing as a percent of the total California collections. Sales Tax -Pointof Sale San DiegoCounty &State of California 2007 2008 2009 2010 San Diego County $479,321,893 $459,722,550 $400,443,927 $422,136,500 California Total $5,678,049,172 $5,404,318,187 $4,617,418,638 $4,830,249,373 SDas%of CA 8.44%8.51%8.67%8.74% Source:HDL MARKETPOINTE REALlY ADVISORS 4.11 The San Diego Housing Market The resale housing market in San Diego is currently considered one of the strongest in the nation and has recovered significantly since the end of 2008.While sales volume is not back to pre crisis levels,things are moving along in a healthy manner. 7,000 ..------------------------------,-$600,000 •Weighted AveragePrice •Sales Count $0 $100,000 1,000 2,000 6,000 i--------------:--lr---=.~~:__:lF_lr;---------r$500,000 5,000 $400,000 .~It 4,000 $300,000 II.!!l'..~ 3,000 $200.000 m m moo a ~~rl N N N m m m ~~~~~~~~~~~~00 00 00 m m moo 0 rl~~~9 9 9 999 9 9 9 999 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 7 7 ~7c>~c >~c >~c >~c >~c >~c >~c >~c >~c >~c >~c >~c~i ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Otay Water District 23 4/29/2011 The foreclosure crisis,which hit South San Diego particularly hard,has subsided significantly from its peak in 2008-2009.The number of completed foreclosures has been in a downward trend since mid 2009. Trust••D.eds 2,500 2,000 1,500 1,000 l500 1994 1999 2002 2006 2010 2014 A particular caveat that bodes extremely well for the near term recovery,but creates a strong possibility of future pricing run-ups,is the constrained supply of housing in San Diego. New Home Sales MarketPointe's Residential Trends surveys all new residential construction in San Diego County every quarter.The following table shows the massive decline in construction in the past four years.The attached product includes new as well as conversion projects. NEW HOME SALES (IN THOUSANDS),SAN DIEGO CO.) 2006-2010 (SOURCE:MARKETPOINTE REALTV ADVISORS RESIDENTIAL TRENDS) 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 a 2006 2007 2008 2009 2010 Otay Water District 24 4/29/2011 Mark inti! iii•.'•••.•••'"••;,. New home prices fell as well,plummeting from 2006-2010.The following able shows the averages for both single-family and condominiums.Recognize that the prices shown here have not declined anywhere nearly as rapidly as in the resale sector,but the reason is that very few new units were sold.Countywide,most of the homes being built and sold are higher priced.Relatively few entry level homes or condominiums have been built since the recession began. NEWHOME PRICING DATA SAN DIEGO COUNTY 2006-2010 Submarket Data 2006 2007 2008 2009 2010 South County Weighted Ava Price $511,105 $446,352 $437,691 $441,124 $452,356 WeiQhted AVQ $/SQft $295 $277 $224 $187 $188 Rest of County (S.County excluded)Weiahted Ava Price $528,726 $571,759 $576,321 $551,100 $616,677 WeiQhted AVQ $/Sqtt $343 $320 $274 $272 $263 Apartment construction remained at a modest pace,with relatively few units built in the past five years.More information on that topic appears in Section 6. Otay Water District 25 4/29/2011 nW'i"·······~*·ij.i,'i Section 6:South Bay,San Diego County The South Bay region of San Diego County has seen booming growth over the previous two decades,led by several large master-planned communities.Inexpensive new housing,border proximity and quality schools led to rapid growth of the area east of Interstate 805.And,as usual,there continues to be a heavy cross-border influence. The population,demographic profile and historic housing production will be discussed in this section. Population Growth The south county has strongly outpaced the growth path of the County and California, with most of that south county growth in the City of Chula Vista: POPULATION CHANGE CHULA VISTA,SAN DIEGO COUNTY AND CALIFORNIA 2001-2010 (LEFT COLUMN IN MILLIONS) 1.35 1.30 1.25 -ChulaVista -San Diego Cnty. -California 1.20 1.15 1.10 1.05 1.00 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 OPULATONCHANCE CHULA VISTA,SAN DIEGO OOUNTY AND CAUFORNA 2000-2010 CHANGE 2000·201 0 AREA 2000 2010 NO.% 1 CHULAVISTA 181,613 237,595 55,982 30.8°;' SD COUNTY 2,892,542 3,239,223 346,681 12.0°;' CALIFORNIA 34,766,730 38,826,898 4,060,168 11.7% I 1 --SOURCE:U.S.CENSUS I MARKETPOINTE REALTY ADVISORS 3.2011 I Otay Water District 26 4/29/2011 Ma -nte,·,•.•••••.