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Report For:
Fiscal Impact Analysis of the Silverwood
Development
Revised September 2022
Attachment 2
TABLE OF CONTENTS
1. INTRODUCTION ................................... ................................................... ........................... 1
2. BACKGROUND ..................................... ................................................... ........................... 2 Analysis Methodology .............................................................................................................. 2 Current City Persons Served .................................................................................................... 3 Project Area Description .......................................................................................................... 4
3. REVENUE ESTIMATE .................................................................................. ......................... 8 Property Tax Revenue .............................................................................................................. 8 Property Tax in Lieu of Vehicle License Fee (“VLF”) Revenue ............................................... 12 Documentary Transfer Tax ..................................................................................................... 13 Sales Tax Revenue .................................................................................................................. 14 Transient Occupancy Tax ....................................................................................................... 17 Other City Revenue ................................................................................................................ 18 Revenue Summary ................................................................................................................. 19
4. EXPENDITURES ESTIMATE ............................................................................. ................... 22 Current Service Level Expenditures ....................................................................................... 22 Allocation of Expenditures to Population Served .................................................................. 23 Current Service Level Expenditures per Person Served ......................................................... 24 Project Area Expenditures ..................................................................................................... 25 Total Expenditures Summary ................................................................................................. 28
5. FISCAL IMPACT................................... ................................................... ........................... 30
6. FISCAL IMPACT FUNDING OPTIONS ..................................................................... ............. 31 Community Facilities Districts ................................................................................................ 31 CFD Special Tax Recommendation ......................................................................................... 32
LIST OF TABLES
Table 1. Current Persons Served ................... ................................................................................................. 3 Table 2. Project Area Development ................. .............................................................................................. 5 Table 3. Project Area Future Persons Served ....... .......................................................................................... 6 Table 4. Future Development Residential per Housing Unit & Employee Density ........................................ 6 Table 5. Total Future Residential Development Asses sed Value ................................................................... 9 Table 6. Total Future Residential Development Incre mental Assessed Value ............................................... 9 Table 7. Property Tax Revenue Generated by Future R esidential Development .......................................... 9 Table 8. Total Assessed Value of Future Non-Residen tial Development ..................................................... 10 Table 9. Incremental Assessed Value of Future Non-R esidential Development .......................................... 11 Table 10. Property Tax Revenue Generated by Future Non-Residential Development ................................ 11 Table 11. Property Tax in Lieu of VLF Ratio ....... ............................................................................................. 12 Table 12. Property Tax in Lieu of VLF Revenue ..... ......................................................................................... 12 Table 13. Documentary Transfer Tax Generated by Fut ure Residential Development ................................. 13 Table 14. Documentary Transfer Tax Generated by Fut ure Non-Residential Development ......................... 13 Table 15. Residential Household Incomes ........... .......................................................................................... 15 Table 16. Sales Tax Revenue Generated by Increase i n Residential Population ............................................ 15 Table 17. Sales Tax Revenue Generated by Increase i n Employee Population .............................................. 16 Table 18. Summary of Sales Tax Revenue Generated by Development Type ............................................... 17 Table 19. TOT Revenue Generated by Future Hotel Dev elopment ............................................................... 17 Table 20. Other City Revenue ...................... ................................................................................................... 18 Table 21. Other City Revenue per Resident, Employee , or Persons Served .................................................. 18 Table 22. Other City Revenue Generated by Future De velopment ............................................................... 19 Table 23. Revenue Summary ......................... ................................................................................................. 19 Table 24. Revenue Summary by Future Development Typ e .......................................................................... 20 Table 25. Current Service Level Expenditures ...... .......................................................................................... 22 Table 26. Expenditures Allocation Persons Served Ca tegory ......................................................................... 23 Table 27. Current Service Level Expenditures per Pe rson Served ................................................................. 24 Table 28. Current Service Level Expenditures Genera ted by Project Area .................................................... 24 Table 29. Project Area Public Safety Expenditures . ....................................................................................... 26 Table 30. Project Area Roadway Services Expenditure s ................................................................................ 27 Table 31. Project Area Silverwood Trail Maintenance Expenditures ............................................................. 27 Table 32. Expenditures Summary .................... ............................................................................................... 28 Table 33. Expenditures Summary by Future Developmen t Type ................................................................... 29 Table 34. Annual Fiscal Impact – Residential Land U ses ................................................................................ 30 Table 35. Annual Fiscal Impact – Non-Residential La nd Uses ........................................................................ 30 Table 36. Proposed CFD Special Tax Rates – Resident ial ............................................................................... 32 Table 37. Proposed CFD Special Tax Rates – Non-Resi dential ....................................................................... 33
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 1
1. INTRODUCTION
The City of Hesperia (“City”) is undertaking a comprehensive review of the net fiscal impact to its General Fund (“General Fund”) in anticipation of projected future development within the City identified as the Silverwood Project (“Project Area” or “Silverwood Development”), formerly referred to as the Tapestry Development. A review of revenues expected to be generated by projected development within the Project Area, as compared with expenditures the City will incur to provide certain public services within the boundaries of the Project Area, determined that the Project Area will have a negative fiscal impact on the City’s General Fund. To offset negative fiscal impacts created by development within the Project Area, the City should consider establishing a funding source through a special financing district.
This fiscal impact analysis will provide background information, applicable financial information, and recommended actions for the City’s consideration. To accomplish these objectives, this report includes the following information:
Background Information . The introductory portion of the report focuses on the City and public services/operations under review. Existing development information is also addressed in this section.
Revenues . The revenue section of the report identifies the various revenue sources and the potential recurring revenues, given certain reasonable assumptions. Expenditures . The expenditure section of the report identifies the estimated recurring cost burden placed upon the City’s operations.
Fiscal Impact . Using projected development’s identified revenues and expenditures, this section of the report identifies the overall fiscal impact on the City’s operations. Fiscal impacts are addressed on a land use category basis using either a per dwelling unit, building square foot, lot square foot, or acre factor.
Recommendations . The report concludes with a summary of fiscal analysis findings and recommendations for the City’s consideration.
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 2
2. BACKGROUND
As part of the overall decision-making process to move forward with proposed development, it is important to evaluate the contributions and demands that future development will have on a public agency’s operating budgets. This analysis seeks to determine the fiscal impact of the Silverwood Development on the City’s General Fund. The General Fund accounts for all financial resources of a governmental unit not accounted for in another fund.
To determine the anticipated fiscal impacts placed upon the City, this fiscal impact analysis is designed to quantify the approximate cost of providing services to the City’s projected future population as well as any added services needed to serve the future population.
Analysis Methodology
The revenue portion of the fiscal impact analysis focuses on various taxes, fees, and other City revenues collected to fund ongoing operational costs. The expenditure portion of the fiscal impact analysis focuses on recurring expenditures incurred by the City to provide ongoing services to its population.
This analysis utilizes data from various sources including, but not limited to, the California Department of Finance, the United States Census Bureau, the California State Board of Equalization, the California Economic Development Department, the Southern California Association of Government Agencies, Environmental Systems Research Institute (“ESRI”), CoStar, Tapestry Specific Plan, Tapestry Final Environmental Impact Report, and financials of the City. Data sources are detailed where applicable in this report. Current-day dollar values are used due to the inability to project with accuracy revenues and expenditures at the time of buildout. The rounding of decimals may cause marginal variances between calculated and listed figures that appear in this report.
There are several industry-accepted methods for allocating a public agency’s recurring revenues and expenditures to future development. This fiscal impact analysis primarily employs two industry-standard approaches: the case study approach and the multiplier approach. Both approaches are described below.
CASE STUDY APPROACH
When data used in a fiscal impact analysis is specific to the analysis itself and is not dependent upon industry-accepted generalized multipliers such as the number of residents, employees, etc., the case study approach is utilized. The case study approach relies on development-specific data to estimate the fiscal impacts of projected future development. Data used in the case study approach may include anything applicable to future projections, including assessed valuations, property turnover rates, residential and employee populations, household incomes, estimated sales, and taxable expenditures.
