PUBLIC SERVICES AND PUBLIC FACILITIES FINANCING PLAN SALINAS FUTURE GROWTH AREA. November 12, 2007

Transcription

1 PUBLIC SERVICES AND PUBLIC FACILITIES FINANCING PLAN SALINAS FUTURE GROWTH AREA November 12, 2007 Prepared for the City of Salinas Prepared by Applied Development Economics 100 Pringle Avenue, Suite 560 Walnut Creek, California (925) River Plaza Drive, Suite 150 Sacramento, CA (916)

2 CONTENTS Summary of the Public Services Plan... 1 Municipal Service Requirements... 1 Funding for Municipal Services... 3 Facilities Financing... 5 Conclusion... 5 Fiscal Impact Analysis... 6 Setting... 6 Project Description... 7 Project Impacts: City of Salinas Municipal General Government Revenues and Services Service Expenditures Projected Maintenance District Impact Over Time Projected Fiscal Impact Public Facilities Financing Plan Development Impact Fees Facilities Funded Through Property Assessments or Developer Investments Appendix A: Provision of Public Services and Infrastructure Appendix B: Measure V Level of Service Analysis TABLES Exhibit A Year 20 Fiscal Impacts in Current and Future Dollars... 4 Table 1 City Budget for Year: Table 2 Proposed FGA Land Use Mix (Net Acres)... 8 Table 3 Housing and Population Growth Table 4 Commercial Space and Employment Growth Table 5 Build-out Assessed Value of FGA Table 6 Salinas Future Growth Area Annexations Table 7 Operating Capital Outlay Table 8 Maintenance District... 22

3 Table 9 Maintenance District Project Impact by Land Use Table 10 Maintenance District Project Impact Over Time Table 11 Project Absorption by Year Table 12 Project Impact Over Time Table 13 Summary of Development Impact Fees Table 14 Traffic Impact Fees Table 15 Sanitary Sewer Fees Table 16 Storm Drain Fees Table 17 Street Tree Fees Table 18 Park Fees Table 19 School Fees Table 20 Estimate of Proposed MCWRA Rec. Ditch Impact Fees Table 21 Salinas FGA Funding Capacity Table 22 Preliminary Cost Estimates Backbone Infrastructure and Public Facilities Table 23 Salinas FGA List of Backbone Infrastructure and Public Facilities Table A-1 Public Services and Facilities Service Standards... 45

4 SUMMARY OF THE PUBLIC SERVICES PLAN This report analyzes and describes the public services and facilities impacts of the proposed annexation and development of 2,457 acres of General Plan Future Growth Area (FGA) in the City of Salinas. When fully developed, the FGA is projected to provide 11,609 dwelling units with a resident population of nearly 43,000, and 1,618,400 square feet of retail and office commercial space with an employment base of about 4,049 jobs. The report provides a financing plan for ongoing municipal services and maintenance functions as well as the construction or enhancement of infrastructure and facilities to support the FGA development. MUNICIPAL SERVICE REQUIREMENTS The City has established service level standards in its General Plan (Appendix A). It has also recently reviewed its service standards as part of its Measure V analysis (Appendix B). Based on these standards, and more detailed review of the development by City Departments, the following services will be required to serve the proposed annexation area. General Government. This category includes the City Manager s Office, City Clerk, Human Resources, Community Safety and Neighborhood Services, Finance/Information Systems, and the City Attorney as well as Non-Departmental services. Total expenditures for these General government functions are about 12.9 percent of General Fund Departmental expenditures. Specific staff increases needed for the FGA include: City Manager/City Clerk: Service Standard = 1 FTE 1 /15,000 population. FGA increases population by 43,000, requiring 3 new FTE. Human Resources: Service Standard = 1 FTE/100 City employees. FGA requires 202 new City employees, requiring 2 1 FTE refers to Full Time Equivalent City staff position. Applied Development Economics, Inc. 1

5 new staff positions in Human Resources, for a total of 204 new positions. Finance/Information Systems: Service Standard: 1 FTE per 7,000 population. FGA increases population by 43,000, requiring 6 new FTE. City Attorney: Service Standard: 1 FTE per 20,000 population. FGA increases population by 43,000, requiring 2 new FTE. Police. Service Standard: 1.5 sworn officers per 1,000 population, plus civilian support personnel at a ratio of one-third of sworn officers, plus School Resource Officers. With a population of 43,000, the FGA would require 65 additional sworn officers, and 22 civilian personnel. Fire. Service Standard: 4-6 minutes response time for engine company, primarily for residential fire protection; 8 minute response time for aerial ladder truck company for commercial property. FGA requires one new fire station for the engine company onsite plus either a new station for the truck company within 8 minutes of the project or a larger, combined station on-site. Staffing requirements equal 24 firefighters. Development and Engineering Services: Service Standard: Process and check applicable plans and construction permits. Staff requirements for FGA = 2 senior planners, 2 plan checker IIs, 1 senior permit clerk and 2 code enforcement officers. Recreation: Service Standard: 1 FTE per 5,000 population. FGA population requires 9 FTE. FGA would need two new recreation centers, plus after school programs at selected school sites, of which there are eleven in the proposed development. Parks: Service Standard: 3 acres per 1,000 population. FGA requirement would be 129 acres. The FGA specific plans propose 241 acres of parks in addition to 189 acres of open space. Library. Service Standard: 0.5 square feet of library space per capita and 1 FTE per 3,000 population. FGA population would require a library of about 22,000 square feet, and a staff of 14 FTE. Applied Development Economics, Inc. 2

