Loading...
The URL can be used to link to this page
Your browser does not support the video tag.
Home
My WebLink
About
02/22/1994, 1 - AIRPORT AREA ANNEXATION FISCAL ANALYSIS
MEET m� II�Ip�a�l� city of san'Luis OBISPO IATE: 9 COUNCIL AGENDA REPORT I NUMBER: / FROM: John Dunn, City Administrative Offic�/ Prepared by: William C. Statler, Director of Finance Ken Hampian, Assistant City.Administrative Office SUBJECT: AIRPORT AREA ANNEXATION FISCAL ANALYSIS CAO RECOMMENDATION ■ Consider the fiscal analysis of the airport area annexation prepared by the consulting firm of Angus McDonald & Associates. ■ Direct staff to proceed with the schedule and action steps previously approved by the Council relative to the Airport Area Annexation. DISCUSSION Background Preparation of the accompanying fiscal impact analysis was approved by the Council on November 2, 1993 in conjunction with their consideration of an overall strategy for analyzing and pursuing the airport area annexation. Attached is a summary schedule outlining the basic action steps and the schedule for accomplishing them that was subsequently approved by the Council. As noted at that time, reviewing the fiscal impact of the annexation is only one issue among many that needs to be.addressed in considering the annexation of this area. Once questions concerning the fiscal consequences of this annexation are asked and answered,we can move on to the other important issues that need to be considered before the annexation is finalized, which is currently projected for the Summer of 1995. In approving the preparation of this fiscal impact analysis, the Council selected the consulting firm of Angus McDonald & Associates, which has extensive experience in performing this type of analysis. The results of their analysis are fully detailed in the accompanying report. Workscope The purpose of this analysis is narrowly defined: to determine if the annual revenues generated in the airport area will be sufficient to support the operating costs that will be incurred in delivering services to this area. The report does not address land use, transportation, resource, environmental, social, or other "quality of life" issues; nor does it address the cost of facility improvements that will be necessary to service this area and the manner in which they will be financed. These are important issues, but they will be considered in subsequent phases of the overall planning process as identified in the approved schedule for the annexation of this area. ��������►►mIINIII�IIii�ui���d�N city of san L AAs osispo COUNCIL AGENDA REPORT In performing this fiscal analysis, the consultant considered two distinct scenarios in recognition that significant development of the area cannot occur until the City commits to one or another of the additional sources of water supply currently being evaluated: ■ Status quo scenario. Analyzes City costs and revenues based on existing development only. ■ Future growth and development scenario. Analyzes City costs and revenues based on a reasonable rate of growth and development in the area. This forecast is not directly tied to a date when this development will occur, but rather, its starting point begins with when water becomes available to the area. Costs and revenues are then projected based on projected levels of development for the next 15 years consistent with the City's current growth management policies and what is achievable in a market-driven economy. Summary of Findings The consultant concludes that annexing this area would be fiscally positive under both scenarios over the entire forecast period. It is important to note that this conclusion is based on a number of critical assumptions that are fully discussed in the report. Although each of the assumptions forms a major building block in performing this analysis, it is important to note that a significant portion of the City revenues from this area will ultimately depend on the results of our property tax negotiations with the County. As detailed in the report, the current model for sharing existing and future property tax revenues between the City and the County has been used in preparing this analysis; however, no sharing of existing or future sales tax revenues with the County has been assumed. This negotiating process has previously been identified as one of the key steps remaining in this planning process if the Council authorizes going forward with the annexation. Conclusion and Next Steps Annexation of the airport area, including the Margarita Area, has been anticipated in City policy for a number of years. In November of 1993, the Council affirmed this policy, and further clarified its intent through revised text in the draft land use element. The purpose of the fiscal impact study was to determine if there are any "fatal flaws" from a fiscal point of view in continuing to pursue this policy. The Angus McDonald study indicates that the area can be annexed without negative fiscal consequences for the City, provided certain actions are taken in conjunction with annexation (e.g., that infrastructure costs are borne by development within the area and that a reasonable mutual aid agreement can be negotiated with the County for fire services). If the policy to annex the Airport Area remains valid, then the question before Council at the moment relates to timing: that is, should the City continue to pursue annexation consistent with the schedule adopted in November? Staff believes that we should. The non- ��►���� ►�Illllfl�lhA�`��yf city Of San LaiS OBISPO COUNCIL AGENDA REPORT fiscal benefits of annexation remain unchanged (e.g. land use control, added housing stock, industrial expansion area). As development continues in the County, the fiscal advantages projected in the study will diminish as more of the property tax base growth accrues to the County. At the same time, service demands on the City immediately after annexation will grow larger the longer we wait. Therefore, staff recommends continuing with the adopted schedule. In terms of