CHINO EEAA AND PSIC ANNEXATION: PLAN FOR
SERVICE AND FISCAL ANALYSIS
Prepared for:
Golden Management Services Inc.
October 20, 2022
SUBMITTED BY:
THE NATELSON DALE GROUP, INC.
YORBA LINDA, CA • www.natelsondale.com
O: 714.692.9596 • F: 714.692.9597
CONTENTS
Executive Summary ............................................................................................................................................ 1 Property Tax Scenarios Considered in this Analysis ....................................................................................... 1 Summary Conclusion ...................................................................................................................................... 2 Chapter 1: Introduction ...................................................................................................................................... 4 Purpose of the study ...................................................................................................................................... 4 Organization of the Report ............................................................................................................................. 7 Chapter 2: Project Description ........................................................................................................................... 8 Planned Improvements .................................................................................................................................. 8 Assessed Valuation and Property Tax .......................................................................................................... 10 Chapter 3: Public Facilities/Services Before and After Annexation .................................................................. 12 Chapter 4: City of Chino Fiscal Analysis Assumptions ...................................................................................... 14 Baseline Population and Employment ......................................................................................................... 14 City Revenue Data ........................................................................................................................................ 16 City Cost Data ............................................................................................................................................... 17 Chapter 5: Fiscal Impacts of Annexation Area .................................................................................................. 19 Chapter 6: Project One-Time Fees and Charges ............................................................................................... 23 Appendix A: Supporting Fiscal Documentation ................................................................................................ 24
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
1 Executive Summary
This report presents the plan for service and fiscal analysis of the proposed annexation of the East End Annexation Area (EEAA), including the 3.2-acre Philadelphia Street Industrial Center (PSIC) development, into the City of Chino. Whereas a specific development project is currently proposed for the PSIC, potential development within other portions of the EEAA is unknown at this time. However, since the City will require annexation of the overall EEAA as a single “project” for LAFCo purposes, this analysis evaluates the potential fiscal impacts of the specific land uses proposed for the PSIC and an assumed land use mix for the balance of the EEAA. In this regard, the analysis does not assume full buildout of the EEAA but considers estimated development within the 5-year forecast horizon required for LAFCo fiscal studies. Chapter 2 details the study’s land use assumptions.
In keeping with the LAFCo guidelines for reports of this type, the cost and revenue categories included reflect those associated with municipal revenues and functions that would be absorbed by the City upon annexation of the Project. For the City’s budget, this includes the categories listed below.
General Fund and Relevant Other Accounts, Annual Recurring Revenues Property Taxes
VLF-Property Tax in Lieu
Property Transfer Tax
Off-Site Retail Sales and Use Tax
Proposition 172 Half Cent Sales Tax
Measure I 2010-2040 Half Cent Sales Tax
Franchise Fees
Transfers In: State Gas Tax
Transfers In: From Other City Funds
General Fund and Relevant Other Accounts, Annual Recurring Costs General Government
Police Protection
Community Services
Community Development
Public Works: Street Maintenance
Public Works: Other Costs
Property Tax Scenarios Considered in this Analysis
Consistent with the City’s current discussions with LAFCo, this analysis considers two scenarios regarding the share of the 1% property tax levy that would accrue to the City’s General Fund:
• “Half Share” Property Tax Scenario – assumes 5.4% of the 1% property tax levy accrues to City’s General Fund
• “Full Share” Property Tax Scenario – assumes 10.8% of the 1% property tax levy accrues to City’s General Fund
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
2 Summary Conclusion
A summation of the annexation area’s projected annual recurring revenues and costs, for the categories listed above, is shown on Table E-1 below. Based on the conservative revenue assumptions used in this analysis (as described further below), the annexation area would:
• Generate a small fiscal deficit ($2,200 per year) to the City under the “half share” property tax scenario; and
• Generate a fiscal surplus of $22,600 per year under the “full share” property tax scenario.
Under more favorable revenue assumptions (see discussion of potential sales tax revenues below), the annexation area would potentially generate a significantly larger annual surplus for the City (even under the “half share” property tax scenario).
TABLE E-1. SUMMARY OF ANNUAL FISCAL IMPACTS AT BUILDOUT Annual Impact at Buildout
Property Tax Scenario
Half Share Full Share
Total Recurring Revenues $46,842 $71,665
Total Recurring Costs $49,024 $49,024
Annual Recurring Surplus/Deficit -$2,183 $22,641
Source: Table 5-3a and Table 5-3b.
Whereas most revenue sources associated with the project are reasonably predictable based on standard development assumptions, one key revenue item – sales tax – can vary widely for industrial buildings based on the specific tenant type(s) occupying the space. Some industrial businesses generate substantial sales tax revenue (due to “point of sale” business activities) while some industrial tenants generate little or no sales tax. Based on available data, The Natelson Dale Group, Inc. (TNDG) estimates that existing industrial space in the combined Chino/Chino Hills area generates average taxable sales of $32.20 per square foot of building area.1
Given that specific tenants are not currently known for the PSIC or the overall EEAA, it is reasonable to expect that the tenant mix (and therefore the level of sales tax generation) for project would mirror the overall makeup of Chino’s industrial market. However, in order to remain analytically conservative (per direction from City staff), the fiscal analysis assumes that no sales tax revenue would be generated by the proposed project.