6 Maintenance Services. This Department includes maintenance of City facilities, vehicle fleets, parks, and streets, as well as graffiti abatement and operation of the waste water system. Service standard: Various maintenance standards result in combined staffing of 1 FTE per 900 population. The FGA would require 48 FTE. Housing: Service Standard: Administer Inclusionary Housing program, ranging from 20 percent to 35 percent of housing units in the development. FGA Staffing requirement: 2 FTE. FUNDING FOR MUNICIPAL SERVICES The cost of services to fund the plan outlined above is projected to be about $61.2 million annually in Year 20 of the development phase of the FGA (see Exhibit A next page), at which point the project is anticipated to be about 80 percent built out. 2 Of these costs, about $15.2 million would be funded by a Maintenance Assessment District, which would levy an assessment of $792 per Equivalent Dwelling Unit (in 2007 dollars) with an annual escalation for inflation. For the remaining services, the development is projected to generate $41.9 million per year in tax and fee revenue. Measure V funds would increase this amount by about $1.4 million, but Measure V is currently scheduled to sunset on April 1, 2016 and would not be available at project buildout unless it is renewed by the voters. Thus, the general tax and fee revenues generated by the project would not be sufficient to fund the cost of municipal services for the project. This is due in part to the City s experience with service cost escalation, particularly for public safety personnel, and also in part to the need to construct and operate certain facilities before the project is completely built out, such as the fire station and the library. The City will need to consider requiring the establishment of a Community Facilities District (CFD) to provide additional special taxes to meet the service demands of the project, in particular to cover projected deficits during the project 2 These figures are reported here and in the rest of the report in future dollar terms unless otherwise indicated. However, Exhibit A also shows the costs and revenues in current 2007 dollar terms. Applied Development Economics, Inc. 3

7 development phase and to cover deficits associated with fluctuations in City revenues such as Measure V. The analysis includes a projection of funding needs for operations from a CFD. The annual assessments would begin at about $1,014 per unit but could potentially decrease to about $210 per unit in year 20 (in 2007 dollars) as additional units are built to help support the costs. The financing analysis in the last chapter of this report indicates that these CFD assessments would be feasible for the FGA development. EXHIBIT A YEAR 20 FISCAL IMPACTS IN CURRENT AND FUTURE DOLLARS Year 20 Year 20 (Current 2007 Dollars) (Future Dollars) REVENUES Total Property Taxes $10,116,284 $17,503,698 Total Sales Tax $1,605,791 $2,778,420 Utility Users Tax $1,221,154 $2,112,902 Property Transfer tax $562,315 $972,945 Business License Tax $220,665 $381,806 Franchise Fees (incl Royalty) $592,981 $1,026,005 Licenses & Permits $56,622 $97,971 Building permit fees $898,869 $1,555,268 Fines & Penalties $17,349 $30,018 Investment Earnings $331,151 $572,975 Other Agencies $312,027 $539,885 Motor Vehicle In-lieu $6,924,789 $11,981,614 Fees for Services $528,314 $914,115 Other Revenue $18,126 $31,363 Gas Tax $679,236 $1,175,248 Traffic Safety Fund (to Gen. Fund) $167,989 $290,663 Measure V $0 $0 Subtotal Taxes and Annual Fee Revenue $24,253,662 $41,964,892 Proposed Maintenance Assessment District $8,803,388 $15,232,060 Proposed Community Facilities District $2,344,892 $4,057,249 TOTAL REVENUES $35,401,942 $61,254,201 EXPENDITURES General Government $3,030,270 $5,243,124 Police $12,485,654 $21,603,299 Fire/EMS $6,957,550 $12,038,299 Development & Engineering $1,071,593 $1,854,124 Street Sweeping $342,097 $591,914 Recreation - Parks $1,246,964 $2,157,560 Library $1,085,606 $1,878,369 Housing $352,846 $610,512 Maintenance Services [a] $8,803,388 $15,232,060 TOTAL EXPENDITURES $35,375,969 $61,209,260 NET (COST)/REVENUE $25,974 $44,941 CUMULATIVE (COST)/REVENUE $510,092 $882,586 [a] Maintenance services include streets, parks, landscaping, storm drains, facilities and City fleet services. Source: ADE, Inc. Applied Development Economics, Inc. 4

8 FACILITIES FINANCING The development would be subject to about $214.5 million in existing development impact fees, which includes City fees for traffic, sewer, storm drain, parks, and street trees, as well as Monterey Water Pollution Control Agency treatment plant fees and school district impact fees. In addition, it is anticipated that the development will pay as much as $91.6 million in new fees including $9.875 million for City government buildings, $52.7 for TAMC regional traffic impact fees, and $29.1 million in City offsite traffic fees, which are as yet not approved. The project services plan calls for at least one new fire station, a new library, and two new recreation centers, which together are estimated to cost about $15.5 million and may be funded through new impact fees, through new property assessments, or through other means specified by the City. The development will also be subject to provisions regarding the required phasing for installation of these facilities, currently projected at Year 3 for the first fire station and Year 8 for the library In addition to the impact fees, project engineers have identified $344.6 million in backbone infrastructure costs. The development would have the capacity to fund about $224.5 million in facilities costs through an assessment district or CFD. Any remaining infrastructure costs not covered by impact fees or assessments would be required to be paid directly by the project builders. CONCLUSION The total impact fees and backbone infrastructure identified to date total about $663.5 million, which represents about 12.4 percent of the projected total development value for the FGA. Typically, developments are able to support a maximum of 15 percent of value in such costs. This measure, combined with the positive net revenue shown in Exhibit A, indicates the public services plan for the FGA is financially feasible. Applied Development Economics, Inc. 5