the "next step", the major issue to be addressed relates to funding of the specific plan and related environmental and public facilities financing plan work. To date, the property owners have not put forth a plan for funding these costs, preferring to wait until the Council acts on the fiscal impact study. In addition, they have also expressed concern regarding their ability to fund specific plan/environmental review costs prior to actual annexation(requiring a specific plan in advance of annexation is current City policy). When a financial plan for these activities is established, then the related work will be undertaken, which will take several months, and which will represent another critical phase of the annexation process and decision. In the meantime, the annexation application itself will remain on file with LAFCO;however,significant progress in processing the application must await completion of the specific plan, environmental work, and subsequent prezoning. If Council approves continuing with the annexation process, the Council Subcommittee and staff will continue to meet with property owners, and will also meet with the LAFCO Board in a study session on March 17 to advise them of the actions taken by the City toward annexation of the airport area. LAFCO is expected to reconsider expanding CSA 22 powers in April or later. ATTACHMENT Airport area planning and annexation process ENCLOSURE Airport area annexation fiscal impact analysis prepared by Angus McDonald & Associates i I iI I L ! 00 i I CA O 9C Sim o °a� � off °; ! v� amv� ! aq odaed W W C �H a C o 0 w I e _ , o v _ , f a 0 'moi'L`, �I b Cq CGJ y e� QtJ Fi Y � 19 � � I ❑ –� g' n' a ❑c r. � ° ! � � � � o — to s y I UQU _ >, I Q , LM — c -� as if ¢ i ! - i I I I w ! 1 E �.ni'4- i.. ❑ ! •5Swqq oaN Isis!�{,I I. . r ortiy p u2 to r6 o. (, 1 vFE JL y U a HE ` pZE 6 _ .ri1 .a..: ,;. 9M Y ¢ CQ V o C3 o A9a � � � g a � Q�Q a tot ,�, `� � 44° �5�5+. ry� �Gc $� o aqq� ] ��, � � � o�C ° � ���` �Qf 7q8 .+, Z, G Q W o e ❑ M ¢ w ❑ ❑ rn © ¢ U ¢ W A IRO a ,�i � F .7 S a m 'L .r _SAN LUIS OBISPO AIRPORT AREA FISCAL IMPACT ANALYSIS .(City Council Workshop Edition) U 1 A Report Prepared For CITY OF SAN LUIS OBISPO BY. . Angus McDonald & Associates Berkeley, California February 229 1994 1� i i i San Luis Obispo Airport Area Fiscal Impact Analysis TABLE OF CONTENTS I. INTRODUCTION AND SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 A. Purpose of the Airport Area Fiscal Analysis . . . . . . . . . . . . . . . . . . . . . 1 �I B. Summary of Fiscal Impacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1. Short-Term Fiscal Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2. Mid-Term Fiscal Impact . . . 4 G . . . . . . . . . . . . . . . . . . . . . . . . . . .Conclusions and Recommendations 4 1. The Fiscal Implications for the City . . . . . . . . . . . . . . . . . . . . . . 4 2. Impact Monitoring and Mitigation . . . . . . . . . . . . . . . . . . . . . . . 7 3. Next Steps 8 II. FUTURE LAND USES IN THE AIRPORT AREA . . . . 9 . . . . . . . . . . . . . . . . . A. The Status Quo — With and Without Annexation 9 B. Growth and Development After Annexation . . . . . . . . . . . . . . . . . . . . . 9 IIL FISCAL IMPACT ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 A. Public Services Delivery and Cost 12 1. The Concept and the Commitment 12 2. Estimate of Annual Expenditures . . . . . . . . . . . . . . . . . . . . . . . 16 B. Revenues to the City . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 1. Sources of Revenue . 18 2. Assumed Tax-Sharing Agreement With San Luis Obispo County . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 . . . . . . . . . . . . . . . C.. The Fiscal Impact on the City of San Luis Obispo 19 1. Short-Term Fiscal Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 2. Mid-Term Fiscal Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 D. Impact Monitoring and Mitigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 1. Sources of Vulnerability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 2. Responses to Adverse Fiscal Impacts . . . . . . . . . . . . . . . . . . . . 22 IV. NEXT STEPS IN THE EVALUATION PROCESS . . . . . . . . . . . . . . . . . . . . 26 A. Significance of the Fiscal Impact Analysis . . . . . . . . . . . . . . . . . . . . . . 26 B. Considerations Other Than Fiscal Impact . . . . . . . . . . . . . . . . . . . . . . 26 1. Land Use Controls In The Airport Area . . . . . . . . . . . . . . . . . 26 1 2. Required Commitment of City Staff . . . . . . . . . . . . . . . . . . . . . 27 3. The Implications of Development-Related Financing . . . . . . . . 27 APPENDIX A. METHODOLOGY AND ASSUMPTIONS . • . . . . . . . . . . . . . . • . 29 A. General . 29 City Council Workshop Edition Page i 3XM3 San Luis Obispo Airport Area Fiscal Impact Analysis TABLE OF CONTENTS (continued) 1. Continuity Of Legal And Institutional Constraints . . . . . . . . . . 29 2. Cost And Revenue Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . 29 3. Time Period For Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 B. General Fund Revenues . . . . . . . . 29 1. Property Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 2. Real Property Transfer Tax (Documentary Transfer Tax) . . . . . 34 3. Transient Occupancy Tax 34 4. Sales Tax 35 5. Utility Users Tax and Franchise Fees . . . . . . . . . . . . . . . . . . . . 36 6. Business Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 7. Vehicle Code Fines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 8. Other Fines and Forfeitures . . . . . . . . . . . . . . . . . . . . . . . . . . 38 9. Motor Vehicle License Fees . . . . . . . . . . . . . . . . . . . . . . . . . . 38 10. Use Of Money And Property . . . . . . . . . . . . . . . . . . . . . . . . . . 39 C. Fuel Tax Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 1. Highway Users Taxes - Tax Rates. . . . . . . . . . . . . . . . . . . . . . . 39 2. §2105. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 3. §2106. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 4. §2107. . 