MULTIPLIER APPROACH
The multiplier approach is used in a fiscal impact analysis when relationships between projected future development and revenues or expenditures generated from projected future development are difficult to quantify. This approach anticipates that certain revenues and expenditures are indicators of future anticipated revenues and expenditures, which can be quantified based on metrics such as changes in the number of persons served by a public agency. To apply the multiplier approach, this report determines an
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 3 average revenue or expenditure amount based on a per-person served or other per unit basis. Depending on the type of revenue or expenditure being considered, persons served can include residents, employees, or a combination of both.
Current City Persons Served
To best apply the multiplier approach in this fiscal impact analysis, and to allocate applicable revenues and expenditures, population information is utilized.
RESIDENTIAL POPULATION
Current residential population data was obtained from the State Department of Finance (“CA DOF”). Per the CA DOF, the January 1, 2022 residential population of the City was 100,324.
EMPLOYEE POPULATION
Current employee population data was obtained from the California Employee Development Department (“CA EDD”). Per the CA EDD, as of January 2022 the employee population of the City (i.e., number of jobs in the City) was approximately 34,600.
PERSONS SERVED
Using residential and employee population estimates, the total number of persons served within the City can be determined. This analysis recognizes that an employee population does not have the same impact on demand for public services as a residential population. This is especially true for the portion of the employee population which works within the City but resides outside of its boundaries. While the exact service-demand relationship between an employee and a resident is difficult to quantify with accuracy, an industry-standard correlation of 0.50 employee to one resident is commonly used. This 50% adjustment suggests that a resident will have more of an impact on a public agency’s revenues and demand for services than that of an employee within the City. The 50% adjustment also seeks to account for employees who are also residents of the City. This analysis makes no attempt to segregate the count of employees that live within the City from those who live outside of it. Applying the industry-standard 50% adjustment to the City’s existing employee population base, the total number of persons served within the City is calculated in the following table.
TABLE 1. CURRENT PERSONS SERVED
Description Total
Current Residential Population (1) 100,324
Current Employee Population (2) 34,600
Adjusted Employee Population (3) 17,300
Current Persons Served (4) 117,624
(1) Per the CA DOF.
(2) Per the CA EDD.
(3) Current Employee Population adjusted by 50%, rounded to the nearest whole number. (4) Equal to (Current Residential Population) + (Adjust ed Employee Population).
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 4 Project Area Description
Details of the Silverwood Project were obtained from the CSCDA SCIP Assessment District No. 20-02 (Tapestry (Phase I)) Official Statement dated May 24, 2022 (“OS”). This analysis focuses on current development details of the Project Area.
The Project Area is located at the southern end of the City of Hesperia. The property is situated along the foothills of the north face of the San Bernardino Mountains and at the southern edge of the San Bernardino County High Desert area. The Project Area will include nine phases of development and approximately 15,663 total residential units with a mix of densities ranging from very low density to estate residential to high density and mixed-use. The largest proportion of the residential units would be low/medium density. Development would be separated into three distinctive villages: Mesa Village, Summit Valley Village, and Grass Valley Village. The latter would be primarily equestrian. The Project Area, as shown in the Silverwood Specific Plan adopted February 2, 2016, is pictured below.
PROJECT AREA DEVELOPMENT SUMMARY
The Project site consists primarily of agricultural (cattle grazing) lands and native habitat. Two unoccupied, partly demolished structures, a wellhead structure and an occupied homestead exist on the property.
Several utility easements including gas lines, electrical transmission corridors, and others exist on the site.
The following table provides a summary of proposed development within the Project Area projected to generate General Fund revenues for the City. Development details were provided by City staff, the
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 5 developer team, and drawn from the EIR. Of note, NAQ Apartments, NAQ SF Attached, NAQ SF Detached, AQ SF Attached, AQ SF Detached development are referred to collectively as residential development in this report. Hotel, Retail/Restaurant, and Office development are referred to collectively as non-residential development. Additionally, it is recognized the anticipated schools will generate a level of revenue for the City; therefore, schools have been recognized in this analysis, and the associated revenues and expenditures have been included within only those development types expected to utilize the school properties, which includes NAQ Apartments, NAQ SF Attached, and NAQ SF Detached properties.
TABLE 2. PROJECT AREA DEVELOPMENT
Development Type Units Bldg. Sq. Ft
NAQ Apartments 1,328 N/A
NAQ SF Attached 1,709 N/A
NAQ SF Detached 8,097 N/A
AQ SF Attached 454 N/A
AQ SF Detached 4,075 N/A
Hotel 450 270,000
Retail/Restaurant N/A 750,000
Office N/A 350,000
School 5,923 (1) 2,043,853 (2)
(1) Projected number of students.
(2) Estimated building square footage for the 7 anticipa ted schools as noted below.
The Project Area will also include various public schools, open space, and recreational facilities including, but not limited to, the following:
Five elementary schools, one middle school and one high school Community parks, a sports park, neighborhood parks, view parks, and pocket parks Trails, including multi-use and equestrian trails
Class I multi-use paths and paseos
Public and civic facilities
Open space including conservation areas and preserves Open space areas to protect sensitive biological and cultural resources including a conservation easement and 81-acre Serrano Heritage Preserve
PROJECT AREA POPULATION
To allocate and assign certain revenue and expenditure estimates to the Project Area, the future residential, employee, and persons served population of the Project Area needs to be established.
According to the U.S. Census Bureau American Community Survey 5-Year Estimate, the average population per housing unit in the City of Hesperia is 3.65. Additionally, according to the survey, NAQ SF Detached development average population per housing unit is 2.63. For purposes of this analysis, AQ SF Attached and Detached average population per housing unit is 1.85, as shown in Table 4. These household densities
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 6 are applied to the residential unit counts detailed in Table 2 to calculate the future residential population within the Project Area.
Additionally, based upon the estimated non-residential land uses planned for the Project Area, the future Project Area population was estimated to be 1,872 as shown in Table 3 below. Applying the 50% adjustment (described earlier in this report) to the Project Area’s projected future employee population, the total number of future persons served within the Project Area is calculated below.
TABLE 3. PROJECT AREA FUTURE PERSONS SERVED
Description Total
Project Area Residential Population 45,887
Project Area Employee Population 1,872
Project Area Persons Served (1) 47,759
(1) Equal to (Project Area Residential Population) + (P roject Area Employee Population adjusted by 50%, rounded to the nearest whole number) .
The employee density of projected Hotel, Retail/Restaurant, and Office development was estimated using non-residential density values from the County of Riverside General Plan Build-Out Projections 1. Per this study, the average amount of building square feet per employee of Tourist and Commercial business types is approximately 500 building square feet per employee and for Office development types it is approximately 300 building square feet per employee. This relationship, combined with the estimated growth in the employee population resulting from development within the Project Area, was used to arrive at the estimated employee density of future Hotel, Retail/Restaurant, and Office development.
Additionally, it is anticipated there will be a need for up to 7 schools to accommodate an estimated 5,923 future students. In order to calculate the expected number of employees that will be needed to serve the student population, the student/teacher and student/staff ratios were utilized from the National Center for Education Statistics (NCES) 2. Additionally, using a Floor Area Ratio of 0.50 pulled from the City’s General Plan, the estimated school acreage of 161 acres was converted to 2,043,853 estimated building square feet. This combined with the NCES ratios was used to estimate the future employee population in the schools. The estimated number of residents and employees that will result from development within the Project Area is summarized in the following table.
TABLE 4. FUTURE DEVELOPMENT RESIDENTIAL PER HOUSING UNIT & EMPLOYEE DENSITY
Development Type
Unit Count/
Employee Bldg. Sq.
Ft. (1) Per
Population per
Housing Unit/
Employee
Density (2)
Resident/
Employee
Count (3)
NAQ Apartments 1,328 Unit 2.63 3,490
NAQ SF Attached 1,709 Unit 2.63 4,491
NAQ SF Detached 8,097 Unit 3.65 29,527
1 County of Riverside General Plan Socioeconomic Build-Out Projections Assumptions & Methodology dated 4/11/2017. 2 National Center for Education Statistics Student/Teacher and Student/Staff Ratios: weblink:
https://nces.ed.gov/pubs2010/2010309/tables/table_04.asp
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 7 Development Type
Unit Count/
Employee Bldg. Sq.
