City of C
osta Mesa
3150 Bear Street - Fiscal Impact
Analysis
December 11, 2024
Prepared for:
MLC Holdings, Inc.
5 Peters Canyon Road, Suite 310
Irvine, CA 92606
Prepare
d by:
28202 Cabot Road, Suite 620
Laguna Niguel, CA 92677
T. 949-542-7070
F. 949-542-7076
ATTACHMENT 8
MLC Holdings, Inc. – 3150 Bear Street
Fiscal Impact Analysis Report
December 11, 2024
2 | Page
1. INTRODUCTION
On behalf of MLC Holdings, Inc. (“Developer”), Zimmerman Group, Inc. has completed a f iscal impact analysis (“FIA”) for the proposed residential home development located at 3150 Bear Street (“Property”) in the City of Costa Mesa (“City”). The Property is currently being used for hosting luxury events , but Developer is proposing to develop 142 residential units (“Project”), which includes seven affordable housing units on the Property. The Project is proposed to include 122 4-story stacked flats and 20 cluster motor court homes. This FIA report calculates the estimated annual recurring fiscal impact on the City’s general fund (“General Fund”) that will result from development of the proposed Project.
2. FISCAL IMPACT ANALYSIS
2.1 PURPOSE & METHODOLOGY
The FIA analyzes the additional revenues and expenses to the General Fund expected to result from the development of the Project . The additional revenues are then compared to the additional expenses to determine the net fiscal impact (surplus or deficit) on the General F und. Revenues and expenses are calculated using the case study method (“Case Study Method”) or the per capita method (“Per Capita Method”) . The Case Study Method uses Project specific variables, such as estimated home values, to determine the estimated impact on the General Fund . The Per Capita Method is based on the City’s total revenue or expense from the Adopted 2024- 25 Budget, divided by the current service population to determine the average revenue or expense per person.
For certain revenue and expense categories, adjustments are made to account for the marginal impact differing from the existing citywide average per capita amount. For example, there are certain fixed costs that are not expected to increase as a result of the Project development.
The estimated projected revenues and expenditures are based on information and assumptions for the proposed Project , data from the City’s Fiscal Year 2024- 25 Operating Budget , 2024-25 tax rates and tax allocations from the Orange County Auditor Controller, 2024- 25 assessed values and tax rate area information from the Orange County Treasurer, as well as statistical data from the California Department of Finance and the U.S. Bureau of Statistics.
MLC Holdings, Inc. – 3150 Bear Street
Fiscal Impact Analysis Report
December 11, 2024
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2.2 CONCLUSIONS
A. Summary
The increase in General F und revenues following the buildout of the Project is estimated to be approximately $440,593 per year, and the increase in General F und expenses is estimated to be approximately $362,535 per year. Accordingly, there is expected to be an annual surplus of approximately $78,058 to the G eneral Fund following Project buildout . The table below summarizes the estimated annual General Fund revenues, expenses and surplus. As indicated, the revenue to expense ratio is 1.22, meaning the revenues exceed the expenses by approximately 22%.
MLC Holdings, Inc. – 3150 Bear Street
Fiscal Impact Analysis Report
December 11, 2024
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TABLE 2-1
GENERAL FUND – FISCAL IMPACTS
Annual General Fund Revenues
Amount at
Buildout
Percent
of Total
Property Tax $204,145 46.4%
Prop Tax-In Lieu VLF 92,585 21.0%
Property Transfer Tax 8,786 2.0%
Sales Tax 64,982 14.7%
Sales Tax - Prop 172 1,221 0.3%
Franchise Fees 17,186 3.9%
Business Licenses 2,422 0.5%
Fines and Forfeitures 3,352 0.8%
Licenses and Permits 12,354 2.8%
Fees and Charges 33,559 7.6%
Total Revenues $440,593 100.0%
Annual General Fund Expenditures
Amount at
Buildout
Percent
of Total
Parks and Community Services 23,267 6.4%
Police Department 159,417 44.0%
Fire and Rescue Department 97,249 26.8%
Development Services 21,691 6.0%
Public Works 60,912 16.8%
Total Expenditures $362,535 100.0%
Annual Recurring Surplus/(Deficit) at Buildout $78,058
Revenues to Expenditure Ratio 1.22
B. Recurring Revenues
Property Tax
The County Auditor -Controller identifies property tax rates as a percentage of total assessed valuation by Tax Rate Area ("TRA"). The Project is within TRA 15-139. Property tax revenues are calculated using the TRA apportionment factors to forecast property tax revenues expected from the Project. Based on information provided by the Auditor -Controller’s office, the General Fund receives approximately 14.92% of the basic one percent ad valorem property tax levy.