•'1'.1·0 In the past decade the population of the City of Chula Vista grew at more than twice the rate as the County as a whole and three times faster than the state of California. Profile of the Otay Water District Population and Demographics Median age in the District is 33.5 years old.One-third of the population has at least a four-year college degree and the median household income is $83,115.Compared with the county,the Otay population is slightly younger,has denser households and has significantly higher median household incomes. DemographicOverview County Otay District 1990 -2000 Growth 12.6%30.0% 2000 -2010 Growth 10.5%44.4% Persons /Household 2.8 3.2 %White 63.3% 54.6% %Hispanic 31.3% 37.3% Median Age 34.5 33.5 %>4 Yr Degree 34.0%33.9% Median Household Income $64,890 $83,115 Source:Claritas MARKETPOINTE REALTY ADVISORS 3.11 "For Sale"New Housing Production in South County In the following table we document the new residential construction activity in South County.In the 2000-2004 period,the south County accounted for almost one-third of County production of new "for sale"housing.In the years since then,South County has accounted for 20-25%of production,most of which was in the Otay Ranch. In 2010,a total of 2,221 new homes sold,352 of which were in the South County.Over the past decade,one in every four new homes sold were in the South County. Otay Water District 27 4/29/2011 NEW HOME SALES AS %OFTOTAL SAN DIEGO COUNTY SALES NEW CONSTRUCTION SOUTH COUNTY &SAN DIEGO COUNTY 2001-2010 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Total SOUTH COUN1Y SFA Weighted Avg Price $199,476 $256,142 $316,499 $390,552 $429,109 $422,588 $347,460 $303,880 $325,192 $318,001 Weighted Avg $/Sqft $147.75 $197.69 $228.01 $283.05 $306,61 $301.69 $294,17 $235.53 $205.53 $205.70 CurSold 499 254 393 1,205 759 697 372 123 186 102 4,590 SFD Weighted AvgPrice $315,690 $393,433 $501.270 $624,504 $749,164 $740,114 $704,083 $639,298 $521,825 $513,243 WeightedAvg $/Sqft $132.55 $157.22 $193 66 $248.85 $283.28 $280.20 $256.61 $215.10 $180.43 $183.10 CurSold 2,295 2,574 2,555 2,409 932 536 345 284 287 250 12,467 Total WeightedAvgPrice $294,979 $381,128 $476,655 $545,814 $605.020 $586,050 $518,378 $494,090 $445,401 $452.356 WeightedAvg$ISqft $134.22 $159.18 $196.27 $256.31 $290.34 $288.61 $268.58 $220.18 $186.90 $187.62 CurSold 2,794 2,828 2.948 3,614 1,691 1,233 717 407 473 352 17,057 COUNTY WIDE SFA Weighted Avg Price $300,945 $416,940 $400,500 $485,269 $509,683 $489,513 $479,395 $463,325 $470,608 $528,134 Weighted Avg$/Sqll $228.66 $307.65 $295.82 $394.20 $397.88 $377.32 $36413 $352.61 $346.86 $369.30 CurSold 2,220 2,354 3,351 6.116 3,714 2,161 1,691 730 1,072 699 24,108 SFD Weighted Avg Price $424,669 $510,261 $579,419 $709,840 $844,334 $856,091 $815,364 $715,638 $648,817 $628.341 Weighted Avg $ISqft $156.79 $180.62 $206.92 $253.11 $278.46 $284.77 $269.50 $233.68 $216.53 $220.83 CurSold 6,934 8,979 7,571 5,884 4,467 2.876 2,379 1,528 1,317 1,522 43,457 Total WeightedAvg Price $394,647 $490.815 $524.514 $594,352 $684,399 $686,538 $667,248 $617,172 $566,514 $595,682 WeightedAvg $ISqfI $166.47 $194.86 $222.60 $297.87 $311.77 $309.83 $293.68 $259.31 $253.00 $249.86 CurSold 9,154 11 ,333 10,922 12.000 8,181 5,037 4.070 2,258 2.389 2,221 67,565 SO.CNTY %OFSD SFA 22.5%10.8%11.7%19.7%20.4%32.3%22.0%16.8%17.4%14.6%19.0% SFD 33.1%28.7%33.7%40.9%20.9%18.6%14,5%18.6%21.8%16.4%28.7"Ai Total 30.5%25.0%27.0%30.1%20.7% 24.5%17,6%18.0%19.8%15.8%25.2% 'EXCLUSIVE OF CONDOMINIUM CONVERSIONS AND CONDO HOTEL PURCHASES ..SOUTH COUNTY INClUDES NATIONALOTY,IMPERIAL8EACH,SAN YSIDRO,CHULAVISTA,NESTOR AND OTAY MESA MARKETPOINTE REALTY ADVISORS 4.11 Apartment Production Apartment production in south county has been relatively meager in the past few years, with only 760 units produced since 2003.The county as a whole has produced almost 17,000 in that ten-year timeframe. Otay Water District 28 4/29/2011 Ma -nle ••,••••••••1••"',1." APARTMENTS BY YEAR BUilT (MARKET RATE PROJECTS LARGER THAN 25 UNITS) EAST CHULA VISTA/OTAY MESA AND SAN DIEGO COUNTY 2000-2010 Zip:91913 Zip:92154 TOTAL ECV/OTAY MESA SDCOUNTY Yr Built Units Complexes Units Complexes UNITS COMPLEXES UNITS COMPLEXES 2001 364 1 364 1 3,064 9 2002 422 1 562 2 984 3 3,822 13 2003 --1,318 3 2004 --2,986 7 2005 --353 2 2006 --1,488 7 2007 --955 5 2008 98 1 282 3 380 4 1,582 14 2009 --1,023 5 2010 --229 2 TOTAL 2001-2010 884 3 844 5 1,728 8 16,820 67 TOTAL 884 3 844 5 1,728 8 16,820 67 MARKETPOINTE REALTY ADVISORS 4.11 The projects built in south County since 2008 are shown here: RECENTLVBUILT MARKET-RAlE APARTMENTCOMPLEXES SOlJntCOUNTY AS OF MARCH 2011 Weighted Average Ranges LeaseStart Vac.