HomeMy WebLinkAboutItem 1 - Attch 5 - Fiscal Impact Study 05-27-2016Pr® Forma
Advisors
To: Todd Galarneau, Meridian Development
From: Lance Harris
Cate: May 27, 2016
ATTACHMENTS
memo
re: Millenia Fiscal Impact Analysis - Potential Removal of 450,000 Square Feet of Office
Development
cc:
Introduction
The following provides a discussion of the potential fiscal impact associated with the removal of 450,000
square feet of office development in the Millenia project to the City of Chula Vista's General Fund. It is
important to note that this analysis is based on a previous development program that was evaluated in
connection with a fiscal analysis for the Eastern Urban Center Specific Plan Area. The development plan
envisioned the delivery of this 450,000 gross square feet of office space near the end of the project's 20 -year
absorption period (6,500 square feet in year 16 and the remaining 443,500 square feet in year 21). As a
result, references herein to fiscal impacts at an illustrative Year 5 and Year 10 would be realized by the City
approximately 20 years in the future.
The analysis uses the the City's approved Fiscal Impact Analysis (FIA) Framework as described in the
memorandum "Chula Vista Fiscal Model Update Overview and User's Guide," dated January 2015. A copy
of the model used to perform this analysis is available upon request.
Findings
The annual impact of the potential removal of the planned office development represents a loss of revenues
to the City's General Fund, on average, of approximately $29,200 per year over a ten year evaluation
period as well as the loss of approximately 1,900 jobs at project build out. All values are presented in
constant 2015 dollars. The following table and Appendix presents the findings based on the mid -rent
scenario described in detail below.
Net Fiscal Impact - Potential Removal of 450,000 Square Feet of Office Development ($2015)
Note: Totals may not add', References herein to fiscal impacts at an illustrative Yenr 5 and Year 10 could be ra4zed by the City approve natefy 2u yews in the kAxe
Source: Ck, of Chda Vista and Pro Forma AdVsors
Sensitivity Analysis
While the baseline estimates are tied to contemporary market assumptions, Pro Forma Advisors provided
additional analysis to demonstrate the range of impacts due to achievable office rents to provide a range of
fiscal impacts for the City. The following rent scenarios have been used:
► Low -Rent Scenario: Average $2.50 per square foot.
> Mid -Rent Scenario. Average $2.70 per square foot.
r High -Rent Scenario: Average $2.85 per square foot.
Pro Forma AdWsors LLC Los Angeles T 316.616.6079 Hartford T 203.604.9007 F 888.696.9716 www.ProEolmaAdvisors coin
Pro Forma
Advisors L LU
M�*
Rent Sensitivity Analysis - potential Removal of 450,000 Square Feet of Office Development
($2015)
Note We: Toms may nci add, References herein to fiscal impacts at an illustrative Year 10 would be raalped by the City appro;amatAJ 20 years in the future
Source: Gty of Chula Vista and Pro Forma Advisors
Based on this analysis the potential removal of 450,000 square feet of office space would result in the loss of
$10,400 to $64,500 in net fiscal revenue to the City on an annual basis.
Key Assumptions
Specific assumptions include the following building program, employment, value, and equivalent dwelling unit
(EDU) calculation.
It should be noted that although the office development's net leasable square feet has not been adjusted,
adjustments have been made to be consistent with the new FIA Framework that defaults to a 90 percent
occupancy and one employee for every 300 square feet of leased office space. This change from 93
percent occupancy in the previous analysis to 90 percent is made to be conservative, while the change from
one employee for every 300 square feet to 200 square feet in this analysis reflects a contemporary
employment density factor for higher intensity Class A office development'.
The model has applied the full Public Work department expense? to the pro rata share-of lane miles
associated with the office development. While it is assumed that the community facilities district (CFD14M)
will contribute to various aspects of infrastructure and street frontage maintenance, these financial
contributions will not offset any of the City's Public Work costs associated with street maintenance in the
General Fund. It should be noted that this is very likely a conservative assumption as in addition to Cl 4M,
the Millenia Master Community Association is obligated to maintain a number of elements within the street
rights of way pursuant to recorded Grants of Easement, License and Maintenance agreements (" GELMAS°)
with the City.
Pro Forma Advisors used a methodology to estimate the current tax value of the 5.1 -acres of undeveloped
land based on a pro rata share of the project's 2015 -2016 total assessed value. An adjustment of the
undeveloped office land's assessed value was made to 2011 dollars. Proposition 13 limits properties' annual
value to increase at the inflation rate, which is measured by the lesser of the California CPI or 2 percent. The
1 This reflects the new base employment density in the revised Fiscal Impact Framework
2 Per lane mile
-2-
Pro Forma
Advisors i_ -C
VNEW61
California CPI was used because between 2011 and 2015 the annual increase averaged less than 2 percent
a year (1.6 percent).
All other model assumptions are consistent with the City's approved FIA Framework.
