1107 9th Street, Suite 360 ◼ Sacramento CA 95814 ◼ 916-538-6091 534 W Struck Ave
City of Orange, California
Economic and Fiscal Impact Analysis
November 23, 2022
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ABOUT ANDREW CHANG & COMPANY
Andrew Chang & Company works with clients to achieve tangible results by combining best-in-class research and analyses with unique insights into business operations, public policy, and government operations to help frame and solve business and public policy problems. Using advanced economic, statistical, and business techniques, we provide strategy and operations consulting to Fortune 1000 firms to improve their top and bottom lines. Alsoor public sector agencies and non-profit organizations to shape policies and government operations at the federal, state, and local levels. Their experience covers a host of clients and industries including:
▪ General business & infrastructure;
▪ Health and human services;
▪ Federal, state and local government;
▪ Military & aerospace;
▪ Energy & natural resources; and
▪ Education.
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TABLE OF CONTENTS
1. Summary .......................................................................................................................................4
2. Introduction ..................................................................................................................................5
3. Study Approach.............................................................................................................................6
4. Direct Spend..................................................................................................................................7 Construction Costs..............................................................................................................................7 Operational Costs...............................................................................................................................8
5. Employment Impact......................................................................................................................9
6. Personal Earnings Impact............................................................................................................10
7. Economic Output Impact............................................................................................................11
8. Fiscal Impact to the City..............................................................................................................12
9. Conclusion...................................................................................................................................14
10. Appendix .....................................................................................................................................15 Appendix A – Direct Spend Methodology ........................................................................................15 Appendix B – Employment, Personal Earnings, & Output Methodology.........................................19 Appendix C – Tax Revenue Scope & Methodology ..........................................................................20 Appendix D – Struck Avenue On-Site Employees Memorandum ....................................................23 Appendix E – Multipliers ..................................................................................................................31 Appendix F – High Thru Put LTL Truck Terminal Market Research Table ........................................32 Appendix G – Project Site Plan.........................................................................................................33 857
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1. SUMMARY
▪ The Project is projected to cumulatively inject approximately $73 million1into the City of Orange’s economy from 2023 to 2027 as a result of construction and operations of the tenants. ▪ As a result of increased economic activity from the Project, 80 direct jobs2 and 3 indirect jobs3 will be created from ongoing operational activities of the Project. ▪ The Project is projected to increase city residents’ personal earnings by $4.4 million on an ongoing basis starting in 2026. Between 2023 to 2027, personal earnings are expected to cumulatively total $15.4 million.
▪ The Project is projected to produce approximately $60 million in cumulative economic output between 2023 and 2027 to the City of Orange. By 2026, annual economic output generated by the Project’s ongoing operations will be approximately $16.5 million. ▪ The City of Orange is projected to increase its property and sales tax revenues as a direct result of the Project. The Project will support approximately $200,000 in property taxes, $210,000 in sales taxes, and $800,000 in development fees from 2023 to 2027. The Project will create $80,000 of total taxes on an ongoing, annual basis from 2026 and on. 1 Ranges from $55 million to $101 million. See Table 3.1 for detailed breakdown. 2 25th to 75th percentile ranges from 55 to 120 direct, on-site jobs, with the median estimate being 80 direct, on-site jobs. See 2022 Appendix D for detailed overview on methodology. 3 Ranges from 2 to 4 indirect jobs with median estimate being 3. Jobs are rounded to the nearest 5, so all jobs that are disaggregated to < 5 from this page on will be denoted as so. 858
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2. INTRODUCTION
The City of Orange is located in North Orange County, California. Prologis submitted an application to the City of Orange to develop two buildings at 534 W Struck Ave (Project), totaling 63,300 square feet (sq. ft.) to act as a high thru-put less-than-truckload (LTL) truck terminal on 9.94 acres of land. The Project will be constructed between Struck Avenue and Collins Avenue and will consist of a 52,900 sq. ft. warehouse with a 5,000 sq. ft. commercial office space, and a separate 5,400 sq. ft. maintenance building.
Development of the Project is estimated to begin in July 2023 and completed November 2024. The site currently houses a vacant 40,000 sq. ft. facility that was previously occupied by Nursery Supplies, Inc. Per the Project Site Plan4, the Project will have 188 trailer parking stalls, and 62 slots for auto parking (59 standard, 3 handicapped).
