Standard Operating Agreement

Purpose:

Determine whether a proposed phase of development accounts for financial risks that are common to the real estate market. Analyses will be reviewed by a neutral, third-party consultant to ensure standard, market projections, and to ensure that the interests of the Utah Transit Authority (UTA) are being properly observed.
All financial analyses are to be formalized by an Operating Agreement, entered into by both UTA, the development partner, and any other interest involved in the development. Operating Agreements are to explicitly document any and all deal terms involved with a phase of development, as well as ownership percentages.

Scale and Scope:

Financial Analyses are to account for the cost and income generated by a single phase of development. Costs and income are to be expressed using industry-standard metrics (e.g. Net Operating Income (NOI), Return on Investment (ROI), Net Present Value (NPV), etc.), and documented in an industry-standard pro forma.

Roles and Responsibilities:

• Development partners are to oversee and produce the financial analysis materials.
• UTA Transit-Oriented-Development (TOD) Staff is to work alongside its development partners, to accurately communicate UTA’s position and negotiate terms of the Operating Agreement.
• A third-party consultant will be employed to review market assumptions and methods used to create financial proposals.
• UTA Internal Audit Staff is to review terms and conditions proposed in operating agreements, to ensure that no conflicts exist, and to make formal recommendations to UTA Board of Trustees.

Approvals:

All financial proposals and operating agreements are to be reviewed by the Executive Staff and reviewed and approved by the UTA Board of Trustees.

End Product:

The end product of the Financial Analysis Process is an executed Operating Agreement, as well as any supporting financial materials (e.g. market research, pro forma, etc.) that have been reviewed by a 3rd-party consultant and the UTA Internal Audit Department.

Process:

1. Financial Analysis Proposal: Financial Analysis proposals are to be completed by development partners within the timeframe defined in a project’s Master Development Agreement (MDA).
2. Review of Proposal by TOD Staff: The TOD Department is to review all financial proposals and perform a cost-benefit analysis per standards defined within Title 17B, Chapter 2a, Part 8, Section 804 of the Utah State Code.
3. Does Proposal meet UTA Standards?: If a financial proposal does not comply with the aforementioned standards, the TOD Department is to provide the development partner with a list of findings that may be used to refine the proposal.
4. 3rd Party & Internal Audit Review of Terms: All financial proposals are to be reviewed by a 3rd-party consultant and the UTA Internal Audit Department. 3rd-Party consultants are to primarily review assumptions made in pro forma documents. The Internal Audit Department is to review ownership interests to ensure that no conflicts of interests exist.
5. Does Proposal Meet UTA Standards?: If a financial proposal does not comply with the aforementioned standards, the TOD Department is to work with the 3rd-party consultant and/or the Internal Audit Department to identify any inconsistencies or conflicts, and provide the development partner with a list of findings that may be used to refine the proposal.
6. Final Reviews: After financial analyses have been reviewed by a 3rd-party consultant and the Internal Audit Department, proposals will be reviewed by Executive Staff and UTA Board of Trustees.
7. Execute Operating Agreement:Upon approval by the UTA Board of Trustees, UTA Staff and developer partners may finalize any negotiations necessary to execute the Operating Agreement and prepare for construction.