41 S. $21075. � . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 D. Ongoing Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 LIST OF TABLES AND FIGURES Figure I-1 THE SAN LUIS OBISPO AIRPORT AREA. . . . . . . . . . . . . . . . . . . . . . . . . 2 �! Figure I-2 SHORT-TERM FISCAL IMPACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Figure I-3 MID-TERM FISCAL IMPACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Table II-1 GROWTH ASSUMPTIONS FOR THE FISCAL IMPACT ANALYSIS . . . . 11 Table III-1 SUMMARY OF EXPENDITURE ESTIMATING RELATIONSHIPS . . . . . 15 Table III-2 ESTIMATE OF CITY EXPENDITURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Table III-3 ESTIMATE OF CITY REVENUES AND FUND BALANCES . . . . . . . . . . 20 Figure 1114 SENSITIVITY TO AMOUNT OF COMMERCIAL DEVELOPMENT . . . . 24 Figure III-5 SENSITIVITY TO DIVERSION OF PROPERTY TAX . . . . . . . . . . . . . . . . 25 Table A-1 ANNUAL DEVELOPMENT FORECAST . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Table A-2 MARKET VALUE AND TURNOVER RATE ASSUMPTIONS . . . . . . . . . 32 Table A-3 SAN LUIS OBISPO COUNTY SALES TAX RATES . . . . . . . . . . . . . . . . . . 35 Table A4 DERIVATION OF UTILITY USERS TAX AND FRANCHISE FEES FROM HOUSEHOLDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Table A-5 DERIVATION OF UTILITY USERS TAX AND FRANCHISE FEES . . . . 37 Table A-6 EXPENDITURE MULTIPLIERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Page ii City Council Workshop Edition w7LO Sen Luis Obispo Airport Area Fiscal Impact Analysis I. INTRODUCTION AND SUMMARY The planning area referred to as the San Luis Obispo Airport Area is the area between the existing southern city limit of the City of San Luis Obispo and the San Luis Obispo County Airport. This area is shown in Figure I-1. Efforts to plan for urban development of this area have been going on for many years. Recently, on April 25, 1993, the San Luis Obispo County Local Agency Formation Commission(LAFCo)considered a request by the property owners in County Service Area (CSA) 22 for an expansion of the CSA's powers to allow the CSA to provide urban level water services to a majority of the Airport Area. LAFCo deferred a decision for two months in order to allow time for the City and CSA property owners to meet and clarify the City's intentions regarding eventual annexation to the City and provision of City services to the area. At the June 17th LAFCo meeting,the City stated its intent to annex the Airport Area. LAFCo then deferred a decision on the CSA's request for an expansion of powers until March of 1994 to allow the City and the Airport Area property owners to make"substantial progress" toward annexation. Since then, the City has taken several steps toward annexing the Airport Area. This report presents conclusions about one factor that the City will consider when deciding whether or not to annex. The report examines whether taxes and other revenues generated in the Airport Area after annexation would be sufficient to support the expenditures that the City would incur to provide public services on an annual basis. A. Purpose of the Airport Area FWA Analysis In the present report, the term "fiscal analysis" or "fiscal impact analysis" deals with the question of whether annual revenues from the Airport Area would support the increases in annual expenditures to provide police protection, fire protection, parks and recreation, general government, and other City services that would be incurred after annexation took place. The comparison of annual revenues and annual expenditures is the sole subject of the present report. Consideration of significant other issues will be deferred until after the City Council has had the opportunity to review the results of the fiscal analysis. Important areas of concern that are deferred to the future include: ■ The level of land use control guidelines and other growth management techniques that would be appropriate in the Airport Area, if annexation takes place. ■ The cost to provide facilities necessary to deliver public services (including water supply, sewer collection and treatment, roads and highways, park lands, etc.), and the manner in which these facilities will be financed. City Council Workshop Edition Page 1 aa7so i EMEMMEMIN ttu \ No ONZ Pill ROMN mm 1. ��.w �� San Lois Obispo Airport Area Fiscal Impact Analysis ■ The overall and total environmental,community and social impacts on the City of San Luis Obispo, if annexation takes place. The exclusive concentration in the present report on fiscal analysis is a matter of administrative convenience. It does not imply that fiscal considerations are the first or most important reason to make a decision about whether to annex the Airport Area. Rather, the sequence of steps in the analysis merely recognizes the fact that if the annexation does not appear to be fiscally beneficial,then there would be a burden of proof on the supporters of annexation to demonstrate that the additional steps in the analysis were worthy of the time and expense that would be incurred. B. Summary of Fiscal Impacts The exact time at which growth and development could take place in the Airport Area (assuming a policy decision that growth would be supported) depends on the time at which additional water supply will be available to the City of San Luis Obispo. Alternative sources of water are currently being evaluated,but the availability of alternatives suggests that it is reasonable to assume that a source of water can be available,at acceptable cost, to support growth and development in the Airport Area. i A period of time may pass between the time the Airport Area is annexed and the time that water becomes available and the tax base begins to grow. A significant question to the City of San Luis Obispo is whether, during this time period,the Airport Area would be a net loss to the tax base. To deal with this question, a decision was made to consider two time periods. ■ A time after which annexation takes place (and the City becomes responsible to provide public services) but before there is any significant increase in the tax base, beyond development projects that are now fully committed to take place. ■ A time period after a source of water becomes available, when a reasonable and foreseeable amount of residential and commercial growth takes place. 