To better inform interested parties, Prologis retained Andrew Chang & Company, Inc. to conduct an economic and fiscal impact analysis of the Project in the City of Orange. The purpose of this study is to analyze the economic and fiscal impact to the City resulting from the development of the Project and the on-going tenant operations of the facility. This report relies on site plans and supporting documents to assess the economic and fiscal impact of the project. Key questions addressed in this study include:
▪ What are the total (direct and indirect) impacts of the initiative on employment in the region on a one-time and ongoing basis?
▪ What are the total (direct and indirect) impacts to the personal earnings of City residents on a one-time and ongoing basis?
▪ What are the total (direct and indirect) impacts of the initiative on economic output on a one-time and ongoing basis?
▪ What is the fiscal impact to the City’s General Fund revenues on a one-time and ongoing basis?
4 See Appendix G
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3. STUDY APPROACH
This study relies on generally accepted principles of public policy analysis, public finance, economics, and mathematics to construct cash flow/direct spend and economic models specific to the proposed project. The models are constructed using publicly available information and current market data. For data gaps or requirements that were not readily available, assumptions were made according to industry practices and standards. All assumptions are documented in this report.
To assess the economic impact of the Project, regional input-output multipliers were utilized to quantify the direct and indirect effects of new monies put into the local economy from construction of the facilities and their on-going operations. The economic multiplier approach is a common and generally accepted means of assessing the full economic impact (both direct and indirect) of new development scenarios. This approach assesses the full effects of injecting new monies into the local economy as the new monies ripple through the economy. The extra spending from new business operations generally leads to more income, which leads to more consumption and monies being circulated throughout the economy. The multiplier effect refers to the increase in final economic activity arising from the new injection of spending within an economic region. The multipliers used in this study were obtained from the United State (U.S.) Bureau of Economic Analysis for Orange County and were adjusted to isolate the impacts to the City of Orange. The detailed model configuration and data sources are included in the appendix of this report.
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4. DIRECT SPEND
The Project is a high thru-put LTL truck terminal, which operates differently from a standard warehouse, purposed to serve an LTL freight company. Additional market research was conducted on the major publicly traded LTL freight companies in the United States to better understand the potential employment numbers of the Project, in order to properly approximate annual direct spend from the Project. As for operational revenue activities, we assume that the tenant will begin operations the month after construction ceases, (in this case, December 2024) scaling up to full capacity operations by the year after.
Construction Costs
Table 4.1
Square Footage Breakdown (Sq. ft.)
FACILITY TYPE TOTAL
Warehouse 52,900
Office 5,000
Maintenance 5,400
Total 63,300
Table 4.2
Median Construction Cost Per Square Foot by Building Type with Fees Per Square Foot5
FACILITY TYPE COST
Warehouse $195
Maintenance $195
Office $375
Fees $13
Table 4.3
Estimated Site Construction Costs by Development and Fees
FACILITY TYPE COST
Warehouse $10,315,500
Office $1,875,000
Maintenance $1,053,000
Fees $802,000
Total $14,046,000
5 Provided by Prologis: “Development Impact Fees = $7.67 per sf, Building Permit Fees = $5.00 per sf.” 861
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Since the model assumes that construction of the Project will commence in July 2023 and be completed in November 2024, the earliest the Project can be occupied is December 2024; scaling up to full capacity in Q3 of 2025; 2026 being the first complete, full-capacity year of operations.
Operational Costs
To calculate the operating revenues of the project, Andrew Chang & Company surveyed per sq. ft. revenue estimates from 10-K forms of top value-added retailers in the U.S. 6 Actual revenues per sq. ft.
are highly dependent on the specific nature and operations of the specific tenants; factors influencing revenues include, but are not limited to, the type and value of products that are being warehoused or retailed, whether the tenant maintains point of sales operations, whether the tenant maintains operations that could deem the site an e-commerce facilitator, number of shifts per operation, and product throughput.
The analysis represented in this case reflects the impact from typical tenants within the warehousing and retail industries and economic conditions, but actual impact may vary. The revenue estimates shown in Table 4.4 are representative of the industry and assumes that the Project would operate and financially perform in a manner similar to others in its respective industry, with a range of operational direct spend since the tenant is speculative.