Based on estimated industrial sales tax generation in other Inland Empire cities, TNDG believes that it is highly likely that the proposed project would generate significant taxable sales. TNDG estimates industrial
1 This factor was derived from two sources: 1) total taxable sales during Calendar Year 20 21 in the “All Other Outlets” (i.e., non-retail) sales category as reported by the California Department of Tax and Fee Administration and 2) total square feet of industrial buildings in Chino/Chino Hills as reported by Kidder Matthews (Q2 2022 industrial “Market Trends” report for the Inland Empire). Specifically, total taxable sales of $1,758,858,921 divided by a total industrial inventory of 54,627,425 square feet equals average taxable sales of $32.20 per square foot.
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
3 taxable sales PSF in other key Inland Empire sub-markets as follows2: Corona ($53.24), Fontana ($14.19), Jurupa Valley ($20.33), Moreno Valley ($8.83), Ontario ($32.38), Perris ($9.12), Rancho Cucamonga ($21.51), Redlands ($7.08), Rialto ($40.77), Riverside ($32.55), and San Bernardino ($16.86). The weighted average for these 12 sub-markets is $25.11 per square foot.
As indicated by the above data, the potential exists for the project to substantially outperform the conservative “no sales tax” assumption used in this analysis. For example, if the project achieved taxable sales equivalent to the existing average for the 12 sub-markets noted above ($25.11 PSF), the project would generate a net fiscal surplus for the City of $41,600 per year under the half-share property tax scenario and $66,400 per year under the full-share property tax scenario. If the project achieved taxable sales equivalent to the existing average for the Chino/Chino Hills area ($32.20 PSF), the project would generate a net fiscal surplus for the City of $53,900 per year under the half-share property tax scenario and $78,800 per year under the full-share property tax scenario. Table E-2 below compares the net fiscal impact of the project under the various property and sales tax scenarios considered in this analysis.
TABLE E-2. COMPARISON OF NET FISCAL IMPACTS AT BUILDOUT
BY SALES TAX AND PROPERTY TAX SCENARIO
Taxable Sales Assumptions
Property Tax Scenario
Half Share Full Share
No Taxable Sales -$2,183 $22,641
Taxable Sales @ $25.11/square foot $41,573 $66,397
Taxable Sales @ $32.20/square foot $53,928 $78,752
Source: The Natelson Dale Group, Inc. (TNDG).
2 These estimates were derived using the same data sources used for Chino (as described in the previous footnote).
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
4 Chapter 1: Introduction
This report presents the plan for service and fiscal analysis of the proposed annexation of the East End Annexation Area (EEAA), including the Philadelphia Street Industrial Center (PSIC) development, into the City of Chino. The overall EEAA totals approximately 46.48 acres in the County of San Bernardino unincorporated area, adjacent to the city of Chino boundary and within the city’s sphere of influence. The PSIC site totals 3.2 acres and is a part of the larger EEAA. The PSIC property consists of mostly vacant land with an existing single-family residential structure (see Figure 1). The Project developer for the PSIC proposes to construct 60,000 square feet of industrial space on the property.
Purpose of the study
The Local Agency Formation Commission (LAFCo) for San Bernardino County requires a Plan For Service and Fiscal Impact Analysis (Analysis) be prepared when a jurisdiction is affected by a proposed change such as the annexation proposed for this Project. According to the San Bernardino LAFCO Policy and Procedure Manual (2020), the Analysis needs to address:
A. A description of the level and range of each service to be provided to the affected territory.
B. An indication of when the service can be feasibly extended to the affected territory.
C. An identification of any improvement or upgrading of structures, roads, water or sewer facilities, other infrastructure, or other conditions the affected agency would impose upon the affected territory.
D. The Plan shall include a Fiscal Impact Analysis which shows the estimated cost of extending the service and a description of how the service or required improvements will be financed. The Fiscal Impact Analysis shall provide, at a minimum, a five (5)-year projection of revenues and expenditures. A narrative discussion of the sufficiency of revenues for anticipated service extensions and operations is required.
E. An indication of whether the annexing territory is, or will be, proposed for inclusion within an existing or proposed improvement zone/district, redevelopment area, assessment district, or community facilities district [does not apply to this analysis].
F. If retail water service is to be provided through this change, provide a description of the timely availability of water for projected needs within the area based upon factors identified in Government Code Section 65352.5 (as required by Government Code Section 56668(k)).
In keeping with the LAFCo guidelines, the cost and revenue categories included in this report reflect costs and revenues associated with municipal functions that would be absorbed by the City upon annexation of the Project. Within the City’s budget, this includes amounts for a broad range of General Fund-related activities plus specific functions associated with, primarily, the Public Works Department. The intent is to align cost categories with corresponding revenue sources, tabulating the effects on each due to the annexation. Additional discussion pertaining to the conceptual basis for the figures used in the analysis is provided in table footnotes.
Figures 1-1 and 1-2 below show Chino and the annexation area, respectively.
