Memorandum
DATE: February 24, 2022
TO: Honorable Mayor and City Councilmembers
CC: Anil Comelo, Interim Deputy City Manager
Belinda Brown, Director of Finance
Lina Velasco, Director of Community Development
Joe Leach, PE, Director of Public Works
FROM: Mark Northcross, Principal, NHA Advisors
Eric Segal, MAI, Managing Director, Integra Realty Resources Mike Medve, Senior Project Manager, Willdan Financial
Services
Brian Forbath, Special Counsel (Bond Counsel), Stradling Yocca Carlson & Rauth
Reed Glyer, Special Counsel (Bond Counsel), Stradling Yocca Carlson & Rauth
SUBJECT: Point Molate CFD Formation – Council Questions and Responses from the City’s Technical Team
Note: Following please find written questions from Council members that have been submitted to the City’s technical team for response. Some questions may also best be answered by the Staff Report for the February 24, 2022, Study Session, and its attachments. Please consider and refer to those attachments when reading these responses. Please note that the technical professionals have been independently and directly hired by the City Council to provide technical assistance to the City Council and by extension City staff; they have not been hired by the Point Molate developer.
Questions about the Point Molate Project’s Impact on Richmond’s General Fund
Real estate market questions - to help city council and the public set ranges for average unit prices and ranges for time to sell 1,002 condos and townhome units.
These questions are typically answered by what is called an absorption study, which is a ATTACHMENT 4
detailed look at applicable real estate market trends and conditions as they relate to a particular project. The absorption study projects the rate of sale for each residential product type proposed for a project based on current market trends and conditions.
The City does not have an absorption study for Point Molate at this time. SunCal has commissioned such work from absorption consultants but considers that information confidential.
Nevertheless, the City's finance team has prepared answers to these questions based on the limited information available.
Why does the City not have an absorption study for Pt, Molate at this time? Absorption studies are typically done as the basis for an appraisal of the property securing the special tax lien at the time of bond issuance. By practice in the municipal securities industry, both an absorption study and an appraisal should be finalized within 90 days of the actual bond sale. Since both the absorption and appraisal reflect current real estate market conditions, if the date of these reports is more than 90 days before the bond sale, the reports are considered inadequate to meet the Federally-mandated disclosure requirements for a municipal bond offering.
A bond issuance for a Point Molate CFD is at least one year, if not two years, in the future.
Consequently, following the standard for "best practices" in the municipal securities industry, it is too early to prepare an absorption study for the purpose of risk disclosure to potential bond investors.
However, the Council's key questions about absorption for the Point Molate project remain.
While such a study could be commissioned, it would take about 2 months to prepare. This means that the report would not be available until after the April 20, 2022, deadline in the DDA for CFD formation.
Even if we had an absorption study now for Council review, there is another key reason why its findings at this time should not be given much weight. In all likelihood, the Bay Area is at the top of the real estate market. The question that consequently arises is whether public policy decisions regarding Point Molate should be based on an absorption study done at the top of real estate market.
Questions from the Council on fiscal impact and on the CFD debt service cash flows have focused on the risk of slow absorption. This is a good approach to addressing the absorption risk when absorption projections would otherwise be based on market conditions at the top of a real estate market. A 30-year absorption analysis, as requested in one of the questions, is a prudent way of gauging the potential negative interim fiscal impact of Point Molate on the City’s General Fund. The City’s finance team has used this approach, and determined that with slow absorption, the fiscal impact of the project on the City’s General Fund is likely to be negative for a number of years, as described elsewhere in this summary. We can, however, bracket the number of years of negative impact as follows:
Projected Case: If buildout takes place over 7 years, the negative impact to the General Fund will occur in the first 3 years.
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Worst Case: If buildout takes place over 30 years, which we consider to be the very worst-case scenario, the negative impact to the General Fund will occur in the first 12 years.
What has been the average annual absorption of new shoreline condos and townhomes in the Marin, Contra Costa, and Alameda markets over the last twenty years? What percentage of these have been in 5-6 story block buildings with over 40 units?