Table 4.4
Direct Spend of Project Disaggregated by Construction and Operations, 2023-2027 ($Millions)
2023 2024 2025 2026 2027 TOTAL
Construction $5.3 $8.8 $ -- $ -- $ -- $14.1
Operations (Low) $ -- $0.6 $11.5 $14.2 $14.2 $40.5
Operations (Median) $ -- $0.9 $16.7 $20.6 $20.6 $58.8
Operations (High) $ -- $1.3 $24.7 $30.4 $30.4 $86.6
Total (Median) $5.0 $9.2 $16.7 $20.6 $20.6 $72.9
As shown in Table 4.4, revenues from operations will be consistent once tenants fully occupy the facility in 2026. Cumulative revenues from operations during that time period are expected to total approximately $72.9 million, and $20.6 million annually. This direct spend will result in the local economy experiencing economic ripple effects as it creates new employment opportunities, increases personal earnings, and adds to the City’s local economic output, and subsequently fiscal effects in terms of property and sales taxes.
6 See Appendix C
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5. EMPLOYMENT IMPACT
The Project is expected to directly support 40 Full-Time Equivalent (FTE) jobs during its construction phase from July 2023 to November 2024. Once operations scale to full capacity, the Project is expected to support between 55 and 125 FTE jobs directly and indirectly, with a median estimate of 85 total FTE jobs. (FTE jobs are rounded to the nearest 5)
Figure 5.1
FTE Jobs Supported by Project’s Construction and Operations, 2023-2027 Figure 5.2 demonstrates the “highest capacity scenario” and how 120 direct, on-site jobs would be spread throughout the week, with regards to the LTL shift explanation from the Study Approach.
Figure 5.2
Upper Bound Estimate of Operations Workers on Project Site by Shift and Day of the Week 15 25
50 55 55
1 2023 2024 2025 2026 2027
Indirect Jobs
Direct Operations Jobs (High)
Direct Operations Jobs (Median)
Direct Operations Jobs (Low)
Direct Construction Jobs 100
120 120
70 80 80
< 5
< 5
< 5
< 5 < 5
15 15
40 35 35 35
Monday - Friday Saturday - Sunday
12 AM - 8 AM 8 AM - 4 PM 4 PM - 12 AM
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6. PERSONAL EARNINGS IMPACT
The economic activity generated by construction and ongoing operations of the tenant will increase the personal earnings of City residents as the monies generated from the activities circulates through the local economy. The Project is projected to increase the earnings of local residents by $2.6 million as a result of the construction activities, and the operations of the facility are expected to increase earnings of City residents by $4.4 million7 on a sustained annual basis beginning in 2026.
Figure 6.1
Personal Earnings Supported by Project’s Construction and Operations, 2023-2027 ($Millions)
7 The Project’s range of estimates for Personal Earnings Impact for the City of Orange is $3.0 million to $6.4 million with a $4.4 million median estimate, using employment impact numbers and Bureau of Labor Statistics data for industry (Transportation and Warehousing) mean salary by metropolitan area. Indirect jobs assumed to be the median salary of the City of Orange.
$1.0
$1.6
$2.6
$3.0 $3.0
2023 2024 2025 2026 2027
Operations (High)
Operations (Median)
Operations (Low)
Construction
$3.8
$4.4 $4.4
$5.2
$6.4 $6.4
$0.3
$0.4
$0.4
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7. ECONOMIC OUTPUT IMPACT
The new monies introduced into the City from the Project will also increase the economic output of the region. Economic output is a measurement of value created through the commercial activity and is akin to Gross State Product (GSP) and Gross Domestic Product (GDP) at the local level. The construction and ongoing business activity of the Project is projected to increase the City’s economic output by $56.5 million8cumulatively from 2023 to 2027. Construction activities will result in approximately $9.3 million of economic output. Operations are projected to increase the economic output within the City by $16.5 million9 on an ongoing basis starting in 2026.
Figure 7.1
Economic Output Supported by Project Construction and Operations, 2023-2027 ($Millions)
Appendix B – Employment, Personal Earnings, & Output Methodology details the methodology used to calculate earnings in this study.
