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Report For:
Fiscal Impact Analysis of Future Development
May 2022
ATTACHMENT 2
TABLE OF CONTENTS
Section 1 | INTRODUCTION....................................................................................................1 Section 2 | BACKGROUND......................................................................................................2 Analysis Methodology..............................................................................................................2 Current City Persons Served ....................................................................................................3 Future City Persons Served ......................................................................................................4 Section 3 | REVENUE ESTIMATE .............................................................................................6 Property Tax Revenue..............................................................................................................6 Property Tax in Lieu of Vehicle License Fee (“VLF”) Revenue ...............................................14 Documentary Transfer Tax.....................................................................................................15 Sales Tax Revenue..................................................................................................................16 Other City Revenue ................................................................................................................18 Revenue Summary .................................................................................................................20 Section 4 | EXPENDITURES ESTIMATE .................................................................................. 21 Current Service Level Expenditures.......................................................................................21 Allocation of Expenditures to Population Served ..................................................................22 Current Service Level Expenditures per Person Served.........................................................23 Target Service Level Expenditures - Police ............................................................................23 Target Service Level Expenditures - Fire................................................................................25 Target Service Level Expenditures – Street Maintenance .....................................................26 Total Expenditures Summary.................................................................................................27 Section 5 | FISCAL IMPACT................................................................................................... 28 Section 6 | FISCAL IMPACT FUNDING OPTIONS .................................................................... 29 Community Facilities Districts................................................................................................29 CFD Special Tax Recommendation.........................................................................................30 ATTACHMENT 2
LIST OF TABLES
Table 1. Current Persons Served .................................................................................................................... 4 Table 2. Future Persons Served...................................................................................................................... 4 Table 3. Change in Persons Served................................................................................................................. 5 Table 4. Growth in Households...................................................................................................................... 7 Table 5. Allocation of Future Housing to Various Household Income Categories......................................... 7 Table 6. Categorization of Housing Allocated to Income Categories............................................................. 8 Table 7. Future SFR, MFR, and Affordable Housing Development within City .............................................. 8 Table 8. Total Future Assessed Value of SFR and MFR Development............................................................ 9 Table 9. Residential Density ........................................................................................................................... 9 Table 10. Undeveloped Residential Acreage and Assessed Value ................................................................... 9 Table 11. Current Assessed Value of Future Residential Development......................................................... 10 Table 12. Incremental Assessed Value of Future Residential Development.................................................. 10 Table 13. Property Tax Revenue Generated by Future Residential Development ........................................ 10 Table 14. Future Development Employee Population ................................................................................... 11 Table 15. Estimated Non-residential Building Square Feet to Develop ......................................................... 12 Table 16. Current Assessed Value of Future Non-residential Development.................................................. 12 Table 17. Commercial and Industrial Price per Building Square Foot............................................................ 13 Table 18. Incremental Assessed Value of Future Non-residential Development .......................................... 13 Table 19. Property Tax Revenue Generated by Future Non-residential Development................................. 14 Table 20. Property Tax in Lieu of VLF Ratio.................................................................................................... 14 Table 21. Property Tax in Lieu of VLF Revenue .............................................................................................. 15 Table 22. Documentary Transfer Tax Generated by Future Development.................................................... 15 Table 23. Residential Household Incomes ..................................................................................................... 16 Table 24. Sales Tax Revenue Generated by Increase in Residential Population............................................ 17 Table 25. Sales Tax Revenue Generated by Increase in Employee Population.............................................. 17 Table 26. Sales Tax Revenue Generated by Future Commercial Development............................................. 18 Table 27. Other City Revenue......................................................................................................................... 19 Table 28. Other City Revenue per Person Served/Employee......................................................................... 19 Table 29. Other City Revenue Generated by Future Development............................................................... 20 Table 30. Revenue Summary.......................................................................................................................... 20 Table 31. Revenue Summary By Future Development Type.......................................................................... 20 Table 32. Current Service Level Expenditures................................................................................................ 22 Table 33. Expenditures Allocation to Persons Served, Residents Served, or Employees Served .................. 22 Table 34. Current Service Level Expenditures per Person Served ................................................................. 23 Table 35. Current Service Level Expenditures Generated by Future Development ...................................... 23 Table 36. Annual Cost of Additional Police Personnel for Target Service Level............................................. 24 Table 37. Target Service Level Expenditures Attributable to Future Development ...................................... 24 Table 38. Annual Cost of Additional Fire Personnel for Target Service Level ................................................ 25 ATTACHMENT 2
Table 39. Total Annual Street Maintenance Expenditures ............................................................................ 26 Table 40. Expenditures Summary................................................................................................................... 27 Table 41. Expenditures Summary by Future Development Type................................................................... 27 Table 42. Annual Fiscal Impact....................................................................................................................... 28 Table 43. Fiscal Impact by Development Type............................................................................................... 28 Table 44. Proposed CFD Special Tax Rates..................................................................................................... 31 ATTACHMENT 2
City of Manteca
Fiscal Impact Analysis of Future Development 1
SECTION 1 | INTRODUCTION
The City of Manteca (“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. A review of the revenues expected to be generated by projected development, as compared with expenditures the City will incur to provide certain public services, determined that projected Single-Family Residential (“SFR”), Multi-Family Residential (“MFR”), Affordable Housing (“Affordable Housing”), and Industrial (“Industrial”) development within the City will have a negative fiscal impact on the City’s General Fund, whereas Commercial (“Commercial”) development will have a positive fiscal impact. To offset negative fiscal impacts created by projected development, 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.
ATTACHMENT 2
City of Manteca
Fiscal Impact Analysis of Future Development 2
SECTION 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 place upon a public agency’s operating funds. This analysis seeks to determine the fiscal impact of future development throughout the City and the accompanying impact placed upon the City’s General Fund. The General Fund is used to account for all the general revenues of the City not specifically levied or collected for other City funds or related expenditures. 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.
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 San Joaquin Council of Governments, the General Plan, and financials of the City. Data sources are detailed where applicable in this report. Current-day dollar values are used in this analysis 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 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 on industryaccepted 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 the 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 changes in, for example, the number of persons served by a public agency. To apply the multiplier approach, this report determines an average revenue or expenditure amount based upon a per person served basis. Depending on the type of revenue or expenditure, persons served can include residents, employees, or a combination of both.
ATTACHMENT 2
City of Manteca
Fiscal Impact Analysis of Future Development 3
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 California Department of Finance (“CA DOF”).
Per the California Department of Finance, as of 2021, the residential population of the City is 87,319.
EMPLOYEE POPULATION
Current employee population data was obtained from the San Joaquin County (“County”) Demographic and Employment Forecast prepared by the University of the Pacific Center for Business and Policy Research for the San Joaquin Council of Governments (“SJCOG”). This report refers to the Demographic and Employment Forecast as the SJCOG Report.
Per the SJCOG Report, in 2020 the employee population of the City (i.e., number of jobs within the City) was 21,103 and is expected to grow annually by approximately 1.08% through the year 2050. Using the 2020 employee population and projected annual growth rate, this analysis estimates that as of 2021 the employee population of the City is 21,330.
PERSONS SERVED
Using residential and employee population estimates, the total number of persons served within the City can be determined. When establishing the total number of persons served within the City, 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 onehalf employee to one resident is commonly used. This 50% adjustment suggests that a resident will have twice the impact on a public agency’s revenues and demand for services as that of an employee within the City. The 50% adjustment also seeks to account for employees included within the identified employee population count that are also residents of the City. Applying the 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.
ATTACHMENT 2
City of Manteca
Fiscal Impact Analysis of Future Development 4
TABLE 1. CURRENT PERSONS SERVED
Description Total
Current Residential Population (1) 87,319
Current Employee Population (2) 21,330
Adjusted Employee Population (3) 10,665
Current Persons Served (4) 97,984
(1) Per CA DOF.