Ft. (1) Per
Population per
Housing Unit/
Employee
Density (2)
Resident/
Employee
Count (3)
AQ SF Attached 454 Unit 1.85 840
AQ SF Detached 4,075 Unit 1.85 7,539
Residential Total 45,887
Hotel 270,000 Bldg. Sq. Ft. 500 540
Retail/Restaurant 750,000 Bldg. Sq. Ft. 500 1,500
Office 350,000 Bldg. Sq. Ft. 300 1,167
School 2,043,853 (1) Bldg. Sq. Ft. 0.50 537 (4)
Employee Total: 3,744
(1) Identified in Table 2.
(2) Residential density represents persons per housing unit. Hotel, Retail/Restaurant, and Office density represents employee building square feet per employ ee, and Schools density represents the floor area r atio used to estimate total building square feet. Assump tions used to arrive at densities detailed in the p revious paragraph.
(3) For residential development, equal to (Unit Count/E mployee Bldg. Sq. Ft.) x (Population per Housing Un it).
For non-residential development, equal to (Unit Cou nt/Employee Bldg. Sq. Ft.) / (Employee Density). (4) Based on the National Center for Education Statisti cs Student/Teacher and Student/Staff Ratios applied against the estimated 10,153 per the Silverwood Specific Plan.
NAQ Apartments
7%
NAQ SF Attached
9%
NAQ SF Detached
60%
AQ SF Attached
2%
AQ SF Detached
15%
Lodging
1%
Retail/Restaurant
3% Office
2%
Schools
1%
PERCENTAGE OF RESIDENTS/EMPLOYEES AS A RESULT OF FUTURE DEVELOPMENT
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 8
3. REVENUE ESTIMATE
The City relies on revenue received from several sources. A majority of the City’s operating revenue derives from sales taxes, property taxes, property transfer taxes (i.e., documentary transfer taxes), property tax in lieu of vehicle license fee revenue, and various other taxes and fees. The case study approach is primarily used to determine the estimated property tax revenue generated from projected future development within the Project Area and the multiplier approach is used to allocate certain types of other revenue the City receives.
Property Tax Revenue
Under California law, non-exempt property pays an ad valorem property tax equal to 1% of the assessed value of the property. Any additional voter-approved taxes or assessments will result in a total property tax rate burden that can exceed 1% of the property’s assessed value. The property tax revenue received from the 1% ad valorem property tax rate is then allocated to various overlapping public agencies based upon their authorized allocation for each Tax Rate Area (“TRA”). Across the City’s various TRAs, of the 1% ad valorem property tax collected from property within its boundaries, the City receives approximately 1.50%, as detailed in the City FY 2022/23 Budget. Therefore, this analysis assumes that of the 1% ad valorem property tax revenue generated by taxable future development within the Project Area, the City will receive
1.50%.
The total assessed value of taxable projected future development and the amount of property tax revenue expected to be generated for the City by projected future development is calculated on the following pages.
RESIDENTIAL DEVELOPMENT
Property is subject to the 1% ad valorem tax rate unless it can qualify for an exemption under existing California laws. Certain types of property that are granted this property tax exemption, also known as the Welfare Exemption (“Welfare Exemption”), include hospitals, universities, churches, affordable housing, and other nonprofits. If the Welfare Exemption is granted, the property will not be subject to the 1% ad valorem property tax. However, the property may still be subject to other assessments, taxes, and charges levied by local governments. Future residential development will be subject to the 1% ad valorem property tax rate.
The Project Area is not expected to contain any affordable housing development that will qualify for the Welfare Exemption and thus not be subject to the 1% ad valorem property tax.
To calculate the amount of property tax revenue projected to be generated for the City by residential development, the number of units expected to develop and the median sales price per unit is considered.
The median sales prices were provided by the City’s Economic Development Manager based upon recent sales comps in the area. It should be noted this analysis does not account for the homeowner’s property tax exemption of $7,000 as the state backfills the lost property tax revenues via the Homeowner’s Property Tax Relief Fund payment to the City on an annual basis.
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 9 TABLE 5. TOTAL FUTURE RESIDENTIAL DEVELOPMENT ASSESSED VALUE Description
Median Price
per Unit (1) Unit Count (2)
Total Future
Assessed Value (3)
NAQ Apartments $148,087 1,328 $196,659,536
NAQ SF Attached 305,000 1,709 521,245,000
NAQ SF Detached 515,536 8,097 4,174,294,992
AQ SF Attached 264,917 454 120,272,318
AQ SF Detached 387,800 4,075 1,580,285,000
(1) Provided by the City’s Economic Development Manager , drawn from recent sales comps in the area. (2) Identified in Table 2.
(3) Equal to (Median Price per Unit) x (Unit Count).
INCREMENTAL ASSESSED VALUE
The incremental assessed value of residential development in the Project Area is calculated by subtracting the current assessed value of parcels in the Project Area, pulled from the San Bernardino County secured roll as of January 1, 2022, from the total estimated assessed value of the expected Project Area.
TABLE 6. TOTAL FUTURE RESIDENTIAL DEVELOPMENT INCREMENTAL ASSESSED VALUE Description
Total Future
Assessed Value (1)
Current Assessed
Value (2)
Total Incremental
Assessed Value (3)
NAQ Apartments $196,659,536 $538,148 $196,121,388
NAQ SF Attached 521,245,000 692,541 520,552,459
NAQ SF Detached 4,174,294,992 3,281,163 4,171,013,829 AQ SF Attached 120,272,318 183,975 120,088,343
AQ SF Detached 1,580,285,000 1,651,320 1,578,633,680
(1) From Table 5.
(2) Pulled from San Bernardino County Secured Roll data as of January 1, 2022. (3) Equals (Total Future Assessed Value) – (Current Ass essed Value).
The amount of property tax revenue expected to be generated by projected residential development is calculated in the following table.
TABLE 7. PROPERTY TAX REVENUE GENERATED BY FUTURE RESIDENTIAL DEVELOPMENT Description
Total Incremental
Assessed Value 1% Ad Valorem (1)
Allocation of
1% Ad Valorem
to City (2)
Property Tax
Revenue (3)
NAQ Apartments $196,121,388 $1,961,214 1.50% $29,418
NAQ SF Attached 520,552,459 5,205,525 1.50% 78,083
NAQ SF Detached 4,171,013,829 41,710,138 1.50% 625,652
AQ SF Attached 120,088,343 1,200,883 1.50% 18,013
AQ SF Detached 1,578,633,680 15,786,337 1.50% 236,795
(1) Equal to (Total Incremental Assessed Valu e) x (1.00%) (2) Per City FY 2022/23 Budget.
(3) Equal to (1% Ad Valorem) x (Allocation of 1% Ad Valorem to City).
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 10
NON-RESIDENTIAL DEVELOPMENT
To calculate the amount of property tax revenue projected to be generated for the City by future non- residential development in the Project Area, the average sales price of each property type was calculated.
An average price per building square foot was calculated for Retail/Restaurant and Office property types, as well as an average price per unit for Hotel property types using price data pulled from the CoStar online platform as of April 9, 2022. These averages were then multiplied by the projected building square feet of future Retail/Restaurant and Office development and by unit for Hotel development to obtain the projected assessed value of non-residential property in the Project Area.
TABLE 8. TOTAL ASSESSED VALUE OF FUTURE NON-RESIDENTIAL DEVELOPMENT Description Hotel
Retail/
Restaurant Office
Average Price per Building Sq. Ft. (1) $135,036 $264 $191 Projected Building Sq. Ft. (2) 450 750,000 350,000
Total Non-Residential Assessed Value: (3) $60,766,200 $198,000,000 $68,850,000 (1) Per the CoStar online platform as of 4/9/2022.
(2) Identified in Table 2. Hotel represents the number of units. (3) Equal to (Average Price per Building Sq. Ft.) x (Pr ojected Building Sq. Ft.).