1. Short-Term Fiscal Impact Revenues, expenditures and the net fiscal balance were estimated for a situation wherein annexation takes place but growth and development are limited to those projects for which commitments have already been made. This fiscal situation is summarized in Figure I-2. There is a significant surplus of revenues over expenditures. City Council Workshop Edition Page 3 3073.0 San Luis Obispo Airport Area Fiscal Impact Analysis 2. 11Tid-Term Fiscal Impact A fiscal impact analysis was completed for the period that begins after a reasonably-priced source of water becomes available to serve the Airport Area. This fiscal impact analysis was made for the first five years after water becomes available and for Years 10 and 15. The results are summarized in Figure I-3. The revenues associated with growth exceed the City's cost to provide service. C. Conclusions and Recommendations The present section of the report distinguishes carefully between conclusions and recommendations. The consulting team is quite prepared to express conclusions and opinions as to the fiscal implications of a decision to annex the Airport Area. The consultants recognize that there is a wide range of public policy issues— some of which are particularly sensitive in San Luis Obispo — that transcend fiscal considerations. The consultant team does present "If, Then" recommendations to assure that a fiscal balance is maintained,if the City Council decides to support annexation. 1. The Fiscal Implications for the City Figures I-2 and I-3 show a comfortable fiscal surplus under both the "status quo after annexation"assumption and,in the longer term,as growth and development take place. The consultant team asserts that these results are reliable and that there can be a high level of confidence that the decision to annex the Airport Area will not place a burden on the existing City tax base. f Three important qualifiers are relevant to this conclusion. Controlling Cost Per Persons Served. The City Administrative Officer (CAO) and the City's management team projects the delivery of City services at a fixed cost per person served (measured in real dollar terms, net of cost inflation) that did not increase, as development took place. Further, costs for the senior management functions are projected to grow at a lower rate than direct service delivery cost (in terms of cost per persons served) than has been the current experience. Recovery of Service Costs. The fiscal impact evaluation is based on the assumption that the . City of San Luis Obispo will use fees,charges and assessments to recover the full cost of all services that provide a direct and particular service or benefit to an individual or business. Examples include water and sewer services,cost of building inspections, etc. Such costs are in contrast to services (e.g., police and fire protection) that provide a general benefit to the entire City. The person who must call on these services is not expected to pay the direct cost for the service provided. Page 4 City Council Workshop Edition 307" San...as Obispo Airport Area Fiscal Impact Ana.,. s Figure 1-2 SHORT-TERM FISCAL IMPACT Tbousmils of DoOars 6N . . ..... . . . ..... . . . . ................ .. ...... . . 400 .. ..... . ..... . . . . . ..... 200 ........ .......... ..... ` 6 Revenues E:penditarea ' Net Revenues Souri m Angus Md)onaM&Assodates Note: 1) This exhibit shows the annual revenues,expenditures and surplus after annexation, but with no new development in the Airport Area. City Council Workshop Edition Page 5 coxa 7 1 1�1�1i1�1O�1�1i 11�1i1�O1�1�1�1�1i� rO�1i1�1i1i1�1�1i1�1i1�0i1�1�1ii1. x111111111111111111 x1111111.111111111• �il�iiiiiiiiiil#ii 111111111111111111 •11111111111111111' 111111111111111111 x111111111111111111 x111111111111111111 •i1�1�1�1�1�1i1�1�1i1�1i101�1�1�1i1� r1�1�1i1�1�1i1�1�1�1�1�1�1i1i1�1i1i1� r1�1�1�1�1�1i1�1�1�1i1�1i1i1�1�1�1�1i •111111111111••111 1.111111111111111• 11111111111.1.1111 _1111.1..1..111111.1 x111111111111111111 x11111111111111111♦ 11111111111111111• 11111111111111111• •1111111111111111• 11....11.11111.11.1 x111111.111111••11• .1111111111111.111• ♦11111111111111111 11111111111111111• 111111111111111111' •11111111111111111♦ x111111111111111111 x111111.11111111111 1111.1111111111111 •111.111111111111♦ 111111111111111111 •111111111111111111 •111111111111111111 x11111111111111111• •11111111111111111 •11111111111111111 •11111111111111111' 1111 •1111111111111.1111 1111111111111111111 x11..•♦•1111111111• •11111.111111• •1111111111111111• •11111111111111111' ' p 1. •111111111111111111 x111111111/1111111• •11111111111111111• •1111111111111111• •11111111111111111 •11111111111111111' •1111111.1111111111 x11.11111111111111♦ x111111111111111111 •1111111111111111• •1111111111111111• •1111111111111111• 1.11111111111111111 x11111111111111111• 1..111.1.1.1.1.1111 •111111111111111•• •11111111.1111111• •11111.11111111111 •111111111111111111 •11111111111111111• 111111111111111111• 111111111111111111 •1111111111111111• •11111111111111111 111.11111111111111• •1111111111.1111111 •111.111111111111110 •1111111111111111• •11111111111111111 ♦11111111.1111111' 1111111111111111111 1111111111111111111 x11111111111111111• 1..1•....1.1.111.1 1...•1.11111.111•• 1.1.1.•.1..11..... . .I •11111111.1.1.111.1 x1.111111.11111.1.1 x1.111.1111111.111• 111111111.11.111111 •111111111111.1111 ♦11111111111111111 111.1.111.111.1111 1111111111.11111111 x1111111111111111.1 •.1.111.1.1111...1 1...........1.111• •1..11111111111.1♦ •111111.1.111.11111 x•11.11111..111111• x1.11.111111.111.11 •1.111....111.1.1• •11.11111...1111•♦ •.111111..111111.1 •11111.....1.1.1..1 x.1.1.1.11.1.....1• x.••11.11.11.111111 - 1.11111.1.1111111♦ •11111.11.111111.1 ♦111111111111.1111' 11.11111111111..111 •11111.1111.1111111 x111111111111111111 11111�.