THE POTENTIAL ECONOMIC AND FISCAL IMPACTS OF A NESTLÉ WATERS NORTH AMERICA PROPOSED BOTTLING FACILITY IN CENTRE COUNTY, PENNSYLVANIA

Transcription

1 - THE POTENTIAL ECONOMIC AND FISCAL IMPACTS OF A NESTLÉ WATERS NORTH AMERICA PROPOSED BOTTLING FACILITY IN CENTRE COUNTY, PENNSYLVANIA February 1, 2018 REPORT SUBMITTED TO: Nestlé Waters North America 900 Long Ridge Road Building 2 Stamford, CT REPORT SUBMITTED BY: Econsult Solutions 1435 Walnut Street, 4 th floor Philadelphia, PA Econsult Solutions, Inc Walnut Street, 4 th floor Philadelphia, PA econsultsolutions.com

2 i TABLE OF CONTENTS Table of Contents... i Executive Summary... ii 1.0 Introduction The Proposed Bottling Facility Geographical Focus About Economic Impact Modeling About Fiscal Impact Modeling Structure of the Report Potential Economic Impact from Construction Direct Capital Investment Economic Impact from Construction Tax Revenue Impact from Construction Potential Marginal Cost of New Bottling Facility s Construction Cost To Township Potential Economic Impact from Ongoing Operations Estimated Operation Costs Economic Impact from Ongoing Operations Tax Revenue Impact from Ongoing Operations Cost to Township Operations of New Bottling Facility Appendix A Input-Output Methodology... A-1 Appendix B Data for Township Marginal Cost Calculation... A-3 Appendix C - About Econsult Solutions, Inc... A-6

3 ii EXECUTIVE SUMMARY Nestlé Waters North America (NWNA) has proposed a new water bottling facility in Centre County, Pennsylvania, with water sourced from Spring Township, Pennsylvania. The 200,000 to 250,000 square foot facility will have two bottling equipment lines and will bottle water under the Deer Park brand. As the project is in its early planning phase, all costs presented are estimates, and can change as the project further develops. Some costs are not known at this time and ranges are presented. Overall, construction of the new bottling facility is estimated to cost approximately $50 million. During construction, NWNA will spend $22 to $23.5 million of the $50 million construction budget within Pennsylvania. This construction spending will generate an estimated total economic impact of $33 to $36 million within the Commonwealth of Pennsylvania (of which approximately $30.1 to $32.2 million will occur within Centre County), supporting 240 to 250 total jobs (of which an estimated 230 to 240 will be supported within the County). In addition, the one-time economic impact from construction will generate approximately $700,000 to $740,000 in taxes to the Commonwealth (see Figure ES.1). At full occupancy, ongoing operation of the proposed bottling facility will produce approximately $58 million in economic impact within the Commonwealth of Pennsylvania annually (of which an estimated $50.6 million will occur within Centre County), supporting approximately 140 direct, indirect and induced jobs (of which an estimated 110 will be supported within the County). Included in these jobs estimates are the anticipated 50 new direct jobs at the proposed bottling facility. Ongoing operations of the bottling facility will generate approximately $510,000 in taxes to the Commonwealth each year. In addition, construction and operations of the proposed new bottling facility will generate direct local taxes. Most of the local taxes generated will go to the municipality and school district in which the proposed bottling facility is located. However, construction workers and NWNA employees at the proposed bottling facility may not live in that specific municipality, therefore their earned income taxes will go to their home municipalities and school districts, benefitting more than just the taxing jurisdictions in which the proposed bottling facility is located. During construction, we estimate that Pennsylvania municipalities, including the municipality in which the proposed bottling facility is located, could receive one-time tax payments of approximately $77,000 to $82,000. Pennsylvania school districts could receive an estimated $81,000 to $86,000 in direct taxes from construction and the Commonwealth could receive an estimated $20,000 to $30,000 in real estate transfer taxes from the sale of selected property(ies). From operations, we estimate Pennsylvania municipalities could receive $22,000 and Pennsylvania school districts could receive approximately $159,250 in annual direct local taxes. Centre County could receive an estimated $21,000 in annual real estate taxes (see Figure ES.2).

4 iii FIGURE ES.1 THE POTENTIAL ECONOMIC IMPACT IN THE COMMONWEALTH OF PENNSYLVANIA FROM THE CONSTRUCTION AND ONGOING OPERATIONS OF NWNA S PROPOSED BOTTLING FACILITY Source: IMPLAN (2015), Piktochart (2017)

5 iv FIGURE ES.2 - THE POTENTIAL DIRECT LOCAL TAXES FROM THE CONSTRUCTION AND ONGOING OPERATIONS OF NWNA S PROPOSED BOTTLING FACILITY IN PENNSYLVANIA Source: IMPLAN (2015), County and State websites (2017), Piktochart (2017)