INCREMENTAL ASSESSED VALUE
The incremental assessed value of non-residential development in the Project Area is calculated by subtracting the current assessed value of parcels in the Project Area, pulled from the San Bernardino County secured roll as of January 1, 2022, from the total estimated assessed value of the expected Project Area developments.
63%
24% 8% 3% 2%
PERCENTAGE OF PROPERTY TAX REVENUE GENERATED BY FUTURE
RESIDENTIAL DEVELOPMENT
NAQ SF Detached
AQ SF Detached
NAQ SF Attached
NAQ Apartments
AQ SF Attached
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 11 TABLE 9. INCREMENTAL ASSESSED VALUE OF FUTURE NON-RESIDENTIAL DEVELOPMENT Description Hotel
Retail/
Restaurant Office
Assessed Value (1) $60,766,200 $198,000,000 $66,850,000 Current Non-Residential Assessed Value (2) 10,889 47,185 36,296 Incremental Assessed Value (3) $60,228,052 $197,952,815 $66,813,704 (1) Calculated in Table 8.
(2) Pulled from San Bernardino County Secured Roll data as of January 1, 2022. (3) Equal to (Assessed Value) – (Current Non-Residentia l Assessed Value).
The amount of property tax revenue expected to be generated by future non-residential development in the Project Area is calculated in the following table.
TABLE 10. PROPERTY TAX REVENUE GENERATED BY FUTURE NON-RESIDENTIAL DEVELOPMENT Description Hotel
Retail/
Restaurant Office
Incremental Assessed Value (1) $60,228,052 $197,952,815 $66,813,704 1% Ad Valorem (2) 602,281 1,979,528 668,137
Allocation of 1% Ad Valorem
to City (3) 1.50% 1.50% 1.50%
Property Tax Revenue (4) $9,034 $29,693 $10,022
(1) Calculated in Table 9.
(2) Equal to (Incremental Assessed Value) x (1.00%)
(3) Per City FY 2022/23 Budget.
(4) Equal to (1% Ad Valorem) x (Allocation of 1% Ad Valor em to City).
Lodging, 19%
Retail/Restaurant,
61%
Office, 21%
Percentage of Property Tax Revenue Generated by Future Non-Residential Development
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 12 Property Tax in Lieu of Vehicle License Fee (“VLF”) Revenue Property tax in lieu of VLF is revenue the City receives in addition to the City’s share of ad valorem property tax revenues. In 2004, the California Legislature permanently reduced the VLF rate from 2.00% to 0.65% and compensated cities and counties for their revenue loss with a like amount of property taxes, dollar for dollar. A public agency’s property tax in lieu of VLF revenue allocation changes in proportion to the growth or decline in gross secured assessed valuation.
Per assessed value data provided by the California State Board of Equalization (“CA BOE”), and the Fiscal Year 2022/23 Property Tax in Lieu of VLF revenue drawn from the City’s Fiscal Year 2022/23 Adopted Budget (“City FY 2022/23 Budget”), the ratio of property tax in lieu of VLF received by the City to the City’s assessed value is calculated, as shown in the following table.
TABLE 11. PROPERTY TAX IN LIEU OF VLF RATIO
Description
Fiscal Year
2020/21 Value
City Total Assessed Value (1) $7,308,705,000
VLF Revenue (2) 10,463,724
Property Tax in Lieu of VLF Ratio (3) 0.1432%
(1) Per the CA BOE.
(2) Drawn from the City FY 2022/23 Budget.
(3) Equal to (VLF Revenue) / (City Total Assessed Value ).
The property tax in lieu of VLF ratio is applied to the future assessed value of projected development within the Project Area to estimate the amount of property tax in lieu of VLF to be generated by said development.
TABLE 12. PROPERTY TAX IN LIEU OF VLF REVENUE
Description
Total Future
Assessed Value (1)
Property Tax in
Lieu of VLF Ratio
Property Tax in Lieu
of VLF Revenue (2)
NAQ Apartments $196,659,536 0.1432% $281,616
NAQ SF Attached 521,245,000 0.1432% 746,423
NAQ SF Detached 4,174,294,992 0.1432% 5,977,590
AQ SF Attached 120,272,318 0.1432% 172,230
AQ SF Detached 1,580,285,000 0.1432% 2,262,968
Lodging 60,766,200 0.1432% 87,017
Restaurant/Retail 198,000,000 0.1432% 283,536
Office 66,850,000 0.1432% 95,729
Property Tax in Lieu of VLF Revenue $6,918,373,046 $9,907,110 (1) Identified in Table 5.
(2) Equal to (Total Future Assessed Value) x (Property Tax in Lieu of VLF Ratio).
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 13 Documentary Transfer Tax
When property is sold, a documentary transfer tax is charged and distributed to the City and County. The documentary transfer tax is charged at a rate of $1.10 per $1,000 of assessed value. This $1.10 transfer tax is then split between the City and San Bernardino County, $0.55 each.
To determine the annual documentary transfer tax revenue projected future development will generate, the estimated property turnover rate is considered. This analysis assumes that residential units will turnover approximately every 12 years, which is equivalent to an annual turnover rate of approximately 8%. However, multi-family developments are expected to have a longer holding period, therefore NAQ Apartments are estimated at 5% turnover rate or once every 20 years.
TABLE 13. DOCUMENTARY TRANSFER TAX GENERATED BY FUTURE RESIDENTIAL DEVELOPMENT Description
Total Future
Assessed Value
Estimated
Annual
Turnover
Rate (1)
Annual
Turnover
Assessed Value
(2)
Annual
Turnover
Assessed
Value / $1,000
Documentary
Transfer Tax
Revenue (3)
NAQ Apartments $196,659,536 5% $9,832,977 $9,833 $5,408 NAQ SF Attached 521,245,000 8% 41,699,600 41,700 22,935
NAQ SF
Detached 4,174,294,992 8% 333,943,599 333,944 183,669
AQ SF Attached 120,272,318 8% 9,621,785 9,622 5,292
AQ SF Detached 1,580,285,000 8% 126,422,800 126,423 69,533 (1) Source: For NAQ Apartments, “Latest Calculations Sh ow Average Buyer Expected to Stay in Home 13 Years,” Economic and Housing Policy, National Association o f Homebuilders. For all other residential Developme nt, “2022 National Association of Realtors Home Buyer and S ellers Generational Trends,” National Association o f Realtors.
(2) Equal to (Total Future Assessed Value) x (Estimated Annual Turnover Rate). (3) Equal to (Annual Turnover Assessed Value / $1,000) x (Do cumentary Transfer Tax Rate of $0.50 per $1,000).
Non-Residential land uses typically have minimal ownership turnover. However, to consider the potential for land use turnover, a conservative estimate of once every 20 years, or an annual turnover rate of 5%, is applied in this analysis to the projected non-residential development. Utilizing the estimated incremental assessed value of projected future development and the estimated annual turnover rates, the City’s share of the documentary transfer tax is calculated in the following table.
TABLE 14. DOCUMENTARY TRANSFER TAX GENERATED BY FUTURE NON-RESIDENTIAL
DEVELOPMENT
Description Hotel
Retail/
Restaurant Office
Total Future Assessed Value (1) $60,766,200 $198,000,000 $66,850,000 Estimated Annual Turnover Rate (2) 5% 5% 5%
Annual Turnover Assessed Value (3) 3,038,310 9,900,000 3,342,500 Annual Turnover Assessed Value / $1,000 3,038 9,9 00 3,343 Documentary Transfer Tax Rate per $1,000 (4) 0.55 0.55 0.55 Documentary Transfer Tax Revenue (5) $1,671 $5,445 $1,838
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 14 (1) Identified in Table 8.
(2) Source: “Latest Calculations Show Average Buyer Exp ected to Stay in Home 13 Years,” Economic and Housing Policy, National Association of Homebuilders.
(3) Equal to (Total Future Assessed Value) x (Estimated Annual Turnover Rate). (4) The $1.10 tax rate split $0.55 to the County and $0.55 to the City. (5) Equal to (Annual Turnover Assessed Value / $1,000) x (Do cumentary Transfer Tax Rate per $1,000).