-ecy CommJnity DlMllopmentiOwner Rent Sqft $/sqft Rent Sqft $/Sqft Map #Units L_ed Vacant Rate Location MARQUIS VILLAS AT OTAV RANCH $2,457 1,964 $125 $2,400 1,917 $1.19 3-Jul-08 98 97 1 1.0%CHULA VISTA OAKWOOD DEVELOPM:NT $2,600 2,182 $1.30 704 GREENFIELD VILLAGE $1,735 1,028 $1.69 $1,345 723 $1.61 15-Dec-08 288 283 5 1.7%OTAY MESA GARDEN COMMUNITIES $2,150 1,338 $1.86 765 GREENFIELD VILLAGE TOWNHOMES $1,739 1,162 $1.50 $1,650 972 $1.39 1-Jul-08 72 70 2 2.8%OTAY MESA GARDEN COMMUNITIES $1,785 1,280 $1.70 766 RIVEREDGETERRACE $1,940 1,224 $1.58 $1,675 996 $1.52 23-Dec-08 50 50 0 0.0%OTAY MESA PARDEE OONSTRUCTION COMPANY $2,200 1,451 $1.66 766 4Total Projects $1,941 1,085 $1.79 $1,345 723 $1.19 508 500 8 1.6% $2,600 2,182 $1.86 MARKETPOINTE REALTY ADVISORS 3.2011 Otay Water District 29 4/29/2011 Section 7:Projections for the Otay Water District Service Area In this section of the report,we address the future growth of the Otay Water District service area and the events that will guide its future.In the following table,we have itemized the major events,estimating the time span in which the event would take place.Some items,like the development of the balance of the Otay Ranch will span multiple time periods. PROPOSEDJPLANNED PROJECTS AFFECTING OTAY WATER DISTRICT SOUTH BAY SAN DIEGO 2011-2040 TIME SPAN 2011-2017-203G-EVENT (2)CATEGORY201620302040 X COMPLETION OF SR-ll TRANSPORTATION COMPLEnON OF MESA DE OTAY II PORT OF ENTRY (20 X NORTHBOUND LANES)TRANSPORTATION FULL·SERVICE CROSS·BORDER TERMINAL TO TIJUANA INTL X AIRPORT TRANSPORTATION TRUCKS TRAFFIC IN NORTHBOUND DIRECTION FROM MEXICO IS PROJECTED TO INCREASE FROM 749,464 TODAY TO X X X 4,442,000 BY 2040 TRANSPORTATION MAJOR RESIDENTIAL DEVELOPMENT ON THE EASTERN SIDE X X OF TIJUANA RESIDENCES MAJOR COMMERCIAL DEVELOPMENT ON THE EASTERN SIDE X X OF TIJUANA EMPLOYMENT NEW TOWN OF 500,000 PEOPLE TO BE DEVELOPED IN X X TECATE RESIDENCES NEW DESALINATION PLAN IN ROSARITA TO SERVICE OTAY X WATER DISTRICT &BAJA CALIFORNIA UTILITIES X DEVELOPMENT OF UNIVERSITY ON OTAY RANCH EDUCATION BUILD-OUT OF HOUSING ON OlAY RANCH (21,000 X X X ADDITIONAL RESIDENCES)RESIDENCES X X X BUILD·OUTOF HOUSING ON OTAY MESA (10,000+UNITS)RESIDENCES BUILD OUTOF EASTERN URBAN CENTER (3,000 UNITS & X X COMMERCIAL)RESIDENCES X SOUTH BAY BUS RAPID TRANSIT ROUTE TRANSPORTATION X COMPLETION OF 1-905 TRANSPORTATION X WIDENING OF 1-805 FROM CHULA VISTA NORTH TRANSPORTAnON DEVELOPMENTOF MAJOR EMPLOYMENT CENTER ON BOTH SIDES OF SR11 (AREA HAS 4,000 ACRES,40%OF COUNTY'S X X DEVELOPABLE EMPLOYMENT LAND)EMPLOYMENT X 1-805 REACHES GRIDLOCK IN PEAK HOURS TRANSPORTAnON x COMPLETION OF 3 MORE INTERCHANGES ON SBX TRANSPORTAnON x BROWN FIELD COMMERCIAL AIR TRAFFIC EXPANSION TRANSPORTATION X X EMPLOYMENT GROWTH IN SBXCORRIDOR &OTAY MESA EMPLOYMENT LAND MAPPED AND READY TO BE DEVELOPED WHEN THE X ECONOMY IMPROVES RESIDENCES (1)CORRELATES WITH OTAYWATER DISTRICT SIXYEAR PROJECTIONS (2)MEXICAN RELATED EVENTS HIGHLIGHTED IN LIGHTPURPLE MARKETPOINTE REALTYADVISORS3.2011 Otay Water District 30 4/29/2011 lint.!.·,•.••••.•,•.'I··'i" The Cross-Border Influence Several of the events that will take place will involve the Mexican economy.Those events are highlighted in light purple.Certainly none of these events is guaranteed to occur,but most are well into the planning and financing process and several are already underway. It is difficult to place an economic impact figure on these events,but it can be stated that all would have a very positive effect on the future of south San Diego County and,of course,the Otay Water District demand for services. In terms of their relationship to the service area of the Otay Water District,perhaps the most important elements are the residential demand and the commercial space demand created by the growth of the cross-border economy. Residential Demand Demand for residential housing in the South County by persons previously living in Tijuana has been bolstered over the past decade by a combination of factors,two of which stand out: First,the expansion of the maquiladora plants has meant a major increase in non- Mexican management positions.The non-Mexican management has typically opted to live on the U.S.side of the border and commute. Second,the drug-related crime rates have caused a substantial number of Tijuana businessmen to have their families in the U.S.The most affluent of these tend to buy in the north county coastal areas,but the majority opt to live in south county.The attraction of the schools (public and private)on the U.S.side of the border has proven to be a major component in the decision process. We are unaware of any source that can document the number of Tijuana residents who have opted to have a home on this side of the border,but we are convinced that the number is substantial.Our conversations with members of the realty and construction community give rise to our position. In the eastern reaches of Tijuana,the Valle Las Palmas master-planned community by URBI will eventually have more than 10,000 units at an average density of ten units per acre.The community will also contain 500 acres of industrial development which is anticipated to produce 13,000 jobs.The project,being built in cooperation with the government of Baja California,will be a "sustainable community"with a strong emphasis on environmental sensitivity.Once again,we cannot document how that community will enhance business opportunities in south county,but know that the retail community will benefit has it does at present from cross-border shopping. Otay Water District 31 4/29/2011 Ma -nte•.,•.