6 1 1.0 INTRODUCTION 1.1 THE PROPOSED BOTTLING FACILITY Nestlé Waters North America (NWNA) has proposed a new water bottling facility in Centre County, Pennsylvania, with water sourced from Spring Township, Pennsylvania. The 200,000 to 250,000 square foot facility will have two bottling lines and will bottle water under the Deer Park brand. As the project is in its early planning phase, all costs presented are estimates, and can change as the project further develops. In addition, some costs are presented as ranges. Overall, construction of the new bottling facility is estimated to cost approximately $50 million. 1.2 GEOGRAPHICAL FOCUS For the purpose of this study, we modeled the economic impacts that will occur in Centre County and in the Commonwealth of Pennsylvania (see Figure 1.1). Economic impact models take expenditures and apply geography specific multipliers to estimate the magnitude of total expenditure, employment and wage impacts. For this analysis, we modeled the direct potential construction and operations expenditures by NWNA in Centre County. The model estimates direct inputs such as the number of direct construction workers and their wages based on the overall expenditures of the construction budget. Then IMPLAN models the induced and indirect impacts generated by the expenditure activity in Centre County and the rest of Pennsylvania (see Figure 1.2). In addition, we present multiple tax models. The first model builds off the economic impact analysis for the Commonwealth. It estimates the total income, sales and business taxes that are generated to the Commonwealth from the direct, indirect, and induced economic activity from construction and ongoing operations. The second model looks at the taxes and fees that will be owed to the municipalities in Pennsylvania, including the potential municipality where the bottling facility will be located. This municipal level model also looks at the costs that will be incurred by host municipality in terms of increased expenditures to provide public services to the new facility and its employees.

7 2 FIGURE 1.1 MAP OF PROPOSED DEVELOPMENT, CENTRE COUNTY AND THE STATE OF PENNSYLVANIA Source: Mapbox (2017) FIGURE 1.2 ILLUSTRATION OF ECONOMIC IMPACT MODEL BY GEOGRAPHIC REGION Source: Mapbox (2017), Econsult Solutions (2017)

8 3 1.3 ABOUT ECONOMIC IMPACT MODELING This analysis uses IMPLAN, an input output modeling software, to estimate the economic impacts of the construction and ongoing operations of NWNA s proposed bottling facility. IMPLAN is an industry standard tool to assess the economic and job creation impacts of economic development projects, the creation of new businesses, and public policy changes. IMPLAN translates an initial amount of direct economic activity into the total amount of economic activity that it supports, which includes multiple waves of spillover impacts generated by spending on goods and services and by spending of labor income by employees. Direct economic activity generated by NWNA translates into additional economic activity: First, some portion of the direct expenditures goes to the purchase of goods and services which gets circulated back into an economy when those goods and services are purchased from local vendors that supply the construction and operations of the proposed NWNA bottling facility. This represents the indirect effect, and reflects the fact that local purchases of goods and services support local vendors, who in turn require additional purchasing with their own set of vendors. Second, annual salaries are paid to the construction workers and the bottling facility s employees. That labor income gets circulated back into an economy when those employees spend some of their earnings on various goods and services. This represents the induced effect, and reflects the fact that some of those goods and services will be purchased from local vendors, further stimulating a local economy. The total economic impact is the sum of its own direct economic footprint and the indirect and induced effects generated by that direct footprint. See Appendix A for more information about our input output methodology (see Figure 1.3).

9 4 FIGURE ECONOMIC IMPACT METHODOLOGY Source: ESI (2017), Piktochart (2017)

10 5 1.4 ABOUT FISCAL IMPACT MODELING The scale of the proposed bottling facility is significant and warrants a fiscal impact analysis. The fiscal impact analysis evaluates the new tax and fee revenues that will be generated to the township and the costs incurred by the township to deliver public services to the workers at the new bottling facility. Expenditures will occur because the township will have more workers to serve. These workers will mean higher expenditures in some (but not all) municipal expenditure categories. Not all budget categories will increase due to the introduction of one more worker. There are costs that are fixed in nature and others that are variable, to different degrees, based on the number of new workers. NWNA has preliminarily identified several different properties in Benner and Spring Townships as possible sites for the bottling facility. Construction of the proposed bottling facility and its ongoing operations will generate new revenues to the host township from a number of sources: Upfront construction generates revenues from building permits for the physical construction of the bottling facility to the township in which it is built. Upfront construction will generate local services tax (LST) to the township in which it is built and earned income tax (EIT) from the construction workers to their home townships and school districts. The sale of property for the proposed facility to NWNA will generate real estate transfer tax to the township in which it is built. The new bottling facility will generate an ongoing increase in the real estate tax base to its township. New workers at the bottling facility will result in an ongoing increase in LST to its township and EIT to the home municipalities and school districts of its employees. Using data provided by NWNA, local tax rates for Centre County municipalities, and the Benner Township budget as an illustrative example to calculate potential costs to the home township, we utilized conservative assumptions based on industry averages where needed (see Table 1.1). We estimated several of the direct taxes that would accrue from the construction and operations of the bottling facility to PA municipalities and school districts. Then, using Benner Township as an example, we calculated the potential marginal cost the bottling facility will add to a local municipality s budget.

11 6 TABLE 1.1 DATA PROVIDED TO ESI FOR MARGINAL COST CALCULATIONS Construction Ongoing Operations The land price The number of employees The cost of constructing the building Average wage of employees The sourcing of the bottling lines Building permits and fees The cost of constructing the new pipeline The cost of constructing the new well Source: NWNA (2017) TABLE 1.2 DATA POINTS ESTIMATED BY ESI FOR MARGINAL COST CALCULATIONS Construction Ongoing Operations The number of construction workers The future real estate market value for the proposed bottling facility The wages of the construction workers Source: IMPLAN (2015), Centre County Assessments (2017) 1.5 STRUCTURE OF THE REPORT The purpose of this report is to estimate the potential economic and fiscal impacts from NWNA s proposed bottling facility in Centre County, Pennsylvania. In Section 2, we present the results of the potential economic and tax revenue impacts from construction of the new bottling facility. In Section 3, we present the potential ongoing economic and tax revenue impacts from the proposed bottling facility s annual operations.