9 FISCAL IMPACT ANALYSIS SETTING Total City operating revenues for all funds for the fiscal year are estimated at $127,205,050. Total expenditures are budgeted at $135,933,400, including use of reserves and accumulated capital projects funds for a variety of improvement projects as well as operating expenses. This analysis pertains to a portion of the total City budget, as shown in Table 1, including primarily the General Fund as augmented by Measure V funds, gas taxes, and traffic safety revenues. Certain adjustments have been made to both revenues and expenditures in order to focus the analysis on the net cost of providing services with local revenues. On the revenue side, the adjustments are mainly outside grant funds that are not dependent on development growth in the City or they are certain incidental one-time fees that are only paid at the time a building project is approved and do not fund ongoing operation of City services. (Exceptions to this are the building permit and plan check fees which are included in the analysis). On the expenditure side, these revenue adjustments are subtracted from budgeted service costs to calculate the net cost of providing services from annual local revenues. Expenditure adjustments also include capital expenditures, since the focus of this part of the analysis is on annual operating costs for City services. In addition, budget augmentations have been made to reflect City service standards that are as yet unfunded in the current City budget. The revised figures have been derived from the Measure V presentation dated May 11, 2007 (Appendix B). The budget additions by expenditure category are shown below. General Government $925,200 Police $2,077,000 Fire $147,500 Development and Eng. $617,400 Maintenance Services $265,900 Recreation $859,700 Library $421,512 Applied Development Economics, Inc. 6

10 TABLE 1 CITY BUDGET for Year: REVENUES BUDGET GENERAL FUND Property Taxes $26,340,000 Sales Tax $24,700,000 Utility Users Tax $8,550,000 Hotel - Motel Tax $1,625,000 Property Transfer Tax $425,000 Business License Tax $4,000,000 Franchise Fees $3,435,000 Licenses & Permits $1,068,000 Fines & Penalties $100,500 Investment Earnings $1,283,000 Other Agencies $1,820,500 Fees for Services $3,935,000 Other Revenue $120,000 SUBTOTAL GENERAL FUND $77,402,000 Measure V $10,300,000 Gas Tax to General Fund $425,000 Traffic Safety to General Fund $900,000 TOTAL RESOURCES $89,027,000 EXPENDITURES General Government $12,527,686 Police $36,942,200 Fire $14,256,500 Maintenance $10,239,010 Library $3,693,200 Parks/Recreation $3,691,304 Development & Permit Services $3,433,100 Development & Engineering $2,396,400 SUBTOTAL GENERAL & MV FUNDS $87,179,400 Fairways Golf Course $750,000 Paramedic Program $472,500 Downtown Parking $300,000 Debt Service $454,000 Grant Matches $45,000 TOTAL EXPENDITURES $89,200,900 SURPLUS (SHORTFALL) ($173,900) Source: City of Salinas Adopted Operating Budget [a] Revenue adjustments are made for revenue sources not projected in the impact analysis. Expenditure adjustments reflect the net between services funded by the revenue adjustments and budget augmentations to meet any City services standards that are currently unfunded. PROJECT DESCRIPTION The City of Salinas General Plan, adopted September 17 th, 2002, identifies 3,525 acres of unincorporated Monterey County land as Future Growth Area (FGA) for the City. This Fiscal Impact Analysis focuses on approximately 2,457 acres of that FGA, located north of East Boronda Road between San Juan Grade Road and Williams Road, outside the City Limits. The City intends to submit an application to the Local Applied Development Economics, Inc. 7

11 Agency Formation Commission (LAFCO) to incorporate the FGA 3 acres on which this analysis focuses. The FGA is divided into three (3) distinct areas: 1) Area 1 West 2) Area 2 Central 3) Area 3 East The FGA boundaries are Boronda Road (south/southeast), San Juan Grade Road (west), Russell Road/Old Stage Road 4 (north/northeast), and Williams Road (east/southeast). Area 1 West is separated from Area 2 Central by Natividad Road Area 3 East begins at Constitution Blvd. and continues to the Williams Road boundary. Table 2 details the FGA s projected land use mix. The table illustrates the net acreage for each land use in the entire FGA as well as each of its discrete areas. TABLE 2 PROPOSED FGA LAND USE MIX (NET ACRES) Total FGA Area 1 - West Area 2 - Central RESIDENTIAL Area 3 - East Low Density Medium Density High Density Mixed Use Residential Residential Subtotal 1, COMMERCIAL Retail Mixed Use Retail Mixed Use Office Commercial Subtotal PUBLIC Open Space Parks Public/Semi-Public Public Subtotal TOTAL 1, Source: Project sponsors for each specific plan area. Acreages in mixed use areas have been prorated to the component land uses. Totals may not add due to rounding. 3 From this point forward, the 2,457 acres of FGA on which this analysis focuses, will be referred to as the FGA. 4 A portion of the FGA lies north of Russell Rd. This portion is bounded by Natividad Rd to the east, Rogge Rd. to the north, a housing development (located between Russell, San Juan Grade, and Rogge Roads) to the west and Russell Rd to the south. Applied Development Economics, Inc. 8

12 Almost sixty-two percent (1,188) of the net acres in the FGA are designated for residential land uses. The majority of the residential acres (561) are designated for Low-Density Residential land use. Four percent (87 acres) of the FGA is designated Commercial. Thirty acres are designated for Retail land use and 57 for Mixed Use 5. About one-third of the acres (656) are reserved for parks, open space, and public/semipublic land uses 6. Table 3 below illustrates the projected number of dwelling units that will be constructed in the FGA, as well as the number of people projected to inhabit those dwelling units, based upon the City s General Plan. The number of people projected to inhabit the new dwelling units represents the increase in the City s population expected to result from annexing and developing the FGA. In the aggregate, the FGA consists of the following types of residential dwelling units: Low Density Medium Density High Density Mixed Use Residential Low Density dwelling units refer primarily to single-family detached homes. Medium Density residential developments are dominated by duplexes and town houses with between two and four dwelling units per structure, but may also include small-lot single-family units. High Density residential developments contain structures with five or more dwelling units, typically apartment complexes and condominiums. Mixed Use Residential refers to dwelling units constructed among Commercial spaces. These units are typically similar in size to higher density apartment units. 5 Mixed Use combines retail, office, or residential land uses on the same acres. 6 Public/Semi-Public land uses include schools and their playfields. Applied Development Economics, Inc. 9