8 Range of total economic output is ($41.8 million, $78.9 million) with a median projection of $56.5 million. 9 Range of annual economic output is ($11.4 million, $24.4 million) with a median projection of $16.5 million. $3.5
$5.8
$9.3
$11.4 $11.4
2023 2024 2025 2026 2027
Operations (High)
Operations (Median)
Operations (Low)
Construction
$16.5 $16.5
$13.4
$19.8
$24.4 $24.4
$0.5
$0.7
$1.0
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8. FISCAL IMPACT TO THE CITY
This study10 reviewed the most recent budget for the City and identified four tax categories that will be impacted by the Project.
The following tax categories will provide General Fund revenue to the City:
▪ Property tax;
▪ One-time sales tax from construction of the Project;
▪ Ongoing sales tax from increased City resident earnings.
The Project will produce approximately $428,000 in property and sales tax revenues cumulatively for the City between 2023 and 2027, with an additional $800,000 from development fees, as shown in Table 8.1. The City can obtain sales tax as a result of materials purchased during construction and additional spending as a result of increased earnings.
Table 8.1
City Tax Revenue
($Thousands)
TYPE OF TAX 2023 2024 2025 2026 2027 TOTAL
Property Tax $40.8 $41.6 $42.4 $43.3 $44.1 $212.3
Sales Tax
Construction $32.9 $54.9 $ -- $ -- $ -- $87.8
Earnings $8.1 $14.6 $30.5 $37.5 $37.5 $128.2
Subtotal $39.1 $66.3 $30.5 $37.5 $37.5 $210.9
Total Fees $300.8 $501.4 $802.2
Total Taxes $382.6 $612.5 $72.9 $80.8 $81.6 $428.3
Appendix C – Tax Revenue Scope & Methodology details the methodology used for calculating each tax category total.
10 The fiscal impact model utilizes the median estimates from the economic impact model’s projections. 866
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Per the City’s FY 2022-2023 Adopted Budget, Orange is projected to collect $50.10 million in sales tax revenue in 2023. Once the Project begins full operations in 2026, Orange is estimated collect an additional $38,000 million in sales tax revenue annually. The City can expect a new baseline of approximately $50.14 million annually in annual sales tax revenue with the Project’s ongoing operations.
Figure 8.2
City of Orange Projected Sales Tax Revenue
Per the City’s FY 2022-2023 Adopted Budget, Orange is projected to collect a baseline of $50.60 million in property tax revenue. Once developed, the Project will pay approximately $40,000 in additional property tax revenue annually, beginning in 2024. The City can expect a new baseline of approximately $50.64 million in annual property tax revenue with the Project being built.
Figure 8.3
City of Orange Projected Property Tax Revenue
$50,100,000
Projected Sales Tax Revenue Prologis Facility New Baseline Sales Tax Revenue $38,000 $50,138,000
$50,600,000
Projected Property Tax Revenue Prologis Facility New Baseline Property Tax Revenue $40,000 $50,640,000
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9. CONCLUSION
The Project stands to provide meaningful benefits to the City of Orange’s community. The Project is expected to inject approximately $73 million into the community cumulative from 2023 to 2027. This additional direct spend is expected to stimulate economic activity and support up to 125 FTE jobs annually directly and indirectly in the City. The Project is also expected to support approximately $15 million in personal earnings produced within the City from 2023 to 2027, while increasing economic output by nearly $60 million during the same time frame. Additionally, the Project is projected to support over $1 million in tax collections and development fees cumulatively through 2027, generating $80,000 in total taxes on a consistent annual basis.
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10. APPENDIX
Appendix A – Direct Spend Methodology
The direct spend analysis for the project is comprised of two components:
▪ Dollars spent in the construction of the facilities; and ▪ Revenue through on-going operations of the proposed project.
Andrew Chang and Company surveyed current market estimates11,12,13 to estimate the per sq. ft. construction cost of each building type. The median of the market estimates was then used. Per sq. ft. cost estimates for ongoing operations revenues are based on a survey of top retailers in the U.S. (See Table A.2). The construction cost and revenue per sq. ft. estimates were factored by the project’s total active sq. ft. (i.e., sq. ft. currently being utilized/occupied by a tenant). Additional details regarding the methodology used to derive each revenue estimate are listed in Flowchart A.1.