12 7 2.0 POTENTIAL ECONOMIC IMPACT FROM CONSTRUCTION 2.1 DIRECT CAPITAL INVESTMENT NWNA will make an estimated $48 to $50.5 million capital investment for a new bottling facility in Centre County, Pennsylvania. Building and site development are estimated to cost $20 million. The facility will have two bottling lines at a cost of approximately $12 million each. Bottling lines are specialized equipment and primarily built in Europe. Economic impact models are geography specific to capture the spending and movement of money within the geography of interest. Since the bottling lines will primarily be manufactured in Europe, they are excluded from the model. Also included in the construction budget is the cost of a new back-up well in Spring Township, in recognition that the capacity of the Spring Township Water Authority s existing back-up well would be substantially utilized in providing water to the NWNA plant. A new pipe will be laid to transport the water from the well in Spring Township to the bottling facility. NWNA will reimburse Spring Township for the construction and drilling of a new back up well for Spring Township as part of the proposed arrangement. In total, we modeled the direct expenditures of approximately $22 to $23.5 million in Centre County, which includes the building and site development, new well, and pipe construction costs (see Table 2.1). Budget Category TABLE 2.1 NWNA S PROPOSED CONSTRUCTION BUDGET Potential Costs Modeled Budget of Spending in Pennsylvania Bottling Equipment $24,000,000 $0 Building and Site Development $20,000,000 $20,000,000 Water Pipeline $1,500,000-$3,000,000 $1,500,000-$3,000,000 Land Cost 1 $2,000,000-$3,000,000 $0 New Well for Spring Township $500,000 $500,000 Total Project Cost $48,000,000-$50,500,000 $22,000,000-$23,500,000 Source: NWNA (2017) 1 Input-output modeling classifies different types of expenditures based on their direct ability to generate a second round of economic impact. For construction economic impact modeling, land acquisitions are not entered into the model as they are considered a transfer of assets.

13 8 2.2 ECONOMIC IMPACT FROM CONSTRUCTION The construction of the new NWNA bottling facility will create a one-time economic impact in the Centre County and Pennsylvania economies over the course of the assumed one-year construction period. The direct spending of approximately $22 to $23.5 million will generate an estimated total economic impact of $30.1 to $32.2 million in Centre County and support approximately 230 to 240 total jobs with up to $12 million in earnings over the construction period. Within the Commonwealth of Pennsylvania, construction will potentially generate an estimated $33 to $36 million in economic impact and support around 240 to 250 total jobs with approximately $12 to $13 million in earnings over the construction period (see Table 2.2). TABLE 2.2 POTENTIAL ECONOMIC IMPACT DUE TO CONSTRUCTION OF THE PROPOSED BOTTLING FACILITY WITHIN CENTRE COUNTY AND THE COMMONWEALTH OF PENNSYLVANIA Centre County Commonwealth of Pennsylvania Impact Type Low-End High-End Low-End High-End Direct Output ($M) $22.0 $23.5 $22.0 $23.5 Indirect & Induced Output ($M) $8.0 $8.7 $11.4 $12.1 Total Impact ($M) $30.1 $32.2 $33.4 $35.6 Employment Supported (FTE) Earnings ($M) $11.1 $11.8 $12.0 $12.8 Source: IMPLAN (2015) 2.3 TAX REVENUE IMPACT FROM CONSTRUCTION TOTAL TAXES TO THE COMMONWEALTH Construction of the bottling facility will generate one-time tax revenues to the Commonwealth of Pennsylvania. Income, sales, and business taxes are part of our total economic activity tax model. In the model we estimate the tax revenues generated by the direct activity and the tax revenues from the indirect and induced activity. The Commonwealth imposes a one percent realty transfer tax. NWNA estimates that the potential land cost will range between $2 million and $3 million. The potential real estate transfer taxes to the Commonwealth range from $20,000 to $30,000 from a property sale to NWNA. In total, the estimated one-time tax revenues to the Commonwealth from the construction of the proposed bottling facility range from $700,000 to $740,000 (see Table 2.3).

14 9 TABLE 2.3 POTENTIAL INCOME, SALES, BUSINESS TAX, AND REALTY TRANSFER TAX REVENUES FROM THE DIRECT, INDIRECT, AND INDUCED ECONOMIC IMPACTS FROM THE CONSTRUCTION OF NWNA S PROPOSED BOTTLING FACILITY TO THE COMMONWEALTH OF PENNSYLVANIA Low-End of Range High-End of Range Indirect & Indirect & Tax Types Direct Induced Total Direct Induced Total Income $270,000 $100,000 $370,000 $280,000 $110,000 $390,000 Sales & Use $150,000 $90,000 $240,000 $160,000 $90,000 $250,000 Business $40,000 $30,000 $70,000 $40,000 $30,000 $70,000 Realty Transfer Tax $20,000 $20,000 $30,000 $30,000 Total One-Time Taxes to PA $480,000 $220,000 $700,000 $510,000 $230,000 $740,000 Source: IMPLAN (2015), NWNA (2017) DIRECT LOCAL TAXES Realty Transfer Tax In addition to the estimated realty transfer tax that will go to the Commonwealth, Spring and Benner Townships each impose a real estate transfer tax as does the local school district. It is unknown at this time where the proposed bottling facility will be located. NWNA has preliminarily identified Benner Township and Spring Township as potential locations for the bottling facility, including alternative sites within an industrial park. The potential real estate transfer taxes to the municipality and school district in which the bottling facility will locate ranges from $10,000 to $15,000 for each, based on potential land costs of $2 million to $3 million (see Table 2.4). TABLE ESTIMATE OF REAL ESTATE TRANSFER TAX TO THE MUNICIPALITY AND SCHOOL DISTRICT OF THE PROPOSED BOTTLING FACILITY Bottling Facility Municipality Bottling Facility School District Potential Land Cost $2,000,000-$3,000,000 $2,000,000-$3,000,000 Tax Rate 0.50% 0.50% Total $10,000-$15,000 $10,000-$15,000 The exact location of the proposed bottling facility is not known at this time. NWNA is exploring several alternative sites in Benner and Spring Townships. However, we can make some