13 TABLE 3 HOUSING AND POPULATION GROWTH Total FGA Area 1 - West Area 2 Central Area 3 - East Dwelling Dwelling Dwelling Dwelling Units Population Units Population Units Population Units Population Low Density 3,976 14,632 2,003 7, ,972 1,437 5,288 Medium Density 4,903 18,043 1,637 6,024 1,315 4,839 1,951 7,180 High Density 2,138 7, , , ,259 Mixed Use Res , , Total 11,609 42,312 4,340 15,866 3,155 11,415 4,114 15,031 Source: Applied Development Economics based upon information from the CA Dept of Finance and the City of Salinas; Totals may not add due to rounding. As shown in Table 3, annexation and development of the FGA will lead to an 11,609 dwelling unit increase in the City s Housing Stock. About two-thirds of the new dwelling units (7,633) will be medium to high density. 7 Single family homes will account for 3,976 of the new dwelling units. More than 42,000 new residents will populate the FGA s 11,609 new dwelling units. Nearly 28,000 of these new residents will live in Medium to High Density units. Table 4 details the commercial square footage that will be developed and the number of jobs that developed square footage will support. The number of jobs the new commercial square footage will support represents the employment growth expected from annexing and developing the FGA. TABLE 4 COMMERCIAL SPACE AND EMPLOYMENT GROWTH Total FGA Area 1 - West Area 2 - Central Area 3 - East Square Square Square Square Feet Employment Feet Employment Feet Employment Feet Employment Retail 295, , , Mixed Use Retail 713,800 1, ,000 1,218 20, , Mixed Use Office 609,400 2, , ,200 1,807 Total 1,618,400 4, ,000 1, , ,000 1,977 Source: Applied Development Economics based upon information from the FGA developers; Totals may not add due to rounding. Commercial Mixed Use accounts for more than 80 percent of the projected 1.6 million square feet of commercial space in 7 For the purposes of this report, Mixed Use Residential dwelling units are considered Medium to High Density. These units are typically similar in size to apartments and are constructed in relatively dense clusters of commercial spaces. Applied Development Economics, Inc. 10

14 the FGA. The most commercial development will occur in Area 1 West; about 779,000 square feet, followed by Area 3 with 627,000 sq.ft. The remaining commercial building space would be in the Central Area, about 212,400 sq.ft. Development of the new residential dwelling units and commercial space described above will increase the assessed value of the property in the FGA. At build-out, the FGA s assessed value will be more than $5.3 billion, with Residential land uses accounting for 95 percent. Table 5 details, by land use, the estimated assessed value of the FGA, and each of its individual sub-areas, at build-out. Build-out assessed value for each land use has been calculated using the following assumptions: Market Rate Residential Low Density = $600, ,500 per Du Medium Density = $390, ,000 per Du High Density = $300, ,000 per Du Mixed Use Residential = $300, ,000 per Du Inclusionary Housing 8 Very Low Income = $93,705 Lower Income = $158,645 Moderate Income = $244,595 Workforce Housing = $331,760 Commercial Retail = $100 per square foot Mixed Use Retail = $150 per square foot Mixed Use Office = $200 per square foot 8 Twenty-five percent of the housing is projected to be sold initially as inclusionary housing at the prices shown above. The projections of fiscal impacts assume that this housing will re-sell at market prices; however the assessed value figures shown in Table 5 reflect the initial inclusionary prices. Applied Development Economics, Inc. 11

15 TABLE 5 BUILD-OUT ASSESSED VALUE OF FGA ($millions) LAND USE Total FGA Area 1 West Area 2 Central Area 3 East RESIDENTIAL Low Density $2,120 $1,116 $299 $706 Medium Density $2,013 $755 $607 $651 High Density $738 $265 $302 $170 Mixed Use Res. $215 $0 $192 $23 Total Residential $5,087 $2,136 $1,399 $1,551 NON-RESIDENTIAL Retail $29 $17 $12 $0 Mixed Use Retail $107 $91 $3 $13 Mixed Use Office $122 $0 $13 $108 Total Non-Residential $258 $108 $29 $121 Source: Applied Development Economics; Totals may not add due to rounding. PROJECT IMPACTS: CITY OF SALINAS MUNICIPAL GENERAL GOVERNMENT REVENUES AND SERVICES Annexation and development of the FGA will generate a number of revenues for the City of Salinas, including property taxes, sales taxes, and a variety of other taxes and fees. Most of the major revenues included in the analysis have been projected using specific tax rates or methodologies that mirror the actual revenue generation for the City. These methodologies are described in the sections below. Other, minor revenues have been projected on a per capita basis and the methodology for that is explained at the end of this section. PROPERTY TAX The base property tax paid by property owners, equal to one percent of assessed value under Proposition 13, is allocated to a wide range of local taxing agencies, including County government, special service districts, local school districts and other agencies. The City of Salinas does not currently receive any tax from the Future Growth Areas, but when the property is annexed to the City, a portion of the tax that is currently allocated to some of the existing taxing agencies will shift to the City. Applied Development Economics, Inc. 12