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
5 FIGURE 1-1. REGIONAL LOCATION
Sources: The Natelson Dale Group, Inc.; US Census; Open Street Map CC By 4.0
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
6 FIGURE 1-2. EEAA ANNEXATION AREA
Sources: The Natelson Dale Group, Inc.; US Census; Open Street Map CC By 4.0; San Bernardino County GIS
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
7 Organization of the Report
Chapter 2 includes a description of the Project’s planned improvements and information pertaining to property taxes associated with the Project. Chapter 3 addresses conditions pertaining to public facilities/services before and after the proposed annexation. Chapter 4 derives cost and revenue projection factors from the City’s budget, for purposes of the fiscal impact forecasts. Chapter 5 summarizes the fiscal impacts related to the proposed annexation area. Chapter 6 presents the one-time fees and charges that would be paid to the City by the Project. Supporting fiscal documentation is shown in Appendix A.
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
8 Chapter 2: Project Description
Planned Improvements
Within the PSIC portion of the EEAA, the Developer proposes to construct 60,000 square feet of industrial space on a 3.2-acre site. Whereas a specific development project is currently proposed for the PSIC, potential development for the balance of the EEAA is unknown at this time. However, since the City will require annexation of the overall EEAA as a single “project” for LAFCo purposes, this analysis evaluates the potential fiscal impacts of the specific land uses proposed for the PSIC and an assumed land use mix for the balance of the EEAA. In this regard, the analysis assumes that an additional 100,000 square feet of industrial space (i.e., over and above the PSIC Project) would be developed within the 5-year forecast horizon required by LAFCo. Thus, the analysis considers total EEAA development (including the PSIC) of 160,000 square feet of industrial space. See Table 2-1 for the assumed phasing of this development.
T
ABLE 2-1. PROJECT DESCRIPTION
CHINO EEAA AND PSIC: PLAN FOR SERVICE AND FISCAL ANALYSIS Phasing of future development (5 years): Year 1 Year 2 Year 3 Year 4 Year 5 Total
Industrial Buildings (square feet)
PSIC (Building 1) 25,000 0 0 0 0 25,000
PSIC (Building 2) 19,500 0 0 0 0 19,500
PSIC (Building 3) 15,500 0 0 0 0 15,500
EEAA 0 25,000 25,000 25,000 25,000 100,000
Total 60,000 25,000 25,000 25,000 25,000 160,000
Cumulative 60,000 85,000 110,000 135,000 160,000
Acres Absorbed During Year 3.20 1.33 1.33 1.33 1.33
Cumulative acres absorbed 3.20 4.53 5.87 7.20 8.53
Total Dwelling Units (beginning of year) 3 2 2 2 2
Dwelling Units Demolished During Year 1 0 0 0 0
Total Dwelling Units (end of year) 2 2 2 2 2
Cumulative Population by Year 7 7 7 7 7
New Employees per Year 40 17 17 17 17
Cumulative Employees per Year 40 57 73 90 107
Total Service Population by Year 27 35 44 52 60
Sources: The Natelson Dale Group, Inc.; Developer
The indicated numbers of employees reflect an assumed employment density of one job per 1,500 square feet of industrial space. The “service population” numbers assume that on “daytime” employee is equivalent to 50% of a full-time City resident in terms of demand on public services.
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
9 Table 2-2 below provides a summary of the public streets that would become the City’s maintenance responsibility upon annexation of the EEAA. The City-maintained streets would include existing streets currently maintained by the County, as well some additional lanes that would be developed at some future date. Per City staff, the new lanes would mostly likely be developed after the five-year timeframe for this analysis. However, in order to fully account for this potential cost, the analysis assumes that the new lanes would be operational by Year 5. The analysis assumes that any new internal streets (i.e., developed within individual business parks) would be privately maintained.
TABLE 2-2. PUBLICLY MAINTAINED INFRASTRUCTURE
CHINO EEAA AND PSIC: PLAN FOR SERVICE AND FISCAL ANALYSIS Off-Site Roads to be Maintained by City
Street Segment Length
Existing Lanes
to be Annexed
Future Lanes
to be Developed
East End Avenue – from 660’
South of Philadelphia Street to
Philadelphia Street, west half
660’ 1 lane
(0.125 lane miles)
1 lane
(0.125 lane miles)
East End Avenue – from
Philadelphia Street to Francis
Avenue, west half (existing)
1,000’ 2 lanes
(0.379 land miles)
East End Avenue – from
Philadelphia Street to Francis
Avenue, west half (future
widening)
1,660’ 1 lane
(0.314 lane miles)
1 lane
(0.314 lane miles)
Philadelphia Street – county line
to channel, north half
460’ 1 lane
(0.087 lane miles)
1 lane
(0.087 lane miles)
Philadelphia Street – channel to
East End Avenue, full width
680’ 2 lanes
(0.258 lane miles)
2 lanes
(0.258 lane miles)
Francis Avenue – county line to
East End Avenue, south half
525’ 1 lane
(0.099 lane miles)
1 lane
(0.099 lane miles)
Totals 4,985’ 1.262 lane miles 0.883 lane miles
5-Year Projection Year 1 Year 2 Year 3 Year 4 Year 5
New Publicly Maintained Road Lineal Miles1
On-Site: New Internal Roads 0.00 0.00 0.00 0.00 0.00
Off-Site: Subdivision's Share of New Off-Site Roads,
Lane-miles 1.56 0.00 0.00 0.00 0.00
Total New Road Lineal Lane-Miles 1.56 0.00 0.00 0.00 0.00 Cumulative lane miles 1.56 1.56 1.56 1.56 1.56
Source: The Natelson Dale Group, Inc.; Developer
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
10 Assessed Valuation and Property Tax
Table 2-3 shows the projected assessed valuation of the Project, and various property tax implications. The assessed valuation is based on a projected development value (including land and improvements) of $180 per square foot of industrial building area.