15 10 assumptions that allow us to model the taxes that will be due to the municipality in which the facility locates, and other local direct taxes that will go to other PA municipalities. EIT, LST and Permits Construction of the proposed bottling facility, the new well and pipeline will generate taxes to municipalities in PA from EIT and LST paid by the construction workers. EIT will go to the home municipality and school district of each construction worker who lives in PA. The LST revenues will go to the municipality in which the bottling facility is located and at least some portion to Spring Township for the construction of the new well and part of the new pipeline. For analysis purposes, we assume that the construction workers all live in PA, given Centre County s central location in PA and use the tax rates for Benner and Spring Townships, resident EIT of 0.5% and 1.05% for the school district. 2,3 In addition to the tax revenues from construction, the project will generate various fees and permits. The total local permit costs are not known at this time, but are estimated by NWNA to be no more than $25,000 which will mostly go to the municipality in which the bottling facility is located. In total, PA municipalities, including where the bottling facility is located, will receive an estimated $67,000 in direct tax revenues from construction. PA school districts will receive an estimated $71,000 in tax revenues during construction (see Table 2.5). TABLE 2.5 POTENTIAL EARNED INCOME TAX, LOCAL SERVICE TAXES, AND PERMITS TO PA MUNICIPALITIES AND SCHOOL DISTRICTS FROM DIRECT CONSTRUCTION ACTIVITY OF THE PROPOSED BOTTLING FACILITY, NEW WELL, AND PIPELINE PA Municipalities PA School Districts Labor Category EIT LST EIT LST Direct Construction Labor Income $6,700,000 - $6,700,000 - Number of Direct Employees Tax Rate 0.50% $ % $5 Taxes Owed $34,000 $8,000 $70,000 $1,000 Permits $25,000 Total Taxes and Permits Owed $67,000 $71,000 Source: IMPLAN (2015) PA DCED (2017) 2 Additionally, at the county level, 58 percent of those who work in Benner Township live in Centre County and 96 percent of those who work in Spring Township living in Centre County from 2015 LEHD OnTheMap data. 3 For Centre County 33 of the 36 municipalities have resident EITs of 0.5%. The county s school districts EIT s range from 0.5% to 2.05% with an average rate of 1.37%.

16 11 In aggregate, the construction of the proposed bottling facility will result in potentially $77,000 to $82,000 in local taxes and permits to the municipality, and potentially $81,000 to $86,000 in local taxes to PA school districts (see Table 2.6). TABLE 2.6 POTENTIAL DIRECT LOCAL TAXES FROM CONSTRUCTION OF NWNA S PROPOSED BOTTLING FACILITY IN CENTRE COUNTY Tax Type PA Municipalities PA School Districts EIT $34,000 $70,000 LST $8,000 $1,000 Real Estate Transfer Tax $10,000 - $15,000 $10,000 - $15,000 Permits $25,000 - Total $77,000-$82,000 $81,000-$86,000 Source: IMPLAN (2015) PA DCED (2017), NWNA (2017)

17 POTENTIAL MARGINAL COST OF NEW BOTTLING FACILITY S CONSTRUCTION COST TO TOWNSHIP A new event, business, or construction, among other items, may add to the budgetary costs of a municipality because of the increases in public service needs such as police and fire protection, streets maintenance, and trash pickup. We estimated that the municipality in which the bottling facility is located will see little in the way of increased costs during construction as most public services, such as additional police to block roads, are paid for directly by the developer. It is anticipated that the plant will be located within an existing developed area appropriately zoned for the activity where necessary infrastructure is available. Photo Credit: NWNA, Pennsylvania Community Website (2017)