16 The City s share of the property tax would be subject in part to the tax sharing agreement between the City of Salinas and the County of Monterey. The tax sharing agreement specifies that, upon annexation, the City will receive percent of the County s property tax share from the area. In addition, the City would receive the property tax share currently allocated to the County Library and the Salinas Rural Fire Protection District, since the City would commence providing these services when annexation occurs. Table 6 provides the calculations of the City s property tax share. The annexation area includes portions of two Tax Rate Areas (TRAs) with slightly different tax allocations among the taxing agencies. 9 Generally speaking, the County s gross share of property tax is about 24 percent, of which 9.6 percent is shifted to the State s Education Revenue Augmentation Fund (ERAF), about 40 percent of the County s revenue. The City, on the other hand, loses 19 percent to ERAF, and this differential transforms the City s share of the tax from 43.8 percent to 36.6 percent, with the County retaining 63.4 percent. Thus, the County s 24 percent gets distributed 8.8 percent to the City and 15.2 percent to the County. TABLE 6 SALINAS FUTURE GROWTH AREA ANNEXATIONS PROPERTY TAX RATES AND ALLOCATION METHODOLOGY TRA TRA Monterey County-Wide Rate City Share [a] 36.64% 36.64% City Share Remaining County Share Special District Tax Rates to City County Library (Service provided by City) Rural Fire District (Service provided by City) City Tax Rate Less: 19% City ERAF Loss City Net Property Tax Rate [a] The City share is a function of the existing tax sharing agreement which allocates the City 43.84% and adjustments to account for the ERAF shift. Source: Julie Aguero, Property Tax Manager, County of Monterey. In addition, the County Library receives about 2.2 percent of the base tax and the Salinas Rural Fire Protection District 9 In reviewing the parcel maps forte FGA, we believe that the west area is entirely within TRA and the East area is entirely within TRA The Central area is divided about 15 percent to TRA and 85 percent to TRA The resulting assessed value distribution is about two-thirds to TRA and one-third to TRA Applied Development Economics, Inc. 13

17 receives nearly 11 percent. Combined with the tax share the City would receive from the County, the total tax share for the City would be about 22 percent. However, a portion of the City s tax share is also shifted to the ERAF, reducing the net effective tax share to about 17.6 percent (average between the two TRAs). In current 2007 dollar terms, the FGA is projected to increase total assessed values of $5.2 billion at buildout, which would generate $9.2 million per year in property tax revenues for the City under the formula discussed above. 10 The County of Monterey would receive nearly $5 million per year in new property taxes at full buildout of the project (about 9.2 percent of the 1 percent base tax after the ERAF shift), which would help to fund County services to the new population such as criminal justice and public health. The development will require more than 20 years to build out, however, so in order to calculate the year to year tax projections, it is necessary to account for changes in assessed valuation. Under Proposition 13, assessed value may only increase 2 percent per year unless the property is sold, at which time it may be reassessed at the current market value, or sales price. In this analysis, it is assumed that residential units will resell on average every seven years, and the calculations are done on the basis of 14 percent (one-seventh) of the units reselling every year after their initial sale. We assume market prices will increase 5 percent per year. For non-residential property, we project a resale of the entire property 15 years after its initial development, with no incremental annual interim sales. Based on previous County Assessor policy, we have assumed that the inclusionary units in the development would be assessed at their lower, affordable prices. However, the City s program permits an equity recapture and resale and market prices after the initial sale of the units. We anticipate the assessor will re-assess the properties at whatever sales price is obtained at the time of the resale, which may be market rate. 10 The existing tax base from the property would continue to be shared by existing taxing agencies. Applied Development Economics, Inc. 14

18 SALES TAX AND MEASURE V FUNDS Salinas receives base sales tax at the rate of 1 percent of taxable sales within the City jurisdiction. In addition, the voters passed Measure V, which established a 0.5 percent tax override for ten years to help fund City services. The FGA includes about 1,009,000 square feet of retail commercial space, which should generate about $201 million in taxable sales per year at full buildout ($2007). 11 This would result in about $2 million per year in base sales tax for the City and about $1 million in Measure V funds per year (if Measure V is extended beyond the initial ten year sunset period). This is approximately equal to the projected spending of the residents in the FGA, so the revenue projections for the project have been tied to the growth in residential population rather than the development schedule for the commercial space. It is possible the new commercial could further boost overall retail capture in Salinas if the new stores offer shopping opportunities not currently available elsewhere in the City. At this point, there is not sufficient information to make this assumption, so the analysis is based on the more conservative assumption that the new retail space will serve the local residents primarily. PROPERTY TRANSFER TAX The City receives transfer tax on each real estate transaction in the amount of $0.55 per $1,000 in sales value. This revenue is calculated both for the initial sale of the residential units and commercial space and also as these properties re-sell during the twenty year analysis period. The sales price and market escalation assumptions are the same as those used to calculate the property tax. BUILDING PERMIT/PLAN CHECK FEES These fees are paid only once when each residential unit and commercial building is built, so the revenues would occur only during the build-out phase of the project and they would help support the additional city staff in the Planning and Building Division, needed to process the development. 11 $200 in taxable sales per square foot. Applied Development Economics, Inc. 15

19 MOTOR-VEHICLE-IN LIEU This is a state subvention of vehicle registration fees to local government. However, the State now pays this subvention (at a two-thirds level) in the form of added property tax revenues. Future increases in the revenues to local government are based on annual changes to assessed value. The FGA development would increase the City s assessed value substantially, and future increases in Motor-vehicle-inlieu revenues for the City have been projected as a function of this increase in assessed value. INVESTMENT EARNINGS The City receives a small amount of interest on its bank accounts. This revenue is calculated in this analysis as about 1.65 percent of annual revenues in each year. PER CAPITA REVENUES Other revenues in the analysis have been projected on a per capita basis, on the assumption that future population and businesses will generates these revenues at about the same rate as the existing population. Many of these revenues are essentially charges for services or purchases of permits, and DE has used a service population approach that allocates two-thirds of the service activity to the residential population and one-third to the business sector. This follows the assumption that service demands for the residential population generally occur during non-working hours (16 hours per day) while the employment base occupies an eighthour shift. Exceptions to this approach include the gas tax, which is allocated 100 percent to residential population, the utility tax, which is divided 50/50 between residences and businesses, and the Transportation Safety Fund revenues, which are projected 75 percent residential and 25 percent business. SERVICE EXPENDITURES The City has undergone a period of significant fiscal constraints for the past 5-6 years, brought about by state budgetary policies, increasing service costs and an economic slowdown that reduced local revenues. In the past year, the voters in the City passed Measure V, which is a sales tax Applied Development Economics, Inc. 16