Based on the projected assessed value for the Project , less the existing assessed value of the Project site, additional property tax revenues to the General Fund are projected to be $ 204,145 MLC Holdings, Inc. – 3150 Bear Street
Fiscal Impact Analysis Report
December 11, 2024
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annually at build- out. See Tables 2 and 3 of the Appendix for details of the property tax calculations.
Prop Tax-In Lieu VLF
Historically, approximately three-fourths of Vehicle License Fee (VLF) revenue was allocated to cities and counties as general-purpose funding. Beginning in 1998- 99, the State reduced the VLF payment required from vehicle owners. However, the State made up the revenue impact of the VLF rate reductions with State G eneral Fund revenue (the “VLF Backfill”). The VLF Backfill was eliminated in the 2004 -05 State Budget. In that year, the VLF Backfill to cities and counties was permanently replaced with an equivalent increase in property tax revenues (Property Tax In Lieu of VLF). This increase was funded by decreases in property tax revenues allocated to schools and community colleges.
Annual Property Taxes in Lieu of VLF are estimated to be $92,585 for the Project as shown in Table 2 of the Appendix. Revenues from Property Taxes In Lieu of VLF are estimated at .06765% of the increase in assessed valuation of $136,855,950. This percentage is based on the total Property Tax In Lieu of VLF in the Adopted Budget of $16,734,432 divided by the total City assessed valuation of $24,736,139,990.
Property Transfer Tax
Property transfer tax applies to all sales of real property at a rate of $1.10 per $1,000 of sale or resale value, excluding assumed liens or encumbrances. The City receives 50% of the Documentary Stamp Tax , and it is assumed the Project will have a 10% turnover rate each year estimated to generate $8,786 per year in revenues to the General Fund as shown in Table 2 of the Appendix.
Sales Tax
Sales tax revenues are generated by taxable purchases made within the C ity. As shown in Table 4 of the Appendix, it is anticipated that the Project will generate approximately $ 45,762 in annual taxable sales per unit totaling $6,498,204 in taxable sales at buildout . This includes only the taxable sales expected to be captured by the City. The C ity will receive 1.00% of taxable sales resulting in an estimated recurring annual sales tax revenue of $64,982 to the General Fund.
MLC Holdings, Inc. – 3150 Bear Street
Fiscal Impact Analysis Report
December 11, 2024
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Sales Tax – Prop 172
The Sales Tax – Prop 172 revenue is the Proposition 172 half -cent sales and use tax approved by voters in 1993 to cushion the impact of the “Educational Revenue Augmentation Fund” (ERAF) property tax shifts. The State collects the Proposition 172 tax and apportions it to each county based on their proportionate share of statewide taxable sales. Each county is then required to allocate this revenue to the cities for public safety services only. It is estimated the City receives
3.76% of the Sales Tax – Prop 172 revenues and the increase to the General Fund will be $ 1,221 for the Project as shown in Table 4 of the Appendix.
Franchise Fees
Franchise Fees are the fees paid by utility companies for franchise rights and use of City streets and rights of way. The Project is estimated to generate additional revenues of $17,186, based on the Per Capita Method, as shown in Table 5 of the Appendix.
Business License Tax
Business licenses are issued for either regulatory or cost recovery purposes, to applicants who conduct business activities within the City. The regulatory authority provides cities the means to protect overall community interests. The Project is estimated to generate additional revenues of $2,422, based on the Per Capita Method, as shown in Table 5 of the Appendix.
Fines and Forfeitures
Fines and Forfeitures primarily come from municipal code violations, motor vehicle code violations, and parking fines . Amounts paid by a defendant include fines and various penalties, assessments, and restitution. The Project is estimated to generate additional revenues of $3,352, based on the Per Capita Method, as shown in Table 5 of the Appendix.