TABLE 2-3. PROJECTED ASSESSED VALUATION AND PROPERTY TAX CHINO EEAA AND PSIC: PLAN FOR SERVICE AND FISCAL ANALYSIS Year 1 Year 2 Year 3 Year 4 Year 5 Total
Industrial Buildings (square feet)
PSIC 60,000 0 0 0 0 60,000
EEAA 0 25,000 25,000 25,000 25,000 100,000
Total 60,000 25,000 25,000 25,000 25,000 160,000
Cumulative 60,000 85,000 110,000 135,000 160,000
Assessed Valuation
Assessed Value of Undeveloped
Land (beginning of year) $21,073,673 $19,609,906 $19,000,003 $18,390,100 $17,780,197
Assessed Value of New
Development $10,800,000 $4,500,000 $4,500,000 $4,500,000 $4,500,000 Adjustment for Previous AV of
Developed Land ($1,463,767) ($609,903) ($609,903) ($609,903) ($609,903) Net Annual Change in Assessed
Valuation $9,336,233 $3,890,097 $3,890,097 $3,890,097 $3,890,097 Cumulative New Valuation (for
Property Tax calculations) $30,409,906 $34,300,003 $38,190,100 $42,080,197 $45,970,294 Projected Property Tax
Cumulative 1 Percent Tax Levy $304,099 $343,000 $381,901 $420,802 $459,703
City (half-share scenario) $16,421 $18,522 $20,623 $22,723 $24,824 City (full-share scenario) $32,843 $37,044 $41,245 $45,447 $49,648 Projected VLF-Property Tax In Lieu
Total Valuation for Purposes of
VLF-Property Tax In Lieu1 $9,336,233 $13,226,330 $17,116,427 $21,006,524 $24,896,621
Total Annual VLF-Property Tax
In Lieu2 $6,478 $9,177 $11,875 $14,574 $17,273
Chino Valley Fire District Payment (cost to City 's General Fund) City "make whole" payment to
Fire District3 $1,192 $1,345 $1,497 $1,650 $1,802
Notes:
1. See Table 4-2.
2. See Table 4-2.
3. Fire protection for the project area is currently provided by the Chino Valley Fire District, and the District will continue to serve the project area after annexation. Upon annexation, the City will be required to make the Fire District whole to
15.071154% of the 1% property tax. The Fire District’s existing share in this Tax Rate Area is 14.679153%. The difference (0.392001%) is reflected in this analysis as an added General Fund cost to the City.
Source: The Natelson Dale Group, Inc.; Developer; San Bernardino County Assessor, Property Information Management System (PIMS), Year 2022 TaxRoll.
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
11 Table 2-4 shows the assessed valuation of the Project site as it currently exists (as of Year 2022 Tax Roll).
TABLE 2-4. ESTIMATED EXISTING ASSESSED VALUATION OF ANNEXATION AREA CHINO EEAA AND PSIC: PLAN FOR SERVICE AND FISCAL ANALYSIS
Parcel Information Category Values
2022 Assessed Valuation: EEA PSIC Total
Land $9,830,471 $2,165,840 $11,996,311
Improvement $9,091,362 $191,891 $9,091,362
Exemptions
Homeowner $14,000 $0 $14,000
Special $0 $0 $0
Net Value $18,907,833 $2,357,731 $21,073,673
Acres (per Parcel Map) 43.28 3.20 46.48
Tax Rate Area(s)
61101,
61105,
61102 61102
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
12 Chapter 3: Public Facilities/Services Before and After Annexation Current and anticipated providers of government services related to annexation of the EEAA are shown on Table 3-1 on the next page. The primary service categories in which the provider will change with annexation are: General Government Services, Community Development, Police, and Health and Welfare.
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
13 TABLE 3-1. CURRENT AND ANTICIPATED PROJECT SERVICE PROVIDERS CHINO EEAA AND PSIC: PLAN FOR SERVICE AND FISCAL ANALYSIS Service Current Service Provider Anticipated Service Provider General Government Services:
Finance San Bernardino County City of Chino
Human resources San Bernardino County City of Chino
Business registration San Bernardino County City of Chino Community Development:
Planning San Bernardino County City of Chino
Building & safety San Bernardino County City of Chino
Code compliance San Bernardino County City of Chino
Fire and Paramedic Chino Valley Fire District Chino Valley Fire District Sheriff/Police San Bernardino County Sheriff City of Chino Police Department
Library San Bernardino County Library San Bernardino County Library Parks and Recreation:
Local facilities City of Chino City of Chino
Regional facilities San Bernardino County San Bernardino County Animal Control IVHS service area IVHS contract
Street Lighting and Traffic Signals San Bernardino County City of Chino Landscape Maintenance N/A N/A
Water:
Domestic water Monte Vista Water District Monte Vista Water District Recycled water N/A N/A
Irrigation water N/A N/A
Water quality San Bernardino County City of Chino, Public Works, Environmental Division
Sewer Septic City of Chino
Transportation:
Freeways and interchanges Cal Trans Cal Trans
Arterials and collectors
City of Chino (south half of Philadelphia/east
half of East End); County
City / County (centerline of
Philadelphia/East End); City of
Chino (south half of Francis)
Local roads N/A - no existing local roads City of Chino Transit Omnitrans Omnitrans
Flood Control and Drainage:
Local facilities San Bernardino County Flood Control District San Bernardino County Flood Control District
Regional facilities San Bernardino County Flood Control District San Bernardino County Flood Control District
Utilities:
Cable/internet/telephone Time Warner Cable Time Warner Cable Power SCE SCE
Natural gas So Cal Gas So Cal Gas
Schools Chino Valley Unified Chino Valley Unified
Solid Waste Management Waste Management (individual accounts) City of Chino Contract with Waste Management
Health and Welfare San Bernardino County Department of Public Health
San Bernardino County
Department of Public Health
Sources: The Natelson Dale Group, Inc.; Various Websites
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
14 Chapter 4: City of Chino Fiscal Analysis Assumptions The general approach to conducting the fiscal impact assessment includes the following steps:
1. Establishing baseline population, employment, and similar conditions that apply to the annexing city, including a determination of appropriate city “service populations,” in this case a combination of residents and workers.