(2) 2020 Employee Population per the SJCOG Report adjusted to 2021. (3) Current Employee Population adjusted by 50%, rounded to the nearest whole number.
(4) Equal to (Current Residential Population) + (Adjusted Employee Population).
Future City Persons Served
FUTURE RESIDENTIAL POPULATION
Per the SJCOG Report, the City’s residential population is projected to grow annually by approximately
1.42% through the year 2050. Using the 2021 residential population and projected annual growth rate, this analysis estimates that in 2050 the City’s residential population will be 131,361.
FUTURE EMPLOYEE POPULATION
As noted, the SJCOG Report projects that the City’s employee population will grow annually by approximately 1.08% through the year 2050. Using the 2021 employee population and projected annual growth rate, this analysis estimates that in 2050 the City’s employee population will be 29,099.
FUTURE PERSONS SERVED
Using projected future residential and employee population estimates, the total number of future persons served within the City can be determined. Applying the 50% adjustment (described earlier in this report) to the City’s projected future employee population, the total number of future persons served within the City is provided in the following table.
TABLE 2. FUTURE PERSONS SERVED
Description Total
Future Residential Population (1) 131,361
Future Employee Population (1) 29,099
Adjusted Future Employee Population (2) 14,550
Future Persons Served (3) 145,911
(1) Current Residential/Employee Population adjusted to 2050. (2) Future Employee Population adjusted by 50%, rounded to the nearest whole number.
(3) Equal to (Future Residential Population) + (Adjusted Future Employee Population).
ATTACHMENT 2
City of Manteca
Fiscal Impact Analysis of Future Development 5
CHANGE IN PERSONS SERVED
A summary of the change in persons served as a result of projected future development within the City is presented in the following table.
TABLE 3. CHANGE IN PERSONS SERVED
Description Total
Change in Residential Population 44,042
Change in Employee Population (1) 7,769
Change in Persons Served 47,927
(1) Reflects change in employee population prior to application of 50% adjustment.
Figure used to estimate future non-residential development & certain revenues.
ATTACHMENT 2
City of Manteca
Fiscal Impact Analysis of Future Development 6
SECTION 3 | REVENUE ESTIMATE
The City relies on revenue received from several sources. A majority of the City’s operating revenue derives from property taxes, sales taxes, property taxes in lieu of vehicle license fees, property transfer taxes (i.e., documentary transfer taxes), and various other taxes and fees. The case study approach is used to determine the estimated property tax revenue generated from projected future development within the City, 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 13.87%.
There are also several former redevelopment project areas (“RDA Zones”) managed by the City Successor Agency (“Successor Agency”). The 1% ad valorem incremental property tax generated within these former project areas is allocated each January 2 and June 1 per redevelopment dissolution statutes. The 1% ad valorem tax increment revenue is allocated on these dates by first deducting County administrative costs and then by the payment of pass-through obligations. The tax increment revenue remaining is available for payment of the former redevelopment agency’s obligations and the administrative costs of the Successor Agency. Tax increment revenue remaining after payment of all obligations is referred to as Residual Revenue (“Residual Revenue”). The Residual Revenue is allocated to relevant taxing entities based on their proportional shares of the total tax increment revenue. The portion of the Residual Revenue received by the City was recently reduced due to a revision of the Residual Revenue allocation methodology by the County.
Residual Revenue was 69.23% of the total 1% ad valorem tax increment revenue in Fiscal Year 2020/21. This percentage tends to increase over time as revenue grows while obligations paid remain relatively level. The City’s share of the Residual Revenue allocated in Fiscal Year 2020/21 was approximately 14.69% of the total amount, which equates to approximately 10.17% of the 1% ad valorem property tax revenue. To attempt to account for increases in the City’s share of the Residual Revenue before the completion of any projected future development examined in this analysis, it is assumed that within RDA Zones, the City receives approximately 11.00% of the 1% ad valorem property tax revenue.
RESIDENTIAL DEVELOPMENT
To calculate the amount of property tax revenue projected to be generated for the City by future residential development, the projected increase in households is considered. Per the CA DOF, as of 2021, there are 28,485 households in the City, with approximately 82% of the total consisting of SFR households and 18% of the total consisting of MFR development. Per the SJCOG Report, between 2020 and 2045, the number of households within the City is projected to grow annually by 1.42%. Using the number of households within the City in 2021 and the projected annual growth rate, this analysis estimates that in 2050 the City will have a total of 42,822 households, as shown in the following table.
ATTACHMENT 2
City of Manteca
Fiscal Impact Analysis of Future Development 7
TABLE 4. GROWTH IN HOUSEHOLDS
Description Total
Households in 2021 (1) 28,485
Annual Growth Rate (2) 1.42%
Households in Future (3) 42,822
Growth in Households (4) 14,337
(1) Per CA DOF.
(2) Per SJCOG Report, annual growth rate in number of households from 2020 to 2045. (3) Households in 2021 adjusted to the year 2050.
(4) Equal to (Households in Future) - (Households in 2021).
In August of 2014, SJCOG published the Regional Housing Needs Plan for the years 2014 through 2023 (“SJCOG RHNP”). The SJCOG RHNP provides SJCOG member cities guidance, policies, and objectives for providing housing to all economic segments of their current and future populations. Using guidance provided in the SJCOG RHNP, the City’s most recent Housing Element details how the construction of housing between 2014 and 2023 should be allocated to above moderate-income, moderate-income, lowincome, very low-income, and extremely low-income households. These allocations are detailed in the following table.
TABLE 5. ALLOCATION OF FUTURE HOUSING TO VARIOUS HOUSEHOLD INCOME CATEGORIES Income Category
% of Future Housing Allocated
to Income Category (1)
Above Moderate-Income 44.49%
Moderate-Income 18.75%
Low-Income 15.75%
Very Low-Income 10.59%
Extremely Low-Income 10.43%
Total 100.00%
(1) Percentages based on total unit counts provided in City’s Housing Element.
This analysis assumes that housing constructed through 2050 will follow similar guidelines as those detailed in the SJCOG RHNP and the City’s most recent Housing Element. This report also recognizes that a percentage of housing allocated to very low-income and extremely low-income households will be exempt from certain taxes examined further in Section 3 of this report. The following table details how future housing allocations by income, as shown in Table 5, equate to future housing units by residential development category.
ATTACHMENT 2
City of Manteca
Fiscal Impact Analysis of Future Development 8
TABLE 6. CATEGORIZATION OF HOUSING ALLOCATED TO INCOME CATEGORIES Development
Type Composition of Future Housing Construction (1)
% of Total Future
Housing (2)
SFR
100% of Housing Allocated to Above Moderate-Income
Households +
50% of Housing Allocated to Moderate-Income Households
53.86%
MFR
50% of Housing Allocated to Moderate-Income Households + 100% of Housing Allocated to Low-Income Households +
30% of Housing Allocated to Very Low-Income Households
28.30%
Affordable
Housing
70% of Housing Allocated to Very Low-Income Households + 100% of Housing Allocated to Extremely Low-Income Households 17.84% (1) Future Housing Allocations detailed in Table 5. Percentages are estimated and subject to change. (2) Calculated using Composition of Future Housing Construction identified in this table and percentages detailed in Table 5.
Using the projected change in dwelling units from 2021 to 2050 calculated in Table 4, and the allocations detailed in Tables 5 and 6, the number of future residential units projected to develop within the City are calculated in the following table. For purposes of this analysis, future condominium development is categorized as MFR.
TABLE 7. FUTURE SFR, MFR, AND AFFORDABLE HOUSING DEVELOPMENT WITHIN CITY Development
Type
% of Total
Future Housing (1)
Total
Unit Count (2)
SFR 53.86% 7,723
MFR (3) 28.30% 4,056
Affordable Housing 17.84% 2,558
Totals 100.00% 14,337
(1) Detailed in Table 6.