20 override that now adds about $10 million in new revenues to the City budget. Using these funds, the City has been able to partially restore its desired service levels, but still falls short in more service functions. It is the City s intent, however, to plan for an adequate level of service for new development as it occurs, to avoid future shortfalls in service capacities. The City has established service level standards in its General Plan (Appendix A) and has recently conducted a more detailed service level analysis for Measure V (Appendix B). Based on these standards, and more detailed review of the development by City Departments, the following services will be required to serve the proposed annexation area. General Government. This category includes the City Manager s Office, City Clerk, Human Resources, Community Safety and Neighborhood Services, Finance/Information Systems, and the City Attorney as well as Non-Departmental services. Total expenditures for these General government functions are about 12.9 percent of General Fund Departmental expenditures. Specific staff increases needed for the FGA include: City Manager/City Clerk: Service Standard = 1 FTE 12 /15,000 population. FGA increases population by 43,000, requiring 3 new FTE. Human Resources: Service Standard = 1 FTE/100 City employees. FGA requires 202 new City employees, requiring 2 new staff positions in Human Resources, for a total of 204 new positions. Finance/Information Systems: Service Standard: 1 FTE per 7,000 population. FGA increases population by 43,000, requiring 6 new FTE. City Attorney: Service Standard: 1 FTE per 20,000 population. FGA increases population by 43,000, requiring 2 new FTE. Police. Service Standard: 1.5 sworn officers per 1,000 population, plus civilian support personnel at a ration of one-third of sworn officers, plus School Resource Officers. With a population of 43,000, the 12 FTE refers to Full Time Equivalent City staff position. Applied Development Economics, Inc. 17

21 FGA would require 65 additional sworn officers, and 22 civilian personnel. Fire Department: Service Standard: 4-6 minutes response time for engine company, primarily for residential fire protection; 8 minute response time for aerial ladder truck company for commercial property. The City Fire Department cannot currently meet either standard at the FGA with its existing stations. In order to meet the engine company response time, the FGA project has sited a new station #7 within the development near Boronda Road. This station would require twelve new fire fighters to operate the engine company 24 hours/7 days per week. In addition, this station should be designed to house either a transport capable ambulance or rescue. The service costs for the fire department shown in Table 12 below include costs for ambulance service, which is operated out of the City s EMS Fund. A new truck company could be located either at a new station #8 in the northern portion of the City, perhaps on Boronda Rd. further west from the FGA near the interchange at US 101, or in an expanded version of station #7 within the FGA. The truck company in either location would also require twelve additional fire fighters. The City also anticipates needing to move the existing station #6 to a location on Russell Rd. to further improve response times in the northern portion of the City. In terms of phasing for the station(s), the engine company should be operational once 10 percent of the homes are built (about 1,200 of proposed 11,609 total DUs). This is projected to occur in year 3 after development commences. The truck company should be operational once 25 percent of the commercial space is developed (400,000 sq.ft. of proposed 1.6 million total sq.ft.). This is projected to occur in year 7 after development commences. Development and Engineering Services. Service Standard: Process and check applicable plans and construction permits. Staff requirements for FGA = 2 senior planners, 2 plan checker IIs, 1 senior permit clerk and 2 code enforcement officers. Applied Development Economics, Inc. 18

22 Recreation. Service Standard: 1 FTE per 5,000 population. FGA population requires 9 FTE. FGA would need two new recreation centers, plus after school programs at selected school sites, of which there are eleven in the proposed development. Parks. Service Standard: 3 acres per 1,000 population. FGA requirement would be 129 acres. The FGA specific plans propose 241 acres of parks in addition to 189 acres of open space. Library. Service Standard: 0.5 square feet of library space per capita and 1 FTE per 3,000 population. FGA population would require a library of about 22,000 square feet, and a staff of 14 FTE. The City will require that the new library be operational when 30 percent of the dwelling units have been competed. This is projected to occur in year 8 after development commences. Maintenance Services. This Department includes maintenance of City facilities, vehicle fleets, parks, and streets, as well as graffiti abatement and operation of the waste water system. Service standard: Various maintenance standards result in combined staffing of 1 FTE per 900 population. The FGA would require 48 FTE. Housing. Service Standard: Administer Inclusionary Housing program, ranging from 20 percent to 35 percent of housing units in the development. FGA Staffing requirement: 2 FTE. Operating Capital Expenditures. In addition to the increased staffing levels, the City will need to purchase vehicles and equipment. The following table outlines the assumption used in developing costs for these items. Most of these costs have been incorporated into the figures shown in Table 12 below. The fire station vehicles, however, are included in the capital finance section (see Table 22), while the portions of the maintenance equipment costs have been included in the Maintenance District analysis shown in Table 8 below. Applied Development Economics, Inc. 19