2. Compiling data on costs and revenues for relevant categories of city services from budget documents.
3. Determining and applying methods for projecting these costs and revenues within a process appropriate for the analysis of the Project-specific fiscal impacts.
The application of these three steps to this analysis is addressed in the rest of this chapter.
Baseline Population and Employment
Population and employment figures applied to this analysis are shown on Table 4-1. Notes accompanying the table describe the data sources and rationale applied to deriving the relevant figures.
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
15 TABLE 4-1. CITY POPULATION, HOUSING AND EMPLOYMENT ASSUMPTIONS CHINO EEAA AND PSIC: PLAN FOR SERVICE AND FISCAL ANALYSIS Variable Description Applied values
Population and Housing1
Total population 91,998
Household Population 87,854
Single Family Units 21,337
Multi-Family Units 6,266
Other Units 634
Total Housing Units 28,237
Occupied Housing Units 27,101
Average Citywide Household Size 3.24
Employment
Total Employment in the City2 41,165
Estimated Service Population3
Total Population 87,854
Estimated Effective Employment (at 50 percent of workers) 20,583 Estimated Daily Total Service Population 108,437
Notes:
1. Source is California Department of Finance (DOF), Table 2: E-5 City/County Population and Housing Estimates, 1/1/2022.
2. The total City employment is from the "2022 City of Chino Spatial and Statistical Summary" published by the Southern California Association of Governments (SCAG).
3. The service population consists of the estimated resident population plus 50 percent of workers, to account for the estimated less frequent use of City services by this group.
Sources: The Natelson Dale Group, Inc.; State of California, Department of Finance, E-5 Population and Housing Estimates for Cities, Counties and the State, January 1, 2020 -2022, Sacramento, California, May 2022; Southern California Association of Governments (SCAG).
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
16 City Revenue Data
Table 4-2 shows revenues for relevant line items in the City of Chino Budget, along with the factors that are derived for projecting the annexation area’s potential effects on these revenues.
TABLE 4-2. GENERAL FUND AND OTHER RELEVANT ACCOUNTS, RECURRING REVENUE FACTORS AND PROJECTION FACTORS CHINO EEAA AND PSIC: PLAN FOR SERVICE AND FISCAL ANALYSIS
Revenue Source
Chino
Budget
Property Taxes $12,769,537 5.40% of City share of 1% levy Property Taxes $12,769,537Full share scenario 10.80% of City share of 1% levy VLF - Property Tax In Lieu2 $12,019,000 $694 per $1,000,000 assessed valuation
Property Transfer Tax $750,000 0.0% X $0.55 per $1,000 assessed valuation
Taxable Sales $0.00 per square foot
1.0% of sales tax
Use Tax $4,101,128 12.3% of sales tax
Proposition 172 (Half-Cent
Sales Tax)4 $1,100,000 $29.34 per $1,000 of City sales and use tax
Measure I 2010-2040 (Half-
Cent Sales Tax)5 $2,240,422 $59.76 per $1,000 of City sales and use tax
Franchise Fees $3,342,245Service Population = 108,437 $30.82 per capita, service population Charges for Services $415,534Service Population = 108,437 $3.83 per capita, service population Fines and Forfeitures $716,580Service Population = 108,437 $6.61 per capita, service population Transfers In:
Gas Tax Fund $0 Population = 91,998 $0.00 per capita
General Fund: Transfers
in from Other Funds $4,052,245Service Population = 108,437 $37.37 per capita, service population $17,323,282,962
$12,019,000
$693.81
$37,490,128
$1,100,000
$29.34
$37,490,128
$2,240,422
$59.76
Annual Projection Factors:
Figures and Units
City sales tax revenue
Use Tax as Percent of Sales Tax
Property Turnover and Valuation
Assumptions
Case Study
Half share scenario
Projection Basis1
Measure I Revenues for 2021-2022
4. See tabl e bel ow for cal cul ati on of esti mate.
Citywide Sales & Use Tax FY 2021-2022
Proposition 172 Tax
5. See tabl e bel ow for cal cul ati on of esti mate.
Total City Sales and
Use Tax = $37,490,128
Notes:
1. See Table 4-1 for explanation of service population.
2. See tabl e bel ow for cal cul ati on of esti mate.
Citywide A.V. FY 2021-2022
VLF In-lieu FY 2021-2022
VL F pe r $1 m illion in ne w A V:
Sales and Use Tax $33,389,000
Citywide Sales & Use Tax FY 2019-2020
Proposition 172 Tax per $1,000 Sales and
Use Tax:
Measure I 2010-2040 Tax per $1,000 of
Sales and Use Tax:
Sources: The Natelson Dale Group, Inc.; City of Chino Projected Budget for Fiscal Year 2021-2022.