18 POTENTIAL ECONOMIC IMPACT FROM ONGOING OPERATIONS 3.1 ESTIMATED OPERATION COSTS The new bottling facility will contribute to the local and state economies through its annual ongoing operations. Its expenditures on staff, goods and services will have a multiplier effect throughout the local and state economies, supporting jobs and increasing various tax bases throughout the county and state. To model the future economic impact from ongoing operations, we used data provided by NWNA on the estimated number of employees for the proposed bottling facility and average wage per position type from their Lehigh Valley bottling facility. Using industry data from IMPLAN, annual revenue levels and total employee compensation can be derived. These figures were modeled to estimate the total economic impacts from operations. 3.2 ECONOMIC IMPACT FROM ONGOING OPERATIONS The operations of the proposed bottling facility will generate direct, indirect and induced economic impacts within Centre County and the Commonwealth of Pennsylvania. Future operations will potentially generate an estimated $50.6 million in economic impact within Centre County, supporting approximately 110 total jobs and over $6 million in earnings annually. Within the Commonwealth of Pennsylvania, operations will potentially generate $58 million in economic impact and will support an estimated 140 jobs with over $8 million in earnings annually (see Table 3.1). 4 TABLE 3.1 THE POTENTIAL ANNUAL ECONOMIC IMPACT OF NWNA S PROPOSED NEW BOTTLING FACILITY S OPERATIONS Impact Type WITHIN CENTRE COUNTY AND THE COMMONWEALTH OF PENNSYLVANIA Centre County Commonwealth of Pennsylvania Direct Output ($M) $40.2 $40.2 Indirect & Induced Output ($M) $10.4 $17.8 Total Impact ($M) $50.6 $58.0 Employment Supported (FTE) Employee Compensation ($M) 5 $6.7 $8.5 Source: IMPLAN (2015) 4 The economic impacts within the Commonwealth are inclusive of the economic impact within Centre County, these are not additive. 5 Employee compensation includes wages and benefits

19 14 ONGOING EMPLOYMENT IMPACT Jobs that Pay is an initiative to improve Pennsylvania s overall job climate and promote job growth by partnering with the private sector to encourage the creation and retention of jobs that pay at least 80 percent of the annual average wage in the county where the jobs are located. The Commonwealth has stressed the need for job creation and retention to provide employment opportunities for all of the state residents, improve the local tax base, and achieve prosperity and a higher quality of life for families and communities. 6 The initiative requires jobs to pay at least 80 percent of the county s average annual wage, which is $38,646 7 for Centre County. The jobs at the proposed bottling facility will have an average wage of $58,000 8 and will meet the Jobs that Pay criteria. The impact of ongoing operations of the bottling facility supports numerous industries within the state. In addition to the manufacturing sector, which is the industry for the direct jobs, and many of the indirect jobs, NWNA s operating activity affects a variety of industries, including management, professional services, retail and wholesale trade, and accommodation and food services industries (see Figure 3.1). As can be seen in the indirect jobs, NWNA s supply chain will require products and services from a wide range of industries. Upon completion of the facility, NWNA will source raw materials from other vendors in the region. In addition, NWNA will contract with carriers to transport raw materials to the factory and finished goods to the market. 6 Pennsylvania Department Single Application for Assistance. 7 Pennsylvania Department of Labor and Industry, Employment and Wage Data. 8 This is wages only and does not include benefits.

20 15 FIGURE 3.1 ANNUAL INDUSTRY DISTRIBUTION OF THE POTENTIAL ONGOING EMPLOYMENT IMPACT OF NWNA S FACILITY WITHIN THE COMMONWEALTH OF PENNSYLVANIA Source: IMPLAN (2015), Piktochart (2017)

21 TAX REVENUE IMPACT FROM ONGOING OPERATIONS TOTAL TAXES TO THE COMMONWEALTH Annually, operations at the bottling facility will generate state taxes both directly through its spending and indirectly by spending of its vendors and employees. In aggregate, approximately $510,000 in state tax revenue will be generated annually from the direct, indirect, and induced economic activity (see Table 3.2). TABLE 3.2 POTENTIAL TAX REVENUES FROM THE DIRECT, INDIRECT AND INDUCED ECONOMIC ACTIVITY GENERATED BY NWNA S PROPOSED NEW BOTTLING FACILITY S OPERATION WITHIN THE COMMONWEALTH OF PENNSYLVANIA Tax Categories Taxes to the Commonwealth of Pennsylvania Income Tax $240,000 Sales & Use Tax $210,000 Business Tax $60,000 Total Tax $510,000 EARNED INCOME TAX AND LOCAL SERVICES TAX Once construction of the proposed bottling facility is completed, the new workers at the bottling facility will generate EIT and LST. We did not estimate nonresident EIT revenues from ongoing operations since most municipalities in and near Centre County have a resident EIT. We followed the same assumption as we did for the local tax revenue estimates from construction. We assumed the 50 bottling facility employees all live in PA, given Centre County s central location in PA and used the same tax rates for the EIT and LST calculations. 9,10 We estimate that PA municipalities will receive approximately $17,000 in EIT and LST from the 50 new employees of NWNA during operations, which includes the municipality in which the proposed bottling facility will be located. PA school districts, including the school district in which the proposed bottling facility will be located, will receive an estimated $30,250 in taxes annually during operations. 9 Additionally, at the county level, 58 percent of those who work in Benner Township live in Centre County and 96 percent of those who work in Spring Township living in Centre County from 2015 LEHD OnTheMap data. 10 For Centre County 33 of the 36 municipalities have resident EITs of 0.5%. The county s school district EIT s range from 0.5% to 2.05% with an average rate of 1.37%.