23 TABLE 7 CITY OF SALINAS FUTURE GROWTH AREA OPERATING CAPITAL OUTLAY Twenty-year One-time Three-year Five-year Seven-year Cost Item Cost Replacement Replacement Replacement Police Cars One Car for Three Officers 24 hours service (Three Shifts) $50,000 per vehicle (includes computer) 66 Officers/22 $50,000 $1,100,000 Fire Engine $700,000 per truck company $700,000 $450,000 per engine $450,000 Computer System New Computer System: $2.5 million FGA 30% $750,000 PC & Printers 198 new $2,500 $495,000 Workstations 198 new $6,000 $1,188,000 Staff Vehicles $25,000 per 20 vehicles $500,000 Finance 2 Legal 1 Fire 2 Police 5 D & E 2 Recreation 5 Library 3 Maintenance Equipment Maintenance Assessment District $900,000 Wastewater Enterprise Fund $825,000 Totals $1,938,000 $2,825,000 $995,000 $1,150,000 Years to amortize Total Annual = $1,401,852 $96,900 $941,667 $199,000 $164,286 Source: Applied Development Economics based on data supplied by Tom Kever, Salinas Finance Director, the Salinas Maintenance Services Department, and Salinas Fire Chief Edward Montez. MAINTENANCE DISTRICT ANALYSIS A portion of the maintenance services described above is proposed to be funded through a separate maintenance assessment district, rather than through general tax and fee revenues. According to portions of the Landscaping and Lighting Act of 1972, the Act permits the establishments of assessment districts by agencies to provide public improvements, which include maintenance, construction, and services regarding public landscaping, lights and facilities. The City has estimated annual maintenance costs of about $8.25 million dollars to provide this function for the FGA (including administrative expenses). This section of the report Applied Development Economics, Inc. 20

24 details these maintenance costs and indicates how an annual assessment could be structured to pay for maintenance services. Table 8 shows the comprehensive totals of the cost associated with the maintenance district and the annual collection per residential home in FGA. The table shows the direct costs for the maintenance functions and also the administrative costs for operating the assessment district and collecting the annual assessments. The anticipated annual assessment per dwelling will be around $792 dollars per equivalent dwelling unit. 13 The detailed line items in Table 8 are described below. Direct Costs: Landscape Maintenance Shall include all schedule landscape maintenance, water, electrical, sprinkler repair and replacement, tree and plant replacement. Supplies and Materials Includes all supplies and materials necessary for street maintenance, utilities and waste water treatment, parks, fleet, and landscape area maintenance. Storm Drain Maintenance Includes maintenance of storm drains in the streets. Figures for detention basin maintenance are not yet available. Fleet Includes labor costs at $10,000 per employee Parks Includes labor costs for 22 workers and two supervisors. Street Maintenance Includes personnel/labor costs for street maintenance of the West, Central, and East areas. Capital Cost Includes capital equipment costs for landscape area maintenance, fleet, parks, street maintenance and administration necessary for maintenance improvements. 13 EDUs equal 1,000 sq.ft. of non-residential space. Applied Development Economics, Inc. 21

25 TABLE 8 MAINTENANCE DISTRICT Maintenance District Annual Collection Budget Item Amount Direct Costs Landscape Maintenance Contract Cost $3,938,880 Storm Maintenance $401,225 Supplies and Materials $855,058 Fleet $246,528 Parks $1,721,953 Street Maintenance (CIP Reserve) $635,875 Capital Cost (one- time) $900,000 3 yr schedule $300,000 Direct Cost Subtotal $8,099,550 Administration Costs Agency Administration Expenses $152,577 City's Collection Fee $132,274 Administrative Subtotal $284,851 Levy Breakdown Total Direct and Admin. Costs $8,384,401 Operating Reserve $2,096,100 Subtotal Levy Collection $10,480,502 Deficit from Previous Year $0 Estimated Interest Earnings $0 Subtotal Levy Reduction $0 Balance to Levy $10,480,502 Number of Units (EDUs) within District 13,227 Annual Collection Fee Per Unit $792 Source: Applied Development Economics, and Larry Oda, City of Salinas Fleet Manager Administration Costs: Agency Administration Expenses Personnel costs includes one deputy and one secretary. City s Collection Fee ADE estimates a $10 dollar collection fee per dwelling unit. LEVY BREAKDOWN: Total Direct and Administrative Costs Sum of all direct costs and administration costs. Direct costs: landscape maintenance contract cost, supplies and material, fleet, parks and street maintenance. Admin costs: agency administration expenses and City s collection fees. Capital Improvement Reserve Collection ADE has not anticipated any reserve collection costs at this present time. Deficit from Previous Year As the FGA proceeds through its development process, annual assessments may lag Applied Development Economics, Inc. 22

26 the actual cost to maintain facilities that have been installed prior to full buildout of the development. However, in this analysis we assume the City will manage expenditures to match available assessment revenues. Balance to Levy Includes all direct, capital, administrative, as well as deficit cost totals. Table 9 indicates how the costs and assessments would be distributed by land use at full buildout of the development in current dollar terms. Table 10 then projects the operations of the district during the first 20 years of FGA development. TABLE 9 MAINTENANCE DISTRICT PROJECT IMPACT BY LAND USE Total Low Density Medium Density High Density Mixed Use Res. Retail Mixed Use Retail Mixed Use Office Maintenance District Fund Landscape Maintenance Contract Cost $3,938,880 $1,183,977 $1,460,020 $636,656 $176,286 $87,905 $212,556 $181,468 Supplies and Materials $855,058 $257,019 $316,943 $138,206 $38,268 $19,083 $46,142 $39,393 Storm Maintenance $401,256 $120,612 $148,733 $64,856 $17,958 $8,955 $21,653 $18,486 Fleet $246,528 $74,103 $91,380 $39,847 $11,033 $5,502 $13,304 $11,358 Parks $1,721,953 $517,597 $638,274 $278,326 $77,067 $38,429 $92,923 $79,332 Street Maintenance $635,875 $191,136 $235,699 $102,779 $28,459 $14,191 $34,314 $29,295 Capital Cost $300,000 $90,176 $111,201 $48,490 $13,427 $6,695 $16,189 $13,821 Admin/Collection $284,851 $85,623 $105,585 $46,042 $12,749 $6,357 $15,372 $13,123 Operating Reserve $2,096,100 $630,061 $776,959 $338,800 $93,812 $46,779 $113,113 $96,569 Levy amount $10,480,501 $3,150,304 $3,884,794 $1,694,002 $469,059 $233,896 $565,565 $482,846 Est. Annual Collection $10,480,501 $3,150,304 $3,884,794 $1,694,002 $469,059 $233,896 $565,565 $482,846 Net $0 Source: Applied Development Economics PROJECTED MAINTENANCE DISTRICT IMPACT OVER TIME Depending on the schedule for infrastructure development and maintenance requirements, the district may show annual deficit in the early years. In Table 10, we have attempted to project maintenance services increasing in proportion to the development, and therefore, matching available assessment revenues. 14 When more detailed phasing plans become available, the City can review the actual schedule for maintenance cost expenditures that will be needed. 14 All costs and assessments are projected to escalate at 3 percent per year. Applied Development Economics, Inc. 23