•••••IA"···I. Commercial Space Demand Research by local development agencies indicates that as many as 50%of the maquiladora firms operating in the greater TijuanalTecate area also have a presence in San Diego.That presence may be office or warehouse space,but in either case,it contributes to the demand for space.We are unaware of any statistics that show where the maquiladora companies are in San Diego County,but are certainly aware of a number of Mexican firms that do business with the import/export community near the border and occupy industrial space in south County. Based on the changing NAFTA rules on product content,it is likely that there will be continued expansion of the maquiladora industry in Tijuana. By way of example of the growing influence of the Mexican economy on San Diego,the following table indicates the major increase in anticipated truck traffic crossing the border.The newest regulations allowing Mexican trucks to drive freely in the United States (they were previously allowed to drive only 25 miles in the United States)will have a heightened effect on this trend. Truck POE Freight Forecast ,, Otay Mesa I Me..de Otay POE volume.m~lion tons 8.4 value.$billion $30.7 loaded trucks.'0003 810 1 Tecate OE volume.millIOn tons 0.9 value,$billion $32 loaded trucks.'0003 84.8 Calexico East I Mexicalill POE volume mIllion tons 3.9 value.$billion $14.6 loaded trucks.'0009 378.4 2050 Average AnnualForecastGrowth 35.5 34% $280 1 5.3% 4,021.1 3.8% 3.7 3.4% $29.3 5.3% 420.9 38% 169 3.4% $142.8 5.4% 1,912.9 3.8% Note~Estimates in volume and value include both imports and exports.Numberofloaded trucks estimated from average payload faclors;includes both incoming and outgoitpg loaded trucks. Source~Team HDR analysis In the table below,we show the recent car and truck crossing trends at the crossings at San Ysidro,Otay Mesa and Tecate.Over the past decade,the total crossings average almost 20,000,000 vehicles annually. Otay Water District 32 4/29/2011 30,000,000 ,------------------------------1 Northbound Car and Bus Crossings San Ysidro,Otay Mesa and Tecate Ports of Entry 25,000,000 +------------ 20,000,000 5,000,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 The population of Tijuana grew by 29%during the 2000 -201 °period and is officially 1,559,683.During the same period,Baja California grew by nearly 27%to a total of 3,155,070 residents.It is generally accepted that the Mexican census significantly underestimates actual population figures.Baja California grew at a pace of more than three times that of San Diego County in the past decade. CENSUS POPULATION TIUANA AND BAJA CALIFORNIA 2000-2010 Year Tijuana Baja 2000 1,210,000 2,487,367 2010 1,559,683 3,155,070 CHANGE 20G0-2010 349,683 667,703 %CHANGE 28.9%26.80/6 Source:INEGI Tijuana is home to the second largest base of maquiladora manufacturing employment with approximately 140,000 jobs.This is second only to Juarez in this category.Mexicali is the sixth largest maquiladora employment center with 45,145 jobs. Otay Water District 33 4/29/2011 MarketPointe... SIX YEAR TREND -OTAY WATER DISTRICT AREA The development of residential housing will drive population gains and demand for retail and other commercial space as well as government services. South County Residential Housing Demand We have prepared projections of residential construction for the south County and the Otay Water District service area.For all intents and purposes,virtually all of the future residential development will take place within the Otay Water District boundaries,with the except of the development that will ultimately take place east of 1-5 in Chula Vista and the very limited spot development elsewhere in the south County. The Otay Water District prepares six-year projections of demand for its services.Those demands are based on the number of new residences,commercial space and governmental needs of its service area.Therefore,we have prepared the following table which provides our estimate of the activity in the Otay Water District area as a percent of the County activity. We project residential construction over the next six years to average about 6,000 units countywide.Of that total,18-20%or 1,100+units annually would be built in the Chula Vista/Otay Mesa area,the vast majority of that housing to be built on the Otay Ranch, with a growing percentage in the Millenia (Eastern Urban Center)community across from the regional shopping mall. The table below documents the remaining lands to be developed on the Otay Ranch including Millenia (Eastern Urban Center). ADOPTED PLAN AND UNITS REMAINING OTAY RANCH AND EUC (MILLENIA) AS OF YEAR END 2010 EUCAS%OF UNITS UNITS UNITS ADOPTED REMAININGIN BUILT %BUILT REMAINING IN HOUSING TYPE PLAN OTAY RANCH OUT OUT %REMAINING EUC OTAYRANCH SINGLE-FAMILY 11,082 2,281 8,801 79%21%-0% MULTI·FAMILY 15,915 8,677 7,238 45%55%3,300 38% TOTAL 26,997 10,958 16,039 59%41%3,300 30% SOURCE:CITY OF CHULA VISTA MARKETPOINTE REALTV ADVISORS 3.2011 In the latter part of the six-year period,we anticipate more multi-family construction in the Otay Mesa area,in line with the new specific plan of the City of San Diego with its heightened densities. Otay Water District 34 4/29/2011 -nte •.1•.