�.�11i•11 1111111.X1.1.1.11 1�.111.1111�1�.11�.11�111111.11111111 x1111111.1.1.1.1111111111111.�.�11.�i 111.11111111.111.• 1111111.111111111• •1111111.111111.11' •11.1111.1.1.1111.1 x111.111..11111111• x.111.1.1.11111..1♦ •1111111•.11.11.1. •1.•.1111.111.1111 ♦11111.1.1.1.111.♦ I. 111111111.1.1111111 •11111111111111111. x11111.11111.111111 ♦.111111111111111111• 1111111.1111111111..111111♦ 1111111111111.1111' 11..11.11.1..1.1x1. 111.111 1111111111111111111 •.•.11.11111..1.1♦ .1.111.1.111111111 •.111111111111111♦ •1..11..1.111.11111 1.1..1...1.1..11.11 x1.1.111.1..1.11.1• •....11.1..1..11.• ..1•..1.1.1...1... ♦111111..111.•111♦ 1...1.111111.11.111 x.................1 ..................1 •1.11111.11111111• 1.....1111.11.1.1• ..............•11. ♦1111..11•.11.....1 x1..1..1.•1..1.1..1 x1.111111..1•.1••11 111...1....1.1.1.x.1.1.1111 X1.11 xx1111.1...1...1.1.1.1.1.111111111111 11.111111.11111111.*1111.+.111.1111 •.••1..1.....•11.1 •.1•.1•.1.11.11••♦ ...11.1.1111...1.• ..•.•........•1.1.1 .1.1...1.•1••.1••1 x1..•1•••1.11...••♦ •.11....••.1....1♦ ♦111..111111..1111 •111111..111.1...1 I � .1..111.•11.1.111.1 x1•.11.1.1..1...1.1 x11...1.....111.1.1 ♦11.1.111..111.1.. ♦1.11111.11111.1.. •111111.11.1..1.1•' 111.1.1....1.11..11 x1.1111...•1111.... x1.1.1.1..1.•.11.11 •11111.1111.1111.♦ ♦11.1.1..11.1.1.11111.1111..1.♦ ♦.1111...1111•.•111.1 •.•.11.11..1..1...1 x111111.11111.11111.1. •�11111.�.�11.�1��1��.�111�1111 x1.11�111111�1�111�1111.1.111.�.�1�1 111.1.11111.11111111.111.1111111111 1...•...•.••...11• 1...1.1.1...1..1.• ♦1..11.11..1...11• ..•1.....1.1.••1.11 x..1...1....1111111 x.1.11..1.1..1.1111 ♦.11.1111...111111 ♦..11111.•..1.111♦ ♦11.111111111111.1 11111111...111..111 11111111111..11111. 1.1..1.11111..1.111 ♦11.1111111..11.1• •.1111111111.11.1• ♦1.11.1111.1.1111• 111.11.1.11..111111 x111111111111..1111 1111111.11111111111 I 'I 1111111.1.111.11.• .1111111.1..11.11• ♦.11111.1.11..1.11 ♦ ♦....11.1.....1.111 x1..1.11..111.1.111 x1.111.1111111..11•...1..1...11..11• ♦11..•11..11.1.11• 11.1..1111..1..11♦ 111..11111.1...1111 x111.1.1111.1.11111 1.1.11.111111...111 •1.1.1111111....11 ♦11111111..111..1♦ ♦11111...11.11.11.' • 11111..11.111111.11 11..11.111.11.11111 x..111.11.11.111111.1.111.111111111• ♦111.1.111111...1♦ ♦1..1111111.1111.♦ 1111•.11.1...11••11 1...•.111111.111.1• •11111111111..1111♦ ♦1.11.11.11111.11♦ .1..1.111111111..1 1111111111111.111.' •.1.1..111111.111.• x111111.1111.111111 1111..11...11111.11 11.i11111i1.1.1111111111111111111 x1111111111.11111111111/111.111.1111 11/11.11111.111.11111111111111.1111 .Ii1�i��...11ii i��i i�1. 6::�.�.���.1.:1...-.- •�1.1. -1..--1.1.-1.1.-� nl � 1 " 1 1 - • 1 1 - / 11 1 1 I Y 1 1 1 1 1 1 1 1 San Luis Obispo Airport Area Fiscal Impact Analysis Paying for Public Improvements. An unfortunate fact of life regarding land development in the 19906 is that there is virtually no tax support available from either the Federal, the State or local governments to pay for the capital costs necessary to provide additional public service capacity. As a practical matter,in the face of the staff cuts and other economies that were necessary when San Luis Obispo entered into its current fiscal year,there is no realistic possibility that tax monies from the City would be available to pay for additional roads, parks, etc., to serve the Airport Area. Instead, development projects must finance the full cost of public improvements. The fiscal results shown in Figures I-2 and 1-3 would be subject to revision if the City Council did decide to use tax monies to pay for public improvements. However, it is assumed that development will pay its own way regarding public improvements and that general purpose revenues will.not be used. 2. Impact Monitoring and Mitigation . An unfortunate admission is appropriate when a fiscal impact analysis is presented. It must be admitted that, at least in terms of individual line items, the future will prove the fiscal impact analysis to be less than exact. For example, local governments m California have been impacted severely by decisions of the State legislature and the Governor to solve State budget problems at the expense of the entitlement.of cities,counties and special districts to property tax revenues. There can be no assurance that this type of adverse fiscal impact will not continue in the future. Therefore,IF the City decides to annex theAirport Area,THEN it is strongly recommended that the City monitor actual fiscal impacts each fiscal year. A growth management program could require corrective action if continued growth and development in the Airport.Area.do �. not produce a fiscal balance that is in the best interest of the City. As one example,an Airport Area growth management program could impose.no restrictions, other than the existing City residential growth limit,provided that an annual measurement confirmed.that incremental revenues were at least matching incremental expenditures. If the City's fiscal balance was found to be eroding, a potential growth management policy might limit the rate of residential development until the amount of the generally more fiscally-beneficial retail and other commercial land uses grew to the point that a fiscal balance could be maintained. Achieving this improvement in fiscal balance would be largely a private sector process. Owners of lands zoned for residential and commercial purposes could enter into joint ventures and/or profit sharing arrangements that would permit both land uses to proceed. City Council Workshop Edition Page 7 San Lids Obispo Airport Area l?wW Impact Analysis 3. Next Steps As the City Council begins its deliberations about whether to continue considering the possibility of annexing the Airport Area, the appropriate role of both City staff and the consultants is to be available to answer questions about implications as forthrightly as possible. The annexation decision itself is a"legislative act" in the fullest sense of the word. Only the City Council can weigh the fiscal, environmental, social, and