Sales Tax Revenue
A sales tax is a tax levied on the sale, transfer, or exchange of a taxable item or service. The base sales tax rate in California is 7.25%. Revenue generated from sales tax is allocated to certain state and local jurisdictions, with the City receiving 1.00% of the base sales tax rate.
Sales tax revenue is the largest source of General Fund revenues in the City FY 22/23 Budget. This analysis seeks to focus solely on general revenue streams that will be consistently available to the City, therefore voter-approved taxes which expire or are earmarked for specific uses are excluded from consideration in this report. The sales tax rate used to project sales tax revenue for the City in this analysis is 1.00%.
FUTURE RESIDENTS
To determine the amount of sales tax revenue expected to be generated by the residential population in the Project Area that will result from projected residential development, the median household income, per capita income, median price per unit, and the average population per unit are considered.
According to the ESRI Demographic and Income Profile for the City of Hesperia, in 2021, the median household income was $58,958. According to the US Census Bureau American Community Survey 5-Year Estimate, the average population per housing unit is 3.65. Additionally, according to the survey, NAQ SF Detached development types average population per housing unit is 2.63. For purposes of this analysis, AQ SF Attached and Detached average population per unit is 1.85 per Table 4. Therefore, this analysis also assumes that NAQ SF Attached development will have a median household income equal to 80% of the $183,669
$69,533
$22,935
$5,445 $5,408 $5,292 $1,838 $1,671
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
$200,000
Documentary Transfer Tax Revenue by Development Type
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 15 median household income of NAQ SF Detached development, NAQ Apartments will have a median household income of 70% of the median household income of NAQ SF Detached development, and AQ SF Attached and AQ SF Detached will have a median household income equal to 65% of the median household income of NAQ SF Detached. The estimated income of households within projected residential development are calculated in the following table.
TABLE 15. RESIDENTIAL HOUSEHOLD INCOMES
Development Type Median Price per Unit (1) Household Income NAQ Apartments $148,087 $41,271
NAQ SF Attached 305,000 47,166
NAQ SF Detached 515,536 58,958
AQ SF Attached 264,917 38,323
AQ SF Detached 387,800 38,323
(1) Identified in Table 5.
Per the California State Board of Equalization (“CA BOE”), approximately 29.5% of a household’s spending is spent on taxable retail goods. Thus, the CA BOE percentage of 29.5% is utilized here. However, in order to attempt to account for purchases made outside of City boundaries and shifts in taxable sales from one point of sale to another within the City, plus the general geography of the Project Area---situated on the outskirts and less accessible to the rest of the City, this percentage has been discounted by 30%. The estimated sales tax revenue generated by projected future housing units is calculated in the following table.
TABLE 16. SALES TAX REVENUE GENERATED BY INCREASE IN RESIDENTIAL POPULATION Dev. Type
Median
Household
Income per
Unit (1)
Number of
Housing
Units (2)
% of Household
Income Allocated
to Taxable Retail
Sales (3)
% of Sales
Projected to
Occur within City
Boundaries
Sales Tax
Revenue –
Residential
Population (4)
NAQ Apartments $41,271 1,328 29.5% 70% $113,177
NAQ SF Attached 47,166 1,709 29.5% 70% 166,454
NAQ SF
Detached 58,958 8,097 29.5% 70% 985,796
AQ SF Attached 38,323 454 29.5% 70% 35,928
AQ SF Detached 38,323 4,075 29.5% 70% 322,481
(1) Identified in Table 15.
(2) Identified in Table 2.
(3) Per the CA BOE.
(4) Equal to (Estimated Annual Household Income p er Unit) x (Unit Count) x (% of Household Income Al located to Taxable Retail Sales) x (% of Sales Projected to Occur Within City Boundaries) x (1.00%).
FUTURE EMPLOYEES
In addition to the increased residential population, the increase in employees resulting from projected non- residential development in the Project Area will generate a certain amount of sales tax revenue for the City.
The International Council of Shopping Centers conducted a survey that determined the approximate dollar
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 16 amount an average employee spent per year on taxable goods and services in 2013. After adjusting this amount to the year 2021 using the change in Consumer Price Index (“CPI”) of the Riverside-San Bernardino- Ontario region, it’s estimated that an average employee within the City will spend approximately $6,066 per year on taxable goods and services. While personal spending is unique to everyone, as a result of the Covid pandemic, many employees have transitioned into hybrid and/or fully remote work environments, resulting in reduced spending outside of the employee’s home location. Therefore, this analysis assumes that approximately 70% of an employee’s annual spending will be on taxable purchases that will occur near their place of employment within the City’s boundaries. Using this information, the estimated sales tax revenue generated from future employees is calculated in the following table.
TABLE 17. SALES TAX REVENUE GENERATED BY INCREASE IN EMPLOYEE POPULATION Description Hotel
Retail/
Restaurant Office School
Average Annual Taxable
Spending per Employee (1) $6,066 $6,066 $6,066 $6,066 Additional Employee
Count (2) 540 1,500 1,167 537
Estimated % of Taxable
Sales within City 70% 70% 70% 70%
Employee Taxable Sales
within City 2,292,797 6,368,880 4,954,989 2,280,059
Sales Tax Revenue –
Employee Population (3) $22,928 $63,689 $49,550 $22,801 (1) Drawn from a survey conducted by The International Council of Shopping Centers, adjusted to the year 2021 using the change in CPI of the Riverside-San Bernar dino-Ontario region. (2) Identified in Table 4.
(3) Equal to (Average Annual Spending per Employee) x ( Additional Employee Count) x (Estimated % of Taxabl e Sales within City) x (1.00%).
SUMMARY OF SALES TAX REVENUE
The approach in Tables 16 and 17 utilizes a demand side approach based on assumptions of future residential and employee demand for retail goods and services, which generates a lower overall estimate of sales tax revenues as a result of future growth from the Project Area. This analysis could alternatively utilize a supply side approach based upon the new taxable sales generated by the non-residential square feet in the Project Area. Sales tax revenues generated as a result of future growth typically combine the amount of new sales tax revenue generated by retail demand from new residents and employees, with the sales tax revenue that the supply of new retail development will generate elsewhere in the City. However, to avoid overcounting, this analysis does not combine a demand and supply side approach. The summary of total sales tax revenues anticipated as a result of the Project Area is summarized below.
It should be noted that the sales tax revenue resulting from the school properties in Table 17 has been summarized in Table 18 within only those development types expected to utilize the school properties, which includes NAQ Apartments, NAQ SF Attached and NAQ SF Detached properties. The revenues have been applied based upon the weighted number of units per residential land use type as applicable.
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 17 TABLE 18. SUMMARY OF SALES TAX REVENUE GENERATED BY DEVELOPMENT TYPE Development Type Total Sales Tax Revenue
NAQ Apartments (1) $115,897
NAQ SF Attached (1) 169,954
NAQ SF Detached (1) 1,002,377
AQ SF Attached 35,928
AQ SF Detached 322,481
Hotel 22,928
Retail/Restaurant 63,689
Office 49,550
Sales Tax Revenue Total $1,782,803
(1) Includes a portion of the school properties revenue calculated in Table 17.
Transient Occupancy Tax
Transient Occupancy Tax (“TOT”) revenue is revenue generated for the City’s General Fund by taxing the cost of hotel/lodging stays within City boundaries with durations of less than 30 days. The City’s TOT rate is 10%. In addition to the $1.5 million in TOT revenue included in Table 20 under Other City Revenue, it is recognized that the 450 hotel rooms anticipated as a result of the Project Area will generate TOT revenue for the City.
However, TOT revenue generation is especially sensitive to economic downturns and disruptions to business and leisure travel, such as those experienced most recently during the height of the COVID-19 pandemic. Thus, to account for the volatility of TOT revenue and conservatively estimate the base level of revenue the City can expect to receive regardless of broader economic disruptions, a 75% occupancy rate is assumed. The amount of TOT revenue projected to be generated, on average, by each Hotel room was calculated using internal data sourced by City Staff.