22 17 TABLE 3.3 POTENTIAL ANNUAL EIT AND LST REVENUES TO PA MUNICIPALITIES AND SCHOOL DISTRICTS FROM NWNA EMPLOYEES, STEADY STATE OPERATIONS PA Municipalities PA School Districts Category EIT LST EIT LST Number of Employees Aggregate Wages $2,900,000 - $2,900,000 - Tax Rates 0.50% $ % $5 Estimated Tax Revenues $15,000 $2,000 $30,000 $250 Total EIT and LST Revenues $17,000 $30,250 Source: NWNA (2017), PA Munistats (2017) REAL ESTATE TAXES As part of our tax impact analysis, we also analyzed the potential real estate taxes that would go to the municipality in which the bottling facility is located. Given that NWNA is looking in Centre County, we searched for comparable industrial parcels. It was difficult to find comparable properties, as much of the land in the county is for agricultural uses and the size of the proposed bottling facility is larger than many of the buildings on the identified industrial sites. Based on the county tax assessment records, we have identified eight parcels. We calculated their land assessment per acre and building assessment per square foot and arrived at averages across the properties. Based on the large size of the proposed bottling facility, the high level of construction materials and practices NWNA will employ to have it built, and its Lehigh Valley s LEED Gold facility, we believe the $10 per square foot is too low. We believe a range of $12 to $15 per square foot is more likely. To be conservative in our estimates, we used $12 per square foot in our estimates of the building assessment, and used the smaller size of the potential facility, 200,000 square feet. 11 For illustrative purposes, we assumed the bottling facility is located in Benner Township. The actual tax revenues due are dependent on the county s assessment of the land and building and the future tax rates of the municipality and school district in which the proposed bottling facility will be located. 11 The age, conditions, and use of the buildings vary greatly. These are being used for estimation purposes only and do not reflect the future assessed value of the bottling facility.

23 18 TABLE 3.4 TAX ASSESSMENT INFORMATION FOR SELECT COMPARABLE PARCELS Building Square Land Building Land Assessment Assessment per square Parcel id Owner Name Acres Feet Assessment Assessment per Acre foot ,083A,0000- CON LIME INC ,961 $73,295 $315,020 $1,239 $ ,001A,0000 CENTRE LIME & STONE ,579 $63,300 $488,460 $2,677 $12 COMPANY INC ,117B,0000 CC WATER ACQUISITION ,180 $172,450 $2,624,050 $5,848 $7 COMPANY LLC (Coca Cola) ,110-,0000- STORE MASTER FUNDING IV LLC ,096 $165,775 $713,800 $7,779 $ ,124M,0000- RESTEK CORPORATION ,965 $197,950 $3,058,470 $8,391 $ ,500A,0007- FAR AND SURE LLC ,680 $199,650 $1,312,350 $10,018 $15 (CLEVELAND BROTHERS) ,022-,0000- STORE SPE STATE ,000 $624,825 $1,178,850 $11,721 $5 COLLEGE A,021-,0000- A W & SONS ENTERPRISE ,000 $194,500 $312,000 $50,000 $7 LP Average $12,209 $10 Source: Centre County GIS and Tax Assessment, 2017 Assessments So that we could estimate an increase in the real estate taxes that will occur from the construction and operations of the new bottling facility, we used the current assessment level of one development ready parcel. As the search for a potential location is not complete, we are not identifying a specific parcel here. To develop an estimate of potential real estate tax, we used Benner Township as our example. Therefore, if the plant were to be located in Benner Township, the net real estate tax to Benner Township would be an estimated $5,000 annually, $129,000 to the Bellefonte Area School District annually, and $21,000 to Centre County annually (see Table 3.5).

24 19 Real Estate Tax Category TABLE 3.5 POTENTIAL FUTURE LAND AND BUILDING ASSESSMENTS OF THE PROPOSED BOTTLING FACILITY AND POTENTIAL REAL ESTATE TAX REVENUES IF LOCATED IN BENNER TOWNSHIP Assessments and Tax Rates Potential Current Land Value $260,000 Potential Future Land Assessment $520,000 Potential Future Building Assessment $2,400, Real Estate Tax Potential Real Estate Tax Net Real Estate Tax Benner Township Tax Rate and Taxes 0.189% $500 $5,500 $5,000 Bellefonte Area School District Tax Rate and Taxes 4.847% $13,000 $142,0000 $129,000 Centre County Tax Rate and Taxes 0.784% $2,000 $23,000 $21,000 Source: ESRI Business Analyst (2017), PA Department of Revenue (2017), Benner Township Budget (2017), Barton Partners (2017) In aggregate, ongoing operations of the proposed bottling facility will potentially result in approximately $22,000 annually in local taxes to the township, $159,250 annually to the Bellefonte Area School District, and $21,000 annually to Centre County (see Table 3.6). TABLE 3.6 THE POTENTIAL DIRECT ANNUAL LOCAL TAXES FROM ONGOING OPERATIONS OF NWNA S PROPOSED BOTTLING FACILITY IN PENNSYLVANIA Tax Type PA Municipalities Bellefonte Area School District Centre County EIT $15,000 $30,000 - LST $2,000 $250 - Net Real Estate Tax $5,000 $129,000 $21,000 Total $22,000 $159,250 $21,000 Source: NWNA (2017), PA Munistats (2017), ESRI Business Analyst (2017), PA Department of Revenue (2017), Benner Township Budget (2017), Barton Partners (2017) PAYMENTS TO SPRING TOWNSHIP WATER AUTHORITY NWNA will enter into a payment arrangement with Spring Township Water Authority for the use of the well that will supply the water for the proposed bottling facility. The rate for the water usage is $4 per 1,000 gallons. Water usage will be dependent on the actual level of operations. With an estimate of 250 gallons per minute, we estimate an annual payment to Spring Township Water Authority of $525,000.