public policy implications of a decision to continue the process of considering annexation. If an affirmative decision is made by the City Council, then it is appropriate for staff and consultants to document the fact that the process of preparing a Specific Plan at the appropriate level of detail, a set of design guidelines and a Public Facilities Implementation Plan (PFTP),is demanding,challenging and time-consuming. This process is vital if San Luis Obispo is to achieve and maintain control of development in the Airport Area. Page S City Council Workshop Edition soap San Luis Obispo Airport Area Fiscal Impact Analysis H. FUTURE LAND USES IN THE AIRPORT AREA If the Airport Area is annexed to the City of San Luis Obispo,there may be a delay before a full level of urban services can be provided. Generally, development cannot occur until the City commits to one or another of the sources of additional water that are currently �. being evaluated. Certain properties with a dependable source of well water may be able to develop in advance of an additional source of water becoming available to the City,if these properties are permitted to continue to use their local water supply,but are able to connect to the City's system of water for fire protection. Because of the uncertainty about when water might be available,the consultants looked at two situations. In the first case, a fiscal evaluation was based on the assumption that the Airport Area is annexed immediately,but only the existing land uses in the Airport Area require services from the City. .This is called the "status quo". In the second case, the period of analysis was assumed to begin the year after additional water becomes available (whenever that occurs). Growth and development would continue from that point, at a realistic rate of development. A. The Status Quo - With and Without Annexation The formal definition of "impact" is a measurement of the difference in some impact variable, measured over time,between a proposed project and a reasonable alternative to the proposed project. In the present case,the "impact variable"being measured is net fiscal balance. The "proposed project" and the "alternative" deserve further discussion. I� For purposes of the first portion of the fiscal analysis, it is assumed that the "proposed project" is the act of annexing the Airport Area. The first fiscal analysis considers whether this "status quo" can be serviced by the City from the outset, without having the additional cost to provide ongoing services exceed the additional revenue that would become available to the City after annexation. No additional development is assumed. B. Growth and Development After Annexation A development forecast for the Airport Area that departs from the status quo was selected �. to illustrate fiscal impact of a reasonable rate of growth and development. This forecast is not tied directly to a date at which development will begin. Instead, the starting point for the analysis is the point at which an additional source of water becomes available to the City, at a price that is comparable to the cost of water in the Central Coast market area. City Council Workshop Edition Page 9 MMO San Luis Obispo Airport Area Fiscal Impact Analysis Guidance for the mix of land uses and design and development standards was taken from the Margarita Area Concept Plan (R=2)1 and from the conceptual land use plan for County Service Area 22. Although the Margarita Area Concept Plan has not been formally adopted, ' it has received wide public review and comment. Its design standards are ambitious,and it is based on a "non-traditional" planning concept that has received much discussion throughout California in the last three years. Further,it is an internally-consistent document that has mutually-supportive policies regarding environmental preservation, a multi-modal circulation system and ambitious policies regarding affordable housing. The Margarita Area Concept Plan is a useful starting point for evaluation of residential development patterns in the Airport Area. The land uses in County Service Area 22 (i.e., in the area between the southern boundary of the Margarita Area and the airport) are primarily business park and areas designated for services and manufacturing. Discussions with the City's department heads confirmed that cost to provide public services was not particularly sensitive to the specific location of development within the entire Airport Area. Accordingly the development forecasts described below do not identify individual parcels that might or might not develop by the end of the planning period being considered. The forecast of growth and development after water becomes available is shown in Table II-1. This forecast was intended to represent a reasonable target that would be consistent with San Luis Obispo's current growth management policies and achievable in a market- driven economy. The growth forecast was reviewed with individuals who are knowledgeable about demand and competing supply in the market area and is considered to be realistic. �I i i ' Underscored numbers in parentheses refer to References listed at the end of this report. Page 10 City Council Workshop Edition wa,o San I -)bispo Airport Area Fiscal Impact Analr- a Oe0 O O O O ! O O O O Y y »Z w w w w n n o . M 6 ' •• w a00 O O O n O M O O O y ww » e w O •• � w n OP w w w M• G a see e e + m + a ee e . aa. . . + ^ n n n It a ^ e . w - e O Y � O e o e O e e e • ae. . « � n n a ^ 0 w •ei ae n e e M � » e e VD n n M » w oeOn e o e y M e O Y M M r r ^w » ww0 e O O o O O w w w 1 e e On n U Ir Y a � w On . w »w M N N + O O q m u a F � •; nee w. w N ^ e e y' 0` . n w ..