(2) For each development type, equal to (% of Total Future Housing) x (Growth in Households identified in Table 4).
(3) Includes future condominiums.
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 non-profits. 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 SFR and MFR development will be subject to the 1% ad valorem property tax rate, whereas future Affordable Housing development will qualify for the Welfare Exemption and will 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 future SFR and MFR development, the estimated sales price of each property type as of January 2022 is considered. For purposes of this analysis, it is assumed that all residential units will apply and qualify for a Homeowner Exemption which reduces the assessed value of each unit by $7,000.
ATTACHMENT 2
City of Manteca
Fiscal Impact Analysis of Future Development 9
TABLE 8. TOTAL FUTURE ASSESSED VALUE OF SFR AND MFR DEVELOPMENT Description SFR MFR Total
Estimated Price per Unit (1) $607,000 $401,000 N/A
Homeowner Exemption 7,000 7,000 N/A
Assessable Value per Unit (2) 600,000 394,000 N/A
Unit Count (3) 7,723 4,056 11,779
Total Future Assessed Value (4) $4,633,800,000 $1,598,064,000 $6,231,864,000 (1) Sales price data drawn from Zillow.com Home Value Index for the City. Figures reflect market conditions as of January 2022 and are subject to fluctuation.
(2) Equal to (Estimated Price per Unit) – (Homeowner Exemption). (3) Identified in Table 7.
(4) Equal to (Assessable Value per Unit) x (Unit Count).
Undeveloped land zoned for residential use currently generates a level of property tax revenue for the City.
For purposes of assigning current assessed value to the property that will contain projected future SFR and MFR development, County Secured Roll data dated January 1, 2021 (“County Secured Roll Data”) was analyzed to determine the estimated number of acres per unit of SFR development within the City. MFR units are estimated to have a density equal to 25% of SFR units. This reduction seeks to account for MFR units, on average, utilizing less land area than SFR units. This analysis also assumes that Affordable Housing units will have the same density as MFR Units.
TABLE 9. RESIDENTIAL DENSITY
Description (1) Value
Acres per SFR Unit (2) 0.1867
Acres per MFR Unit (3) 0.0467
Acres per Affordable Housing Unit (4) 0.0467
(1) Per County Secured Roll Data.
(2) Average acreage of parcels classified as SFRs and townhomes. (3) Equal to (Acres per SFR Unit) x (30%). Reduction is estimated and subject to change. (4) Equal to Acres per MFR Unit.
The total acreage and assessed value of undeveloped property zoned for residential use and projected to develop into SFR and MFR property in the City are detailed in the following table.
TABLE 10. UNDEVELOPED RESIDENTIAL ACREAGE AND ASSESSED VALUE Description Value
Undeveloped Residential Acreage (1) 6,249
Undeveloped Residential Acreage Assessed Value (1) $161,349,060 (1) Per County Secured Roll Data. Reflects undeveloped parcels with residential use codes.
The SFR and MFR residential densities identified earlier are used to estimate the amount of undeveloped acreage, and accompanying assessed value, zoned for residential use that will develop and contain projected future SFR and MFR development, as shown in the following table.
ATTACHMENT 2
City of Manteca
Fiscal Impact Analysis of Future Development 10
TABLE 11. CURRENT ASSESSED VALUE OF FUTURE RESIDENTIAL DEVELOPMENT Description SFR MFR Total
Unit Count 7,723 4,056 11,779
Acres per Unit (1) 0.1867 0.0467 N/A
Acreage Projected to Develop (2) 1,441.72 189.29 1,631.01 % of Total Undeveloped Acreage
Projected to Develop (3) 23.07% 3.03% 26.10%
Current Assessed Value (4) $37,223,800 $4,887,341 $42,111,141 (1) Identified in Table 9.
(2) Equal to (Unit Count) x (Acres per Unit).
(3) Equal to (Acreage Projected to Develop) / (Undeveloped Residential Acreage identified in Table 10). (4) Equal to (% of Total Undeveloped Acreage Projected to Develop) x (Undeveloped Residential Acreage Assessed Value identified in Table 10).
The incremental assessed value of projected future SFR and MFR development within the City is calculated in the following table.
TABLE 12. INCREMENTAL ASSESSED VALUE OF FUTURE RESIDENTIAL DEVELOPMENT Description SFR MFR Total
Total Future Development
Assessed Value (1) $4,633,800,000 $1,598,064,000 $6,231,864,000 Current Assessed Value (2) 37,223,800 4,887,341 42,111,141 Incremental Assessed Value (3) $4,596,576,200 $1,593,176,659 $6,189,752,859 (1) Calculated in Table 8.
(2) Calculated in Table 11.
(3) Equal to (Total Future Development Assessed Value) - (Current Assessed Value).
The amount of property tax revenue expected to be generated by projected SFR and MFR development is dependent on whether property on which it will develop is within an RDA Zone. Per County Secured Roll Data, of the total amount of undeveloped land zoned for residential use, approximately 63% is within an existing RDA Zone. For purposes of this analysis, it is assumed that 63% of projected residential development will occur within an RDA Zone. Given this assumption, the amount of property tax revenue projected SFR and MFR development is expected to generate for this City is calculated in the following table.
TABLE 13. PROPERTY TAX REVENUE GENERATED BY FUTURE RESIDENTIAL DEVELOPMENT Description SFR MFR Total
Incremental Assessed Value (1) $4,596,576,200 $1,593,176,659 $6,189,752,859 1% Ad Valorem – RDA Zones (2) 28,958,430 10,037,013 38,995,443 1% Ad Valorem – Non-RDA Zones (3) 17,007,332 5,894,754 22,902,086 ATTACHMENT 2
City of Manteca
Fiscal Impact Analysis of Future Development 11
Allocation of 1% Ad Valorem -
RDA Zones (4) 11.00% 11.00% N/A
Allocation of 1% Ad Valorem -
Non-RDA Zones (4) 13.87% 13.87% N/A
Property Tax Revenue Generated
for City (5) $5,544,344 $1,921,674 $7,466,018
(1) Calculated in Table 12.
(2) Equal to (Incremental Assessed Value) x (1.00%) x (63%, the percent of future residential development expected to occur within existing RDA Zones). 63% is estimated and subject to change. (3) Equal to (Incremental Assessed Value) x (1.00%) x (37%, the percent of future residential development expected to occur outside of existing RDA Zones). 37% is estimated and subject to change. (4) Provided by City or estimated using data provided by the City. (5) Equal to [(1% Ad Valorem – RDA Zones) x (Allocation of 1% Ad Valorem – RDA Zones)] + [(1% Ad Valorem – NonRDA Zones) x (Allocation of 1% Ad Valorem – Non-RDA Zones)].
NON-RESIDENTIAL DEVELOPMENT
To calculate the amount of property tax revenue projected to be generated for the City by future Commercial and Industrial development, estimated current employee densities and the projected increase in the employee population are considered.
Between 2021 and 2050, the employee population of the City is projected to grow by 7,769 employees. Per County Secured Roll Data, of the vacant land zoned for non-residential use, approximately 73% will be dedicated to Commercial development and 27% to Industrial development. For purposes of this analysis, the projected increase in the employee population within the City is attributed to Commercial and Industrial development according to the proportion of undeveloped non-residential land zoned for each use, as shown in the following table.
TABLE 14. FUTURE DEVELOPMENT EMPLOYEE POPULATION
Description Value
Projected Change in Commercial Employee Population (1) 5,671 Projected Change in Industrial Employee Population (2) 2,098 Projected Change in Employee Population (3) 7,769
(1) Equal to 73% of Projected Change in Employee Population. Estimated, subject to change. (2) Equal to 37% of Projected Change in Employee Population. Estimated, subject to change. (3) Identified in Table 3.