25 COST TO TOWNSHIP OPERATIONS OF NEW BOTTLING FACILITY The proposed bottling facility will impose a service cost upon the municipality in which it is located. To estimate an ongoing operations cost, we used Benner Township as our example township. Actual expenditure costs are dependent on the township in which the proposed bottling facility is located, the overall demand for and level of public services offered, state of equipment, employment levels and efficiency of service delivery. There are several factors to consider when estimating the marginal cost to a Township of service delivery required for a new business and its workers. The below are illustrative estimates. For this calculation, we account for three different factors. First we examined Benner Township s budget. We apportioned the budget to service delivery that would impact workers in the Township, as opposed to residents, whose service needs are higher (see Appendix B, Table B.1). Next, we accounted for the portion of Benner Township s budget that is generated by local taxes (see Appendix B, Table B.2). Finally, to estimate the portion of the service expenditures that are attributable to workers as compared to residents, we used the portion of the Township s land use is commercial in nature (see Appendix B, Table B.3). From that aggregate estimate of employees total expenditure impact to Benner Township, and from the U.S. Census LEHD data, we obtained an estimate of the number of people who work in Benner Township and applied that to get an average cost per worker to the Township of $46 (see Table 3.7).

26 21 TABLE 3.7 ESTIMATED MARGINAL COST CALCULATION OF WORKERS TO BENNER TOWNSHIP Category Values Benner Township Expenditures 2017 $1,651,950 Expenditures for Public Services for Employees in Municipality $828,223 Percent of Municipal Expenditures Attributable to Public Services for Employees in Municipality 50% Operating Revenues (without Assets) $1,096,800 Operating Revenues from Local Sources $965,500 Proportion of the Township Budget from Local Sources 88% Public Services Funded by Municipal Taxes $729,075 Percent of Municipal Expenditures Attributable to Category Land Uses 20% Public Services Funded by Municipal Taxes Attributable to Category Land Uses $148,201 Number of Workers in Benner Township 3,191 Public Services Municipal Expenditure Per Individual $46 Source: Benner Township Budget (2017), Centre County GIS Portal (2017), LEHD OnTheMap (2017), To get the total expenditure impact of the new employees to the Township, we multiply the number of new employees not living in the Township to the $46, for a total expenditure impact to Benner Township of an estimated $2,200 per year (see Table 3.8). TABLE 3.8 ESTIMATED COST OF NWNA BOTTLING FACILITY TO BENNER TOWNSHIP, BASED ON EMPLOYMENT Category Value Estimated Number of Workers at Proposed Bottling Facility 50 Number of Workers not Already Living in Township 96.10% Number of Workers not Already Living in Township 48 Public Services Municipal Expenditure Per Individual $46 Total Cost to Township $2,200 Source: NWNA (2017), Benner Township Budget (2017), Centre County GIS Portal (2017), LEHD OnTheMap (2017) Even if we consider only the estimated net annual real estate taxes to Benner Township of $5,000 and compare that to the estimated expenditure cost of $2,200, we see that Benner

27 22 Township would have a net positive fiscal impact from the operations of the proposed new bottling facility. Add in the LST and EIT from operations, the net positive fiscal impact from operations is greater. In addition, the one-time taxes and fees from construction would also accrue to the township. Overall, the expansion of NWNA within Pennsylvania will be an economic gain for the state, county and township. The proposed bottling facility will add new jobs, create a new supply chain, generate direct local taxes and add to the manufacturing revival of Pennsylvania. 12

28 A-1 APPENDIX A INPUT-OUTPUT METHODOLOGY A.1 OVERVIEW Economic impact estimates are generated by utilizing input-output models to translate an initial amount of direct economic activity into the total amount of economic activity that it supports, which includes multiple waves of spillover impacts generated by spending on goods and services and by spending of labor income by employees. This section summarizes the methodologies and tools used to construct, use, and interpret the input-output models needed to estimate this project s economic impact. A.2 INPUT-OUTPUT MODEL THEORY In an inter-connected economy, every dollar spent generates two spillover impacts: First, some amount of the proportion of that expenditure that goes to the purchase of goods and services gets circulated back into an economy when those goods and services are purchased from local vendors. This represents what is called the indirect effect, and reflects the fact that local purchases of goods and services support local vendors, who in turn require additional purchasing with their own set of vendors. Second, some amount of the proportion of that expenditure that goes to labor income gets circulated back into an economy when those employees spend some of their earnings on various goods and services. This represents what is called the induced effect, and reflects the fact that some of those goods and services will be purchased from local vendors, further stimulating a local economy. The role of input-output models is to determine the linkages across industries in order to model out the magnitude and composition of spillover impact to all industries of a dollar spent in any one industry. Thus, the total economic impact is the sum of its own direct economic footprint plus the indirect and induced effects generated by that direct footprint. A.3 INPUT-OUTPUT MODEL MECHANICS To model the impacts resulting from the direct expenditures Econsult Solutions, Inc. developed a customized economic impact model using the IMPLAN input/output modeling system. IMPLAN represents an industry standard approach to assess the economic and job creation impacts of economic development projects, the creation of new businesses, and public policy changes within a county its surrounding area