••••.•.8111'.1;" NEW RESIDENTIAL CONSTRUCTION PROJECTIONS CHULA VlSTA/OTAY MESA AND SAN DIEGO COUNTY 2011-2017 YEAR 2011 20U 2013 2014 2015 2016 2017 6-YEAR AVERAGE CHULA VISTA/OTAY MESA SINGLE FAM ILY 250 375 375 450 450 450 450 40D CONDOMINIUM (1)200 200 300 500 625 750 70D 468 APARTMENTS 200 200 300 400 400 400 SOD 343 TOTAL 650 175 975 1,350 1,475 1,600 1,650 1,211 SAN DIEGO COUNTY SINGLE FAM ILY 2,000 2,500 2,500 3,000 3,000 3,000 3,OOD 2,714 CONDOMINIUM (1)1,000 1,500 1,500 2,000 2,500 3,000 3,OOD 2,071 APARTMENTS 1,000 1,000 1,500 2,000 2,000 2,000 2,OOD 1,643 TOTAL 4,000 5,000 5,500 7,000 7,500 8,000 8,000 6,429 CVtOM AS %OF COUNTY SIN GLE FAM ILY 13%15%15%15%15%15%15%14.7% CONDOMINIUM (1)20% 25%25%25%25% 25%30%22.6% APARTMENTS 20%20%20%20%20%20%25%20.9% TOTAL 16%16%18%18% 18%20%21%18.8% (1)TOWNHOMES,GARDEN,MID·RISE AND HIGH-RISE CONDOMINIUMS MARKETPOINTE REALTYADVISORS 4.2011 The table above projects new construction,excluding condominium conversions. In terms of density,we anticipate that the single-family units will have an average of 3.5 persons per unit;condominiums 3.0 and apartments 2.0. Thus,the average population gain during the next six years is estimated to be more than 3,000 persons as a result of new construction.We are unable to calculate any changes in densities in the existing housing stock. Otay Water District 35 4/29/2011 PROJECTED DENSITIES AND POPULATION OTAY WATER DISTRICT AREA 2011-2017 HOUSING PERSONS PER TOTAL HOUSING TYPE UNITS HOUSEHOLD POPULATION SINGLE-FAM ILY 400 3.50 1,400 CONDOMINIUM (1)468 3.00 1,404 APARTMENTS 343 2.00 686 TOTAL 1,211 2.88 3,489 (1)MOSTLYTOWNHOMES;EXCLUDES CONDOMINIUM COIWERSIONS MARKETPOINTE REALTY ADVISORS 3.2011 Non-Residential Construction During the next six years,we anticipate relatively little non-residential construction in the south County.The current vacancy rates in south County are 5.1 %for retail with more than 800,000 square foot vacant;17.2%vacant for office (2,899,876 square foot vacant) and 12.6%vacant (4,129,102 square feet vacant)for industrial space.Until those vacancy rates recede to much lower levels,there will be minimal construction. The current direct vacancy rates in south county are comparable with those in the rest of the county.Note that the figures are direct vacancy rates and do not include properties that may have sub-let potential.The sub-let space adds yet another dimension to the vacancy situation. DIREcnYVACANCY RATES COMMERCIAL REAL ESTATE SOUTH COUNTY AND SAN DIEGO COUNTY 4TH QUARTER 2010 SOUTH COUNTY SDCOUNTY PROPERTY TYPE SQ.FT.VACANT VACANCY RATE SQ.FT.VACANT VACANCY RATE I I ~W 827,734 5.1%3,338,101 5.5% OFFICE 2,899,876 17.2%12,227,894 16.9% INDUSTRIAL 4,129,102 12.6%33,569,356 10.1% I I, (1)EXCLUDES OWNER·OCCUPIED SPACE i f ISOURCE:CASSIDY TURLEY MARKETPOINTE REALTY ADVISORS 3.2011 I In the following table,we show the non-residential permit valuations for the County of San Diego from 2001 through 2010.After a vigorous development period from 2001 through 2006,construction declined dramatically falling to near zero in 2009 and 2010, as shown here: Otay Water District 36 4/29/2011 NON-RESIDENTIAL PERMIT VALUATIONS (IN $MILLIONS) SAN DIEGO COUNTY 2001-2010 $MILLIONS YEAR OFFICE RETAIL INDUSTRIAL HOTEL TOTAL 2001 $170 $139 $94 $72 $475 2002 $123 $138 $128 $97 $486 2003 $110 $184 $131 $22 $447 2004 $237 $132 $117 $40 $526 2005 $267 $131 $170 $69 $637 2006 $193 $152 $153 $198 $696 2007 $317 $108 $118 $43 $586 2008 $151 $112 $57 $41 $361 2009 $23 $21 $26 $4 $74 2010 $22 $32 $8 $15 $77 AVERAGE 2001-2005 $181 $145 $128 $60 $514 2006-2010 $141 $85 $72 $60 $359 SOURCE:CONSTRUCTION INDUSTRY RESEARCH BOARD MARKETPOINTE REALTV ADVISORS 4.2011 OFFICE,RETAil,INDUSTRIAL PERMIT VALUATIONS (IN $MILLIONS) SAN DIEGO COUNTY 2000-2010 $350 $300 $250 $200 $150 $100 $50 $- 2000 2001 2002 2003 2004 20052006 2007 2008 2009 2010 -OFFICE -'-RETAIL ~INDUSTRIAL Otay Water District 37 4/29/2011 Ma -nte .ji•.••••.•I••i'.