The updated Integra study as of February 7, 2022, shows absorption data for 7 comparable shoreline projects in Contra Costa and Alameda County: the Breeze at Bay 37 in Alameda; the Villas in Newark; the Bungalows in Newark; the Cottages in Newark; the Crest at Alameda Point in Alameda; Village 29 in El Cerrito; and Skyview in Oakland. The estimated home sales prices by product type in Point Molate prepared by Integra in their attached February 7, 2022, report reflect this and other current market data.
Integra did not look at Marin County real estate market data because they believe that data would not be comparable for the Point Molate project.
How many shoreline condos and townhomes are in the current construction pipeline for Marin, Contra Costa, and Alameda counties?
Data on the actual pace or rate of sales is provided in the February 7, 2022, Integra report for the projects mentioned above, as well as the total units planned to be offered. Under current market conditions, the sales pace is brisk. These projects comprise a total 2,875 units in aggregate.
In addition, Integra has provided the following information regarding the construction pipeline:
The Treasure Island project, including Yerba Buena Island (Improvement Area 1), consists of 461± acres which, at build-out, contain 8,000 residential units primarily in mid- and high- rise residential condos and apartments. Further, Treasure island will also include approximately 140,000 square feet of new commercial and retail space, adaptive reuse of three historic buildings with up to 311,000 square feet of commercial/flex space, up to 500 hotel rooms, and up to approximately 100,000 square feet of office space.
On the Island of Alameda, the former US Navy’s Fleet Industrial Supply Center, which comprises approximately 218 acres, is being developed with 889 residential units of market rate and inclusionary housing (including low income housing to be developed by the Housing Authority), 300,000 square feet of retail space, up to 400,000 square feet of office space, and an eight‐acre waterfront park or other allowable uses consistent with the approved master plan. The retail component of Alameda Landing is anchored by Target and Safeway. Other tenants within the retail center include Michaels, Chipotle, Panda Express, Famous Dave’s, and the Habit Burger Grill.
To initiate development of Alameda Landing, the former Community Improvement Commission of the City of Alameda, now the Successor Agency, entered into a Disposition and Development Agreement with Catellus Alameda Development, LLC (“Catellus”) as ATTACHMENT 4
Master Developer of the project. Subsequent to the Disposition and Development Agreement, Catellus and the City entered into a Development Agreement for Alameda Landing. The following map shows the planned uses of Alameda Landing.
In accordance with the Development Agreement, the City formed two Community Facility Districts (“CFDs”) to facilitate the development of Alameda Landing. The first CFD (CFD No. 13‐1) was formed in January 2014. After voter approval was received on the formation of the CFD, the City subsequently annexed 44.13 additional acres (gross) in April 2015, and increased the total bond authorization of the CFD from $20 million to $40 million.
In addition to Alameda Landing, Alameda Point is part of a former naval air station which closed in 1997. The area includes historic buildings, wildlife habitats, a shoreline on the San Francisco Bay. In June of 2013, the United States Navy gave title of approximately 1,400 acres of land and water, which encompasses nearly a quarter of the 10‐square‐mile island’s land mass, to the City of Alameda. Since this time, the city has overseen the redevelopment of the property.
Alameda Point consists of two sites, the 68‐acre Site A and the 82‐acre Site B.
Development of Site A Phase 1 commenced in the first quarter of 2018. The following table summarizes plans for the development of Site A, Phase 1.
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At build-out, Alameda Point will include 800 market rate residential housing units, 200 affordable housing units and up to 600,000 square feet of commercial space, with the balance dedicated to public open spaces and parks.
We probably need two numbers for each market: units approved (getting close to breaking ground or under construction) and units being planned or considered. In Richmond this would be the difference between the 316 units approved for Terminal One.
City staff will provide data on the potential for new home construction along the Richmond waterfront.
We need to understand the market difference between condos that are less than a ¼ mile from the water and ones that are just “near” the water. And how these compare to condos not on the shoreline but with better access to mass transit, shopping and restaurants - projects such as Village 29 in El Cerrito.
