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Staff Report
City Council
Item No. 3.B
Meeting Date: August 24, 2022
From: Robert Rodriguez, Director of Planning/Building
Title: Thousand Palms Fiscal Analysis
RECOMMENDATION:
This item is presented for information, discussion and direction only.
BACKGROUND:
The City Council, at their Annual Goal Setting Strategy Session held in January 2022 , directed staff to update the Thousand Palms Fiscal Analysis. The Fiscal Analysis, last updated in 2018, provides fiscal implications for a potential an nexation of the City’s Sphere of Influence (SOI) at four stages: immediately upon annexation (Phase 1); at the time 10 percent of the currently vacant land is developed (Phase 2); at the time 50 percent of the currently vacant land has been developed (Phas e 3); and at build out (Phase 4). It also describes how the demand for local services will be met when the annexed area is developed.
The Analysis examined anticipated annual costs needed to serve the future annexation area at the four phases of developme nt including general government and public safety services, projected annual revenues including property, local sales tax , and transient occupancy tax, projected cannabis tax and what the costs and revenues would be for the City should that revenue not be available, one-time revenue sources, and significant one-time costs associated with Fire Department facilities and roadway improvements to bring currently substandard streets to City standards.
The Analysis concluded that revenues are dependent on future development types and intensities in the annexation area. Due to the residential nature of land uses in the SOI, build out will significantly increase residential units, while generating a moderate increase in commercial and industrial development. The res ult is a negative cash flow for the City throughout the build out period. Annexation is projected to result in an annual deficit for the City that ranges from $6.3 million at annexation to $8.1 million with projected cannabis tax revenues included in the a nalysis, and between $6.3 million and $22.0 million at build out without cannabis tax revenues. Today, five years later, that gap has continued to increase due to the increased cost of development and general government services
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DISCUSSION:
Since 2018, the SOI remains largely undeveloped , limited improvements have been made to the public infrastructure, costs to provide general government and public safety services have increased and the cannabis industry, and the projected tax revenue, have not grown as anticipated. Based on the aforementioned, should Council wish to pursue an update to this analysis, staff would commence an RFP process to secure a Consultant to complete, which is anticipated to cost in excess of $50,000. Realizing the update will highly likely still reflect a significant gap as referenced above, Council may wish to postpone any update at this time.
FISCAL IMPACT:
None
ATTACHMENTS:
Attachment 1 - 2018 Staff Report and Attachments