Office Development Assumptions
Mote: 0djnai analysis used a emplc%jee per occupbc office square font of 3aX) and an occupancy rate of 93 percent.
Source City of Chula Vsta and Ho Forma Advisors
Office Development EDU. Calculation
........ .........
Household Population
.
Occupied Dwelling Units
_ _
Persons Per Occupied Dwelling Unit (ODU)
_
3.2
Employees ( Non Resident)
1,3154
Employment Resident Equivalent
€ 35%
t
Employment Resident Equivalents
j 46
Employment Resident Equivalents/ Persons Per ODU _ 142
Induced ODU from Employment (New Residents Households) 454
Equivalent Dwelling Units
59
Source: City of Chula Vista and Pro Forma Advisors
-3-
x Pro Forma
Acviscrs ! _C
Other Considerations
It is useful to quantify the relative impact of the potential removal of 450,000 square feet of office space
within the Millenia project Using the City approved Eastern Urban Center Fiscal Analysis, dated March 31,
2009, the potential removal of the office space would yield a potential loss of $25,600 in net revenue per year
(in 2008 dollars). This suggests that at project buildout the office component under consideration would
represent less than one percent (0.5) of the total net City revenues generated by the Millenia project.
-4-
Pro Forma
�i�viscrs �_�
appendix
Summary of FIA - Potential Removal .,t Square Feet of Offic.-.
Development
The remainder of this page is intentionally left blank
-3-
Pro Forma
Table 1 - Revenue Summary
Summary of FIA
Revenue Estimate (2011 Dollars)
Account CEL62ory
Allocation
Base Year
Rate
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Charges for SerAces
uv-sr rras
Development impact Fees
Fines, Forfeitures. Penalties
mU
$18.04 Pm MU
S
- S
11,i'7 $
11,117 $
11,117 S
11,117 $
11,117 8
11.1'7 $
1t, 117 $
11,117 $
11,117
Licenses and Permits
EI
$1081 P.EDU
S
- $
10,027 $
10,027 $
10,027 S
10,027 $
10,027 $
10.027 $
10,027 S
10,027 S
18027
Other Local Taxes
Business Ucense, Tax
Empkryee
$211 P& Employe
$
- 3
45.424 S
45.424 $
45,424 S
45.424 $
45,424 $
45,424 S
45,424 $
45.424 $
45,424
Franchise Fees
EDU
$115.48P Lou
$
- S
68.993 $
68.883 $
63 a $
wow $
6a.ma S
68,583 $
68;883 $
68.883 S
ea.aw
Heal Prop" Transfer Tax
spatial M dd
$
- S
100.870 8
5ma It
SIM $
5,048 S
5,048 S
5,04a $
5.048 $
5,048 $
5,048
Sales Tax
%Mudd Mudd
$
- $
7115% $
71,0$0 $
71,550 $
71,558 S
71,556 $
71,656 8
71,556 $
71,550 $
71,558
Tranaisnl Occupancy Tau
sredm Mm.1
$
- $
- S
. S
- s
- $
- $
- $
- $
- $
-
UtilflyTaxes
EDU
$47.64 P6r EDU
$
- $
25,415 $
28,415 S
25,4 t5 S
28,415 8
29,415 $
28.416 $
20,415 $
25,415 S
25,415
Other Revenue
EDU 165 %P- .,gvbnU4
$1C3.64 Far EDU
$
5
83,762 S
01,762 S
e1.762 S
81,702 $
81,762 S
61,702 3
B1,782 S
61,702 S
61,782
Property Taxes
Current Taxes Secured
S-0m."
S
- S
193,05H $
196,785 $
200,318 S
263,764 S
207.084 $
210,308 $
213,430 S
215,452 It
219.379
Current Taxes Unsecured
EDU
$11.25 Px MU
$
- S
6,70a $
6,7W S
8,7-08 $
6.708 s
6.706 $
6,783 S
6,708 $
8,71b 8
8704
Delinquent Taxes
EDU
$1.61 Pe EDU
s
- S
614 S
614 $
614 $
614 $
814 $
614 s
514 $
614 $
814
Prop Tax in Lieu
EDU
sd13PS eou
$
- S
114 S
114 $
114 $
114 $
114 S
114 S
114 $
114 $
114
State Secured Unitary
EDU
$11.41 Per EQU
S
- $
6.909 $
CAN $
13.505 $
e.00e $
64aue S
8,878 $
aws S
6.609 $
0.806
Revenue from Other Agencies
MLFV
Spedal Mrdd°
$
- $
143,394 S
146,116 S
148.753 S
151,307 S
153,779 S
156,173 $
159497 S
100.736 S
162,909
Sales Tax
Ho� Pop9atic8
$128 P. HH Popumtlm
S
- $
- $
- s
- S
S
- 8
-
Transfers In
Z-�.-d
Use of Money & Properly
zero f b -t
Total
I
I
Is
- $
748,889 $
859.357 $
885.545 S
871.537 S
877.839 3
682,1,157 S
886,397 S
893.fi84 8
69&74
NA - Not APplica e -
Note: Rafererims hirein to fiscal impacts al 6n illustrative Year 10 v4 iAef be realized by the City approximately 20 years fn the futwe.