�• N O >y o � - IPM n w w e e ya a n y e O C e e b - ^ w.e. r s ' M O O O N N w w f.1G w o ... o Nn+ e e y w •i • w w e f� _ O � •� '� � M IC y i L� r S yy w m P 1 y • » ■ ti A � w m ■ � � w. g Y ppb y m 1. A 1 a dw r ooe � Y•ppp w S u m � � m see Sa R + ; L• r � a 885E Gni ' City Couma Workshop Edition Page ll w�sc+ San Luis Obispo Airport Area Fiscal lmpad Analysis III. FISCAL RMPACT ANALYSIS A fiscal impact analysis is basically a comparison of annual expenditures to provide public services and annual revenues that will accrue to the City. The process of estimating expenditures is fundamentally different from the process of estimating revenues. As a , generalization,revenues respond to State laws and local ordinances and respond directly to economic conditions. As one example,the total amount of taxable retail sales is a function of the national, regional and local economy and the competitive supply of retail outlets in San Luis Obispo compared to the rest of the market area. The City's share of the tax on retail sales is controlled by State law. In contrast, expenditures (e.g., the cost of providing police protection) depend on initial recommendations by the managers of each city department, final recommendations by the City Administrative Officer and decisions by the City Council. The distinction between ' expenditure estimating and revenue estimating is particularly significant regarding the proposed Airport Area.annexation as discussed in the following paragraphs. A. Public Services Delivery and Cost Estimates of the annual cost to provide public services in the Airport Area were strongly influenced by an initial set of assumptions that guided the fiscal impact analysis. 1. The Concept and the Commitment Traditionally,the cost of certain public services has been estimated by adopting standards based on the residential population. For example, a police service standard is frequently defined as number of officers per 1,000 residents or number of total police personnel per 1,000 residents. Park standards are frequently expressed in terms of acres per 1,000 residents, and the recreation program and maintenance costs of the resulting acreage are then calculated. An extension of this concept recognizes the fact that the service population of a city should be defined more broadly. The employed work force, the University population, the tourist population, and those who come to San Luis Obispo for entertainment all create a demand for public services. In other jurisdictions, it has proved practical to gather data over time and to relate demand for services (e.g., calls for police services) to underlying land use categories. Detailed data that would permit this type of analysis were not available for San Luis Obispo, so the concept of"persons served"was based on demands from the residential population and demands from the work force within the City limits. �I Page IZ City Council Workshop Edition xns.o San Luis Obispo Airport Area Fiscal Impact Analysis This approach generally captures the effect of employees, and insofar as employment increases with tourism and other entertainment activities, it may partially capture the demand for public services created by these particular service populations. A more exact - approach would deal explicitly with service demand generated from each land use category in the City. Over time, an attempt should be made to gather the data that will permit a more exact relationship to be formulated between cost of services and University/tourist/visitor demands. In the present instance,it should be noted that the land use plan for the Airport Area does not emphasize tourist/visitor or University-related impacts. Accordingly, the definition of "persons served" as a combination of the resident population and the employment base is a useful method for estimating service demand for the Airport Area.' 1 After the concept of persons served had been introduced, the City Administrative Office (CAO) and the City's management team accepted the "new financial reality" or holding constant or to reducing the real-dollar cost per persons served, while maintaining San Luis Obispo's 1993/94 Level of Service. Productivity enhancements and other economies would permit the cost-per-persons-served to remain constant or to decline (after the cost-per- persons-served had been adjusted for inflation). This policy on cost containment was first assumed,and then tested. An estimate was provided by the consultants of the City's current cost-per-persons-served and this cost-per-persons-served was applied to the residential, commercial and industrial land uses in the Airport Area. Each departmental representative was then asked to confirm that the service could be provided at San Luis Obispo's 1993/94 Level of Service to the Airport Area at the estimated cost. In every instance,care was exercised to be sure that service to the Airport Area would not be at the expense of service to existing residents and businesses. The expenditure-estimating relationships for the two cases being analyzed reflected the purpose of each case. The estimating relationships for "Status Quo With Annexation"were based on the assumption that an cce tab a Level of Service (LOS) would be provided in the Airport Annexation Area. During that interim period between the date of annexation and the date when a newly-available water supply would permit planned growth to occur, "acceptable" was defined as at least equal to the existing LOS provided by the County. Improvements in service standards were assumed,where current City policy requires a higher LOS than San Luis Obispo County currently provides. 