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
17 City Cost Data
Table 4-3 shows costs for relevant line items in the City of Chino Budget, along with the factors that are derived for projecting the annexation area’s potential effects on these costs, for use in a subsequent table.
TABLE 4-3. GENERAL FUND AND OTHER RELEVANT ACCOUNTS, RECURRING COST FACTORS AND PROJECTION FACTORS CHINO EEAA AND PSIC: PLAN FOR SERVICE AND FISCAL ANALYSIS Cost Category Chino
Budget Net Cost1 Projection Basis2 Annual Projection Factors:
Figures and Units
General
Government3 $51,184,891 $38,388,668
See Table 4-4 17.5%
of direct line costs
Police
Protection $42,984,745 $40,927,380
Service population = 108,437 $377.43
per service population
Community
Services $8,279,109 $8,279,109
Service population = 87,854 $94.24
per capita
Development
Services4
$12,085,926
$208,838
Service population = 108,437
$1.93
per service population
Public Works:
Street
Maintenance5
$5,151,976
n/a
Lane-Miles of Streets = 670
$7,690
per lane-mile
Public Works
Administration $294,496 $294,496
Service population = 108,437 $2.72
per service population
Notes:
1. Generally, assumed to be the difference between general tax-based funds and funds from other sources.
2. Estimated service population is described in notes on Table 4 -1
3. The general government overhead rate is estimated on Table 4-4.
4. Net Development Services costs include reductions for projected one-time revenues. See Appendix Table A-1.
5. Includes Budget figures for Asphalt Maintenance, Residential Street Overlay, ROW maintenance, and Street Sweeping.
Sources: The Natelson Dale Group, Inc.; City of Chino, Fiscal Year 2021-2022 Projected Budget
Table 4-4 (on the next page) shows the derivation of the estimate of the general government overhead rate, used to calculate the estimate of the General Government cost factor on Tables 5-3a and 5-3b.
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
18 TABLE 4-4. CALCULATION OF CITY GENERAL GOVERNMENT OVERHEAD RATE CHINO EEAA AND PSIC: PLAN FOR SERVICE AND FISCAL ANALYSIS Funds
Projected
FY 2021-2022
Expenditures
General
Government
Non-General
Government
General Government
Administration, General Fund Expenditures
Legislative $696,536 $696,536
City Attorney $45,000 $45,000
City Manager $886,559 $886,559
City Clerk $522,407 $522,407
Community Promotion $316,646 $316,646
State of the City $52,217 $52,217
Community Services Corps $7,100 $7,100
Finance Dept. (less payments to Fire District) $5,381,425 $5,381,425 Human Resources Department $77,560 $77,560
Internal Service Funds (Non-General Funds)
610 - Central Services $3,327,339 $3,327,339
630 - Liability Insurance $3,635,079 $3,635,079
640 - Employee Benefits $26,332,109 $26,332,109
650 - Building Management $4,815,231 $4,815,231
660 - Equipment Management $5,089,683 $5,089,683
General Government Total $51,184,891 $51,184,891
All Funds Total $271,143,133
Non-General Government $219,958,242
Current General Government Overhead Rate 23.3%
Adjusted Overhead Rate, at % of total = 75% 17.5%
Overhead Amount $38,388,668
Notes:
1. General government costs for the Project are not expected to increase on a one -to-one basis.
Therefore, an overhead rate adjustment is used, set at 75 percent.
Sources: The Natelson Dale Group, Inc.; City of Chino Projected Budget for Fiscal Year 2021-2022.
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
19 Chapter 5: Fiscal Impacts of Annexation Area
A summation of the annexation area’s projected annual recurring revenues and costs, for the categories listed above, is shown on Table 5-1 below. Based on the conservative revenue assumptions used in this analysis (as described further below), the annexation area would:
• Generate a small fiscal deficit ($2,200 per year) to the City under the “half share” property tax scenario; and
• Generate a fiscal surplus of $22,600 per year under the “full share” property tax scenario.
Under more favorable revenue assumptions (see discussion of potential sales tax revenues below), the annexation area would potentially generate a significantly larger annual surplus for the City (even under the “half share” property tax scenario).
TABLE 5-1. SUMMARY OF ANNUAL FISCAL IMPACTS AT BUILDOUT Annual Impact at Buildout
Property Tax Scenario
Half Share Full Share
Total Recurring Revenues $46,842 $71,665
Total Recurring Costs $49,024 $49,024
Annual Recurring Surplus/Deficit -$2,183 $22,641
Source: Table 5-3a and Table 5-3b.
Whereas most revenue sources associated with the project are reasonably predictable based on standard development assumptions, one key revenue item – sales tax – can vary widely for industrial buildings based on the specific tenant type(s) occupying the space. Some industrial businesses generate substantial sales tax revenue (due to “point of sale” business activities) while some industrial tenants generate little or no sales tax. Based on available data, The Natelson Dale Group, Inc. (TNDG) estimates that existing industrial space in the combined Chino/Chino Hills area generates average taxable sales of $32.20 per square foot of building area.