Figure A.1
Warehouse Construction Cost Per Square Foot in Western United States 11 Shetty, Anush. “U.S. Construction Costs Per Square Foot.” Cumming Insights, 24 March 2022, https://ccorpinsights.com/costs-per-square-foot/. Accessed 28 April 2022. 12 Sewell, Cathy. “RLB Construction Cost Report North Americas Q1 2022.” RLB, 31 March 2022, https://www.rlb.com/americas/in
13 “U.S.: warehouse construction cost 2022, by city.” Statista, 6 May 2022, https://www.statista.com/statistics/830417/construction-costs-of-industrial-warehouses-in-us-cities/. Accessed 28 April 2022.
Median cost
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Figure A.2
Commercial Office Construction Cost Per Square Foot in Western United States As a result of the survey of per square foot construction costs in the Western United States, the median construction costs were used as follows: $195 per sq. ft. for warehousing and maintenance buildings, and $375 per sq. ft. for commercial office buildings.
Median cost
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Table A.3
Retailer Revenue per Sq. Ft. from U.S. Operations
RETAILER TOTAL SQ. FT.
TOTAL REVENUE FROM
U.S. OPERATIONS
RETAIL REVENUE
PER SQ. FT.
WAREHOUSE REVENUE
PER SQ. FT.
CVS14 90,500,000 $313,407,000,000 $3,463 $866
Costco Wholesale15 83,200,000 $151,706,000,000 $1,823 $456 Walgreens16 121,027,500 $120,171,000,000 $993 $248
Sam’s Club17 80,351,000 $78,918,000,000 $982 $246
Kroger18 179,000,000 $147,940,000,000 $800 $200
Amazon US19
Median 410,113,000 $300,234,000,000 $732 $183
Albertsons20 113,000,000 $74,771,000,000 $662 $165
Walmart21 703,000,000 $421,917,000,000 $600 $150
Home Depot22 329,000,000 $149,048,000,000 $453 $113
Lowes23 250,128,000 $103,267,000,000 $413 $103
Target24 300,284,000 $113,733,000,000 $379 $95
14 “CVS Health Corporation, Form 10-K”, SEC.gov,
https://www.sec.gov/Archives/edgar/data/0000064803/000006480322000008/cvs-20211231.htm. Accessed 28 April 2022. 15 “Costco Wholesale Corporation, Form 10-K”, SEC.gov,
https://www.sec.gov/Archives/edgar/data/0000909832/000090983221000014/cost-20210829.htm. Accessed 28 April 2022. 16 “Walgreens Boots Alliance, Inc., Form 10-K”, SEC.gov, https://www.sec.gov/Archives/edgar/data/0001618921/000161892121000085/wba-20210831.htm. Accessed 28 April 2022. 17 “Walmart Inc., Form 10-K”, SEC.gov, https://www.sec.gov/Archives/edgar/data/104169/000010416922000012/wmt20220131.htm 18 “The Kroger Co., Form 10-K”, SEC.gov,
https://www.sec.gov/Archives/edgar/data/0000056873/000155837022004595/kr-20220129x10k.htm. Accessed 28 April 2022. 19 “Amazon.com, Inc., Form 10-K” SEC.gov,
https://www.sec.gov/Archives/edgar/data/1018724/000101872422000005/amzn-20211231.htm 20 “Albertsons Companies, Inc., Form 10-K”, SEC.gov,
https://www.sec.gov/Archives/edgar/data/0000056873/000155837022004595/kr-20220129x10k.htm. Accessed 28 April 2022. 21 Walmart Inc., Form 10-K”, SEC.gov, https://www.sec.gov/Archives/edgar/data/104169/000010416922000012/wmt20220131.htm 22 “Home Depot, Inc., Form 10-K”, SEC.gov,
https://www.sec.gov/Archives/edgar/data/0000354950/000035495022000070/hd-20220130.htm. Accessed 28 April 2022. 23 “Lowes Companies, Inc., Form 10-K”, SEC.gov,
https://www.sec.gov/Archives/edgar/data/0000060667/000006066722000038/low-20220128.htm. Accessed 28 April 2022. 24 “Target Corporation, Form 10-K”, SEC.gov,
https://www.sec.gov/Archives/edgar/data/0000027419/000002741922000007/tgt-20220129.htm. Accessed 28 April 2022. 871
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Flowchart A.4
Direct Spend Methodology
Notes
(1) Median construction cost per sq. ft. was used.