•j.j It is our contention that the non-residential permit activity will recover very slowly throughout the County over the next six years.In the table below,we show permit valuation projections through 2017 with averages during the 2001-2017 timeframe. NON-RESIDENTIAL PERMIT VALUATIONS (IN $MILLIONS) SAN DIEGO COUNTY 2001-2017p $MILLIONS YEAR OFFICE RETAIL INDUSTRIAL HOTEL TOTAL 2001 $170 $139 $94 $72 $475 2002 $123 $138 $128 $97 $486 2003 $110 $184 $131 $22 $447 2004 $237 $132 $117 $40 $526 2005 $267 $131 $170 $69 $637 2006 $193 $152 $153 $198 $696 2007 $317 $108 $118 $43 $586 2008 $151 $112 $57 $41 $361 2009 $23 $21 $26 $4 $74 2010 $22 $32 $8 $15 $77 2011 $25 $30 $2S $10 $90 2012 $30 $30 $30 $10 $100 2013 $35 $30 $35 $20 $120 2014 $45 $40 $45 $20 $150 2015 $55 $50 $55 $30 $190 2016 $65 $60 $65 $30 $220 2017 $75 $70 $75 $30 $250 AVERAGE 2001-2005 $181 $145 $128 $60 $514 2006·2010 $141 $85 $72 $60 $359 2011-2014 $34 $33 $34 $15 $115 2015-2017 $65 $60 $65 $30 $220 SOURCE:CONSTRUCTION INDUSTRY RESEARCH BOARD MARKETPO INTE REALTY ADVISORS 4.2011 Traditionally,the Chula Vista/Otay area accounts for approximately 10%of the retail/office/industrial development in the County.Therefore,we have developed the following table which estimates the permit valuations for both the County and Chula Vista/Otay Mesa area from 2011-2017.: Otay Water District 38 4/29/2011 Ma •te'i'········.·"·ll" NON-RESIDENTIAL PERMIT VALUATIONS (PROJECTIONS) (IN $MILUONS) SAN DIEGO COUNTY AND OTAY MESA ZOOl-2017p $MILLIONS YEAR OFFICE RETAIL INDUSTRIAL HOTEL TOTAL SAN DIEGO COUNTY AVERAGE ANNUAL 2001-2005 $181 $145 $128 $60 $514 2006-2010 $141 $85 $72 $60 $359 2011-2014 $34 $33 $34 $15 $115 2015-2017 $65 $60 $65 $30 $220 CHULA VISTA!OTAY MESA AVERAGE ANNUAL 2011-2014 $3 $3 $3 $2 $12 +200!o MISCELLANEOUS $1 $1 $1 $0 $2 TOTAL $4 $4 $4 $2 $14 2015-2017 $7 $6 $7 $3 $22 +200!o MISCELLANEOUS $1 $1 $1 $1 $4 TOTAL $8 $7 $8 $4 $26 SOURCE:CONSTRUCTION INDUSTRY RESEARCH BOARD MARKETPOINTE REALTV ADVISORS 4.2011 Having said that,there are always opportunities for selected construction activity in the commercial sector,primarily for owner-occupied space for industrial and office use.We are unable to project this type of space. Otay Water District 39 4/29/2011 Ma -nte ,;'••••1;11 THIRTY YEAR TREND -OTAY W TER DISTRICT AREA For the time period between 2010 and 2040,we have opted to rely on the Series 12 statistics from the San Diego Association of Governments.The series was completed in February 2010 and projects population and housing units by decade from 2010 to 2040 for both San Diego County and within it the Otay Water District area. SANDAG projects the County population to reach the 4,000,000 level by 2040 with 11.5%of that growth within the OWD boundaries.Thus,the OWD area would grow by 116,715 persons or an average of 3,891 persons per year. We do have some concern over their density projections.SANDAG is projecting an average of 3.5 persons per unit,a rather high density given their projections of housing unit mix.SANDAG is projecting approximately 75%of new units to be multi-family over the next 30 years.We believe that that ratio is rational,but the persons per household are typically far less with multi-family units than single-family units. POPULATION AND HOUSING PROJECTIONS OTAY WATER DISTRICTAREA 2010-2040 TOTALS ANNUALCHANGE AREA POPULATION HOUSING UNITS POPULATION HOUSING UNITS OWDAREA I I 2010 198,125 61,914 N/A N/A 2020 251,386 75,945 5,326 1,403 2030 283,565 83,211 3,218 727 2040 314,840 95,694 3,128 1,248 2010-2040 116,715 33,780 3,891 1,126 I I I I SAN DIEGO COUNTY I I I I 2010 3,095,313 1,091,399 N/A N/A 2020 3,393,445 1,198,753 29,813 10,735 2030 3,715,030 1,300,654 32,159 10,190 2040 3,996,957 1,383,963 28,193 8,331 2010-2040 901,644 292,564 30,055 9,752 OWDAS %OF SO CO I I 2010 6.4%5.7%N/A N/A 2020 7.4%6.3%17.9%13.1% 2030 7.6%6.4%10.0%7.1% 2040 7.9%6.9%11.1%15.0% 2010-2040 12.9%11.5%12.9%11.5% I I ~ NOTE:PREPARED PRIOR TO RELEASE OF 2010 CENSUS DATA SOURCE:SERIES 12SANDAG MARKETPOINTE REALTY ADVISORS 3.2011 Otay Water District 40 4/29/2011 -nle·ii··········;",.,·,. Household Income Projections The San Diego Association of Governments (SANDAG)has produced income projections for the county.Using the SANDAG methodology,we have applied the growth rates to the Otay Water District residents.By 2040,median household income is projected to be $113,353. Median Household Income Projections Otay Water District 2010 2020 2030 2040 $83,115 $92,212 $103,841 $113,353 ·SANDAG Countywide methodology used MARKETPIONTE REALTY'ADVISORS 3.11 SANDAG has also prepared projections for both civilian and military jobs by area.In the table below,SANDAG projects that more than 20%of newly created jobs in the 2020- 2040 time period will be created in the Chula Vista/Otay Mesa area.This analysis is based on SANDAG's analysis of land available for development,much of which is on both sides of SR-11 . CIVILIAN AND MILITARY JOBS CHULA VISTA I OTAY MESA 2020·2040 DECADE