Public-Sector Innovation: $400 Million P3 SoCal Rehab Delivers Cutting-Edge Government Center

Thanks to one of the largest public/private partnerships (P3s) ever assembled in California, Orange County now boasts cutting-edge, energy-efficient government buildings. The $400 million public-sector innovation project, known as the Civic Center, is the cornerstone of a 20-year plan to modernize the county’s real estate assets in downtown Santa Ana, create healthier work environments for employees, and reshape the county’s connections with the public.

Last July, Orange County opened the second phase of the development—the six-story, 250,000-square-foot (23,000 sq m) County Administration North building. A 35,000-square-foot (3,300 sq m) public plaza connects the building to its virtual twin—County Administration South—which opened in 2019. Orange County is pursuing Leadership in Energy and Environmental Design (LEED) Silver certification, at the minimum, for the new administration buildings.

The P3 was composed of the county, developer Griffin Structures, design firm LPA Design Studios, and general contractor Swinerton Builders. In all, the strategic plan is repositioning every aspect of Orange County’s facilities, which house 4,600 employees in more than 1.6 million square feet (149,000 sq m) of space in Santa Ana’s downtown.

“The county had aging building infrastructure; it literally had not constructed a new building in 50 years,” says Dan Heinfeld, president of LPA, which has four offices in California and two in Texas. “From the very beginning, we talked about how this was an opportunity for the county to take a different approach and be a much more transparent and open government. That really guided the whole process.”

The Appeal of P3s

Orange County declared bankruptcy in 1994 after a county treasurer, who had risen through the tax collection and treasury ranks, borrowed $13 billion to leverage the county’s roughly $7.6 billion investment fund. The fund itself was filled with high-risk/high-yield securities that would become well known a decade later—derivatives, reverse purchase agreements, and other financial instruments.

The investments performed well while interest rates were falling, but interest rates rose some 250 basis points to 5.5 percent from early 1993 to late 1994 amid Federal Reserve rate hikes. That sunk the county’s investments, and eventually Wall Street bondholders began selling collateral securing the county’s loans. Orange County lost more than $1.6 billion, and the bankruptcy hamstrung the county’s ability to update obsolete buildings for years.

Years later, as the county put the bankruptcy behind it, executing a P3 to shore up core properties made sense. Because cost management and fiscal discipline are vital to the success of a partnership, the structure tends to foster collaboration and transparency, says Roger Torriero, chief executive officer of Irvine, California–based Griffin Structures, which specializes in the organization and implementation of P3s.

Ideally, that approach leads to solutions to important issues before they have a negative impact on the budget or project schedule. P3s also transfer financial risk to the developer, which promises to complete the project for a guaranteed maximum price. Generally, if the final bill comes in over the price, the developer picks up the tab; if it comes in lower, the cost savings benefit the public client.

In the case of the Civic Center complex, not only was the development team able to navigate the pandemic to finish the project on schedule, but it also returned some $8 million in aggregate savings to the county. Tax-exempt financing bonds backed by the county’s long-term lease funded the development, and ownership will transfer to the county when it pays off the bonds in 30 years.

In a brief question-and-answer interview published by LPA, Thomas “Mat” Miller, the chief real estate officer for Orange County, credited the success of the reimagined campus to the interactive approach, as well as to the development team’s experience in the public versus private realm. “This was a process that really achieved what we hoped it would,” he told LPA. “Fourteen years ago, if you had said, ‘What ultimately would you like in your wildest dreams?’ I’m not sure it would be any different than the way it actually turned out.”

Creation of P3s for the delivery of real estate developments was already catching fire, Torriero says, but the Civic Center project has only heightened the visibility of the arrangement. Griffin Structures, which often partners with LPA in the deals, is currently spearheading police and fire stations, emergency operations centers, and other public safety projects for several cities in California, among other projects. It also has recently begun venturing outside of California, Torriero says.

“We’re in a very dynamic time, and the idea that facilities have to be responsive to a community’s needs as well as fiscally responsible is key,” he says. “If I had to sum this up, I’d say that this process really changed the way the county does business.”

Fixing Inefficiency

Orange County’s inability to pursue administration building improvements since the mid-1990s created challenging logistics for public and county employees alike. More than 15 buildings were spread across 17 acres (7 ha), and little thought had gone into efficiency. Courtrooms and district attorney’s offices, for example, were located in essentially opposite corners of that acreage, requiring prosecutors to get in their cars and drive back and forth, Torriero says.

Meanwhile, county employees were also occupying an average of about 375 square feet (35 sq m) each, above the corporate norm of 325 square feet (30 sq m) at the beginning of the century, not to mention the 196 square feet (18 sq m) that was the norm in 2020, according to JLL. In addition, high energy use created burdensome operating costs of $26 million a year, according to LPA.

To bring down those costs, the county began by vacating leased space to free up revenue, and the development team identified a series of “neighborhoods” where related county functions could be grouped. By putting district attorney’s offices closer to the courts, prosecutors saw an improvement in the number of cases they could pursue, Torriero notes.

The strategic plan also determined that the county could demolish five aging buildings. It further consolidated staff into the two new north and south county administration buildings, which provide the public with easy access to 13 county departments at a “one-stop shop,” retail-like counter. Similarly, the new Orange County Board of Supervisors hearing room, which can hold 300 people, sits near parking and the plaza between the buildings, which also provides easy access, Heinfeld says.

The plaza itself showcases landscaping tied to the five county districts:

• City Grid—the plaza’s center of activity that represents Orange County’s 34 cities;
• Pocket Park—a sign of the county’s commitment to open space;
• Foothills—including trees commonly found at the base of the foothills of the Santa Ana Mountains;
• Native Hillside—including plantings that demonstrate a commitment to reducing water use; and
• The Coast—a palm grove–lined welcoming area that represents the transit plaza.

“We approached the Civic Center project with the idea that since the county was doing this for the first time, it really had to be different and very much about how it could better serve citizens,” Heinfeld says. “From an experience standpoint, there are user-friendly places for the public to sit while they’re waiting to do business, and we brought landscaping to an area where it hadn’t been very predominant.”

Greening Up

Such a sweeping overhaul of the county’s facilities provided the obvious opportunity to shore up energy efficiency amid a broad push for net zero buildings, including the American Institute of Architect’s (AIA) 2030 Commitment initiative, which aims to bring the built environment to carbon neutrality. Orange County’s pursuit of at least LEED Silver certification in the new administration buildings helped establish an ambitious approach to lowering energy use. But instead of using renewable energy sources like solar or wind generation at the complex, LPA relied on its in-house engineering expertise to leverage passive building strategies to meet the AIA 2030 Commitment goals, Heinfeld says.

Among other measures, the development team oriented the buildings so that they had maximum northern and southern exposure; solar shades reduced sunlight on the south side but were largely unnecessary on the shadier north side. Also, smaller windows and vertical shades control direct sunlight and glare from the east and west. The buildings pull power from Orange County’s Central Utility Facility, a cogeneration plant that provides electricity and steam to county buildings at a lower cost than that of other local providers.

Those elements, combined with LED lighting throughout the buildings and efficient mechanical equipment, have cut fossil fuel use by 77 percent, just shy of the current AIA 2030 Commitment goal of 80 percent in 2020.

“Even though these buildings were designed five or six years ago, our energy efficiency came very close to meeting the commitment,” Heinfeld says. “It’s a good, smart, and basic design combined with a standard conservation approach that takes advantage of efficiencies that are readily available.”

More from ULI:

• UL10: Public/Private Partnership Projects
• Understanding Public Private Partnerships
• More from Knowledge Finder