TABLE 19. TOT REVENUE GENERATED BY FUTURE HOTEL DEVELOPMENT Description Amount
Total Hotel Rooms in Project Area (1) 450
Vacancy Rate (2) 25%
Projected TOT Revenue Generated Annually per Room (3) $3,411 TOT Revenue (4) $1,151,087
(1) Sum of rooms identified in Table 2.
(2) Seeks to account for room vacancies, assumes 75% aver age room occupancy rate. (3) Calculated using data provided by City Staff using Fiscal Year 2021-22 revenues received from comparable ho tels. (4) Equal to (Total Hotel Rooms in Project Area) x (Pro jected TOT Revenue Generated Annually per Room) x (Discount to TOT Revenue).
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 18 Other City Revenue
The City receives revenue from various other sources including fees, fines, penalties, charges for services, and other revenues (“Other City Revenues”). For purposes of this analysis, revenues that are not considered include one-time building and planning permits, charges for services, interest from City investments, use of money and property, special project funds, and grants. The following table presents the City’s 2022/23 Other Revenues derived from the City FY 2022/23 Budget.
TABLE 20. OTHER CITY REVENUE
Description Fiscal Year 2022/23 Value
Franchise Fees $4,090,296
Business License 783,600
TOT 1,500,000
General and Administrative Recovery 3,085,930
Other City Revenue Total $9,459,826
To estimate the overall impact that future development will have on the listed Other City Revenue sources, it is assumed that current per capita revenue amounts will serve as the best indicator of future per capita revenue amounts. Therefore, to best allocate Other City Revenues to projected future development, the multiplier approach is utilized here. Using the current City persons served and employee population, the Other City Revenue per person served or employee served can be determined, as shown in the following table.
TABLE 21. OTHER CITY REVENUE PER RESIDENT, EMPLOYEE, OR PERSONS SERVED Description
Fiscal Year
2022/23 Value
Current City Residents,
Employees, or
Persons Served Count (1)
Amount per Resident,
Employee, or
Person Served (2)
Franchise Fees $4,090,296 117,624 $34.77
Business License 783,600 117,624 6.66
TOT 1,500,000 117,624 12.75
General and Administrative
Recovery 3,085,930 117,624 26.24
(1) Identified in Table 1.
(2) Equal to (Fiscal Year 2022/23 Value) / (Current City Res idents, Employees, or Persons Served).
To determine the amount of other City revenue allocated to projected residential and non-residential development within the Project Area, the amount per resident, employee, or person served calculated in Table 21 is multiplied by the increase in residents, employees, or persons served that will result from future development in the Project Area.
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 19 TABLE 22. OTHER CITY REVENUE GENERATED BY FUTURE DEVELOPMENT Description
Increase in Residents,
Employees, or
Persons Served (1)
Amount per Resident,
Employee, or
Person Served (2)
Other City
Revenue
Franchise Fees 47,759 $34.77 $1,660,580
Business License 47,759 6.66 318,075
TOT 47,759 12.75 608,927
General and Administrative
Recovery 47,759 26.24 1,253,196
Total $3,840,779
(1) Identified in Table 3.
(2) Calculated in Table 21.
Revenue Summary
Projected residential and non-residential development within the Project Area will generate various forms of general revenues for the City. A summary of the revenues projected to be generated by future development is presented in the following tables.
TABLE 23. REVENUE SUMMARY
Revenue Description Total
Property Tax $1,036,711
Property Tax in Lieu of VLF 9,907,110
Documentary Transfer 295,791
Sales Tax 1,782,803
TOT Revenue 1,151,087
Other 3,840,779
Total $18,014,280
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 20
TABLE 24. REVENUE SUMMARY BY FUTURE DEVELOPMENT TYPE
Development Type Total
NAQ Apartments $715,586
NAQ SF Attached 1,381,881
NAQ SF Detached 10,179,582
AQ SF Attached 299,016
AQ SF Detached 3,498,063
Hotel 1,293,451
Retail/Restaurant 442,678
Office 204,024
Total $18,014,280
2%
2%
2%
5%
6%
6%
7%
28%
52%
Business License
Transient Occupancy Tax
Documentary Transfer
General and Administrative Recovery
Property Tax
TOT Revenue - Project Area
Franchise Fees
Sales Tax
Property Tax in Lieu of VLF
Percentage of Revenue Generated by Future Development
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 21
NAQ Apartments
4%
NAQ SF Attached
8%
NAQ SF Detached
57%
AQ SF Attached
2%
AQ SF Detached
19%
Lodging
7.2%
Retail/Restaurant
2%
Office
1%
Percentage of Revenue Generated by Future Development Type
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 22
4. EXPENDITURES ESTIMATE
The revenues identified in Section 3 of this report are intended to pay for recurring expenditures related to general services provided by the City. City General Fund expenditures not considered in this analysis include costs associated with infrastructure improvements, special fund expenditures, governmental transfers, and expenses supported by one-time development fees.
Current Service Level Expenditures
Development within the Project Area will add residents and employees to the City’s existing population base. This residential and employee population increase will place additional demands on existing services provided by the City. To account for increased expenditures associated with additional demand for public services, City expenditures are allocated to projected development using the multiplier approach.
However, development-induced increases in demand for public services will not necessarily result in a direct 1:1 relationship increase in expenditures (i.e., there are some “step” functions). For example, a 20% increase in the City’s residential population will likely not cause a 20% increase in City Clerk or City Council expenditures. A portion of the City’s expenditures are fixed or will increase marginally as a result of population increases. Therefore, to account for relationships between expenditures and population changes that are less than 1:1, City expenditures have been adjusted to conservatively estimate the impact of projected development on City expenditures. Of note, City expenditure adjustments are estimates based on the individual characteristics of projected development and industry-standard assumptions. The original budgeted expenditure amounts, the demand adjustment percentage, and the adjusted expenditure amounts are presented in the following table.
TABLE 25. CURRENT SERVICE LEVEL EXPENDITURES
Description (1)
Fiscal Year
2022/23 Expenditures (1)
Demand
Adjustment
Percentage (2)
Adjusted Fiscal Year
2022/23
Expenditures (3)
City Council $798,121 50% $399,061
City Manager 3,918,794 50% 1,959,397
Management Services 4,682,211 75% 3,511,658
Police 20,613,786 100% 20,613,786
Economic Development 371,111 75% 278,333
Community Development 2,182,132 75% 1,636,599
Code Compliance 2,467,764 100% 2,467,764
Animal Control 2,316,058 100% 2,316,058
Public Works 2,326,289 100% 2,326,289
Drainage Maintenance 200,000 100% 200,000
Non-Departmental (4) 1,172,172 100% 1,172,172
Totals $41,048,438 $36,881,117
(1) Drawn from City FY 2022/23 Budget.
(2) Estimated; subject to change.
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 23 (3) Equal to (Fiscal Year 2022/23 Expenditures) x (Demand Ad justment Percentage). Figures applied in Table 27 t o calculate current service level expenditures per pe rson currently served. (4) Excludes non-recurring and one-time expenditures to taling $700,000.
After adjusting the Fiscal Year 2022/23 Budget Expenditures to account for relationships that are less than a 1:1 relationship, the total expenditure amount to be considered is almost $36.9 million. This figure is used to determine the current service level expenditures per person served in the City, which in turn is used to calculate what additional current City expenditures will result from projected development.
Allocation of Expenditures to Population Served
Each City expenditure line item was categorized as being tied to serving the residential and employee population, solely the residential population, or solely the employee population. The following table provides the persons served category for each of the recurring current expenditure categories.
TABLE 26. EXPENDITURES ALLOCATION PERSONS SERVED CATEGORY Description Persons Served Category
City Council Persons Served
City Manager Persons Served
Management Services Persons Served
Police Persons Served
Economic Development Persons Served
Community Development Persons Served
Code Compliance Persons Served
Animal Control Residents Served
City Council, 1%
City Manager, 5%
Management
Services, 10%
Police, 56%
Economic
Development, 1%
Community
Development, 4%
Code Compliance, 7%
Animal Control, 6%
Public Works, 6%
Drainage
Maintenance, 1%
Non-Departmental,
3%
Percentage of Current Adjusted Service Level Expenditures by Department
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 24 Description Persons Served Category
Public Works Persons Served
Drainage Maintenance Persons Served
Non-Departmental Persons Served
Current Service Level Expenditures per Person Served
Using the multiplier approach, the number of persons served within each expenditure category is applied to the corresponding adjusted expenditure line item to determine the allocable expenditure per person.