The relative distance of these projects to amenities, as well as the relative distance of existing residential to the Richmond, Phillips 66, and Shell refineries was all factored into the Integra February 7, 2022, sales price analysis. Also, as referenced above, and most particularly by the current development on Treasure Island, (new) commercial development intended to serve emerging market areas are often infeasible until sufficient housing supply has been added. This doesn’t appear to be a deterrent for homebuyers/rents.
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By year to show trending, what has been the average selling price per sq ft for these units over the last 20 years? What can we say about market price differences between Alameda, Emeryville, Marina Bay, Point Richmond, Tiburon, Sausalito and San Rafael?
The selling price for the comparable new home developments listed above vary from $490/square foot to $1,200/square foot depending on type of product, location, and amenities. This is covered in detail in the Integra report. Again, as noted above, Marin County was not considered a good comparable for Point Molate by Integra.
Over the last 5 years, what types of units have gone for over $900/sf? And for over $800/sf? What percentage of the units sold go for $800-900 and for over $900? Who are these buyers? Will they be attracted to Point Molate?
Integra projects that the detached 3,500 square foot homes in Point Molate will sell for about $514 per square foot. The 1,800 square foot condominiums will sell for $750 per square foot, and the 1,500 square foot condominiums will sell for $875 per square foot.
All these projections by Integra are less than $900 per square foot.
Have units in large (40-60 unit) multi-story buildings fetched less than units in smaller developments?
The low-rise townhomes in Point Molate are projected to sell at $750 per square foot.
The mid-rise condominiums are projected to sell at $875 per square foot. This indicates that with respect to the product types proposed for Pt. Molate that the mid- rise condominium units sell for $125 more per square foot than the low-rise condominium units.
We need to verify the breakdown of the proposed Point Molate condos and townhome units by size. They won’t all be 3-BR 1,500 sq ft units right? What’s the proposed breakdown by number of bedrooms and sq footage? What will be the average size of the 1,002 units?
This information will be developed by the actual merchant builders to whom SunCal will sell the parcels for these projects. Consequently, this information is not available at this time.
For the Main condo buildings, how many will have water views and how many will be looking at the side of a hill or Chevron’s storage tanks? How much less will these fetch per sq ft than units with water views from multiple rooms?
As noted above, this information will be developed by the actual merchant builders to whom SunCal will sell the parcels for these projects. Consequently, this information is not available at this time.
Interest rates have gone up 25% in the last year - from 3.25% to 4% currently for 30- year fixed mortgages. If mortgage rates go up to 5 or 6% over the next 5 years, what will be the likely impact on selling prices? Will it affect all housing units equally or will the condo market get hit harder?
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The most recent increases in interest rates are reflected in the data provided by Integra in their February 7, 2022, report. The expectation of rising interest rates this year may impact the housing market, especially the entry-level housing market, as these buyers are more susceptible to interest rates. In certain markets we’ve seen a recent push by homebuyers hoping to buy homes and lock in the historically low rates. There is the potential for impact on the housing market with rising interest rates, generally speaking.
For different possible price points ($900K, $1,200K, $1,500K), how much higher will monthly non-mortgage carrying costs be for a buyer at Point Molate than for a resale unit at Brickyard Landing, The Waterline or Marina Bay in Richmond or similar projects in Alameda or Marin? Include regular property taxes, CFD assessments and HOA fees.
SunCal will provide estimated HOA fees for Point Molate. The combined impact of all property taxes, special assessments, and CFD taxes for the Point Molate project will be the equivalent of 2% of the assessed valuation. The maximum CFD taxes will be adjusted by valuation estimates done at the time of each new component project approval for Point Molate. HOA fees, by common practice in California, are not included in the 2% of assessed valuation combined tax burden analysis.
What is the income that would really be required to buy a 1,500-sf condo at Point Molate ?00K? Is it $350K? Do people with this kind of income want to live in a condo building at Point Molate? How much higher is this than if buying for $1 million? How much higher than buying a single-family home for $1.5 w/o a CFD or HOA?