CIVILIAN MIUTARY TOTAL CHULA VISTA I OTAY MESA 2020 102,293 1,356 103,649 2030 132,230 1,356 133,586 2040 155,690 1,356 157,046 2020-2040 53,397 .53,397 SAN DIEGO COUNTY 2020 1,515,346 104,269 1,619,615 2030 1,648,361 104,269 1,752,630 2040 1,773,399 104,269 1,877,668 2020-2040 258,053 -258,053 CV 10M AS %OF COUNTY 2020 6.80%1.30%6.40"10 2030 8.00%1.30"10 7.60"10 2040 8.80%1.30"10 8.40% 2020-2040 20.69%20.69% SOURCE:SANDAG SERIES 12 MARKETPOINTE REALlY ADVISORS 3.11 Otay Water District 41 4/29/2011 SUMMARY OF FINDINGS The following summarizes our opinions and projections as to the growth of San Diego County and,within it,the Otay Water District area: •The economic recovery in the United States has only just begun.It will take several more years to reach the type of growth levels we have become accustomed to in the past. •The international situation will play havoc with the world economy,but most of its effect will be on the price and availability of oil,which,in turn,will drive up prices of almost all goods.Thus,there will be modest inflation in the U.S.in the next few years. •In the next six years,San Diego County will fare better economically than most of the rest of the nation because of its highly diversified economy.Most of its major industries are on a long-term growth path. •As a result,the County's population will continue to grow,most probably by 30,000+persons annually.Most of that growth will result from natural household formations. •Annual job growth in San Diego County will most likely average 18,000- 20,000 range during the next six years as well as in the next two decades. •Housing construction will average 6,000-7,000 units during the next six years, with as much as 20%of that growth in the OWD area.This percentage is distinctly higher than that of SANDAG projections.The MarketPointe projections relate to the relative availability of developable and "ready to go" land in the County and the lesser price of land in south county than in northern parts of the County.The Mexican influence will also add to the demand for housing in south county. •Looking out further,SANDAG projects that by 2040,the County will reach 4,000,000 persons,a total that will require growth in excess of 30,000 persons annually.The challenge will be to provide adequate new housing to achieve those totals.In all likelihood,as much as 75%of the new housing will be attached. On balance,San Diego County is one of the more vibrant economies in the Nation and should outpace the Nation in its recovery and ongoing economic growth.. ********* Otay Water District 42 4/29/2011 Ma -nte··,·········W"·ii·· We have enjoyed working on this assignment for you and stand prepared to respond to any follow-up concerns you may have. Sincerely, Alan N.Nevin Director of Economic Research Otay Water District Jon Nevin Research Associate 43 4/29/2011 SOURCES OF INFORMATION ECONOMIC OVERVIEW OTA Y WATER DISTRICT Bureau of Labor Statistics California Department of Finance,Demographics Dept. Cassidy Turley Commercial Real Estate City of Chula Vista Claritas Construction Industry Research Board County of San Diego Dow Jones Foreclosure Radar HdL Tax Advisors INEGI (Mexican Census Bureau) MarketPointe Landtracker MarketPointe Rental Trends MarketPointe Residential Trends Otay Mesa Chamber of Commerce Otay Water District San Diego Association of Governments State of California Team HDR Analysis U.S.Census Bureau U.S.Department of Immigration U.S.Treasury URBI,Inc. Ma -nte'i··········.'I.,I;.. Otay Water District 44 4/29/2011 REALTY ADVISORS ECONOIMIC OVERVIEW S,OUTH BAY REGION S,AN DIE'GO COUNTY Prepared for The Otay Water District by MarketPointe Realty Adv·sors MarketPointe ~ID ():::r 3CD:J..... OJ WATER DISTRICT OVERVIEW MarketPointe Realty Advisors 2 Service Area Otay Water District 3 ean J...-.~~~..-?~--~ ~ DEMOGRAPHIC OVERVIEW SAN DI EGO CO.&OTAV WATER DISTRICT AREA 2010 SDCO.OWD 1990 -2000 Growth 12.6%30.0% 2000 -2010 Growth 10.5%44.4% Persons /Household 2.8 3.2 Median Age 34.5 33.5 %>4 Vr Degree 34.0% 33.9% Median Household Income $64/890 $83/115 Source:Claritas MARKETPOINTE REALTY ADVISORS 3.11 4 MEDIAN HOUSEHOLD INCOME PROJECTIONS *SANDAG Countywide methodology used MARKETPIONTE REALTY ADVISORS 3.11 5 INTERNATIONAL TRENDS MarketPointe Realty Advisors 6 GLOBAL Dow STOCK INDEX (BLUE CHIP) 7 GDOW.3K H.2.8 KffJ~A 2.5 K.IV !\tV'l 2.4K.f r -.-"\-""2.2 K~..,1 .At.La.,n A.-I .~iV\*J~2K At' ~l7 Af tr 1.8 K ,I A ...r lJ~J.1.6 K 1.4 K./'r-....."IV.-<'It.1.2 K~T-~ ~r ~r 1 Kr"'II',__ 800T"£V .,. eOQ 02 03 04 0:5 06 07 08 09 10 11 6 5 4 3 2 1 o 90 I)AY LIBOR INTEREST RATES (LONDON INTERBANK OFFERED RATES) 8 CRUDE ()IL PRICES ($) 3/28/711 150 140 130 120 110 100 90 80 70 60 50 9 GOLD PRICES /OUNCE ($) 10 1110090807 ----r---.,.