The table below provides the current service level expenditures per person served for each of the listed expenditure categories.
TABLE 27. CURRENT SERVICE LEVEL EXPENDITURES PER PERSON SERVED Description
Adjusted Fiscal Year
2022/23
Expenditures (1)
Current City
Residents or Persons
Served (2)
Current Service Level
Expenditures per
Resident or
Person Served (3)
City Council $399,061 117,624 $3.39
City Manager 1,959,397 117,624 16.66
Management Services 3,511,658 117,624 29.85
Police 20,613,786 117,624 175.25
Economic Development 278,333 117,624 2.37
Community Development 1,636,599 117,624 13.91
Code Compliance 2,467,764 117,624 20.98
Animal Control 2,316,058 100,324 23.09
Public Works 2,326,289 117,624 19.78
Drainage Maintenance 200,000 117,624 1.70
Non-Departmental 1,172,172 117,624 9.97
(1) Identified in Table 25.
(2) Identified in Table 1.
(3) Equal to (Adjusted Fiscal Year 2022/23 Expenditures) / (Current City Residents or Persons Served).
To determine the amount of other current service level expenditures allocated to projected residential and non-residential development within the Project Area, the amounts per person served calculated in the previous table are multiplied by the increase in persons served or residents that will result from future development.
TABLE 28. CURRENT SERVICE LEVEL EXPENDITURES GENERATED BY PROJECT AREA Description
Increase in
Residents or
Persons Served (1)
Current Service Level
Expenditures per Resident or
Person Served (2)
Current
Expenditures (3)
City Council 47,759 $3.39 $162,031
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 25 Description
Increase in
Residents or
Persons Served (1)
Current Service Level
Expenditures per Resident or
Person Served (2)
Current
Expenditures (3)
City Manager 47,759 16.66 795,576
Management Services 47,759 29.85 1,425,842
Police 47,759 175.25 8,369,838
Economic Development 47,759 2.37 113,012
Community Development 47,759 13.91 664,510
Code Compliance 47,759 20.98 1,001,989
Animal Control 45,887 23.09 1,059,337
Public Works 47,759 19.78 944,546
Drainage Maintenance 47,759 1.70 81,206
Non-Departmental 47,759 9.97 475,938
Total $15,093,826
(1) Identified in Table 3.
(2) Identified in Table 27.
(3) Equal to (Increase in Residents or Persons Served) x (Current Service Level Expenditures per Resident or Person Served).
Project Area Expenditures
Per the Development Agreement with Hesperia Venture I, LLC (the “DA”), the general staffing levels for public safety services to the Project Area were provided as Exhibit G, which was extracted from the DA and is shown below.
Based on Exhibit G and the projected Project Area residential population of 45,887, there will be a need for two Animal Control Officers, four Code Enforcement Officers, and one Senior Code Enforcement Officer, totaling $918,882 annually. Based upon an estimated future population of 181,333 (includes the future
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 26 Silverwood population), it is estimated that 26% or $238,909 of the costs associated with Animal Control and Code Enforcement Officers will be attributable to the Project Area.
Additionally, the Project Area public safety target service level ratio is 0.80 sworn officers per 1,000 residents. The City is not currently meeting the target public safety service level ratio of 0.80 sworn officers per 1,000 residents. Currently, the City’s ratio of sworn officers per 1,000 residents is approximately 0.57.
The cost of providing this below-target level of service to the City’s projected total future population is captured in the calculation of current expenditures identified in Table 27.
To meet its target public safety service level ratio and provide a target level of Police Services to all residents in the City, the City requires an additional 23.26 sworn officers. Given current staffing levels within the Police Department, there is approximately 0.24 non-sworn support staff for every sworn Police Officer.
This ratio is utilized to estimate the 5.58 additional non-sworn staff that will be needed to support the needed increase in sworn staff. The resulting per capita expenditure per resident for this target level of Police Services is $76.24, resulting in a total of $3,498,515 in Police Services Expenditures attributable to the Project Area.
The table below details the annual costs of the additional personnel needed to provide an optimal level of Public Safety Services to the Project Area.
TABLE 29. PROJECT AREA PUBLIC SAFETY EXPENDITURES
Description Value
Current Residential Population (1) 100,324
Current # of Sworn Officers (2) 57
Current Sworn Ratio 0.00057
Desired Ratio 0.0008
Current Unsworn Personnel (2) 18
Current Sworn/Unsworn Ratio 0.24
Increase in Sworn Officers Needed (3) 23.26
Increase in Unsworn Officers Needed 5.58
Total Cost of Inc. in Sworn Officers Needed (4) 7,175,352 Total Cost of Inc. in Unsworn Officers Needed (5) 473,547 Total Increase in Sworn/Unsworn Costs Needed $7,648 ,899 Total Sworn/Unsworn Costs Applicable to the Project Area (26%) (6) 3,498,515 2 Animal Control Officers 241,363
4 Code Enforcement Officers 537,971
1 Senior Code Enforcement Officer 139,547
Total Animal Control/Code Costs Applicable to the Project Area (26%) (6) 238,909 Total Public Safety Costs Applicable to the Project Area 3,737,424 (1) Identified in Table 1.
(2) Provided by the City.
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 27 (3) Equal to (Target Ratio of 0.8/1000 = 80.26) - (Current Rati o of 0.57/1000 = 57). (4) Equals (23.26 sworn officers) x (average annual cost of sworn officer - $308,495). (5) Equal to (5.58 unsworn officers) x (average annual co st of unsworn officer - $84,832). (6) Equals (Total Increase in Sworn/Unsworn Costs) x (P roject Area % of future population, 26%).
Roadway Services
As a result of expected future development within the Project Area, new roadways will need to be built to provide for vehicular traffic in and around the Project Area. It is expected that approximately 167.72 miles of roadway will need to be maintained annually at a rate of $8,105 per mile for a total of $1,359,938 of anticipated annual roadway general maintenance service costs.
Additionally, slurry would be completed every three years at a cost of $14,454 per mile annually for a total cost of $2,425,179.
And finally, every 15 years a rehabilitation of the roadways will need to be performed. As provided by the City, rehabilitation costs are estimated at a cost of $43,459 per mile annually for a total cost of $7,291,979.
The table below summarizes the total estimated annual roadway service costs attributable to the Project Area.
TABLE 30. PROJECT AREA ROADWAY SERVICES EXPENDITURES
Description Value
General Roadway Maintenance (1) $1,359,938
Slurry (2) 2,425,179
Road Rehabilitation (3) 7,291,979
Total Roadway Services Costs Applicable to Persons Served in Project Area $11,077,096 (1) Per the City, assumes a cost of $8,105 per mile annually . (2) Per the City, assumes a cost of $14,454 per mile annuall y. (3) Per the City, assumes a cost of $43,459 per mile annuall y.
Silverwood Trail Maintenance
As a result of expected future development within the Project Area, the Silverwood Trail Bridge will need to be maintained and inspected annually by the City. The City estimates the annual costs of providing these services will be $200,000.
TABLE 31. PROJECT AREA SILVERWOOD TRAIL MAINTENANCE EXPENDITURES Description Value
Annual Inspection and Maintenance Costs (1) $200,000
Total Silverwood Trail Maintenance Costs $200,000
(1) Provided by the City.
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 28 Total Expenditures Summary
Projected residential and non-residential development within the Project Area will cause the City to incur various forms of expenditures. A summary of the expenditures projected to be generated by future development is presented in the following tables.
