There's Nobility in Simplicity
We have grown suspicious of simplicity. We late 20th Century folk have come to equate complexity with competence. We tend to give the benefit of the doubt to things that have been over-intellectualized, over-wrought and over-papered.
We want massive documents with hundreds of appendices that only consultants can read and interpret for us. The trend has given rise to a kind of info-snobbery: If a non-expert offers us an opinion, we tend to give it less weight than if a specialist weighs in on the same matter. Often, however, our suspicion of simplicity may not be well founded, nor is it fair to assume that simplicity necessarily means a lack of sophistication.
It would be wrong to characterize the agreement between the Southern California International Airport Authority and Orange County-based Stirling Enterprises LLC as simple. It's hardly an IOU scrawled on the back of a napkin. At the same time, this very straightforward agreement can be read, and understood, by non-experts in about half an hour. That is impressive when you realize this document is essentially the working agreement between a public joint-powers authority and a private developer guiding the 20-year redevelopment of a 4,000-acre airport. In comparison, a typical lease in a big-city office building is usually a document that can be several inches thick. And then you have to pay somebody $300 an hour to read this thing and explain it to you.
The comparison to the office lease, of course, is inappropriate in at least one way: the relationship between landlord and tenant is adversarial, while the developer and the Victor Valley communities seem to have a common goal. The desire to get something going at the former George Air Force Base is probably foremost in the minds of the municipalities that make up the Southern California International Airport Authority — the County of San Bernardino, the Town of Apple Valley, and the cities of Victorville and Hesperia. The airport authority is an alter ego of the Victor Valley Economic Development Authority, the official local agency for base closure. When the base closed in 1992, the region lost 6,000 jobs.
Located in the desert about one-third of the way from Los Angeles to Las Vegas, the former military base may not look like a hot property (except in solar terms). But both the local officials and the developers are convinced that the area could become the next important air-cargo hub of Southern California. They make a good sales pitch: the region is already well-served by infrastructure, including Interstate 15 and the Burlington Northern and Southern Pacific rail lines; an eastward extension of the Alameda Corridor, a partially below-surface rail line to the harbor area of Los Angeles-Long Beach that is now under construction, would create a crucial link to the ports. The capacity for cargo at Los Angeles International Airport is fast filling up. Based on a rule of thumb that says truckers need to be within 18 hours of a destination, the area now known as Southern California International Airport could deliver goods to all western states and Mexico. Optimistically, but not unreasonably, local officials think the cargo airfield could more than replace the lost military base jobs.
Both the developer and local authorities seem eager to start as soon as possible and signed the agreement in January. In a nutshell, here are the basic deal points: The public airport authority agrees to pay $40 million in infrastructure costs, which will be funded by bonds (which kind are not specified in the document). Tax-increment revenues on the base will pay off the bonds. (Special legislation granted military bases redevelopment powers.) Stirling agrees to provide the remainder of the infrastructure; the cost is not stated in the document but is estimated to be $70 million.
The developer also agrees to buy a set of parcels, totaling 325 acres, for $28 million. These are the so-called Economic Development Conveyance parcels, which the Air Force has agreed to sell to the local reuse authority. Half of the income that the developer receives from property sales or leases on the base will automatically go into a "Land Pay Down Fund" until the obligation is met. The developer also has the right to lease the so-called Public Benefit Transfer parcels, which the military is not selling at this time.
Additionally, both sides are to contribute $3.5 million to pay off a $7 million bond issue from 1996 that financed initial redevelopment costs at the base. Presumably, this goal will be accomplished through a refinance.
After all other obligations and operating expenses are met, the two sides share income from projects on a 50-50 basis. The developer has the responsibility of marketing, managing and developing the property, but the airport authority also has the right to bring in potential tenants or investors, with the approval of the other party. The agreement is for 10 years, although either party can cancel the agreement at any time during the first year. The agreement can be renewed for two additional five-year terms.
The framers of the agreement acknowledge its directness. Lawyer Andre de Bortnowsky, a partner in the Calabasas office of Sabo & Green, whom the airport authority retained to draft the agreement, said he reviewed several different master-developer agreements used by other former bases but chose to "essentially start from scratch." He characterized the agreement as flexible: "Philosophically, we are trying to accommodate or foresee changes. The agreement outlines the relationship and general obligations between the parties, and, at the same time, it also contemplates a need for additional agreements and fine tuning as the project goes along."
Developer Dougall Agan, a principal in the land development firm of Stirling, put it more simply. "It's the KISS principle," he said, referring to the familiar acronym for Keep It Simple, Stupid. What was most notable was the balance of both responsibility and profit on the part of both parties. "It's the same thing as a good marriage," he said. "It has to be 50-50."
Since the arrangement between the airport authority and the developer is in its infancy, it is obviously too soon to determine whether the agreement is a success or not. Still, it seems to represent an intriguing approach in framing a document that the general public can understand and comment on. The late jazz musician Dizzy Gillespie once said the quality of music depends on knowing which notes not to play. In other words, true sophistication consists in not saying everything. It would be interesting to see if such a straightforward agreement turns out to be workable. In an age of overkill, it is refreshing to see a document that knows when to shut up.