(2) Operations revenue methodology was adjusted to account for independent projections of employment numbers. See Flowchart B.1
(3) Median revenue per sq. ft. estimates similar to those of top retailers in the U.S. (Table A.2). (4) The U.S. consumer price index (CPI)25 is used to convert the 2018 revenue estimates to a projected 2022 value.
25 “Inflation | Department of Finance.” Department of Finance, https://dof.ca.gov/forecasting/economics/economic-indicators/inflation/. Accessed 26 July 2022. 872
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Appendix B – Employment, Personal Earnings, & Output Methodology The economic and fiscal impact analysis includes the total impact in increased employment, personal earnings, and economic output to the City. The approach factored the total jobs of the Project converted into personal earnings, then multiplying it by the correlating final demand multiplier for the direct spend of the Project, then calculating the economic output.
Flowchart B.1
Employment, Earnings, & Output Methodology
Notes
(1) Direct Jobs are obtained from the Struck Ave On-Site Employees Memo. See Appendix G (2) Indirect Jobs are obtained from multiplying Direct Jobs by final demand multipliers for the City. (3) The final demand regional multipliers (RIMS II) for Orange County, produced by the U.S. Bureau of Economic Analysis, as adjusted for the City of Orange (See Appendix E – Multipliers). (4) Household earnings were then calculated by multiplying # of jobs and mean annual salary of T&W employees in the respective metropolitan area26.
26 “Occupational Employment and Wage Statistics” Bureau of Labor Statistics, https://www.bls.gov/oes/current/oessrcma.htm
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Appendix C – Tax Revenue Scope & Methodology
The 2021-22 City of Orange Annual Budget was analyzed to determine potential revenue to the City from the proposed project through taxes and fees. Based on the analysis of the City’s revenues, it was concluded that the following recurring taxes should be positively impacted by the proposed project:
▪ Sales tax; and
▪ Property taxes.
An overview of the calculation for each tax impact is outlined below.
One-Time Sales Tax
One-time sales tax revenue is comprised of two components:
▪ Sales tax revenues from the cost of materials during construction; and ▪ Sales tax revenue from the increase in personal earnings.
Sales tax revenues from the cost of materials are found by factoring the cost of materials estimated at 50% of the total construction cost, per industry standards,27,28 by the statutory city tax rate. Sales tax revenue on earnings is found by first factoring the survey’s median construction costs with the earnings multiplier produced by the U.S. Bureau of Economic Analysis (BEA)29 in order to find the increase in personal earnings resulting from construction of the proposed project. Those earnings are then factored by the effective sales tax rate30 to find the one-time sales tax revenue. See Flowchart C.1 below for a graphical representation for this approach.
27 “CLMA Project Labor Cost Allocation,” Construction Labor Market Analyzer, 2016, http://myclma.com/wpcontent/uploads/2015/02/CLMA-Allocation-of-Project-Cost-2014Oct27.pdf. 28 Hedley, George, “Construction Labor Costs – 5 Percent Factor,” Construction Business Owner, Accessed May 11, 2016, http://www.constructionbusinessowner.com/topics/accounting/accounting-finance/construction-laborcosts-5-percent-factor. 29 “Regional Multipliers,” U.S. Bureau of Economic Analysis, Series: 2012 U.S. Annual I-O Data and 2020 Regional Data. Region: Orange County, CA.
30 See “Effective Sales Tax Calculation” at the end of this Appendix (Appendix C – Tax Revenue Scope & Methodology).
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Flowchart C.1
One-Time Sales Tax Methodology
Notes
(1) Construction costs as calculated in Appendix A – Direct Spend Methodology. (2) Cost of materials estimated at 50% of total construction costs as provided by the applicant per industry standards.31, 32
(3) City’s statutory sales tax rate taken from City’s adopted budget FY 2021-22. (1.25%) (4) Personal earnings as calculated in Appendix B – Employment, Personal Earnings, & Output Methodology.
(5) See “Effective Sales Tax Calculation” at the end of Appendix C – Tax Revenue Scope & Methodology for methodology.
31 “CLMA Project Labor Cost Allocation,” Construction Labor Market Analyzer, 2016, http://myclma.com/wpcontent/uploads/2015/02/CLMA-Allocation-of-Project-Cost-2014Oct27.pdf. 32 Hedley, George, “Construction Labor Costs – 5 Percent Factor,” Construction Business Owner, Accessed May 11, 2016, http://www.constructionbusinessowner.com/topics/accounting/accounting-finance/construction-laborcosts-5-percent-factor.