Average employee density figures specific to the City or the County could not be obtained. As such, for purposes of this analysis, estimated employee density figures for the City were calculated by averaging non-residential density figures presented in the County of Riverside General Plan Socioeconomic Buildout Assumptions and Methodology (“Riverside County Buildout Assumptions”) and the association of Bay Area Governments Non-Residential Buildings Analysis (“ABAG Building Analysis”). The estimated building square feet per employee of non-residential development are presented in the following table and multiplied by the projected change in Commercial or Industrial employee population to arrive at the amount of nonresidential building square feet projected to develop.
ATTACHMENT 2
City of Manteca
Fiscal Impact Analysis of Future Development 12
TABLE 15. ESTIMATED NON-RESIDENTIAL BUILDING SQUARE FEET TO DEVELOP Description Value
Commercial Bldg. Sq. Ft. per Employee (1) 502
Industrial Bldg. Sq. Ft. per Employee (1) 932
Commercial Bldg. Sq. Ft. Projected to Develop (2) 2,847,228 Industrial Bldg. Sq. Ft. Projected to Develop (2) 1,955,260 (1) Average of employee density figures within the Riverside County Buildout Assumptions and ABAG Building Analysis.
(2) Equal to (Projected Change in corresponding Employee Population identified in Table 3) x (Corresponding Bldg.
Sq. Ft. per Employee).
Undeveloped land zoned for non-residential use currently generates a level of property tax revenue for the City. For purposes of assigning current assessed value to property that will contain projected future Commercial and Industrial development, Floor Area Ratios (“FAR”), or the maximum ratio of building to lot square footage, are considered. The maximum FAR of various non-residential uses detailed in Chapter
17.26 of the City’s Municipal Code (“City Development Standards”) were examined. On average, the maximum FAR of non-residential uses that can contain Commercial development range from 0.6 to 1.0.
The FAR of non-residential uses that can contain Industrial development ranges from 0.5 to 1.0. This analysis assumes that on average, Commercial development will have a FAR of 0.6 and Industrial development will have a FAR of 0.5. The current assessed value of property projected to develop to accommodate future non-residential development is calculated in the following table using FARs, amount of building square feet projected to develop, and County Secured Roll Data.
TABLE 16. CURRENT ASSESSED VALUE OF FUTURE NON-RESIDENTIAL DEVELOPMENT Description Commercial Industrial Total
Building Square Feet
Projected to Develop (1) 2,847,228 1,955,260 4,802,488
FAR (2) 0.60 0.50 N/A
Lot Square Feet Projected to
Develop (3) 4,745,380 3,910,520 8,655,900
Acreage Projected to Develop (4) 108.94 89.77 198.71
Undeveloped Non-residential
Acreage (5) 436.54 159.39 595.93
Undeveloped Non-residential
Assessed Value (5) 74,866,881 23,250,169 98,117,050
% of Total
Undeveloped Acreage (6) 24.95% 56.32% N/A
Current Assessed Value (7) $18,682,967 $13,095,104 $31,778,071 (1) Identified in Table 15.
(2) Estimated based on City Development Standards.
ATTACHMENT 2
City of Manteca
Fiscal Impact Analysis of Future Development 13
(3) Equal to (Building Square Feet Projected to Develop) / (FAR). (4) Lot Square Feet Projected to Develop converted to acres. (5) Per County Secured Roll Data, total acreage and assessed value of undeveloped property zoned for nonresidential uses. (6) Equal to (Acreage Projected to Develop) / (Undeveloped Non-residential Acreage). (7) Equal to (% of Total Undeveloped Acreage) x (Undeveloped Non-residential Assessed Value).
To calculate the total assessed value of projected future Commercial and Industrial development, the average sales price per building square foot of each property type was calculated. An average price per building square foot was calculated for Commercial and Industrial property using listing price data of property within the City and neighboring cities listed for sale.
TABLE 17. COMMERCIAL AND INDUSTRIAL PRICE PER BUILDING SQUARE FOOT Description Commercial (1) Industrial (1)
Average Price per Bldg. Sq. Ft. $402 $166
(1) Listing price data drawn from the online commercial real estate marketplace LoopNet.com. Listing price data of Commercial and Industrial property for sale within the City and the cities of Stockton, Modesto, Tracy, Ceres, and Riverbank. Figures reflect market conditions as of October 2021 and are subject to fluctuation.
The total assessed value and the incremental assessed value of projected Commercial and Industrial development are calculated in the following table.
TABLE 18. INCREMENTAL ASSESSED VALUE OF FUTURE NON-RESIDENTIAL DEVELOPMENT Description Commercial Industrial Total
Total Assessed Value (1) $1,144,066,227 $323,650,797 $1,467,717,025 Current Assessed Value (2) 18,682,967 13,095,104 31,778,071 Incremental Assessed Value (3) $1,125,383,261 $310,555,693 $1,435,938,954 (1) Equal to (Building Square Footage Projected to Develop identified in Table 16) x (Average Price per Bldg. Sq. Ft. identified in Table 17).
(2) Identified in Table 16.
(3) Equal to (Total Assessed Value) – (Current Assessed Value).
As with future residential development, the amount of property tax revenue expected to be generated by projected non-residential development is dependent on whether property on which it will develop is within an RDA Zone. Per County Secured Roll Data, of the total amount of undeveloped land zoned for nonresidential use, approximately 83% is within an existing RDA Zone. For purposes of this analysis, it is assumed that 83% of projected non-residential development will occur within an RDA Zone. Given this assumption, the amount of property tax revenue projected non-residential development is expected to generate for the City is calculated in the following table.
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TABLE 19. PROPERTY TAX REVENUE GENERATED BY FUTURE NON-RESIDENTIAL DEVELOPMENT Description Commercial Industrial Total
Incremental Assessed Value (1) $1,125,383,261 $310,555,693 $1,435,938,954 1% Ad Valorem – RDA Zones (2) 9,340,681 2,577,612 11,918,293 1% Ad Valorem – Non-RDA Zones (3) 1,913,152 527,945 2,441,096 Allocation of 1% Ad Valorem -
RDA Zones (4) 11.00% 11.00% N/A
Allocation of 1% Ad Valorem -
Non-RDA Zones (4) 13.87% 13.87% N/A
Property Tax Revenue Generated
for City (5) $1,292,829 $356,763 $1,649,592
(1) Calculated in Table 18.
(2) Equal to (Incremental Assessed Value) x (1.00%) x (83%, the percent of future residential development expected to occur within existing RDA Zones). 83% is estimated and subject to change. (3) Equal to (Incremental Assessed Value) x (1.00%) x (17%, the percent of future residential development expected to occur outside of existing RDA Zones). 17% is estimated and subject to change. (4) Provided by City.
(5) Equal to [(1% Ad Valorem – RDA Zones) x (Allocation of 1% Ad Valorem – RDA Zones)] + [(1% Ad Valorem – NonRDA Zones) x (Allocation of 1% Ad Valorem – Non-RDA Zones)].
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 assessed valuation.
Per assessed value data provided by the CA BOE, and the Fiscal Year 2020/21 Property Tax in Lieu of VLF revenue received by the City, 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 20. PROPERTY TAX IN LIEU OF VLF RATIO
Description
Fiscal Year
2020/21 Value
City Total Assessed Value (1) $9,294,167,000
VLF Revenue (2) 8,135,097
Property Tax in Lieu of VLF Ratio (3) 0.0875%
(1) Per the CA BOE.
(2) Confirmed by City staff.
(3) Equal to (VLF Revenue) / (City Total Assessed Value).
The property tax in lieu of VLF ratio is applied to the incremental assessed value of projected future development within the City to estimate the amount of property tax in lieu of VLF to be generated by said development.