Licenses and Permits
Licenses and Permits are issued for either regulatory or cost recovery purposes, to applicants who conduct business activities within the City. The regulatory authority provides cities the means to protect the overall community interests. An example of licenses issued is animal licenses. Major categories of permits are street permits, building permits, electrical permits, plumbing permits, MLC Holdings, Inc. – 3150 Bear Street
Fiscal Impact Analysis Report
December 11, 2024
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and mechanical permits. The Project is estimated to generate additional revenues of $ 12,354, based on the Per Capita Method, as shown in Table 5 of the Appendix.
Fees and Charges for Services
The City’s fees and charges include: user fees charged to a person or entity participating in the various recreation classes offered by the City, plan check fees, other services provided by the Planning Division related to zoning and conditional use permits, fingerprinting, false alarms, police reports, fire inspection, ambulance transportation, and hazardous materials disclosure fees.
The Project is estimated to generate additional revenues of $33,559, based on the Per Capita Method, as shown in Table 5 of the Appendix.
C. Recurring Expenses
Parks and Community Services
The Parks and Community Services Department provides the citizens of the City with a variety of high-quality recreation facilities, programs, and services. These facilities include the Balearic Community Center, the Downtown Aquatic and Recreation Centers, the Norma Hertzog Community Center, the Costa Mesa Senior Center, and the Jack Hammett Sports Complex. In terms of programs, the Department provides a large offering of youth, teen, and adult recreation programs and classes, as well as Citywide special events. The Project is estimated to generate additional costs of $23,267 based on the Per Capita Method as shown in Table 6 of the Appendix.
Police Department
The Police Department is tasked with protecting life and property while preserving the peace. The department is comprised of three divisions: Police Administration, Police Field Operations, and Police Support Services. The Project is estimated to generate additional costs of $159,417, based on the Per Capita Method, as shown in Table 6 of the Appendix.
Fire and Rescue Department
The Fire and Rescue Department is a public safety function that protects life, property and the environment through its mitigation, prevention, preparedness, response, and recovery services.
The 3 divisions of the Fire and Rescue Department are Fire Administration, Fire/Rescue Operations/Emergency Medical Services, and Community Risk Reduction. The Project is MLC Holdings, Inc. – 3150 Bear Street
Fiscal Impact Analysis Report
December 11, 2024
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expected to generate additional costs of $ 97,249, based on the Per Capita Method, as shown in Table 6 of the Appendix.
Development Services
The Development Services Department implements community development programs and functions. The Department is comprised of five divisions and are as follows: Administration, Planning, Building Safety, Community Improvement, and Housing and Community Development. The Project is expected to generate additional costs of $21,691, based on the Per Capita Method and a marginal cost impact adjustment, as shown in Table 6 of the Appendix.
Public Works
The Public Works Department provides services related to engineering design, construction management, transportation, street, energy and sustainability, park and city facilities maintenance, water quality, waste management and recycling street sweeping, and fleet management . The Project is expected to generate additional costs of $60,912, based on the Per Capita Method, as shown in Table 6 of the Appendix.
MLC Holdings, Inc. – 3150 Bear Street
Fiscal Impact Analysis Report
December 11, 2024
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APPENDIX
FISCAL IMPACT CALCULATIONS
PROPOSED RESIDENTIAL PROJECT
TABLE 1
ESTIMATE OF PROJECT POPULATION
3150 BEAR STREET - FISCAL IMPACT ANALYSIS
PROPOSED RESIDENTIAL PROJECT
City-Wide Household Population (a) 106,907
Number of Housing Units (a) 42,432
City-Wide Average Persons Per Unit 2.52
Residential Units at Buildout 142
Total Project Population at Buildout 358
Footnotes:
(a) Source: E-5 City/County Population and Housing Estimates, 1/1/2024 from the California Department of Finance.