Statutory sales tax rate for
City of Orange
(3)
Effective sales tax rate for
City of Orange
(5)
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Property Tax
According to City of Orange, Fiscal Year 2022-2023 Adopted Budget, the City retains roughly .13% of a property’s assessed value as property tax revenue. Property tax revenue for the Project is found by factoring the assessed property value as provided by the applicant, taking into account the 2% growth in value per year, by the .13% tax rate. See Flowchart C.3 below for a graphical representation of this approach.
Flowchart C.3
Property Tax Methodology
Notes
(1) Acquisition prices provided by Prologis.
(2) Median construction cost from national survey.
(3) City’s statutory property tax rate obtained from https://www.octreasurer.com/property-tax Statutory property tax rate
for City of Orange
(3)
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Effective Sales Tax Calculation
The effective tax rate is the ratio of sales tax revenues over personal earnings for the City. In order to produce an effective sales tax rate for this study, Andrew Chang & Company determined the total income of City residents by factoring the estimated population and the estimated per capita income for the City for 2022
33. The 2021 City sales tax revenue, as provided by the Adopted Fiscal Year 2022-2033 Budget34, is divided by the total income of City residents to produce an effective sales tax rate. See the equation below.
33 https://www.census.gov/quickfacts/fact/table/orangecitycalifornia,orangecountycalifornia/PST045221 34 https://www.cityoforange.org/our-city/departments/finance/budget-and-financial-reporting/budgets ___$50,100,000___ = 0.88%
(137,000) x ($41,500)
____2021 City Sales Tax Revenue Actuals____ =
(Est. 2021 City Population) x (Est. 2021 per Capita Income) 877
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Appendix D – Struck Avenue On-Site Employees Memorandum TO: Maggie Xu, Prologis
Nicole Morse, T&B Planning, Inc.
FROM: Andrew Chang, Managing Director
Assisted by: Thommas Phan, Business Analyst
RE: Struck Avenue On-Site Employees
DATE: November 9, 2022
Summary:
Prologis’ proposed high thru-put Less Than Truckload (LTL) project at 534 Struck Ave, Orange, California (the Project) will support between 55 to 121 on-site Full Time Equivalent (FTE) jobs based on current industry standards and practices.
Background:
Prologis proposes to develop two buildings totaling 63,300 sq. ft on the Project site. The two buildings consist of a warehouse building (52,900 sq. ft.) with a commercial office (5,000 sq. ft.) inside the warehouse, and a maintenance building (5,400 sq. ft.). The Project is intended is to house an LTL freight company, running 24/7/365 as a truck terminal.
Discussion:
Figure 1 displays permutations of LTL on-site staffing requirements per 1,000 square feet of building space based on our recent survey of the market. 878
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Figure 1
LTL On-Site Staffing Requirements
Per 1,000 Square Feet
Specific staffing requirements are driven by many factors, including the types of products transported and warehoused, automation, service levels and business operations of the specific site. The middle 50th percentile range represents the most common staffing requirements per 1000 sq. ft., which ranges from 0.88 to 1.92 FTEs with a median value of 1.30 FTEs. When factored with the 63,300 square feet of the proposed project, the staffing requirements for the Project ranges between 55 and 121 FTEs, with a median value of 82 FTEs.
Please note that the number of employees that are on-site at any given time will not exceed 40 FTEs even in the high FTE scenario, based on the assumption that operations are 24/7 with 6 and on-site administrative staff working only during the hours of 8 am to 4 pm. Staffing requirements for Shift 1 (8:00 AM – 4:00 PM), Shift 2 (4:00 PM – 12:00 AM) and Shift 3 (12:00 AM – 8:00 AM are exhibited in Figure 2, Figure 3 and Figure 4 respectively. 879
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Figure 2
Project Staffing Requirements
Shift 1: 8:00 AM – 4:00 PM
(FTEs)
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Figure 3
Project Staffing Requirements
Shift 2: 4:00 PM – 12:00 AM
(FTEs)
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Figure 4
Project Staffing Requirements
Shift 3: 12:00 AM – 8:00 AM
(FTEs)
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Methodology:
Six annual reports (10-Ks) were available for major publicly traded LTL companies for 2021.
