The findings in Exhibit 51 result in net new taxable sales estimated to accrue to the City of Pleasanton totaling $94.5 million at the end of Phase I, an additional $69.0 million attributable to the incremental development between 2018 and Full Buildout, and a grand total of $1 63.5 million per year at Full Buildout, all in 2015 dollars. This Full Buildout figure will likely increase nominally within a year of full completion of the Project as the small increment of sales impact in the Clothing & Clothing Accessories category is absorbed through new demand generated after the Full Buildout date (see Exhibit 30 for the sales impact figure).
Currently, the Johnson Drive EDZ generates limited taxable retail sales , estimated to total $8.3 million in Fiscal Year 2015. This figure was derived by ALH Economics from reported sales tax revenues of $83,432.
35 These taxable retail sales were generated by four businesses. However, for reasons of confidentiality, t he City cannot disclose the sales taxes generated by the individual businesses.
Johnson Drive EDZ Project Property Valuation
Exhibit 52 presents the assumptions and conclusions regarding the property valuation of the Project upon the completion of deve lopment and the estimated property tax revenues that will accrue to the City of Pleasanton General Fund. The valuation is based on value per square foot assumptions prepared by Brion & Associates. These values are $300 per square foot for club retail, $400 per square foot for general retail, and $300 per square foot for hotel. 36 The
35 Provided by the City of Pleasanton Finance Department, pursuant to the City’s tax consultant, Hinderliter de Llamas.
36 ALH Economics believes the hotel valuation figure may be low given the current hotel concept.
However, for the sake of both consistency and conservatism this fiscal impact analysis continues to assume the $300 per square foot value included in the Brion & Associates analysis.
Johnson Drive EDZ Urban Decay 67 ALH Urban & Regional Economics
resulting values are $72.7 to $85.9 million for Phase I development, depending upon hotel option; and $69.9 million for the incremental general retail space built between 2018 and Full Buildout in 2028. Thus, the total Project valuation at Full Buildout is $142.6 to $155.8 million.
As a point of comparison, in 2014 the assessed value of the parcels in the Johnson Drive EDZ totaled $41.7 million.
37 Assuming the value of the properties increased 2% from 2014 to 2015 pursuant to the provisions of Proposition 13, this would place the current value of the properties at about $42.6 million in 2015.
FISCAL REVENUE ESTIMATES
The revenue calculations for the fiscal impact analysis are presented in Exhibits 52 through 55.
A summary of these exhibits and their primary purpose follows.
Johnson Drive EDZ Property Taxes
Exhibit 52 also includes estimates of the property taxes that will accrue to the City of Pleasanton’s General Fund pursuant to Project development. Based on the estimated valuation and pursuant to the City of Pleasanton’s share of property tax revenues, the Project is estimated to generate $179,133 to $211,658 in property taxes at the end of Phase I and $351,450 to $383,975 at Full Buildout.
Pursuant to the estimated existing Johnson Drive EDZ valuation of $42.6 million, ALH Economics estimates that the City of Pleasanton currently receives an estimated $105,000 in annual property taxes.
Tax in Lieu of VLF Estimates
Property Tax in Lieu of Vehicle License Fees (VLF) is derived from the Project’s anticipated contribution to increased property valuation throughout the City of Pleasanton. This is the method by which such tax revenues are estimated by the State of California and redistributed to local jurisdictions. This is a state substitute for prior motor vehicle license taxes that were redistributed by the State to municipalities. The results of these calculations presented in Exhibit 53 indicate that the incremental value associated with the Project is estimated to increase the City of Pleasanton’s assessed valuation by 0.73% to 0.80% upon Full Buildout. The VLF Revenues associated with this increase range from $20,711 to $24,472 at the completion of Phase I, an additional $19,923 at Full Buildout, for a total of $40,634 to $44,395 for the entire Project at Full Buildout.
Select City of Pleasanton General Fund Revenue Factors
The Brion & Associates study identified a number of per capita revenues applicable to Project employees. These are included in Exhibit 54. The factors under “Daytime Population Factors” exactly match the factors calculated by Brion & Associates. ALH Economics did not adjust these factors based on the more current City of Pleasanton Operating Budget because their derivation involved several steps that were not readily adaptable to a more current budget. Matching these figures to the Brion & Associates analysis is therefore conservative, as it does not adjust for modest increases anticipated between f iscal years. These factors total $72.68 per daytime
37 Brion & Associates Memorandum, Table A-4.
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population, which is equivalent to $36.34 per employee pursuant to the study’s approach to estimating service population.
Exhibit 54 also includes “Sales Tax Factors” that pertain to sources other than the Project’s taxable retail sales. These include retail sales tax pursuant to employee taxable spending in Pleasanton and anticipated local taxable retail spending by hotel guests. These factors were derived from analysis in the Brion & Associates study, and include $26.38 a year per employee and $0.50 per occupied hotel rom.