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TABLE 21. PROPERTY TAX IN LIEU OF VLF REVENUE
Description
Incremental Assessed
Value (1)
Property Tax in Lieu of
VLF Ratio
Property Tax in Lieu of
VLF Revenue (2)
SFR $4,596,576,200 0.0875% $4,022,004
MFR 1,593,176,659 0.0875% 1,394,030
Affordable Housing (3) 0 0.0875% 0
Commercial 1,125,383,261 0.0875% 984,710
Industrial 310,555,693 0.0875% 271,736
Totals $7,625,691,812 $6,672,480
(1) Identified in Tables 12 and 18.
(2) Equal to (Incremental Assessed Value) x (Property Tax in Lieu of VLF Ratio). (3) Affordable Housing is expected to qualify for the Welfare Exemption and thus not expected to generate property tax in lieu of VLF revenue.
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 $0.55 per $500 of assessed value, or $1.10 per $1,000 of assessed value. To determine the annual documentary transfer tax revenue, estimated property turnover rates are considered. This analysis assumes that SFR and MFR units will turnover approximately every 13 years, which results in an annual turnover rate of about 8%. Commercial and Industrial 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 estimated annual turnover rates, the City’s share of the documentary transfer tax is calculated in the following table.
TABLE 22. DOCUMENTARY TRANSFER TAX GENERATED BY FUTURE DEVELOPMENT Description SFR MFR Commercial Industrial
Incremental Assessed
Value $4,596,576,200 $1,593,176,659 $1,125,383,261 $310,555,693 Estimated Annual
Turnover Rate (1) 8% 8% 5% 5%
Annual Turnover
Assessed Value (2) 367,726,096 127,454,133 56,269,163 15,527,785 Annual Turnover
Assessed Value / $1,000 367,726 127,454 56,269 15,528
Documentary Transfer
Tax Rate per $1,000 (3) 0.55 0.55 0.55 0.55
Documentary Transfer
Tax Revenue $202,249 $70,100 $30,948 $8,540
(1) Source for SFR and MFR rates: “Latest Calculations Show Average Buyer Expected to Stay in Home 13 Years,” Economic and Housing Policy, National Association of Homebuilders. (2) Equal to (Incremental Assessed Value) x (Estimated Annual Turnover Rate). (3) $1.10 tax rate is split $0.55 to the County and $0.55 to the City.
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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 the sales tax is allocated to certain state and local jurisdictions, with the City receiving 1.00% of the base sales tax rate.
In addition to the base sales tax, the County levies and collects an additional 0.50% sales tax. Additionally, in November 2006, the City’s electorate approved Measure M, which instituted 0.50% transactions and use tax aimed at providing funding for various public safety services. The Measure M transactions and use tax will remain in effect until repealed by the City electorate. In total, the sales rate in the City is 8.25%. The rate used to project sales and transactions and use tax revenue for the City referred to collectively as sales tax revenue in this report, is 1.50%.
FUTURE RESIDENTS
To determine the amount of sales tax revenue expected to be generated by the residential population that will result from projected residential development, the median income per household within the City, the median home price to median household income ratio, and the percentage of income spent on taxable retail sales per household are considered.
In 2021, the Joint Center for Housing Studies of Harvard University authored the State of the Nation’s Housing report (“Harvard Study”). Per the Harvard Study, in 2020 within the Stockton-Lodi metropolitan area, the median home price to median income ratio was 6.00. Together with the projected median sales price of projected SFR and MFR development, this ratio is used to estimate the income of households within future SFR and MFR development. This analysis assumes that, on average, households within projected Affordable Housing development will have incomes equal to 60% of MFR households. The projected income of households within projected SFR, MFR, and Affordable Housing development are detailed in the following table.
TABLE 23. RESIDENTIAL HOUSEHOLD INCOMES
Description
Median
Price per Unit (1)
Median Home Price to
Median Income Ratio (2)
Household
Income (3)
SFR $607,000 6.00 $101,167
MFR 401,000 6.00 66,833
Affordable Housing N/A N/A 40,100
(1) Identified in Table 8.
(2) For SFR and MFR, equal Stockton-Lodi metropolitan area median home price to median income ratio. Affordable Housing incomes are considered separately.
(3) SFR and MFR household income equal to (Median Price per Unit) / (Median Home Price to Median Income Ratio). Affordable Housing household income equals 60% of MFR household income.
Per the CA BOE, approximately 29.5% of a household’s spending is spent on taxable retail goods. This percentage is discounted by 40% 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. The estimated sales tax revenue generated by projected future households is calculated in the following table.
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Fiscal Impact Analysis of Future Development 17
TABLE 24. SALES TAX REVENUE GENERATED BY INCREASE IN RESIDENTIAL POPULATION Description SFR MFR
Affordable
Housing
Median Household Income (1) $101,167 $66,833 $40,100
Percentage of Income Spent on Taxable
Retail Sales per Household (2) 17.70% 17.70% 17.70%
Income Spent on Taxable Retail Sales
Within City per Household (3) 17,907 11,830 7,098
Number of Households 7,723 4,056 2,558
Sales Tax Revenue – Residential
Population (4) $2,074,378 $719,707 $272,339
(1) Identified in Table 23.
(2) 29.5%, per BOE.gov household spending for California taxable retail goods, discounted by 40% to account for shifts in taxable sales and purchases made outside of the City boundaries. Estimate; subject to change. (3) Equal to (Median Household Income) x (Percentage of Income Spent on Taxable Retail Sales per Household). (4) Equal to (Income Spent on Taxable Retail Sales Within City per Household) x (Number of Households) x (1.50%).
FUTURE EMPLOYEES
In addition to the increased residential population, the increase in employees resulting from projected nonresidential development 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 amount an average employee spends per year on taxable goods and services. After adjusting this amount to the year 2021 using the change in Consumer Price Index (“CPI”) of the San Francisco-Oakland-Hayward region, it’s estimated that an average employee within the City will spend approximately $6,148 per year on taxable goods and services. While personal spending is unique to each individual, this analysis assumes that approximately 60% of the 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 25. SALES TAX REVENUE GENERATED BY INCREASE IN EMPLOYEE POPULATION Description Commercial Industrial
Average Annual Taxable Spending per Employee (1) $6,148 $6,148 Additional Employee Count (2) 5,671 2,098
Estimated % of Taxable Sales within City (3) 60% 60%
Employee Taxable Sales within City 20,919,185 7,739,102 Sales Tax Revenue – Employee Population (4) $313,788 $116,087 (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 San Francisco-Oakland-Hayward region. (2) Identified in Table 14.
(3) 40% reduction seeks to account for taxable sales made outside of the City boundary. (4) Equal to (Average Annual Spending per Employee) x (Additional Employee Count) x (Estimated % of Taxable Sales within City) x (1.50%).
NON-RESIDENTIAL SALES TAX REVENUE
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Sales tax revenue will be generated from taxable sales that occur within future non-residential development. Economic activity within future Industrial development may generate sales tax revenue; though due to an inability to accurately determine the types of businesses that will reside within future Industrial development, this analysis takes a conservative approach and does not attempt to estimate the amount of sales tax revenue that may be generated by Industrial property.
To best estimate the increase in sales tax revenue that will be generated by future Commercial property, this analysis considers the estimated taxable sales per square foot for commercial property calculated within a retail benchmarking report authored by PwC in 2013.1 After adjusting the PwC estimate to the year 2021 using the change in CPI for the San Francisco-Oakland-Hayward region, it’s estimated that future commercial property will generate approximately $482 per building square foot.