FedEx and UPS were excluded from our analysis since the available information did not sufficiently disaggregate freight data from other lines of business. The remaining four, Old Dominion, SAIA, XPO Logistics and YRC, were included in this analysis. Table 1 exhibits the sources for each annual report.
Table 1
Annual Report Sources
Company URL
FedEx https://sec.report/CIK/Search/fedex
UPS https://sec.report/CIK/Search/UPS
XPO Logistics https://sec.report/T/XPO
YRC https://sec.report/T/YRCW
Old Dominion https://sec.report/CIK/0000878927
SAIA https://sec.report/T/SAIA
Based on the information obtained, in general, approximately 50% of the company workforces is comprised of commercially licensed drivers, and the remaining 50% consists of warehouse workers and administrative employees.
Since LTL freight companies tend to discuss number of doors instead of square feet, these 10-Ks have allowed calculations of employees per truck terminal docking door. The results ranged from 1.66 to 2.8 employees per docking door.35 To convert docking doors to square feet36, data on 215 comparable locations37 were collected to determine square footage per docking door. The square feet per door ranged from 181.7 square feet to 1433.9 square feet.
Figure 5 exhibits the methodology to determine the range of employees per 1000 square feet in a high thru put LTL freight truck terminal, calculations follow the flowchart in the Appendix:
35 Note: These employees include commercially licensed drivers and administrative roles. 36 This was done as total square footage for LTL Freight companies were not available, and square footage is more correlated to number of site employees compared to docking doors. 37 Publicly available LTL Freight Truck Terminals with total building square footage and number of docking doors available.
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Figure 5
FTE per 1000 Square Foot
Methodology
Contact:
If there are any questions concerning this memorandum, I can be reached by phone at 415- 572-5291 or by email at [email protected]. Alternatively, Thommas Phan can be reached at [email protected].
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Appendix E – Multipliers
This study uses the most recent regional RIMS II multipliers produced by the U.S. Bureau of Economic Analysis for Orange County, adjusted to reflect the City of Orange, in order to determine the direct and indirect changes in output, earnings, and employment as a result of the proposed project. The industry-specific multipliers used for this study are listed below in Tables D.1 and D.2.
Table D.1
RIMS II Final Demand Multipliers
TYPE OF TAX ORANGE COUNTY
BASE YEAR FINAL
DEMAND
MULTIPLIERS
ORANGE COUNTY
CURRENT YEAR FINAL
DEMAND MULTIPLIERS
CITY OF ORANGE
ESTIMATED DIRECT
EFFECT
CITY OF ORANGE
ESTIMATED INDIRECT
EFFECT
CITY OF ORANGE
ESTIMATED TOTAL
FINAL DEMAND
MULTIPLIER
Jobs
Construction 6.3223 5.4376 2.8288 0.1173 2.9462
Warehousing and storage 8.6065 7.4022 4.2733 0.1407 4.4140 Earnings
Construction 0.3991 0.3433 0.1786 0.0074 0.1860
Warehousing and storage 0.4041 0.3476 0.2006 0.0066 0.2073 Output
Construction 1.4170 1.2187 0.6340 0.0263 0.6603
Warehousing and storage 1.5680 1.3486 0.7785 0.0256 0.8042 Table D.2
RIMS II Direct Effect Employment Multipliers
Construction 1.9222
Warehousing and storage 1.7322
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Appendix F – High Thru Put LTL Truck Terminal Market Research Table Of the major LTL freight companies38 in the United States, market research was conducted on each of the companies that had SEC filings.
Source / Study Year URL
FedEx Freight 10-K 2022 https://sec.report/CIK/Search/fedex YRC Freight 10-K 2021 https://sec.report/T/YRCW
XPO 10-K 2020 https://sec.report/T/XPO
Old Dominion 2021 https://sec.report/CIK/0000878927
TForce Freight 2021 https://sec.report/CIK/0001798405
ABF Freight 2000 https://sec.report/CIK/0000838830
SAIA 2021 https://sec.report/T/SAIA
Southeastern Freight Lines N/A https://sec.report/CIK/0000919112 38 https://blog.intekfreight-logistics.com/top-ltl-truckload-freight-companies 886
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Appendix G – Project Site Plan
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