3 Given that specific tenants are not currently known for the PSIC or the overall EEAA, it is reasonable to expect that the tenant mix (and therefore the level of sales tax generation) for project would mirror the overall makeup of Chino’s industrial market. However, in order to remain analytically conservative (per direction from City staff), the fiscal analysis assumes that no sales tax revenue would be generated by the proposed project.
Based on estimated industrial sales tax generation in other Inland Empire cities, TNDG believes that it is highly likely that the proposed project would generate significant taxable sales. TNDG estimates industrial
3 This factor was derived from two sources: 1) total taxable sales during Calendar Year 20 21 in the “All Other Outlets” (i.e., non-retail) sales category as reported by the California Department of Tax and Fee Administration and 2) total square feet of industrial buildings in Chino/Chino Hills as reported by Kidder Matthews (Q2 2022 industrial “Market Trends” report for the Inland Empire). Specifically, total taxable sales of $1,758,858,921 divided by a total industrial inventory of 54,627,425 square feet equals average taxable sales of $32.20 per square foot.
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
20 taxable sales PSF in other key Inland Empire sub-markets as follows4: Corona ($53.24), Fontana ($14.19), Jurupa Valley ($20.33), Moreno Valley ($8.83), Ontario ($32.38), Perris ($9.12), Rancho Cucamonga ($21.51), Redlands ($7.08), Rialto ($40.77), Riverside ($32.55), and San Bernardino ($16.86). The weighted average for these 12 sub-markets is $25.11 per square foot.
As indicated by the above data, the potential exists for the project to substantially outperform the conservative “no sales tax” assumption used in this analysis. For example, if the project achieved taxable sales equivalent to the existing average for the 12 sub-markets noted above ($25.11 PSF), the project would generate a net fiscal surplus for the City of $41,600 per year under the half-share property tax scenario and $66,400 per year under the full-share property tax scenario. If the project achieved taxable sales equivalent to the existing average for the Chino/Chino Hills area ($32.20 PSF), the project would generate a net fiscal surplus for the City of $53,900 per year under the half-share property tax scenario and $78,800 per year under the full-share property tax scenario. Table E-2 below compares the net fiscal impact of the project under the various property and sales tax scenarios considered in this analysis.
TABLE 5-2. COMPARISON OF NET FISCAL IMPACTS AT BUILDOUT
BY SALES TAX AND PROPERTY TAX SCENARIO
Taxable Sales Assumptions
Property Tax Scenario
Half Share Full Share
No Taxable Sales -$2,183 $22,641
Taxable Sales @ $25.11/square foot $41,573 $66,397
Taxable Sales @ $32.20/square foot $53,928 $78,752
Source: The Natelson Dale Group, Inc. (TNDG).
4 These estimates were derived using the same data sources used for Chino (as describ ed in the previous footnote).
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
21 TABLE 5-3A. DETAILED PROJECTED RECURRING FISCAL IMPACTS “HALF SHARE” PROPERTY TAX SCENARIO
CHINO EEAA AND PSIC: PLAN FOR SERVICE AND FISCAL ANALYSIS Category
Annexation Area
Year 1 Year 2 Year 3 Year 4 Year 5
% of
Total
(Yr. 5)
General Fund and Relevant Other Accounts, Annual Recurring Revenues Property Taxes $16,421 $18,522 $20,623 $22,723 $24,824 53.0% VLF-Property Tax in Lieu $6,478 $9,177 $11,875 $14,574 $17,273 36.9% Property Transfer Tax $0 $0 $0 $0 $0 0.0%
On-Site Sales and Use Tax $0 $0 $0 $0 $0 0.0%
Proposition 172 Half Cent Sales Tax $0 $0 $0 $0 $0 0.0% Measure I 2010-2040 Half Cent Sales Tax $0 $0 $0 $0 $0 0.0% Franchise Fees $832 $1,089 $1,346 $1,603 $1,860 4.0%
Charges for Services $103 $135 $167 $199 $231 0.5%
Fines $178 $233 $289 $344 $399 0.9%
Transfers In: State Gas Tax $0 $0 $0 $0 $0 0.0%
Transfers In: From Other City Funds $1,009 $1,320 $1,632 $1,943 $2,255 4.8% Total Recurring Revenues $25,022 $30,477 $35,932 $41,387 $46,842 100.0% General Fund and Relevant Other Accounts, Annual Recurring Costs General Government $3,609 $4,165 $4,721 $5,276 $7,017 14.3% Police Protection $10,191 $13,336 $16,481 $19,626 $22,772 46.4% Community Services $660 $660 $660 $660 $660 1.3%
Community Development $52 $68 $84 $100 $116 0.2%
Public Works: Street Maintenance $9,704 $9,704 $9,704 $9,704 $16,494 33.6% Public Works: Other Costs $73 $96 $119 $141 $164 0.3%
Chino Valley Fire District (tax adjustment) $1,192 $1,345 $1,497 $1,650 $1,802 3.7% Total Recurring Costs $25,481 $29,373 $33,265 $37,157 $49,024 100.0% Annual Recurring Surplus/Deficit -$459 $1,104 $2,666 $4,229 -$2,183 Revenue/Cost Ratio 0.98 1.04 1.08 1.11 0.96
Sources: Tables 4-1, 4-2 and 4-3.