This analysis recognizes that some taxable sales generated from future Commercial development will not be new taxable sales for the City. A portion of these taxable sales will come from shifts from one existing place of business within the City to a place of business located within the projected Commercial development area. Furthermore, a portion of the sales tax revenue generated by projected Commercial development will derive from purchases made by the projected increase in the residential and employee population, purchases which are quantified separately in this analysis. Therefore, to account for shifts in taxable sales from one point of sale to another point of sale within the City and separately calculated sales tax revenue from the increased residential and employee population, an estimated 50% reduction has been applied.
Applying the estimated taxable sales per square foot and the sales tax revenue reduction percentage, the estimated sales tax revenue from projected commercial development can be determined.
TABLE 26. SALES TAX REVENUE GENERATED BY FUTURE COMMERCIAL DEVELOPMENT Description Amount
Estimated Taxable Sales per Bldg. Sq. Ft. (1) $482
Commercial Bldg. Sq. Ft. Projected to Develop (2) 2,847,228 Taxable Sales (3) 1,372,363,896
Sales Tax Revenue – Commercial Development (4) $10,292,729 (1) Figure drawn from the Measuring Up Retail Benchmarking Survey prepared by PwC, adjusted to the year 2021 using the change in CPI for the San Francisco-Oakland-Hayward. Figure from PwC report is derived from the median sales per square foot estimates for various retail categories. (2) Identified in Table 15.
(3) Equal to (Estimated Taxable Sales per Bldg. Sq. Ft.) x (Commercial Bldg. Sq. Ft. Projected to Develop). (4) Equal to (Taxable Sales) x (City sales tax rate of 1.50%) x (50% reduction factor). Reduction factor estimated and subject to change.
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 2018/19 Other Revenues derived from the City’s Comprehensive Annual Report for the year ended June 2019 (“2019 1 Measuring Up Retail Benchmarking Survey, PwC Consulting, 2013.
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Fiscal Impact Analysis of Future Development 19
ACFR”) which apply to the development categories considered in this analysis (i.e., categories of revenue generated by projected residential and non-residential development). The City’s draft Comprehensive Annual Report for the year ended June 2020 (“2020 ACFR”) was available as of the time of this report.
However, due to the impact of the COVID-19 pandemic on the City’s operations, it was determined that in the context of this analysis, adjusted 2019 ACFR figures better represent the financial position of the City. 2018/19 Other Revenue amounts in the 2019 ACFR are escalated by 2% annually to estimate FY 2021/22 values.
TABLE 27. OTHER CITY REVENUE
Description
Fiscal Year
2018/19 Value (1)
Fiscal Year
2021/22 Value (2)
Other Taxes $4,495,853 $4,771,035
Licenses & Permits 864,778 917,709
Fines & Forfeitures 495,618 525,954
Other Revenue 678,532 720,064
Other City Revenue $6,534,781 $6,934,762
(1) Per 2019 ACFR.
(2) Fiscal Year 2018/19 adjusted to Fiscal Year 2021/22 using a 2% annual adjustment. Estimated, subject to change.
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. It was previously identified that the total number of persons served within the City is 97,984 and the employee population is 21,330. 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 28. OTHER CITY REVENUE PER PERSON SERVED/EMPLOYEE Description
Fiscal Year
2021/22 Value
Current City Persons Served
or Employee Count (1)
Amount per Person
Served/Employee (2)
Other Taxes $4,771,035 97,984 $48.69
Licenses & Permits (3) 917,709 21,330 43.02
Fines & Forfeitures 525,954 97,984 5.37
Other Revenue 720,064 97,984 7.35
(1) Identified in Table 1.
(2) Equal to (Fiscal Year 2021/22 Value) / (Current City Persons Served or Employee Count). (3) Revenue calculated on a per-employee basis due to approximately 60% of revenue deriving from business activity (i.e., business licenses).
To determine the amount of other City revenue allocated to projected residential and non-residential development, the amount per person served/employee calculated in Table 28 is multiplied by the increase in persons served or employees that will result from future development.
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TABLE 29. OTHER CITY REVENUE GENERATED BY FUTURE DEVELOPMENT Description
Increase in Persons
Served/Employees
(1)
Amount per Person
Served/Employee (2) Other City Revenue
Other Taxes 47,927 $48.69 $2,333,566
Licenses & Permits 7,769 43.02 334,222
Fines & Forfeitures 47,927 5.37 257,368
Other Revenue 47,927 7.35 352,263
Total $3,277,419
(1) Identified in Table 3.
(2) Calculated in Table 28.
Revenue Summary
Projected residential and non-residential development will generate various forms of general revenues for the City. A portion of the anticipated revenue was calculated utilizing the case study approach and the remaining City revenue was allocated to projected future development using the multiplier approach. A summary of the revenues projected to be generated by future development is presented in the following tables.
TABLE 30. REVENUE SUMMARY
Revenue
Description Total
Property Tax $9,115,610
Property Tax in Lieu of VLF 6,672,480
Documentary Transfer 311,837
Sales Tax 13,789,028
Other 3,277,419
Total $33,166,375
TABLE 31. REVENUE SUMMARY BY FUTURE DEVELOPMENT TYPE
Development Type Total
SFR $13,641,859
MFR 4,660,963
Affordable Housing 622,621
Commercial 13,333,130
Industrial 907,802
Total $33,166,375
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Fiscal Impact Analysis of Future Development 21
SECTION 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.
For purposes of determining the overall fiscal impact of projected residential and non-residential development, City expenditures are allocated based upon amounts presented in the 2019 ACFR adjusted to estimate Fiscal Year 2021/22 values. Expenditure figures detailed in the 2019 ACFR were used over those in the 2020 ACFR due to the impact of the COVID-19 pandemic on the City’s operations. Of the City service expenditures recognized in this report, there was an approximate 10% decrease between expenditures in the 2020 ACFR compared to the 2019 ACFR. Thus, it was determined that in the context of this analysis, adjusted figures in the 2019 ACFR better represent the financial position of the City.
This analysis assumes that City expenditures other than those related to Public Safety increase annually by 3%. Per data sourced from the 2019 ACFR, between Fiscal Years 2015 and 2019, Public Safety expenditures increased annually by approximately 7%. This analysis thus assumes that Public Safety expenditures increased annually by 7% through Fiscal Year 2021/22.
Current Service Level Expenditures
Future development 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.
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Fiscal Impact Analysis of Future Development 22
TABLE 32. CURRENT SERVICE LEVEL EXPENDITURES
Description (1)
Fiscal Year
2018/19
Expenditures
Estimated Fiscal Year
2021/22
Expenditures (2)
Demand
Adjustment
Percentage (3)
Adjusted Fiscal
Year 2021/22
Expenditures (4)
General
Government $4,310,152 $4,709,819 50% $2,354,910
Public Safety 32,018,062 39,223,503 95% 37,262,328
Library 128,069 139,944 75% 104,958
Public Works 2,395,739 2,617,889 90% 2,356,100
Parks & Recreation 4,534,315 4,954,768 75% 3,716,076
Non-departmental 2,996,435 3,274,285 50% 1,637,143
Totals $46,382,772 $54,920,209 $47,431,515
(1) Community Development and Streets and Highways expenditure line items excluded due to having no expenditures listed in the 2019 ACFR.
(2) Public Safety expenditures adjusted to Fiscal Year 2021/22 using a 7% annual growth rate. Remaining line items adjusted using a 3% annual growth rate.
(3) Estimated; subject to change.
(4) Equal to (Estimated Fiscal Year 2021/22 Expenditures) x (Demand Adjustment Percentage). Figures applied in Table 34 to calculate the City expenditures per person currently served.
After adjusting the estimated Fiscal Year 2021/22 Expenditures to account for relationships that are less than a 1:1 relationship, the total expenditure amount to be considered is approximately $47.4 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. As previously noted, the total number of persons served in the City is 97,984, the number of residents served in the City is 87,319, and the number of employees served is 21,330. The following table provides the persons served category for each of the recurring current expenditure categories.