Select City of Pleasanton General Fund Revenues
Exhibit 55 presents estimated General Fund revenues associated with sales tax, transient occupancy tax (TOT), and employee-based revenues. All of the revenues factors were presented earlier, such as the Project’s estimated taxable sales net new to the City of Pleasanton, the per employee and per occupied hotel room annual sales tax, TOT rate, and the per employee General Fund revenues . The only piece of information new to this exhibit includes the assumptions relevant to the TOT estimate. For this revenue source, the analysis assumes the same $125 hotel room rate assumed in the Brion & Associates study. ALH Economics believes this is c onservative given hotel room rates in the Pleasanton and Dublin area as presented in Exhibit 55, but using a conservative room rate results in a conservative estimate of TOT revenues. The analysis further assumes the same 75% occupancy rate assumed by Brio n & Associates. Thus, for Option 1’s 150 rooms there will be an estimated 41,062.5 occupied room a year, increasing to 63,236.25 for Option 2’s 231 rooms.
The revenue estimates in Exhibit 55 include $814,819 in Project-generated retail sales tax at the completion of Phase I, increasing to $1.7 million a year at Full Buildout (this compares to $83,432 in sales taxes generated in Fiscal Year 2015 from existing Johnson Drive EDZ businesses). This is the largest revenue source included in Exhibit 55, followed by TOT taxes of $410,625 to $632,363 a year beginning with the completion of Phase I. All other revenues included in this exhibit are estimated to total approximately $30,000 or less a year, even at Full Buildout.
FISCAL EXPENDITURES ESTIMATES
The Brion & Associates Memorandum calculated fiscal expenditures based upon the average cost methodology. This approach as implemented by Brion & Associates looks at departmental costs, estimates the amount likely to vary with the size of the population served, determines the share likely to be applicable to employment -generated uses, and derives a per employee expenditure estimate. ALH Economics replicated the Brion & Associates analysis using projected City of Pleasanton expenditures from the FY 2015/16 Operati ng Budget. The sole exception to replicating the Brion & Associates approach pertains to the estimation of Offsetting Revenues.
For this column, ALH Economics could not fully replicate the Brion & Associates approach because some matching figures could not be found in the FY 2015/16 Operating Budget. In these cases, ALH Economics calculated the percent offsetting revenues from the Brion & Associates analysis and applied these percentages to the departmental revenues to deduce the offsetting revenue amounts. This is explained and documented in Exhibit 56.
The expenditures analysis documented in Exhibit 56 results in a per employee annual expenditure estimate of $293.63. The comparative figure in the Brion & Associates Memorandum based upon Fiscal Year 2014/15 expenditures is $269.69.
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NET FISCAL IMPACT
The results of the Project fiscal impact analysis are presented in Exhibit 57. These findings present the estimated annual revenues and expenditures accruing to the City of Pleasanton’s General Fund at completion of Phase I and at Full Buildout of the Project. The results are also presented for the two hotel options. As referenced earlier, the analysis assumes a worst case analysis, in that all diverted taxable sales are diverted from City of Pleasanton reta ilers. This is conservative in that taxable sales diversions, if they occur, are likely to pertain to retailers throughout the Project’s market area.
Summary of Revenues
The fiscal impact findings indicate that on an annual basis, the Project is estima ted to generate $1.5 to $1.7 million in gross revenues to the City of Pleasanton at the completion of Phase I, depending upon the hotel room count option. These revenues are projected to increase to $2.5 to $2.7 million upon Full Buildout. The largest General Fund revenue component is retail sales tax estimated at $ 0.8 million for Phase I and $1.6 million for Full Buildout. All other General Fund revenues are much lower, with property taxes comprising the next largest General Fund revenue source followed by Transient Occupancy taxes. There are likely to be yet additional General Fund revenues generated by the Project, but the most substantial revenue sources are reflected in Exhibit 57.
Summary of Expenditures
The average General Fund expenditures estima ted to be attributable to the Project total $66,422 to $70,728 annually at the completion of Phase I and $194,764 to $199,071 annually at the completion of Full Buildout. This reflects the average City of Pleasanton service costs for General Government, Community Development, Operations Services, Community Services, Library, Police, and Fire. These are the estimated average service costs for the Project’s estimated employees.
These expenditures estimates do not include any City of Pleasanton cost allocati on for the Project’s transportation costs. It is possible the City of Pleasanton may be responsible for a portion of the Project’s transportation costs. However, the amount of this expenditure is not presently identified and will be ultimately determined by the Pleasanton City Council. Thus, Project expenditures may increase by some as yet unidentified amount.
Net Fiscal Impact Summary
The net result of the Project’s fiscal impact at stabilized operations assuming on a worst case basis that all diverted sales are diverted from Pleasanton retailers, is a projected $ 1.4 to $1.7 million annual contribution to the City of Pleasanton’s General Fund at the completion of Phase I. This net revenue estimate increases to $2.1 to $2.3 million annually upon Full Buildout. At full buildout these net fiscal revenues represent an annual contribution equivalent to approximately
2.1% to 2.3% of the City’s General Fund expenditures.