DRAFT
TABLE 2
ESTIMATE OF REVENUES FROM PROPERTY TAXES
3150 BEAR STREET - FISCAL IMPACT ANALYSIS
PROPOSED RESIDENTIAL PROJECT
Property Tax Levy 1.00% In-Lieu Property Tax Per $1,000 of Transfer Tax Rate (d) 0.055% City Portion (b) 14.92% AV Growth (c) $0.6765 Turnover Rate (e) 10.00% Floor Plan
Unit
Mix (a)
Assessed
Value (a)
Total
Assessed
Value
Property Tax
Revenue/
Unit
Property Tax
Revenue at
Buildout
Property Tax
In-Lieu
Revenues/ Unit
In-Lieu
Property
Revenues at
Buildout
Property
Transfer Tax
Revenue/Unit
Property
Transfer Tax
Revenue at
Buildout
Plan 1 13 $1,420,000 $18,460,000 $2,118 $27,536 $961 $12,489 $78 $1,015 Plan 2 7 $1,555,000 $10,885,000 $2,320 $16,237 $1,052 $7,364 $86 $599 Plan 3 42 $990,000 $41,580,000 $1,477 $62,024 $670 $28,130 $54 $2,287 Plan 4 12 $1,080,000 $12,960,000 $1,611 $19,332 $731 $8,768 $59 $713 Plan 5 45 $1,190,000 $53,550,000 $1,775 $79,879 $805 $36,228 $65 $2,945 Plan 6 16 $1,305,000 $20,880,000 $1,947 $31,146 $883 $14,126 $72 $1,148 Plan 3A 4 $193,000 $772,000 $288 $1,152 $131 $522 $11 $42 Plan 4A 3 $219,250 $657,750 $327 $981 $148 $445 $12 $36 Total at Buildout 142 $159,744,750 $238,287 $108,070 $8,786 Less Existing Assessed Value (f) -$22,888,800 -$34,143 -$15,485 $0 Total Increase to General Fund $136,855,950 $204,145 $92,585 $8,786 Footnotes:
(a) Unit mix and assessed value based on estimated home pricing received from Developer. Plans 1A and 2A represent affordable housing units. (d) Transfer tax is 0.11% of the sale price of residential property and the City receives 50% of the taxed amount. (e) Assumes a 10% turnover rate each year.
(f) Project site has assessed value of $22,888,800 per the 2024-25 property tax bills. (c) AV Growth is calculated by taking the Property Taxes-In Lieu amount of $16,734,432, from the Adopted FY 2024-25 Budget, divided by the City AV Estimate of $24,736,139,990, from the 2023-2024 District Values for Publication of Assessed Valuations Booklet Equalized Roll Values from the Orange County Auditor Controller, multiplied by $1,000 to equal $0.6765 of every $1,000 of AV Growth. (b) The Subject Property's Tax Rate Area is 15-139 and the City of Costa Mesa receives 0.14917% of the 1% Ad Valorem from the County.
DRAFT
District District Name
Agency Pct of
Revenue
Property Taxes
at Buildout
001C ORANGE CO GEN. FUND 0.0678159786 $92,810
002A ORANGE COUNTY PUBLIC LIBRARY 0.0183476652 $25,110
710A O C FLOOD CONTROL DISTRICT 0.0217608000 $29,781
713A O C PARKS CSA 26 0.0168204303 $23,020
001C EDUCATIONAL REVENUE AUGMENTATION FUND 0.1124933430 $153,954 002A EDUCATIONAL REVENUE AUGMENTATION FUND 0.0211005817 $28,877 065B EDUCATIONAL REVENUE AUGMENTATION FUND 0.0372952273 $51,041 703A EDUCATIONAL REVENUE AUGMENTATION FUND 0.0008054134 $1,102 708A EDUCATIONAL REVENUE AUGMENTATION FUND 0.0020587714 $2,818 710A EDUCATIONAL REVENUE AUGMENTATION FUND 0.0089396001 $12,234 713A EDUCATIONAL REVENUE AUGMENTATION FUND 0.0032177102 $4,404 744A EDUCATIONAL REVENUE AUGMENTATION FUND 0.0010062745 $1,377 757B EDUCATIONAL REVENUE AUGMENTATION FUND 0.0011051571 $1,512 922A EDUCATIONAL REVENUE AUGMENTATION FUND 0.0052848214 $7,233 703A ORANGE CO CEMETRY FUND-GENERAL 0.0005470431 $749
065B COSTA MESA CITY 0.1498604348 $205,093
757B COSTA MESA SANITARY DIST-GEN.FUND 0.0016577357 $2,269 744A ORANGE CO VECTOR CONTROL DIST 0.0012287604 $1,682