The Integra study includes an analysis of the income required to purchase new homes in Point Molate. Depending on the product type, the annual incomes range from $203,000 per year to $281,000 per year. Within a 7-mile radius of Point Molate, households with incomes in this range comprise 19.2% of all households.
Annual Richmond General Fund Cost Questions
The costs will be a 3-shift Fire Station and a new beat - 1 sergeant and five officer Police Station. A lot of numbers have been tossed around, but it is time to see how the numbers are calculated. There will be 3 firefighters per shift (9 firefighters needed at the new Fire Station).
What are the assumptions we are making? What are the true labor costs of a new fire and police station? Today’s fire department costs us between $350,000 and $375,000 per person per year (fully loaded - all expenses divided by total headcount). The reason these costs are so high, I think, is because most of our fire people are working a lot of overtime. Last budget, staff suggested adding a % for OT. Can you provide information on what is the current OT in the police and fire departments? Has the percentage assumed by the staff been correct or what is the current OT percentage? And how much have both departments exceeded the OT proposed budget and how much will OT be at the end of this fiscal year?
City staff has done a detailed analysis of the operating costs for the combined police and fire station in Point Molate. That analysis is attached.
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Then there is covering the schedule for vacations, sickness, training, and accidents/disability leave. What are the assumptions we are making? What are the true labor costs of a new fire and police stations?
City staff has done a detailed analysis of the operating costs for the combined police and fire station in Point Molate. That analysis is attached.
For both Police and Fire, what assumptions should we make around the inflation rate for wages and benefits? Historically, they seem as though they have generally kept up with inflation. If inflation averages 4-5 over the next 10 years, what annual cost increase in police and fire costs should we anticipate?
Performing an annual analysis in nominal dollars with arbitrary escalators applied differently to revenues and expenditures is generally not very useful. Over a long period of time, both revenues and expenditures tend to go up by about 3% per year. This is why inflation assumptions are not included in EPS/BAE studies. If the inflation assumptions match on both the revenue and expenditure side, then including inflation does not change the conclusion of the analysis.
CalPERS expenses for public safety employees in California cities are generally increasing quickly. CalPERS is doing this to fully amortize the unfunded actuarial liability (UAL) for its member entities. CalPERS intends to fully amortize the UAL over about a 20-year period, depending on the City. This means that projections of employers’ payroll contribution rates are likely to increase for the next several years, and then decline significantly. The EPS study did not factor in changes in Richmond’s CalPERS payroll contribution rate over the next 20 years. However, since the projections of fiscal surplus at build out are based on current payroll contribution rates, amongst the highest in history, it is likely that these projections at build out are conservative.
Annual cost of maintaining a new fire/police station - insurance, utilities, building depreciation, equipment lease expense or depreciation, maintenance?
City staff has done a detailed analysis of the operating costs for the combined police and fire station in Point Molate. That analysis is attached.
Capital cost of fire station equipment?
City staff estimated the cost of rolling stock for the fire station at approximately $1.4 million, and the cost of rolling stock for the police station at $110,000. If this rolling stock were leased financed over typical financing terms, the cost to the City would be about $200,000 per year. In addition, the City staff estimated one time police training costs of $119,000.
These costs were not included in the EPS study.
Annual normal CFD administration costs.
Administrative costs for a CFD that has bonds outstanding typically run between $15,000 and $40,000 per year, depending on the complexity of the CFD. This includes Willdan’s consulting fees for annual administration, continuing disclosures, arbitrage rebate ATTACHMENT 4
calculations and delinquency management, as well as City costs for carrying out their duties related to the CFD.
Extra CFD admin costs if we have to deal with a CFD default - money that might eventually be reimbursed
If judicial foreclosure is required, additional legal costs will be incurred for the retention of Foreclosure Counsel by the City. These costs are fully reimbursable from two sources (1) special taxes levied on the CFD and (2) proceeds of a foreclosure sale for delinquent property. If no CFD special taxes are being collected from any property within the CFD, and if the delinquent property owner files for bankruptcy, the foreclosure process will be stayed.