TABLE 32. EXPENDITURES SUMMARY
Description Total
Current Service Level Expenditures $15,093,826
Project Area Public Safety Expenditures 3,737,424
Project Area Roadway Services Expenditures 11,077,0 96
Project Area Trail Maintenance/Inspections 200,000
Total $30,108,346
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 29
TABLE 33. EXPENDITURES SUMMARY BY FUTURE DEVELOPMENT TYPE Development Type Total
NAQ Apartments $2,369,940
NAQ SF Attached 3,049,783
NAQ SF Detached 17,064,019
AQ SF Attached 695,063
AQ SF Detached 6,238,518
Hotel 104,723
Retail/Restaurant 330,378
Office 255,923
Total $30,108,346
NAQ Apartments
8%
NAQ SF Attached
10%
NAQ SF Detached
57%
NAQ SF Attached
2%
NAQ SF Detached
21%
Lodging 0.3% Retail/Restaurant 1% Office 1%
Percentage of Expenditures by Development Type
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 30
5. FISCAL IMPACT
Based on the estimated total revenue calculated in Section 3 and the estimated total expenditures calculated in Section 4, there is a net negative fiscal impact to the City as a result of projected future development within the Project Area. The table below sets forth the total anticipated fiscal impact for both future residential and non-residential land uses.
TABLE 34. ANNUAL FISCAL IMPACT – RESIDENTIAL LAND USES Description Total City Revenue Total City Expenditures
City Positive /
(Negative) Fiscal Impact
NAQ Apartments $715,586 ($2,369,940) ($1,654,354)
NAQ SF Attached 1,381,881 (3,049,783) (1,667,902)
NAQ SF Detached 10,179,582 (17,064,019) (6,884,437)
AQ SF Attached 299,016 (695,063) (396,047)
AQ SF Detached 3,498,063 (6,238,518) (2,740,455)
TABLE 35. ANNUAL FISCAL IMPACT – NON-RESIDENTIAL LAND USES Description Total City Revenue Total City Expenditures
City Positive /
(Negative) Fiscal Impact
Hotel $1,293,451 ($104,723) $1,188,728
Retail/Restaurant 442,678 (330,378) 112,300
Office 204,024 (255,923) (51,898)
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 31
6. FISCAL IMPACT FUNDING OPTIONS
To mitigate the negative fiscal impacts identified in Section 5 of this report, the City may consider the establishment of a special financing district (“SFD”), which could include a special tax or a special assessment. Since the City’s negative fiscal impacts are attributable to the provision of general services, a special assessment may not be the most appropriate funding option for the City to mitigate those impacts.
Special assessments require the identification and separation of general and special benefits. Special benefits can be assessed to property, but all general benefits must be funded by sources other than the special assessments. Therefore, a special assessment would not entirely alleviate the identified negative fiscal impacts. Alternatively, the City could implement a special tax.
Community Facilities Districts
A Community Facilities District (“CFD”), also referred to as a Mello-Roos District, is a type of SFD that is established via the Mello-Roos Community Facilities District Act of 1982 (“1982 Act”). Through the levy and collection of a special tax, CFDs provide funding for authorized public improvements and/or public services.
The CFD’s Rate and Method of Apportionment includes procedures for identifying and classifying property within the CFD, establishing the initial maximum special tax rates, and the formula for calculating the annual special tax and assigning the special tax to taxable property within the CFD. Since a CFD authorizes the levy and collection of a special tax as opposed to a special assessment, there is no requirement to make a finding of special benefit for the property subject to the special tax. However, the special tax should be based on a benefit received by property, the cost of providing the facilities or services, or some other reasonable basis for assigning the special tax, as determined by the relevant legislative body.
To establish a CFD, the 1982 Act requires two-thirds approval of the registered voters, residing within the proposed CFD boundary, voting in the special tax election. If there are less than 12 registered voters within the proposed CFD boundaries, then a landowner special tax election can take place. In the case of a landowner special tax election, a two-thirds approval is still required, and each landowner receives one vote per acre or portion of an acre of land owned. It should be noted that if a CFD is approved via a landowner special tax election, the CFD is only authorized to fund additional services. In Building Industry Association of the Bay Area v. City of San Ramon , the California Appellate Court held that a landowner- approved CFD can only fund the increase in demand for pre-existing services, so long as the special tax revenue is not available for general government purposes. The additional services funded by the CFD shall not replace services already available and provided within the boundaries of the CFD. Furthermore, special tax revenue generated from the CFD can only be used to fund the authorized public services outlined in the 1982 Act. CFD-authorized public services include fire protection and park maintenance/lighting services. It should be noted that any CFD formed by the City, as well as any potential annexations to that CFD, would be approved by a landowner special tax election, as new development projects would be required to participate in the CFD as a condition of approval.
FUTURE DEVELOPMENT SPECIFIC COSTS
In addition to using a CFD to mitigate the negative fiscal impacts of future development, the CFD can also fund authorized CFD services that are intended to provide an enhanced level of service or services that are unique to future development. These services would be in addition to any identified negative fiscal impacts
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 32 placed upon the City in providing existing levels of public services. Funding for any enhanced and/or additional recurring public service costs, including repairs and replacements, reserves and administration can be accomplished through a CFD.
BENEFITS TO THE CITY
Through the formation of a CFD, the City can establish an ongoing funding source that mitigates negative fiscal impacts created by future residential and non-residential development, as well as provide funding for new or enhanced services within the City. To keep pace with changing costs, the CFD’s maximum special tax rate can include an annual escalation factor based on an annual fixed amount or be tied to a specific inflation index. Furthermore, the CFD special tax can be established without a sunset date so that the CFD special tax can be levied in perpetuity or until voters choose to end it.
CFD Special Tax Recommendation
For the City to continue to provide vital public services to its population base, the City needs to ensure that developing property pays their fair share of any additional financial burdens placed upon the City’s operational budget, including the cost of additional services required because of such development. To mitigate the negative fiscal impacts identified in Section 5 of this report, the City should consider establishing a CFD. The levy and collection of the special tax could generate sufficient revenue to offset the negative fiscal impacts to the City. Furthermore, a CFD provides the flexibility to generate additional revenue to fund any enhanced or new project-specific costs desired by future development.
The CFD’s Rate and Method of Apportionment establishes the special tax formula and sets the initial maximum special tax rates. A benefit of a CFD is that it allows for a great deal of flexibility in structuring the special tax formula so that the formula and maximum special tax rates best fit and accomplish specific needs. In this case, the CFD special tax rates could be sized to recover the annual negative fiscal impact on development, recover ongoing administrative costs related to the CFD, and could be structured to create both residential special tax rates and non-residential special tax rates.
CFD Special Tax Rates for Properties
Based on the overall negative fiscal impacts created by the Project Area identified in Section 5, the total annual amount to be recovered from the CFD is calculated in the following table.
TABLE 36. PROPOSED CFD SPECIAL TAX RATES – RESIDENTIAL CFD Special Tax Rate by Land Use
Total CFD Special Tax
Rate per Dwelling Unit (1)
NAQ Apartments $732
NAQ SF Attached 775
NAQ SF Detached 861
AQ SF Attached 775
AQ SF Detached 818
(1) Rates for services portion; does not include potential CFD administration or reserve/ contingency costs.
City of Hesperia
Fiscal Impact Analysis of the Silverwood Development 33 TABLE 37. PROPOSED CFD SPECIAL TAX RATES – NON-RESIDENTIAL CFD Special Tax Rate by Land Use
Total CFD Special Tax Rat e
per Building Square Foot (1)
Hotel $0.19
Retail/Restaurant 0.30
Office 0.49
(1) Rates for services portion; does not include potential CFD administration or reserve/ contingency costs.
NBS recommends that the City include within initial CFD maximum special tax rates the costs needed for administering the CFD, as well as establish any reserves or contingency funds. Furthermore, the CFD should be structured to include a special tax escalation factor, which would allow for an annual increase to the initial CFD maximum special tax rates. While the CFD maximum special tax rates would increase on an annual basis, the City is not required to levy the special tax at the CFD maximum special tax rates each year.
To meet the CFD annual special tax requirement and fund authorized services and administrative costs, the City has the flexibility to levy a CFD special tax amount that is less than or equal to the CFD maximum special tax.