Scarce: City of Chula Vista; Pro Forma Advisors
Pro Forms Advisors, LLC Appendix, Page 1 PFAiD: 10.808
Fro Forma
Table 2 • Expenditures Surnmary
Summary of FIA
&penditures Estimate (2011 Dollars
Department
_
Allocation
Base Year
Rate
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10
Administration
E011
$14.75 Per Ebi
so
361819
$6. 819
$& 819
$& 819
$8,818
$8,019
SB,8i9
Saws
saels
Boards and Commissiens
EDU
so,ao PerEt"
$o
so
so
to
so
so
$0
$o
so
$o
City Attorney
EDU
$25.19 PrJ EDU
so
$15,020
$15,028
$1 SA28
$15,02B
615,028
515,026
$15.628
$15,028
$15,028
City Clerk
MU
55.60 Per MU
3o
$3. 343
$3 343
$ 3343
53,343
$3,343
59.343
53,343
$3343
$3,343
City Council
EDO
$0.56 Per SOU
$0
$5,703
$5,703
$5,703
$5,703
55.703
$5,783
85,709
$5,7033
$5,703
Community Development
EOU
$6.60 Per EaJ
$6
So
so
$o
$6
.so
So
$o
$o
$o
Engineering
EOU
So.oc Per EDU
56
SD
So
s0
$o
.121
so
SO
So
So
Finance
Eal
$37,97 P. EW
so
$22, 648
$22,646
$22,646
$22.648
$72,548
• $22,648
$22,645
$22,648
S22,648
Fire
Emd.1 V_w
5o
$188,319
5186,319
1186,319
5586,319
$186,319
5186.319
$166,310
$108,319
$186,319
General Services
EOU
115.52NIMU
s0
59259
59.259
$9.250
x,250
$9,259
$9.259
99,259
$9.259
$9.259
Human Resources
EDU
$16,45 Per EOU
So
$9, 613
$9, 613
$9,813
$9.812
59,813
$9.013
59,513
$,313
$9,613
information Technology Srvcs
EDU
$2 6.61 Per EDU
$0
$15,076
$15,876
$1 5876
$15,875
$151876
$15.876
$15,876
$15,676
115,876
Library
HH POpOAa
$11.48 Per NH Pop
$o
so
so
50
$8
$0
so
$0
5o
SO
Nature Center
Eou
SOM Pa FOU
$o
so
$a
so
so
so
so
s3
so
so
Non - Departmental
eau
$0.60 Per Ecu
$7
$0
$o
$o
$o
$0
so
$0
$0
$0
Planning& Building Services
EC11
$28.10 Par EDU
$0
$16.764
$16,764
516.764
$1676d
$16,764
$16,764
$161784
$16,764
$16.764
Police
Special Mood
$0
5352,848
$352,645
$352,849
9352,848
$152, 848
$352.548
$352,848
5382,848
8952,848
Public Works
IoneMle
$16,158.61 PatLd "10
w
$3,301
$3, 301
$3,301
$3, 301
53,301
$3901
$3,301
$3,301
$3,383
Recreation
EDU
$17.19 Per EOU
w
$10.252
510.252
$10.252
$10.252
$10,252
$10,252
$10,252
$10,252
$19.252
Total
$0
5859,974
$659,974
2659,974
5650,974
$ 659, 974
$ 659,974
$658,974
$859,974
$659,974
Note: References herein to fiscal impacts at an illustrative Year 10 Would he raali7ed by the Cky approximately 20 years in the future.
Source: City of Chula Vista; Pro Forma Advil m - -
Pro Forma Advisors, LLC Appendix - Page 2 PFAID: 10.808
Pro Forma Summary of FIA
rrivis� ma
Table 3 - Net Fiscal Impact
General Fund Adjusted to 2015 Year Dollars
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year B
Year 9
Year 10
Revenues
$
$ 797,824 $
702,442 $
709,034 $
715,418 $
721,599 $
727,584 $
733,380 $
738.991 $
744,423
Expenditures
$
$ 703,099 $
703,099 $
703,099 $
703,099 $
703,099 $
703,99 $
703,099 $
703,099 $
703,099
Net Fiscal Impact Estimate
$
$ 94,725 $
557! $
5,935 $
12,319 $
18,500 $
24,485 $
30,281 $
35,892 $
41,324
Note: References herein to fiscal impacts at an illustrative Year 10 would be rea0zed by the City approximately 20 years in the future.
Sourca: City of Chute Vista; BLS; Pro Forma Advisors
Pro Forma Advisors, LLC Appendix- Page 3 PFAID: 10 -808