In that case, the City will need to retain Bankruptcy Counsel to represent its interests in Bankruptcy Court. Those costs are fully reimbursable from the proceeds of sale of the delinquent property through a Bankruptcy Court auction. Note that Federal Bankruptcy Courts have no authority to amend or extinguish a CFD tax lien.
Nevertheless, the General Fund of the City could bear expenses of $100,000 per year or more during a bankruptcy proceeding. Reimbursement might take several years, but such reimbursement would include interest, as well as the penalties and interest on the delinquent taxes. This is a rare event, but the Ritter Ranch CFD bankruptcy took 6 years to reach a successful bankruptcy court auction. The City of Palmdale's total legal expenses amounted to over $1 million. These expenses were reimbursed in full, with interest, from the proceeds of the bankruptcy court auction.
Bond Issuer Questions
How much will a bond issuer be willing to lend to the project? What happens if they are only willing to lend $60 mil instead of the desired $100 mil?
The amount of bonds that can be issued for a CFD is controlled primarily by the value-to- lien ratio. This ratio is the ratio between the total appraised value of undeveloped property combined with the assessed value of any developed property, to the amount of bonds being issue. Most CFD bonds for undeveloped property are sold with a value to lien ratio between 3-to-1 and 5-to-1.
If the net proceeds are insufficient, as controlled by the value-to-lien ratio, to fully fund needed infrastructure, the developer must fund the shortfall from internal sources. The availability of these alternate funds must be verified to the satisfaction of potential CFD investors before any CFD bonds can be sold.
Why wouldn’t we say we want SunCal to spend its share ($90 mil or more) before the bonds are issued?
The expenditure of CFD bond proceeds is typically controlled through what is called an "Acquisition Agreement". This agreement mandates the following:
The developer must fund all project costs independently of the bond proceeds. Bond proceeds will be used to reimburse the developer for those costs as each "discrete component" of the infrastructure package is accepted as complete by the City.
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Consequently, the use of an Acquisition Agreement to control the use of bond proceeds is the approach most commonly used to address the concern expressed in this question.
How would a bond issuer react to the choice between a 3:1 or a 4:1 or a 5:1 valuation to loan amount? Wouldn’t they view 5:1 as safer?
Yes. Bond investors view higher value-to-lien ratios as being safer.
Timing of the Mello Roos payments
Attached is a PDF of a spreadsheet showing the estimated timing of debt service payments for three series of CFD bonds potentially issued to fund infrastructure in Point Molate. Two different scenarios are shown, as summarized in the table below:
CFD Debt Service Projection Scenarios
Scenario 1 Scenario 2
Description
SunCal projected build out
over 7 years
Hypothetical slow build out over 20
years
First Series of Bonds $40 million net in 2023 $40 million net in 2024 Second Series of Bonds $30 million net in 2025 $30 million net in 2032 Third Series of Bonds $30 million net in 2028 $30 million net in 2040
Estimated maximum special taxes from the CFD are also shown in the attached table, assuming that the CFD special taxes inflate at an annual rate of 2%, as allowed under the State authorizing statute. Debt service on the CFD bonds is also escalated at an annual rate of 2%. As provided for in the financing plan in the DDA, a total of approximately $100 million in infrastructure is funded through the CFD.
The analysis shows that over time, the maximum special taxes collectible within the CFD will exceed the debt service requirements by several million dollars per year. This surplus can be used to fund the infrastructure maintenance requirements and other services needs for the CFD. It can also be used to fund community benefits through facilities or services for the City.
More information on potential community benefits
Under State law, public entities can levy CFD taxes to fund a wide variety of both public facilities and public services. The authority is very broad with respect to public facilities.
With respect to public services, it is more limited, but police, fire and recreational services can all be funded.