960A ORANGE COUNTY WATER DISTRICT 0.0077993053 $10,674
961A ORANGE WATER DIST-WATER RESERVE 0.0001171022 $160
708A ORANGE TRANSIT AUTHORITY 0.0030881571 $4,226
916H OC SANITATION #7 GEN FUND 0.0158287550 $21,663
320B NEWPORT-MESA UNIF GEN FUND 0.3804494669 $520,668
300B COAST COMM COLLEGE GEN FUND 0.1060513015 $145,138
600A O C DEPT OF EDUCATION-GEN FUND 0.0153201640 $20,967 Total 1.0000000000 $1,368,560
Sources:
TABLE 3
TRA: 15-072
BREAKDOWN OF 1% AD VALOREM TAX
Orange Count Auditor office
Section 99 Factor Report by TRA 2024-2025
DRAFT
TABLE 4
ESTIMATE OF SALES TAXES
3150 BEAR STREET - FISCAL IMPACT ANALYSIS
PROPOSED RESIDENTIAL PROJECT
Estimate of Household Income
Weighted Average Sales Price $1,124,963
Down Payment 10% $112,496
Loan Amount $1,012,467
Interest Rate (a) 6.75%
Term (Years) 30
Annual Mortgage Payments $78,802
HOA Dues (Per Month) $214 $2,573
Maintenance / Insurance (Per Month) $100 $1,200
Property Taxes 1.25% $14,062
Total Annual Housing Costs $96,637
Percent of Income Spent on Housing 37%
Average Annual Household Income $263,000
Estimated Sales Taxes Per Unit
Percent of Income on Taxable Spending (b) 34.80%
City Spending Capture 50.00%
Taxable Sales within the City $45,762
City Portion of Base Sales Tax (c) 1.00% $458
City Portion of Prop 172 Sales Tax (d) $9
Estimated Sales Taxes at Buildout
Total Units 142
Taxable Sales within the City $6,498,204
City Portion of Sales Tax $64,982
Sales Tax - Prop 172 (Safety) $1,221
Footnote:
(a) Estimate 30 year mortgage rate based on Bankrate.com. (c) Per Page 36 of the City Operating Budget.
(b) Per the U.S. Bureau of Labor Statistics, Western Information Office, Consumer Expenditures for the Los Angeles Area - 2021-22. Assumes 50% of the 13.2% spent on food is taxable. (d) The City receives 3.76% of the Half-Cent Sales Tax (Safety) based on the 2024-25 Adopted Budget.
DRAFT
TABLE 5
ESTIMATE OF ANNUAL RECURRING REVENUES
3150 BEAR STREET - FISCAL IMPACT ANALYSIS
PROPOSED RESIDENTIAL PROJECT
Demographic Profile:
Household
Population
Employment
Population (a)
Total
Population/
Jobs
Total Resident
Equivalents (b)
City of Costa Mesa 106,907 64,291 171,198 139,053
3150 Bear Street 358 0 358 358
City FY 2024-25
Adopted Budget
(c)
Per Capita
Service
Population
Per Capita
Revenue
New Residents/
Resident
Equivalents
"Marginal
Revenue" Impact
Adjustment (e)
Annual Revenue
at Buildout
Taxes
Property Tax $39,815,092 $204,145
Prop Tax-In Lieu VLF $16,734,432 $92,585
Property Transfer Tax $1,139,605 $8,786
Sales Tax $80,063,389 $64,982
Sales Tax - Prop 172 $1,504,501 $1,221
Other Taxes (d) $16,340,474 Res Equiv $117.51 358 100% $0 Franchise Fees $6,675,334 Res Equiv $48.01 358 0% $17,186 Business Licenses $940,807 Res Equiv $6.77 358 0% $2,422 Fines and Forfeitures $1,302,091 Res Equiv $9.36 358 0% $3,352 Licenses and Permits $4,798,456 Res Equiv $34.51 358 0% $12,354 Fees and Charges $13,034,685 Res Equiv $93.74 358 0% $33,559 Use of Money and Property (d) $5,360,700 Res Equiv $38.55 358 100% $0 Other Government Agencies (d) $896,086 Res Equiv $6.44 358 100% $0 Other Revenues (d) $1,288,507 Res Equiv $9.27 358 100% $0 Total Revenues $189,894,159 $440,593
Footnotes:
(b) Assumes that two employees have the same impact as one resident. (c) Amounts from the Adopted 2024-25 City Budget.
