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$- L() CB RICHARD ELLIS CONSULTING Sedway Group CBRE CB RICHARD ELLIS Mr. Larry Carr September' 5, 2005 Page 8 than a community orientation. CBRE Consulting has not included sales associated with potential optical dispensary, pharmacy, or convenience shop. Employee Count and Expenditures. Stanford Hospital and Clinics estimates total employment of 670. This reflects a relatively low employee density figure of 538 square feet per employee. The larger figure relative to the traditional office tenant reflects the nature of the space used by an academically run ambulatory medical clinic, with an array of different space needs. Stanford Hospital and Clinics employees are estimated to make the same level of local retail sales as traditional office tenants, but with a conservative adjustment to account for a portion of these expenditures being made at the facility itself. This adjustment pertains to the lunchtime share of employee expenditures, with the analysis very conservatively assuming that all these expenditures will be made on-site, and thus would be captured in the on-site taxable sales estimate. Patient Expenditures. Stanford Hospital and Clinics estimates total annual patient visits of 188,262. Patients visiting Redwood City's Stanford-owned clinic will undoubtedly make retail expenditures within the local economy. Few medical organizations have developed estimates of local patient spending. The most applicable resource is research conducted by the McGill University Health Centre in April 2002. The results of this research, based on an outpatient/escort/visitor survey, suggested that local visitor spending totaled the equivalent of $10.93 in 2005 dollars. The McGill University analysis was based on a survey of retail establishments located within a seven- minute walk from the proposed hospital site. While the McGill University analysis may present a more urban situation than Redwood City, downtown Redwood City is only approximately 1.4 miles from the site, thus retail establishments in Redwood City are relatively proximate to the proposed Stanford Hospital and Clinics site. CBRE Consulting therefore believes the McGill results are a reasonable conservative proxy for this analysis. This is especially the case given an assumed 50 percent downward adjustment in this figure to $5.46 in 2005 dollars to account for on-site retail purchases. Furthermore, information provided by Fehr & Peers indicates that approximately 80 percent of existing patient visits originate from within zip codes reported in the greater San Francisco Bay Area. The remaining 20 percent of the patient visits come from areas well outside the immediate San Francisco Bay Area, including many out of state patients. Therefore, actual patient visits may result in higher average expenditures and additional revenues generated from overnight stays, such as transient occupancy tax. Utility Rates. The Stanford Hospital and Clinics utility rate of $4.45 was provided directly by Stanford, and assumes that all four of the buildings will be devoted to medical clinic space. The rates used to compile this blended rate are based on existing consumption at comparable Stanford Hospital and Clinics facilities. Stanford Hospital and Clinics Spending Subject to Use Tax. Stanford Hospital and Clinics will purchase goods and services from out-of-state vendors. These purchases will be subject to a use tax paid to the City of Redwood City.9 CBRE Consulting researched existing annual expenditures for the departments anticipated to relocate to the Redwood City facility. As documented in Exhibit 5, total 2004 expenditures were $3.7 million, with a year 2007 equivalent of $4.0 million. These expenditures data were increased by 33.3 percent to account for the anticipated increase in departmental staffing, with staffing (doctors and other staff) at the Redwood City facility approximately one-third greater than the level of staff currently associated with the relocated departments. Therefore, the annual expenditures are assumed to be $5.3 million in 2007 dollars. Based on proprietary information provided by Stanford Hospital and Clinics and CBRE Consulting's 9 Analysis assumes that Stanford Hospital and Clinics applies for a use tax permit registering Redwood City (location of the delivery), which allows for a direct allocation of the use tax to the registered jurisdiction.