Revenue Assumption Questions
What is the range of possible annual sales tax per “upper-middle class family” that moves into Point Molate? The original assumptions were high. If you take Richmond’s current annual sales tax and take away commercial payers like Chevron and divide the remainder by ATTACHMENT 4
the number of households in Richmond (45,000?), you get a current number per household.
Point Molate residents, like Point Richmond and Marina Bay residents, would probably spend 70% or more of their taxable shopping dollars outside of Richmond. Could be as little as 15 - 30% of what they generate in total. We certainly have no reason to think upper middle class Richmond residents spend most of their taxable shopping dollars in Richmond. Am I right?
While it is hard to pinpoint a range, the EPS fiscal impact study estimates that each household will spend an average of $12,703 outside the project but in ways that are captured by the City’s Sales and Use Tax. The City’s standard 1% sales tax captures this expenditure, and a fraction of a percent more will be captured by other sales tax measures allocated to the City. Nationwide, about 12.5% of total retail sales were online, but this percentage is likely much higher in the Bay Area, where customers are more tech savvy.
This trend has increased in the pandemic, and since younger shoppers are more likely to shop online, it will likely continue to trend upward over time. All online sales are captured by the City’s Sales and Use Tax.
It is important to note that only 5% of the revenues projected in the EPS study come from sales tax sources. If the projection ends up being off by 100%, the projected fiscal surplus at build out would decrease by about 4%.
Property taxes - We need to determine how to handle the special assessments and other ad valorem taxes. Do we count the significant Richmond pension tax as GF money? What about the WCCUSD and Richmond sewer taxes? Assuming that these things should be excluded from our financial analysis of the Point Molate project, we are left with about .003% of assessed value for the Richmond GF. But maybe it should be a bit higher.
The pension tax is included in the EPS study. The general Property Tax allocation to the City and the Property Tax In-Lieu of Vehicle License Fee were also reflected in the EPA study. No other overrides were included in the analysis, including any utility charges for the City or EBMUD or dedicated assessments/taxes for other public entities.
Real estate transfer fees need to be tracked with property sales. Do they lag by a year? They certainly come in differently if it takes 30 years to sell all of the units than if they sell in 10 or 20.
They also depend upon assumptions about resale activity. What percentage of the sold units get sold again each year? Does it build over time? Do they all turnover within 10 years? What are the assumptions? What are the worst- and best-case scenarios?
Real Estate Transfer fees to homebuyers are included in the EPS study. Real Estate Transfer taxes from the possible sale of the property by the City to SunCal, or subsequent sales by SunCal to merchant builders or other developers were not included. The BAE peer review did note that one-time taxes from the sale of the land and the subsequent sale of homes would have a significant one-time impact on City revenues. A detailed analysis of the assumptions behind the long-term Real Estate Transfer fees from sales to home buyers is included in the BAE peer review.
“Other” City fees have been a murky area. Some initial development fees normally charged to developers have already been waived for SunCal. Others remain. Some fees might be charged to homeowners over time. Can you get a list of developer fees that normally a ATTACHMENT 4
developer will pay to the city and compare that with what SunCal will pay?
Development Impact Fees are not included in EPS study, as these are one time fees dedicated for particular capital projects. There is an “Other Taxes” category in the EPS study which is projected using a proportionate increase in the population resulting from the project. That is a fairly standard assumption.
Spreadsheet Support of What-if Analysis
It may be easiest to do 3 GF Impact spreadsheets for selling & renting all of the homes over 10, 20 and 30 years. Of course, it will be great to see 15-, 25- and 35-year absorption versions.
The City's finance team has done a proration of the build out fiscal impact for three build out scenarios: 7 years (SunCal estimate), 15 years, and 30 years. This analysis is contained in the slide deck also provided to Council for the February 24, 2022, Council Study Session.
The police and fire operating expenses for Point Molate cannot be prorated or gradually increased as Point Molate builds out. The Finance Team's analysis assumes that the full $5.35 million per year operating expense for combined police and fire commences the first fiscal year of occupancy of homes in Point Molate. Accordingly, the analysis in the slide deck does project negative interim fiscal impacts, particularly for the 15-year and 30-year build out scenarios.