(d) Revenues assumed to not be affected by the increase of the Project population. (e) Indicates the adjustment to certain per capita revenue categories not expected to increase based on the citywide average. (a) Total Employment of 64,291 is from the City Profile on page 7 of the Adopted 2024-25 City Budget. -------------------------------Case Study------------------------------- -------------------------------Case Study------------------------------- -------------------------------Case Study------------------------------- -------------------------------Case Study------------------------------- -------------------------------Case Study------------------------------- DRAFT
TABLE 6
ESTIMATE OF ANNUAL RECURRING EXPENDITURES
3150 BEAR STREET - FISCAL IMPACT ANALYSIS
PROPOSED RESIDENTIAL PROJECT
Demographic Profile:
Household
Population
Employment
Population (a)
Total
Population/
Jobs
Total Resident
Equivalents (b)
City of Costa Mesa 106,907 64,291 171,198 139,053
3150 Bear Street 358 0 358 358
City FY 2024-25
Adopted Budget
Service
Population
Per Capita
Expense
New Residents/
Resident
Equivalents
"Marginal Cost"
Impact
Adjustment (c)
Estimated
Recurring
Expenditures at
Buildout
City Council $874,089 Res Equiv $6.29 358 100% $0
City Manager’s Office $9,594,377 Res Equiv $69.00 358 100% $0 City Attorney $1,086,750 Res Equiv $7.82 358 100% $0
Finance $6,073,764 Res Equiv $43.68 358 100% $0
Parks and Community Services $9,037,068 Res Equiv $64.99 358 0% $23,267 Information Technology $6,402,558 Res Equiv $46.04 358 100% $0 Police Department $61,919,751 Res Equiv $445.30 358 0% $159,417 Fire and Rescue Department $37,772,922 Res Equiv $271.65 358 0% $97,249 Development Services $9,911,803 Res Equiv $71.28 358 15% $21,691 Public Works $23,659,001 Res Equiv $170.14 358 0% $60,912 Non-Departmental (d) $23,562,076 Res Equiv $169.45 358 100% $0 Total Expenditures $189,894,159 $362,535
Footnotes:
(b) Assumes that two employees have the same impact as one resident. (c) Reflects adjustment to expenditures that do not have a 1:1 relationship between projected population growth and costs for municipal services because of certain fixed costs. (a) Total Employment of 64,291 is from the City Profile on page 7 of the Adopted 2024-25 City Budget. (d) Includes costs assumed not to be affected by Project population such as debt service requirements, interfund transfers, City Manager contigency, Retiree Medical Plan benefits for employees hired before January 1, 2024, and subsidy to the Housing Authority.
DRAFT
TABLE 7
ESTIMATE OF GENERAL FUND FISCAL IMPACT
3150 BEAR STREET - FISCAL IMPACT ANALYSIS
PROPOSED RESIDENTIAL PROJECT
Annual General Fund Revenues
Amount at
Buildout
Percent
of Total
Property Tax $204,145 46.3%
Prop Tax-In Lieu VLF 92,585 21.0%
Property Transfer Tax 8,786 2.0%
Sales Tax 64,982 14.7%
Sales Tax - Prop 172 1,221 0.3%
Other Taxes 0 0.0%
Franchise Fees 17,186 3.9%
Business Licenses 2,422 0.5%
Fines and Forfeitures 3,352 0.8%
Licenses and Permits 12,354 2.8%
Fees and Charges 33,559 7.6%
Use of Money and Property 0 0.0%
Other Government Agencies 0 0.0%
Other Revenues 0 0.0%
Total Revenues $440,593 100.0%
Annual General Fund Expenditures
Amount at
Buildout
Percent
of Total
City Council $0 0.0%
City Manager’s Office 0 0.0%
City Attorney 0 0.0%
Finance 0 0.0%
Parks and Community Services 23,267 6.4%
Information Technology 0 0.0%
Police Department 159,417 44.0%
Fire and Rescue Department 97,249 26.8%
Development Services 21,691 6.0%
Public Works 60,912 16.8%
Non-Departmental (d) 0 0.0%
Total Expenditures $362,535 100.0%
Annual Recurring Surplus/(Deficit) at Buildout $78,058
Revenues to Expenditure Ratio 1.22
DRAFT