TABLE 33. EXPENDITURES ALLOCATION TO PERSONS SERVED, RESIDENTS SERVED, OR EMPLOYEES SERVED
Description Persons Served
General Government Persons Served
Public Safety Persons Served
Library Persons Served
Public Works Persons Served
Parks & Recreation Persons Served
Non-departmental Persons Served
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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 34. CURRENT SERVICE LEVEL EXPENDITURES PER PERSON SERVED Description
Adjusted Fiscal Year
2021/22 Expenditures (1)
Current City Persons
Served (2)
Amount per
Person Served (3)
General Government $2,354,910 97,984 $24.03
Public Safety 37,262,328 97,984 380.29
Library 104,958 97,984 1.07
Public Works 2,356,100 97,984 24.05
Parks & Recreation 3,716,076 97,984 37.93
Non-departmental 1,637,143 97,984 16.71
Totals $47,431,515 $484.08
(1) Identified in Table 32.
(2) Identified in Table 1.
(3) Equal to (Adjusted Fiscal Year 2021/22 Expenditures) / (Current City Persons Served).
To determine the amount of other current service level expenditures allocated to projected residential and non-residential development, the amount per person served calculated in Table 34 is multiplied by the increase in persons served or residents that will result from future development.
TABLE 35. CURRENT SERVICE LEVEL EXPENDITURES GENERATED BY FUTURE DEVELOPMENT Description
Increase in
Persons Served (1)
Amount per
Person Served (2)
Current
Expenditures (3)
General Government 47,927 $24.03 $1,151,686
Public Safety 47,927 380.29 18,226,159
Library 47,927 1.07 51,282
Public Works 47,927 24.05 1,152,644
Parks & Recreation 47,927 37.93 1,817,871
Non-departmental 47,927 16.71 800,860
Totals $484.08 $23,200,502
(1) Identified in Table 3.
(2) Identified in Table 34.
(3) Equal to (Increase in Persons Served) x (Amount per Person Served).
Target Service Level Expenditures - Police
The City seeks to provide an optimal level of Police Services to its population by maintaining a minimum ratio of 1 sworn officer per 1,000 residents (“Target Sworn Police Ratio”). Currently, the City’s ratio of sworn officers per 1,000 residents is approximately 0.87. The cost of providing this below-target level of service to ATTACHMENT 2
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Fiscal Impact Analysis of Future Development 24
the City’s projected total future population is captured in the calculation of current expenditures in Table
35. To meet its Target Sworn Police Ratio and provide a target level of Police Services to all future residents, the City requires an additional nine sworn Police Officers, a Police Lieutenant, and a Police Captain. Given current staffing levels within the City’s Police Department, there is approximately 0.42 non-sworn support staff for every sworn Police Officer. This ratio is utilized to estimate the number of additional non-sworn staff that will be needed to support the needed increase in sworn staff. The table below details the positions, sworn or non-sworn status, and annual costs of the additional personnel needed to provide an optimal level of service to the current City population.
TABLE 36. ANNUAL COST OF ADDITIONAL POLICE PERSONNEL FOR TARGET SERVICE LEVEL Position Title
Sworn
Status
Number of
Positions
Annual Cost per
Position (1)
Total
Annual Cost
Police Officer Sworn 9 $213,562 $1,922,062
Police Lieutenant Sworn 1
310,447 310,447
Police Captain Sworn 1
339,734 339,734
Total Sworn 11 $2,572,243
Support Police Staff (3) Non-Sworn 5 (2) $116,666 540,349 Total 16 $3,112,592
(1) Equal to annualized cost at the fully burdened hourly rate per the City’s finance department, plus overhead allocation of 17% per the Cost Allocation Plan prepared for the City by Willdan Financial Services. (2) Equal to (Number of Sworn Positions, 11) x (Current Ratio of Non-Sworn to Sworn Staff, 0.42). (3) Annual Cost per Position equal to average of annualized cost at the fully burdened hourly rate per the City’s finance department, plus overhead allocation of 17% per the Cost Allocation Plan prepared by Willdan Financial Services. Positions included in the average are as follows: Records Clerk, Dispatcher, Community Services Officer, Animal Services Officer, Code Enforcement Officer, Booking Officers, Executive Assistant, and Property/Evidence Officer.
Total Additional Police Expenditures calculated in the previous table are allocated to projected future development based on the projected increase in persons served attributable to future development, as shown in the following table.
TABLE 37. TARGET SERVICE LEVEL EXPENDITURES ATTRIBUTABLE TO FUTURE DEVELOPMENT Description Value
Total Future Persons Served (1) 145,911
Change in Persons Served (2) 47,927
Change in Persons Served % of Total Future Persons Served (3) 33% Additional Police Expenditures Attributable to Future Development (4) $1,027,155 (1) Identified in Table 2.
(2) Identified in Table 3.
(3) Equal to (Change in Persons Served) / (Total Future Persons Served). (4) Equal to (Total Annual Cost of Needed Additional Police Personnel calculated in Table 36) x (Change in Persons Served % of Total Future Persons Served).
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Fiscal Impact Analysis of Future Development 25
Combining the total annual cost of the positions detailed in Table 37 and the Police Services component of the Public Safety Current Expenditures calculated in Table 35, this analysis arrives at the estimated cost of providing Police Services at the City’s target service level to the projected increase in persons served attributable to future development.
Target Service Level Expenditures - Fire
The City seeks to provide a target level of Fire Services to its population. In 2019 the Fire Department worked with Fitch & Associates, LLC to prepare a comprehensive Operational Assessment of services provided. Based upon the findings contained within the Operational Assessment, the current service levels and prediction of future needs can be accurately assessed. On average Fire Departments can expect a 3% - 7% increase in call volume every year. Operating out of five fire stations the Manteca Fire Department responded to 7,737 calls in 2019 and 10,490 calls in 2021, an increase of 35%. Based upon the unprecedented increase in call volume and the City’s current growth patterns, the optimal service level will be obtained through the addition of one fire stations and adding a second apparatus at fire station 2. Five of the six fire stations will house a three person engine company and one of the stations will house a three person engine company and four person aerial ladder truck. In addition to the suppression personnel there will be an associated increase in administrative and prevention positions. The expenditure allocable to future development are calculated in the following table.
TABLE 38. ANNUAL COST OF ADDITIONAL FIRE PERSONNEL FOR TARGET SERVICE LEVEL Description Value
Current Residential Population (1) 87,319
Current # of Firefighters (2) 45
Current # of Administrative Personnel (2) 6
Current # of Prevention Personnel (2) 3.5
Target # of Firefighters (3) 66
Target # of Administrative Personnel (3) 9
Target # of Prevention Personnel (3) 5
Additional Firefighters Needed (4) 21
Additional Administration Personnel Needed (4) 3
Additional Prevention Personnel Needed (4) 1.5
Estimated Annual Cost per Firefighter (5) $275,729
Estimated Annual Cost per Administrative Personnel (6) 294,232 Estimated Annual Cost per Prevention Personnel (7) 105,590 Total Cost of Additional Personnel (8) 6,831,390
Firefighter Expenditures Allocable to Future Development (9) $2,254,359 (1) Identified in Table 1.
(2) Per City Fire Department.
(3) Per City Fire Department based on Operational Assessment prepared by Fitch & Associates LLC. (4) Equal to (Target # of personnel) - (Current # of personnel).
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Fiscal Impact Analysis of Future Development 26
(5) Average of step E salaries for Fire Captain, Fire Engineer, and Firefighter, includes estimated benefits, overhead costs and average overtime compensation.
(6) Average of step E salaries for Assistant Chief, Battalion Chief, Administrative Captain, includes benefits and overhead costs.
(7) Average of step E salaries for Fire Marshal, Fire Inspector, Administrative Assistant, includes benefits and overhead costs.