CFD spreadsheets need to model the term of the bonds. If the bonds are repaid in 40 years, then we just need a 40-year spreadsheet. If it is a choice between 30, 40 and 50, then we should have three spreadsheets. They must be separate from the GF Impact ones. Here we need to decide on how to model the 2% limit on total taxes and fees. Does this include estimated HOA fees? It certainly needs to include all of the “regular” special assessments which bring “regular” property taxes to around 1.6% of assessed value. That leaves only .4% for CFD assessments and (maybe) HOA fees.
HOA fees are excluded by common practice from analyses of overlapping tax burden for CFDs and assessment districts. Only public entity tax/assessment liens are included. The analysis the City's finance team is using for sizing the maximum possible CFD special tax for Point Molate includes all public entity taxes and assessments applicable within the Point Molate area.
Each GF Impact spreadsheet should use an average property tax payment per rental unit and per sale unit. These figures should be easily modifiable using subroutines that calculate averages based on actual achieved prices for different types of units.
The projections of fiscal impact for the three scenarios described above use the February 7, 2022, updated Integra analysis for projected sales prices. These assumptions can be changed, if the City's Finance Team is directed to do so by staff.
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We need to be able to see what happens if the single-family homes go for $2.2 million instead of $2 mil while the 3 BR condos go for $1 mil instead of $1.485 mil.
This analysis can be done at the request of City staff. However, it is important to note that the projected revenues at build out now are in excess of twice that of projected expenses, including the full $5.35 million per year combined police and fire costs. Adjustments as suggested above are very unlikely to change the projection of fiscal surplus at build out.
The fiscal impact risk that remains is from a slow build-out for Point Molate. As noted in the slide deck attachment, depending on how slow actual build out is, the period of negative fiscal impact on the City could persist for a number of years.
We should also be able to assume/use .003 of assessed value as well as .0028 and .0032. (Almost 40% of Richmond “regular” property taxes are special assessments, so people might disagree over how much of these revenues should be included in our Point Molate project GF impact analysis)
Special assessments are not included in the AB 1209 apportionment. That number comes from the County auditor and does not change over time. No special assessments not allocated directly to the City were included in the EPS study.
EPS/BAE excluded special assessments.
Richmond base GF property taxes should go up 2% per year if units don’t get resold at new market prices.
Performing an annual analysis in nominal dollars with arbitrary escalators applied differently to revenues and expenditures is generally not very useful. Over a long period of time, both revenues and expenditures tend to go up by about 3% per year. This is why inflation assumptions are not included in EPS/BAE studies. If the inflation assumptions match on both the revenue and expenditure side, then including inflation does not change the conclusion of the analysis.
Price inflation in selling prices should be adjustable. If one type of unit could sell now for $1 million, we should be able to say that in 10 years they will go for $1.2 or $1.5 million.
As explained above, we do not believe that inflation assumptions, matching historic observations of matched inflation in revenues and expenditures, will change the conclusion.
Sales tax revenue per occupied unit should be adjustable.
As noted above, the EPS study did a detailed analysis of sales tax capture for new households living in Point Molate. In addition, sales tax is relatively small component of the overall General Fund revenue stream projected by the EPS study.
Cost inflation assumptions need to be changeable - for all GF costs, but especially for police and fire wages & benefits. (A key problem is that police and fire wage and benefit costs will likely go up at a significantly higher rate than property tax revenues).
CalPERS expenses for public safety employees in California cities are generally increasing ATTACHMENT 4
quickly. CalPERS is doing this to fully amortize the unfunded actuarial liability (UAL) for its member entities. CalPERS intends to fully amortize the UAL over about a 20-year period, depending on the City. This means that projections of payroll contribution rate are likely to increase for the next several years, and then decline significantly. The EPS study did not factor in changes in the CalPERS payroll contribution rate over the next 20 years. However, since the projections of fiscal surplus at build out are based on current payroll contribution rates, amongst the highest in history, it is likely that these projections at build out are conservative.
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