As noted above, the Project expenditures analysis does not include an y potential City of Pleasanton share of Project -related transportation costs. The expenditure of any such costs will result in a reduction in the Project’s estimated annual net fiscal revenues.
Johnson Drive EDZ Urban Decay 70 ALH Urban & Regional Economics
Sensitivity Analysis for Reduced Club Retail Sales
The Brion & Associates analy sis of the Johnson Drive EDZ included a lower per square foot sales estimate for the Project’s club retail space. This figure was $700 per square foot vs. the $1,152 per square foot figure included in the economic impact analysis. 38 Net fiscal impacts
results reflecting this lower $700 per square foot club retail sales performance estimate are included in Exhibit 57, pursuant to sensitivity analysis. These results indicate that if the club retail space achieved this lower level of sales performance that the Project’s Phase I net fiscal impact would range from $ 1.1 to $1.4 million. This net fiscal impact would increase to $ 1.9 to $2.2 million annually upon Full Buildout. Thus, the net fiscal impact results would be equal to approximately 79% to 86% the amount projected with the club retail sales performance benchmarked to Costco’s national average performance level. 39 FISCAL IMPACT LIMITATIONS
The foregoing fiscal impact analysis is intended to give a general sense of the net fiscal impact of the Johnson Drive EDZ Project. The figures are not precise estimates and changes will occur if the revenue and expenditure factors or other assumptions are developed with more precision.
Nonetheless, the findings suggest a strong likelihood that the Project will result in a significant net positive fiscal impact to the City’s General Fund. However, some limitations to the analysis, listed below, may affect the degree of the Project’s estimated net benefit and change the net fiscal impact balance.
General Limitations
• The analysis is benchmarked to estimated stabilized operations. The net impacts during the ramp up period to stabilized operations will vary from the stabilized operations estimate. It may take several years before the full stabilized impacts transpire.
• The analysis may not be inclusive of all revenue and cost estimates. Major categories associated with ongoing revenues and costs are included, but there may be other less significant categories excluded from the analysis.
One-time Revenues and Appropriations
• The fiscal impact analysis does not include one -time fees that may be assessed by the City of Pleasanton. These fees are typically assessed on a cost recovery basis and are thus excluded from the analysis. Other potential fees, such as impact fees, are a lso excluded as they too are designed to provide a nexus with the services provided.
• Depending upon how construction contracts are structured, there may be the potential for the City of Pleasanton to benefit from construction -related sales and use taxes associated with the construction effort. These revenues are excluded from the analysis but could comprise a strong source of one-time revenues.
38 Brion & Associates Memorandum, Table A-3.
39 See Exhibit 57, footnote 10 for information on the percentage impact on sales tax revenues assuming the lower club retail sales performance figure.
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• Another one -time revenue that could benefit the City of Pleasanton during the construction period includes retail sales tax revenues resulting from construction worker spending in Pleasanton.
Ongoing Revenue and Appropriation Factors
• The analysis does not include any increase in valuation, such that would occur with the maximum 2% allowable increase pursuant to Proposition 13 or that would occur based upon increased valuation upon sale.
• The analysis does not take into account long -term service cost inflation, which may or may not be greater than the estimated rate of inflation.
• The Johnson Drive EDZ Project may trigger the need for additional services not accounted for in this analysis. The costs associated with these services could be meaningful, and could reduce the estimated net positive annual impacts. The likelihood of such additional costs being high, however, is deemed to be low.
In summary, the Johnson Drive EDZ Project net fiscal impact findings estimated above may change as more information and factors are considered. The results, however, suggest a strong likelihood that the Project will result in a significant net positive fiscal impact to the City of Pleasanton’s General Fund.
Johnson Drive EDZ Urban Decay 72 ALH Urban & Regional Economics
ASSUMPTIONS AND GENERAL LIMITING CONDITIONS
ALH Urban & Regional Economics has made extensive efforts to confirm the accuracy and timeliness of the information contai ned in this study. Such information was compiled from a variety of sources, including interviews with government officials, review of City and County documents, and other third parties deemed to be reliable. Although ALH Urban & Regional Economics believes all information in this study is correct, it does not warrant the accuracy of such information and assumes no responsibility for inaccuracies in the information by third parties. We have no responsibility to update this report for events and circumstances occurring after the date of this report. Further, no guarantee is made as to the possible effect on development of present or future federal, state or local legislation, including any regarding environmental or ecological matters.
The accompanying projec tions and analyses are based on estimates and assumptions developed in connection with the study. In turn, these assumptions, and their relation to the projections, were developed using currently available economic data and other relevant information. It i s the nature of forecasting, however, that some assumptions may not materialize, and unanticipated events and circumstances may occur. Therefore, actual results achieved during the projection period will likely vary from the projections, and some of the variations may be material to the conclusions of the analysis.
Contractual obligations do not include access to or ownership transfer of any electronic data processing files, programs or models completed directly for or as by -products of this research effort, unless explicitly so agreed as part of the contract.