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
22 TABLE 5-3B. DETAILED PROJECTED RECURRING FISCAL IMPACTS “FULL SHARE” PROPERTY TAX SCENARIO
CHINO EEAA AND PSIC: PLAN FOR SERVICE AND FISCAL ANALYSIS Category
Annexation Area
Year 1 Year 2 Year 3 Year 4 Year 5
% of
Total
(Yr. 5)
General Fund and Relevant Other Accounts, Annual Recurring Revenues Property Taxes $32,843 $37,044 $41,245 $45,447 $49,648 69.3% VLF-Property Tax in Lieu $6,478 $9,177 $11,875 $14,574 $17,273 24.1% Property Transfer Tax $0 $0 $0 $0 $0 0.0%
On-Site Sales and Use Tax $0 $0 $0 $0 $0 0.0%
Proposition 172 Half Cent Sales Tax $0 $0 $0 $0 $0 0.0% Measure I 2010-2040 Half Cent Sales Tax $0 $0 $0 $0 $0 0.0% Franchise Fees $832 $1,089 $1,346 $1,603 $1,860 2.6%
Charges for Services $103 $135 $167 $199 $231 0.3%
Fines $178 $233 $289 $344 $399 0.6%
Transfers In: State Gas Tax $0 $0 $0 $0 $0 0.0%
Transfers In: From Other City Funds $1,009 $1,320 $1,632 $1,943 $2,255 3.1% Total Recurring Revenues $41,443 $48,999 $56,554 $64,110 $71,665 100.0% General Fund and Relevant Other Accounts, Annual Recurring Costs General Government $3,609 $4,165 $4,721 $5,276 $7,017 14.3% Police Protection $10,191 $13,336 $16,481 $19,626 $22,772 46.4% Community Services $660 $660 $660 $660 $660 1.3%
Community Development $52 $68 $84 $100 $116 0.2%
Public Works: Street Maintenance $9,704 $9,704 $9,704 $9,704 $16,494 33.6% Public Works: Other Costs $73 $96 $119 $141 $164 0.3%
Chino Valley Fire District (tax adjustment) $1,192 $1,345 $1,497 $1,650 $1,802 3.7% Total Recurring Costs $25,481 $29,373 $33,265 $37,157 $49,024 100.0% Annual Recurring Surplus/Deficit $15,962 $19,626 $23,289 $26,953 $22,641 Revenue/Cost Ratio 1.63 1.67 1.70 1.73 1.46
Sources: Tables 4-1, 4-2 and 4-3.
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
23 Chapter 6: Project One-Time Fees and Charges
Table 6-1 below provides a preliminary estimate of one-time development impact fees that the EEAA annexation would generate for the City of Chino and the Chino Valley Unified School District.
TABLE 6-1. ONE-TIME IMPACT AND OTHER DEVELOPMENT FEE PAYMENTS CHINO EEAA AND PSIC: PLAN FOR SERVICE AND FISCAL ANALYSIS Impact Fees
Unit
Measure Price Quantity Amount
City of Chino
Law Enforcement Facilities, Industrial Square feet $0.05 160,000 $8,000 Fire Protection Facilities, Industrial Square feet $0.04 160,000 $6,400 Circulation (Streets, Signals and Bridges) System Square feet $2.31 160,000 $369,600 Storm Drain Collection, Industrial Square feet $0.52 160,000 $83,200 Water Storage and Distribution, Industrial1 Square feet $0.54 160,000 $86,400 Sewage Collection System, Industrial Square feet $0.10 160,000 $16,000 General Facilities, Industrial Square feet $0.06 160,000 $9,600 Public Use Facilities, Industrial Square feet $0.00 160,000 $0 Capital Impact Administration Charge Percentage 12% $69,504 School Fee
Chino Valley Unified School District Square feet $0.64 160,000 $102,400 Total, Impact Fees $751,104
CHINO EAST END ANNEXATION AREA (EEAA) AND PHILADELPHIA STREET INDUSTRIAL CENTER (PSIC) DEVELOPMENT: PLAN FOR SERVICE AND FISCAL ANALYSIS
The Natelson Dale Group Inc.
24 Appendix A: Supporting Fiscal Documentation
TABLE A-1. GENERAL FUND NET COMMUNITY DEVELOPMENT COST FACTORS CHINO EEAA AND PSIC: PLAN FOR SERVICE AND FISCAL ANALYSIS Category Amount
A. DEVELOPMENT SERVICES
Total Development Services Expenditures $12,085,926
One-Time Processing Fees/Permits:
Building Permits/Code Enforcement Fees $4,976,645
Planning Fees $818,898
Development Fees/Permits $6,081,545
Total One-Time Revenues $11,877,088
Recurring Net Community Development Costs $208,838
Service Population1 108,437
Citywide Net Cost Factor per Service Population for Community Development $1.93 B. PUBLIC WORKS ADMINISTRATION
Public Works Administration $294,496
Service Population1 108,437
Citywide Net Cost Factor per Service Population for Other Public Works $2.72 Note:
1. See Table 4-1.
Sources: The Natelson Dale Group, Inc.; City of Chino Projected Budget for Fiscal Year 2021-2022.