1. Hyatt Regency Miami Wednesday, February 29, 2012 – Orchid C

2. Preparing for the Next Phase of Your LRA LRA Overview Michael A. Houlemard, Jr. Executive Officer, Fort Ord Reuse Authority

3. What Really Is an LRA? City, Jurisdiction, or Joint Powers Authority Funded by local resources (taxes, levies, exactions, fees, etc.) Risk averse, often with general fund envy Not always sophisticated in understanding financial markets Tasked with reusing marginal properties

4. Fort Ord Experience  Fort Ord Reuse Authority (FORA) was created by state law in 1994  Broad powers to plan, oversee, finance, and implement base reuse programs  24-member Board of Directors  Responsibilities over 45 square miles  June 30, 2014: Authority Act expires

5. Applications/Use of Insurance (Fort Ord)  General Liability  Pollution Legal Liability  Cost Cap/Risk Management  “Additional Insured”

6. 2012 ADC WINTER FORUM | PAGE 6 The Fort Ord Story Anticipated Cost of Remediation/Grant Amount from Army Cost-Cap Insurance Policy Army’s Obligation for Costs in Excess LRA’s Obligation for Costs in Excess (unlimited)

7. Environmental Services Cooperative Agreement  Elected to complete munitions removal  Cost Cap insurance policy ensures completion of remediation program  Pollution Legal Liability policy addresses post-cleanup liability  Would/Could this be done today?

8. 2012 ADC WINTER FORUM | PAGE 8 Preparing for the Next Phase of Your LRA LRAs in a Post-Cost-Cap World Michael Miller – Drinker Biddle & Reath LLP

9. 2012 ADC WINTER FORUM | PAGE 9 Costs in Excess of Initial Grant  Possible Solutions (1) No DoD Risk (2) All DoD Risk (3) Hybrid (4) “Other”

10. 2012 ADC WINTER FORUM | PAGE 10 Costs in Excess of Initial Grant (1) No DoD Risk: Oakland Army Base (2002) “Costs in excess of the [Army’s] maximum funding obligation will not be paid.” § B.5.1.

11. 2012 ADC WINTER FORUM | PAGE 11 Costs in Excess of Initial Grant No DoD Risk Anticipated Cost of Remediation/Grant Amount from Army Cost-Cap Insurance Policy LRA’s Obligation for Costs in Excess (unlimited) LRA’s Obligation for Costs in Excess (unlimited) Army’s Obligation for Costs in Excess

12. 2012 ADC WINTER FORUM | PAGE 12 Costs in Excess of Initial Grant (2) All DoD Risk Lowry Air Force Base (2002) “The funding obligation of the LERA... is limited to: funds actually received by the LERA from the Air Force... plus [] funds paid to the LERA or named insured from the insurer(s)... pursuant to the Cleanup Cost Cap....” § 401.C.

13. 2012 ADC WINTER FORUM | PAGE 13 LRA’s Obligation for Costs in Excess (unlimited) Costs in Excess of Initial Grant All DoD Risk Anticipated Cost of Remediation/Grant Amount from Army Cost-Cap Insurance Policy Army’s Obligation for Costs in Excess LRA’s Obligation for Costs in Excess (unlimited) Army’s Obligation for Costs in Excess (unlimited)

14. 2012 ADC WINTER FORUM | PAGE 14 Costs in Excess of Initial Grant (3) Hybrid Camp Bonneville (2011) Area 1: LRA has risk Area 2: (i) Contingent fund established by Army; (ii) if costs exceed, parties will amend agreement to provide LRA with additional funding Area 3: Parties agree to discuss additional funding as needed

15. 2012 ADC WINTER FORUM | PAGE 15 Costs in Excess of Initial Grant Hybrid Area 1: LRA has risk Initial Grant Area 1 LRA’s Obligation (unlimited)

16. 2012 ADC WINTER FORUM | PAGE 16 Costs in Excess of Initial Grant Hybrid Area 2: (i) Contingent fund established by Army; (ii) parties will amend agreement to provide LRA with additional funding Initial Grant Area 2 Army’s Obligation Amend Agreement to Provide LRA with Additional Funding

17. 2012 ADC WINTER FORUM | PAGE 17 Costs in Excess of Initial Grant Hybrid Area 3: Parties discuss additional funding as needed Initial Grant Area 3 To Be Addressed After Further Investigation

18. 2012 ADC WINTER FORUM | PAGE 18 Costs in Excess of Initial Grant (4) Other (a)Thorough Delineation = No DoD risk (b)Conservative Estimates = Any excess funds returned to DoD (c)DoD takes layer of risk, remainder left with LRA (d)LRA takes layer of risk, remainder left with DoD

19. 2012 ADC WINTER FORUM | PAGE 19 Costs in Excess of Initial Grant Mike Miller – Partner, Drinker Biddle & Reath LLP Mark E. Kleiner, PE Potential Financial Assurance Alternatives Preparing for the Next Phase of Your LRA

20. 2012 ADC WINTER FORUM | PAGE 20 A Little Bit of History Time Period (Roughly) Remedy BasisCost Cap Insurance Market Environmental Liability Due Diligence Financial Assurance Pre-Late 1990sPost-Decision Documents Not Readily Available Design ReviewsNot Required Late 1990s – Early 2000s Pre-Decisional Documents Multiple Carriers and Broad Coverage File ReviewsDOD Covers Excess Early 2000s – Late 2000s Pre-Decisional Documents Fewer Carriers and Less Coverage File Reviews/ Minimal Gap Sampling DOD Pushes Excess to LRA Late 2000s – Present Pre- and Post- Decision Documents Not AvailableFile Reviews/ Robust Gap Sampling Various Alternatives

21. 2012 ADC WINTER FORUM | PAGE 21 Strategies/Financial Assurance  Comprehensive Due Diligence  Engage Regulatory Agencies  Conservative Estimating to Cushion Initial Grants  Contingent Funds  Phased Approach – Not a one-time transfer

22. 2012 ADC WINTER FORUM | PAGE 22 Funding for Comprehensive Due Diligence  OEA Grants  Economic Development Agency Grants  Low Interest Loans  Tax Incremental Financing  If Not an NPL Site  USEPA Brownfield Grants  State Brownfield Grants  Contractors

23. 2012 ADC WINTER FORUM | PAGE 23 Lessons Learned  Not a Take-It-or-Leave-It  Must Have Redevelopment Plan with Tenants in Hand  Horse Trading  Bounding Risk Through DD