------r-~-___r__-_=__==_=__-~1450 1400 1350 1300 1250 1200 1150 1100 1050 1000 950 900 850 800 750 700 11 COMMODITIES AS OF SPRING 2011 Sugar Wheat 3/28111 34 ~3/2811 925 r---900-32 -875 30 850 28 825 800 26 775 24 750 725 700 20 675 650 18 625 16 600 57514,550- 12 52507080910110708091011 ..--........_....._. u.s.ECONOMIC TRENDS MarketPointe Realty Advisors 12 US Po •ual c ....CJI&&g 13 Growth On millions)32_7 ---Percentage.change 23.3 1950-1g60-1970-1980--1990-2000- 1960 1970 1980 1990 2 2010 POPULATION CHANGE,BY DECADE 14 UNITED STATES 1980-2010 Percentage Change in Population by State and Decade:Percentage 25.0 or more 10.0 to 24.9D0.0 to 9.9 Less than 0.0 2000-20101990-20001980-1990 ....'.·'CJ..:.......• U.S.change =9.8 U.S.change =13.2 U.S.change =9.7 SUUrle;U.S.Cen~us Bureau 15 REAL GDP UNITED STATES G P Change from PftI\'ioUB quartBr at ann oJ rate.S88S0nally adjuslBd 9% 6 Real Gross Dome,tlc Product -Annual 8.00~9+9-0~:::....-19T"93---19,-96--1-9r99--2--,OO-2--2.,OO-5--2""TOO-S ---12011 14.000.---------:---~-~;__--··-----1 12,000 10.000 - 20020092008 3 CONSUMER BEHAVIOR 16 RETAIL SALES &CONSUMER SPENDING UNITED STATES p.ersonal consumption exp dIu~ change from pteViDLlS month. seB.9DnaIIy adjusted 2.00%--"--'---"--"T""' 1.00 0.00 -1.00 ,--:-_~-+- -2.00 375 325 350 300 In bilr RS.seuondy adjusted Q UNEMPLOYMENT RATE UNITED STATES 2001-2011 10 8 6 4 J------T------T-------r------r------T--T---~-__T__-____r_-~ 01/01 01/02 01/03 01/04 01/05 01/06 01/07 01/08 01/09 01/10 01/11 Month 17 800/000 600/000 400/000 NEW HOME CONSTRUCTION UNITED STATES 2006-2010 18 2006 2007 2008 2009 2010 ECONOMIC TRENDS - AN DIEGO COUNTY MarketPointe Realty Advisors 19 POPULATION SAN DIEGO COUNTY 1970-2010 20 2/S00/000 2/000/000 1/S00/000 1/000/000 SOO/OOO 1970 1980 1990 2000 2010 SAN DIEGO COUNTY UNEMPLO-YMENT RATE 199()-2011 (FEB) 21 Unemployment rate The percent of the labor fu~e that is llInemployed,not seasonally adjusted. 10% California San Dieg County 2010 Ft:1u 20112008200620042002 O%-'--r----------.---;-------,-----,-~-__r---..,...._--__;_--_____._---.____--___,___-------r 1990 1~92 1994 1996 1996 2000 D'ata source:U.S.Bureau of Lab()or Statistics -Last update'd Mar 25.2011 RESALE HOME SALES &PRICES SAN DIEGO COUNTY 1999-2011 22 7,000 ,..-------------------------------------------..,.$600,000 Weighted Average Price •Sales Count $500,000 $100,000 6,000 2,000 5,000 $400,000 ~Q...=:.l:::I :!0 II~4,000 $300,000 ><C.!!'a~II..~fieII~ 3,000 $200,000 1,000 $0 en en en 0 0 0 .........N N N m m m <t <t <t III III III \0 \0 \0 """00 00 00 en en en 0 0 0 ...en t en 0 9 0 9 9 9 9 0 0 9 'i 0 9 'i 9 9 'i 9 9 9 0 9 'i 0 9 'i 0 9 'i 0 ";'......";'C:Q.C:>Q.c >Q.C >-Q.c Q.c Q.C Q.C >Q.c Q.c Q.l:Q.c >-Q.c~'"Qj ~'"Qj ~'"Qj ~'"Qj ~'"Qj ~'"Qj ~'"Qj ~'"Qj ~'"Qj ~'"Qj ~'"Qj ~'"Qj ~~VI ~VI ~VI ~VI ~VI ::2:VI ~VI ~VI ::2:VI ::2:VI ::2:VI ::2:VI SAN DIEGO COUNTY,NOD /TRUSTEE SALE 1990-2011 23 Notices of Default 5,000.------·-----------,-------·-----------,1 4,000-1----1----.------1---+----.-:----] 3,000-l-----+---~~~---+----- 2,000-t------+-----t---------i------f----1 201420102006200219981994 0-1-------.------.--------.-----,--------.-------; 1990 Trustee Deeds 2,500.------r------.-----.------:-----:----- 2,000-J-----+------t-----------;------+----t...--+----- 1 ,500 -I---------o------+-------+----4-----.-~ 1,000-1---------:------;------+-----.,.--.·...---....-+-"-...---1 500i---~,.,.~~J"f"4"Kr_---I----t-T~--r-----i 201420102006200219981994 0~~~-.,._---~.=::~~~!!!!!lN!!~~~=------~---~ 1990 350 300 250 200 150 100 50 o OFFICE,RETAIL,INDUSTRIAL PERMIT VALUATIONS (IN $MILLIONS) SAN DIEGO COUNTY 2000-2010 2000 2001 20022003 20042005 200620072008 2009 2010 24 •OFFICE *RETAIL ·-,~··lNDUSTRIAL 2030 2040 8.00% 8.80% 1.30% 1.30% 7.60% 8.40% SOURCE:SANDAG SERI ES 12 MARKETPOINTE REALTY ADVISORS 3.11 25 San Diego County $479/321/893 $459/722/550 $400/443/927 $422/136/500 California Total $5/678/049/172 $5/404/318/187 $4/617/418/638 $4/830/249/373 Source:HDL MARKETPOI NTE REALTY ADVISORS 4.11 SOUTH COUNTY MarketPointe Realty Advisors 26 NEW RESIDENTIAL CONSTRUCTION PROJECTIONS CHULA VISTA/OTAV MESA AND SAN DIEGO COUNTY 2011-2017 27 YEAR CHULA VISTA/OTAY MESA SINGLE FAMILY CONDOMINIUM (1) APARTMENTS TOTAL SAN DIEGO COUNTY SINGLE FAMILY CONDOMINIUM (1) APARTMENTS TOTAL CV10M AS %OF COUNTY SINGLE FAMILY CONDOMINIUM (1) APARTMENTS TOTAL 400 468 343 2,714 2,071 1,643 14.7% 22.6% 20.9% (1)TOWNHOMES,GARDEN,MID-RISE AND HIGH-RISE CONDOMINIUMS MARKETPOI NTE REALTY ADVISORS 4.2011 BORI)ER CROSSINGS SAN YSIDRO,()TAY MESA &TECATE 2000-2009 JD,lIl\lIlIII -r----------- Northbound car and Bus Crossinp .5an Ysidm,Ota,Mesa and Tecate',artsof Entry 28 211I0 1001 211I2 2003 2D04 2005 2006 2007 100B 2009.__._._---~ MarketPointe REALTY ADVISORS 9201 Spectrum Center Boulevard Suite 110 San Diego,California,92123 www.marketpointe.com 619.233.3781