29 A-2 IMPLAN has developed a social accounting matrix (SAM) that accounts for the flow of commodities through economics. From this matrix, IMPLAN also determines the regional purchase coefficient (RPC), the proportion of local supply that satisfies local demand. These values not only establish the types of goods and services supported by an industry or institution, but also the level in which they are acquired locally. This assessment determines the multiplier basis for the local and regional models created in the IMPLAN modeling system. IMPLAN takes the multipliers and divides them into 440 industry categories in accordance to the North American Industrial Classification System (NAICS) codes. The IMPLAN modeling system also allows for customization of its inputs which alters multiplier outputs. Where necessary, certain institutions may have different levels of demand for commodities. When this occurs, an analysis-by-parts (ABP) approach is taken. This allows the user to model the impacts of direct economic activity related to and institution or industry with greater accuracy. Where inputs are unknown, IMPLAN is able to estimate other inputs based on the level of employment, earnings, or output by an industry or institution. A.4 EMPLOYMENT AND WAGES SUPPORTED IMPLAN generates job estimates based on the term job-years, or how many jobs will be supported each year. For instance, if a construction project takes two years, and IMPLAN estimates there are 100 employees, or more correctly job-years supported, over two years, that represents 50 annual jobs. Additionally, these can be a mix of a full and part-time employment. Consequently, job creation could feature more part-time jobs than fulltime jobs. To account for this, IMPLAN has a multiplier to covert annual jobs to full-time equivalent jobs. Income to direct, indirect, and induced jobs is calculated as employee compensation. This includes wage and salary, all benefits (e.g., health, retirement) and payroll taxes (both sides of social security, unemployment taxes, etc.). Therefore, IMPLAN s measure of income estimates gross pay opposed to just strictly wages. A.5 TAX REVENUE IMPACT The economic impacts in turn produce one-time or ongoing increases in various tax bases, which yield temporary or permanent increases in various tax revenues. To estimate these increases, Econsult Solutions, Inc. created a tax revenue impact model to translate total economic impacts into their commensurate tax revenue gains. These tax revenue gains only account for a subset of the total tax revenue generation that an institution or industry may have on the economy. Furthermore, where institutions are tax exempt, only the tax revenue generation from supported indirect and induced industries is accounted for.

30 A-3 APPENDIX B DATA FOR TOWNSHIP MARGINAL COST CALCULATION TABLE B BENNER TOWNSHIP BUDGET BY FUND AND FUNDS DESIGNATED AS DIRECT SERVICE DELIVERY BY ESI Category Expense 2017 Budget Percent of Total Budget Variable Due to New Workers in Township Supervisors $25, % No Auditors $9, % No Tax Collection $13, % No Solicitor $19, % No Secretary/Treasurer $55, % No Engineering $48, % No Municipal Buildings and Facilities $157, % No Fire Safety $131, % $131,300 Zoning Enforcement $34, % No Planning Commission $8, % No Zoning Hearing Board $4, % No Sewage Enforcement $12, % No Leaf & Brush Collection $3, % No Parks & Recreation $60, % No Contributions $17, % No Highways $696, % $696,923 Other $17, % No Payroll Taxes & Benefits $336, % No Total $1,651,950 - $828,223 Source: Benner Township Budget (2017)

31 A-4 TABLE B.2 TOWNSHIP REVENUES BY FUND SUPPORTED BY LOCAL TAXES AND FEES Category Total Revenues Percentage Local Revenues Assets $555,150 Tax Revenue Real Estate current $215, % $215,000 Real Estate delinquent $6, % $6,000 Real Estate transfer $70, % $70,000 Earned Income Tax $425, % $425,000 LST Tax $135, % $135,000 Patron Parking Tax $100, % $100,000 Other Revenue Franchise Fees $60, % N Encroachment $1, % N Fines & Forfeits $1, % $1,500 Interest $ % N Sanitation Reimbursement $0 0.0% N Public Utility Realty $1, % N Building Permits $10, % $10,000 Sewage Permits $3, % $3,000 PSU In-Lieu of Taxes $65, % N Other Gas Revenues (Marcellus) $2, % N Miscellaneous $1, % N Total (exclude assets) $1,096,800 $965,500 Total (plus assets) $1,651,950 Source: Benner Township Budget (2017)

32 A-5 TABLE B.3 BENNER TOWNSHIP LAND USE SUMMARY Land Use Parcels Share Land Use Included For Employee Portion Agriculture % 10% Commercial 54 5% 5% Communications 6 1% No Forests % No Industrial 14 1% 1% Mined Land 9 1% No Mixed Use 11 1% 1% Public or Semi-Public 42 4% 4% Recreation 9 1% No Residential % No Transportation 55 5% No Utility 33 3% No Vacant and Unused Land % No Vacant Structure 2 0% No Water 30 3% No Totals 1,161-20% Source: Centre County GIS Portal (2017)

33 A-6 APPENDIX C - ABOUT ECONSULT SOLUTIONS, INC Econsult Solutions, Inc. is a Philadelphia-based economic consulting firm. It provides businesses and public policy makers with economic consulting services in urban economics, real estate economics, transportation, public infrastructure, bottling facility, public policy and finance, community and neighborhood bottling facility, and planning, as well as expert witness services in support of litigation. Its principals are nationally recognized experts in urban bottling facility, real estate, government and public policy, planning, transportation, non-profit management, and business strategy and administration, as well as litigation and commercial damages. Staff members have outstanding professional and academic credentials, including active positions at the university level, wide experience at the highest levels of the public policy process, and extensive consulting experience.