27 TABLE 10 MAINTENANCE DISTRICT PROJECT IMPACT OVER TIME YEARS 1-10 MAINTENANCE DISTRICT FUND Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 REVENUES Total Residential $385,072 $796,514 $1,249,106 $1,726,406 $2,215,168 $2,694,960 $3,201,546 $3,791,647 $4,414,272 $5,069,809 Total per 1,000 sq. ft. Non-Residential $30,861 $63,574 $98,222 $189,091 $285,323 $345,091 $408,188 $463,261 $521,272 $582,346 Subtotal $415,934 $860,088 $1,347,328 $1,915,497 $2,500,491 $3,040,051 $3,609,734 $4,254,908 $4,935,544 $5,652,155 EXPENDITURES Landscape Maintenance Contract Cost $156,320 $323,246 $506,366 $719,900 $939,758 $1,142,540 $1,356,644 $1,599,119 $1,854,922 $2,124,246 Supplies and Materials $33,934 $70,171 $109,923 $156,277 $204,004 $248,024 $294,502 $347,139 $402,669 $461,134 Storm Maintenance $15,924 $32,929 $51,584 $73,337 $95,734 $116,391 $138,202 $162,903 $188,962 $216,398 Fleet $9,784 $20,231 $31,693 $45,057 $58,818 $71,510 $84,910 $100,086 $116,097 $132,953 Parks $68,338 $141,313 $221,367 $314,717 $410,832 $499,482 $593,082 $699,084 $810,913 $928,653 Street Maintenance/Lighting $25,236 $52,183 $81,745 $116,217 $151,710 $184,447 $219,010 $258,155 $299,450 $342,929 Capital Cost $11,906 $24,620 $38,567 $54,830 $71,576 $87,020 $103,327 $121,795 $141,278 $161,791 Admin/Collection $11,305 $23,376 $36,619 $52,062 $67,961 $82,626 $98,109 $115,645 $134,144 $153,621 Operating Reserve $83,187 $172,018 $269,466 $383,099 $500,098 $608,010 $721,947 $850,982 $987,109 $1,130,431 Prior Year $0 $0 $0 $0 $0 $0 $0 $0 $0 Total Expenditures $415,934 $860,088 $1,347,328 $1,915,497 $2,500,491 $3,040,051 $3,609,734 $4,254,908 $4,935,544 $5,652,155 NET (COST)/REVENUE $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 TABLE 10 CONT MAINTENANCE DISTRICT PROJECT IMPACT OVER TIME YEARS MAINTENANCE DISTRICT FUND Year 11 Year 12 Year 13 Year 14 Year 15 Year 16 Year 17 Year 18 Year 19 Year 20 REVENUES Total Residential $5,762,834 $6,479,717 $7,181,332 $7,919,212 $8,663,741 $9,477,910 $10,333,131 $11,174,823 $12,057,717 $12,983,527 Total per 1,000 sq. ft. Non-Residential $646,615 $727,159 $811,953 $881,632 $954,761 $1,217,686 $1,495,526 $1,733,414 $1,984,229 $2,248,533 Subtotal $6,409,449 $7,206,876 $7,993,285 $8,800,844 $9,618,502 $10,695,595 $11,828,657 $12,908,237 $14,041,946 $15,232,060 EXPENDITURES Landscape Maintenance Contract Cost $2,408,859 $2,708,556 $3,004,111 $3,307,616 $3,614,916 $4,019,719 $4,445,557 $4,851,295 $5,277,376 $5,724,655 Supplies and Materials $522,919 $587,977 $652,137 $718,022 $784,731 $872,607 $965,048 $1,053,126 $1,145,621 $1,242,717 Storm Maintenance $245,392 $275,922 $306,030 $336,948 $368,253 $409,491 $452,871 $494,204 $537,609 $583,173 Fleet $150,767 $169,524 $188,022 $207,018 $226,252 $251,588 $278,240 $303,635 $330,302 $358,297 Parks $1,053,077 $1,184,094 $1,313,302 $1,445,984 $1,580,326 $1,757,293 $1,943,456 $2,120,832 $2,307,101 $2,502,637 Street Maintenance/Lighting $388,875 $437,257 $484,970 $533,967 $583,576 $648,925 $717,671 $783,171 $851,956 $924,163 Capital Cost $183,468 $206,294 $228,804 $251,921 $275,326 $306,157 $338,590 $369,493 $401,945 $436,011 Admin/Collection $174,203 $195,877 $217,251 $239,199 $261,423 $290,697 $321,493 $350,835 $381,648 $413,994 Operating Reserve $1,281,890 $1,441,375 $1,598,657 $1,760,169 $1,923,700 $2,139,119 $2,365,731 $2,581,647 $2,808,389 $3,046,412 Prior Year $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total Expenditures $6,409,449 $7,206,876 $7,993,285 $8,800,844 $9,618,502 $10,695,595 $11,828,657 $12,908,237 $14,041,946 $15,232,060 NET (COST)/REVENUE $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Source: Applied Development Economics Applied Development Economics, Inc. 24