(8) Equal to total of (Additional Personnel) x (Estimated Annual Cost for Personnel) for the three personnel types. (9) Equal to (Total Cost of Additional Personnel) x (Change in Persons Served % of Total Future Persons Served calculated in Table 37).
Combining the allocable expenditures detailed in Table 38 and the Fire Services component of the Public Safety Current Expenditures calculated in Table 35, this analysis arrives at the estimated cost of providing Fire Services at the City’s target service level to the projected increase in persons served attributable to future development.
Target Service Level Expenditures – Street Maintenance
Per data provided by the City’s Public Works Department, the estimated annual cost of providing street maintenance services is approximately $693.83 per unit of SFR. This analysis recognizes that MFR and Affordable Housing development will not generate a direct need for additional streets in the same manner as SFR development, due to SFR development generally requiring more street frontage per unit compared to higher density MFR and Affordable Housing development. However, higher household densities will likely lead to greater vehicular traffic on streets within and leading directly into MFR and Affordable Housing developments, causing greater wear and tear and accompanying maintenance expenses. Thus, this analysis estimates the annual street maintenance cost per unit of MFR and Affordable Housing development to be 85% of SFR development. County Secured Roll data was examined to determine the estimated average building square footage of new SFR development. This analysis assumes that future SFR units will, on average, be sized at 1,955 building square feet. This equates to an annual cost of providing street maintenance services of $0.3548 per building square foot. This analysis assumes that future Commercial development will have an annual street maintenance service expenditure per building square foot twice that of SFR development to account for Commercial development generally having significantly more vehicular traffic than SFR development. Furthermore, this analysis assumes that future Industrial development will have an annual street maintenance service expenditure per building square foot three times that of SFR development to account for Industrial development generally having more heavy-vehicle traffic than SFR and Commercial development.
The following table summarizes the total annual street maintenance expenditures applicable to projected future development. Of note, these expenditures are intended to capture the cost of maintaining new streets resulting from future development as well as existing streets.
TABLE 39. TOTAL ANNUAL STREET MAINTENANCE EXPENDITURES
Description
Annual Street
Maintenance
Expenditure Per
Projected
Future Units (1)
Total Annual Street
Maintenance
Expenditure (2)
SFR $693.83 (3) Unit 7,723 $5,358,449
MFR 589.76 (4) Unit 4,056 2,392,048
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Affordable Housing 589.76 (4) Unit 2,558 1,508,595
Commercial 0.7097 (5) Building Square Foot 2,847,228 2,020,631 Industrial 1.0645 (6) Building Square Foot 1,955,260 2,081,424 Equipment, Materials Street Maintenance Equipment Operators (7) 230,000 Total $13,591,146
(1) Residential units identified in Table 7. Non-residential units identified in Table 15. (2) Equal to (Annual Street Maintenance Expenditure) x (Projected Future Units). (3) Estimated using City-provided data.
(4) Equal to (SFR Annual Street Maintenance Expenditure) x (85%). 85% estimated and subject to change. (5) Equal to (SFR Annual Street Maintenance Expenditure per Building Square Foot of $0.2839) x (2). Estimated, subject to change.
(6) Equal to (SFR Annual Street Maintenance Expenditure per Building Square Foot of $0.2839) x (3). Estimated, subject to change.
(7) Equal to (Equipment & Materials of $60,000) + (Two Equipment Operators of $170,000).
Total Expenditures Summary
Projected residential and non-residential development will cause the City to incur various forms of expenditures to provide an optimal/target level of public services to its current and future populations. A summary of the expenditures projected to be generated by future development is presented in the following tables.
TABLE 40. EXPENDITURES SUMMARY
Expenditure
Description Total
Current Expenditures $23,200,502
Target Service Level Expenditures – Police 1,027,155
Target Service Level Expenditures – Fire 2,254,359
Target Service Level Expenditures – Street Maintenance 13,591,146 Total $40,073,162
TABLE 41. EXPENDITURES SUMMARY BY FUTURE DEVELOPMENT TYPE Development Type Total
SFR $21,636,508
MFR 7,431,031
Affordable Housing 4,686,303
Commercial 3,622,443
Industrial 2,696,877
Total $40,073,162
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SECTION 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 as a result of projected future development within the City. The table below sets forth the total anticipated negative fiscal impact.
TABLE 42. ANNUAL FISCAL IMPACT
Description Value
Total City Revenue $33,166,375
Total City Expenditures (40,073,162)
City Positive / (Negative) Fiscal Impact ($6,906,787)
The fiscal impact future development is projected to have on the City’s General Fund is presented in the following table.
TABLE 43. FISCAL IMPACT BY DEVELOPMENT TYPE
Development Type Revenue Expenditures Fiscal Impact
SFR $13,641,859 ($21,636,508) ($7,994,649) Negative
MFR 4,660,963 (7,431,031) (2,770,068) Negative
Affordable Housing 622,621 (4,686,303) (4,063,682) Negative Commercial 13,333,130 (3,622,443) 9,710,687 Positive
Industrial 907,802 (2,696,877) (1,789,076) Negative
Total $33,166,375 ($40,073,162) ($6,906,787)
The net fiscal impact identified in this section is based on revenues and expenditures projected to be generated by future development within the City. A portion of the expenditures considered when calculating the net fiscal impact are not eligible to be recovered through Community Facilities District special tax revenues. Thus, any revenues generated through Community Facilities District special tax rates proposed through this report must and can only be used to finance eligible services, as detailed in Section 6 of this report.
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SECTION 6 | FISCAL IMPACT FUNDING OPTIONS
To mitigate the negative fiscal impacts identified in Section 5 of this report, the City should 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 landownerapproved 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 ATTACHMENT 2
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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 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 its population base as it continues to grow, the City must 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
Based on the overall fiscal impact to the City’s General Fund resulting from projected future SFR, MFR, and Industrial development, the proposed annual base CFD special tax rates for general City services are provided in the following table for consideration by the City.
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TABLE 44. PROPOSED CFD SPECIAL TAX RATES
Development
Type
CFD
Special Tax
Rates (1) Per
Rate as % of
Value per Unit (2)
Average Current
Effective Tax Rate (3)
Combined
Tax Rate (4)
SFR $1,152 Dwelling Unit 0.19% 1.24% 1.43%
MFR 979 Dwelling Unit 0.24% 1.25% 1.49%
Industrial 2 Building Sq. Ft. N/A N/A N/A
(1) Rates for services portion; does not include potential CFD administration or reserve/contingency costs. (2) Value per SFR unit projected to be $607,000. Value per MFR unit projected to be $401,000. (3) Calculated using the Fiscal Year 2021/22 tax bills of existing residential development. Includes estimated fixed charges, landscaping and lighting, and City CFD 2021-1 rates. (4) Equal to (Rate as % of the Value per Unit) + (Average Current Effective Tax Rate). Discrepancies in sum due to rounding of decimals.
The CFD special tax rates presented in Tables 44 would represent initial CFD maximum special tax rates to mitigate the identified negative fiscal impacts. The City could also increase the initial CFD maximum special tax rates to cover the added costs for administering the CFD, as well as establish any reserves or contingency funds. Furthermore, the CFD would 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.
TARGET SERVICE LEVELS – INSUFFICIENT REVENUES
As noted in Section 4 of this report, the City does not currently provide all public services at its target levels (“Target Service Level”) due to a lack of available revenue. The total cost of providing services at the Target Service Level to the City’s projected future development was not allocated fully to future development.
Instead, a portion of the total cost was allocated to future development based on the projected increase in persons served. Thus, revenue generated through the CFD special tax rates presented in Table 44 will not be sufficient to fund services at the Target Service Level. For the City to have sufficient revenue to provide services at the Target Service Level, alternative revenue sources will need to be explored.
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