'During the design review process of individual development prospects, special demands for public services may be identified. Additional investigation measures can be specified at that time. City Council Workshop Edition Page 13 sms.a San Luis Obispo Airport Area Fiscal Impact Analysis Fire prevention and protection,provided by the City of San Luis Obispo,can be used as an example. The Fire Chief concluded that fire protection services could be extended to the Airport Area(given existing land uses)without increasing City staff or equipment However an increased level of preventive inspection would be necessary to meet a minimal safety standard acceptable to the City of San Luis Obispo. The service standard applicable to the case "Planned Growth and Development" generally assumed a Level of Service comparable to that provided to residents and businesses within the current City limits. Estimates of expenditures applicable to the "Status Quo With Annexation" case were based on case studies by the relevant department heads. For example, the Fire Chief ran numerousresponse drills to evaluate the actual response times from existing fire stations to different parts of the Airport Area. The Police Chief conferred with representatives of the County Sheriff and analyzed frequency and types of calls for service. In most cases it would be possible to serve the Airport Area under the "Status Quo" ; condition with only a limited increase in expenditures. As noted above, an exception was preventive inspections by the Fire Department. A significant budget increase would be required, given that San Luis Obispo County's standards for preventive inspection are not as demanding as those of the City. In addition to the annual cost for preventive inspection described in the following section,it would be necessary to have a fire inspector on contract for 12-18 months to establish reliable data regarding land uses and other items of concern to the Fire,Planning,Police and Public Works/Utilities Departments. This individual would also serve as liaison with existing businesses in the Airport Area. This individual would develop a mutually acceptable plan for future improvements that may be necessary. A second exception involves the requirement to prepare base maps for the Airport Area if annexation takes place. Base maps are required primarily to support planning for public improvements that will provide additional capacity to serve the Airport Area. Accordingly,. the cost of preparing base maps can be recovered from the financing plan that would be part of a Public Facilities Implementation Plan (PFIP) that will be completed,if the airport area is annexed. The expenditure estimating relationships applicable to the "Planned Growth And Development" case are summarized in Table III-1. The issue of costs to maintain parks and trails in the Airport Area requires special ' consideration. The Margarita Area Concept Plan has a target for active-use parks that considerably exceeds both the park standard that exists today for the residents of the City Page 14 City Council Workshop Edition w7so San Luis Obispo Airport Area Fiscal Impact Analysis Table ffi-1 SUMMARY OF EXPENDITURE ESTIMATING RELATIONSHIPS San Luis Obispo Airport Area Fiscal Impact Analysis 31-rab-96 11.3{ AM Total Offsetting Met eacription of Sspesdlture aryaditurns revenues E,penditurm Betimating Aelation.hip Notes �TS11C psOGSAYB Lac sayslY police Protection $5,599.000 $104,300 $3,696,700 Weighted Perrone Served Fire and Bnviromntal Safety $3,989,000 $105,000 $3,806,000 Cm Study/Weighted Persons Served C OTII.ITSBS $6,639,500 98 $6,639,300 N.A. anterprise Fund. rail east recovery is assumed. OS Streets and plod Control Street and Signal Maintenance $1,370,300 $55,000 $1,315,300 Lane Milo Flood Control $65,000 $51,000 615,000 M.A. Any significant conte will be paid from an Airport Area benefit assessment. Transportation Planning $146,000 $166,000 Weighted Persons Served Parking $716,500 $714.500 R.A. anterpriee Fund. Fall cost recovery is aesusmd. Imunicipal Transit systm $933,700 3230,000 $708,700 M.A. Enterprise Fund. 2) LBISURS. CULTURAL 4 SOCIAL SZZVIC38 Parke and Recreation Sun Md Ta 3320.900 $526.500 $65.100 per Weighted tion Program - Other 11 61$903,600 $526,l00 $652,100 Case td Porem Served taasoe services $903.300 $987,100 Case study. (See Report Tat) low Gaaree Oparatim/Naiatenenam $277.600 $177,600 N.A. tiatesprime POW. Tall eont recovery is mamamsd. cultural Services, $75,000 373.800. Weighted persons Baud Social Services (Evan Relations) $207,200 $207,200 Weighted Persons saved 3) OBOBLOPI®1f P ve;I= ant saw ${13,600 $110,000 $333,800 M.A. Full coat recovery is ennead. 4) Plaminp - Other Than Develolrsat Rsoia 6633,000 $613,000 Weighted prions 6scvad 61 Constrvetion Regulation Building and Safety - New Construction $336,300 $150,000 $208.300 M.A. Fall eat recovery is, assumed. Building and Safety - Code Rafoctement $63,000 $65,000 Weighted Persons Served Sagineering Capital Top commons t Program Managsant $507,600 $507,600 Weighted Parsons Served Development Review, $253,700 $133,500 $120,200 M.A. Full cont recovery is assumed. Spread to above two fvaetioas Fconmic Development Business Improvement area (RTA) $132,800 $130,300 $2.000 W.A. Full funding is from Business, Improvement area. City Promotion $301,200 $301,100 Weighted Persons Served Scememic Stability $100,000 $100,000 B.A. No future Genal Fad support is aeaused. GOVERSIUM i.egislatien ad Policy $113.000 $118,000 se Impart Gseecal Administrative ad Support Services 63.773.000 $304.900 $3.393.100 In proportion to operating Programs. 9) I3IG6 A® SQUIDImR Bnaldiap Operatim mad maintenance j441,100 $$91,100 to proportion to operating progress. Vehicle and Epaipmeut maintenance 3112,100 $312,100 In propatlm to operating progress. TOTAL R,Mmmrfmc Im am-TINS psnmum $29,340,000 $2,236,000 $27,311,000 Less 1) Includes Swim Center Maintaance. Also 4-1, -- Commissions and Committees 21 eaipaoditurm for transit will equal the revenm that become available to the Transit Fund. 3) It is, assumed that. in the future. the 1993-94 General Tad contribution for services to the homeless will be replaced with grant 4) The cast ofdepartmentalad. on adcould departmental rimistrattdepartmental /cmittm have been allocated 4 ••ionately to than* two functions. . 5) The growth in dgwctm ntal ed Wstrative eats is limited to half the rata of growth of progro costs. a City of Sae Isis Obispo 1993-95 Financial plan lesesfication of expenditure categories is by Amgm McDonald 6 Asseeiatm.) [A)C a\D\1933\BUDGCL62.W8](lBUDmT-6o1RORT) 34374.43 City Council Workshop Edition Page 15 36379.65 I San Luis Obispo Airport Area Fiscal Lnpact Analysis 1 and the targeted park standard for the future that is incorporated into the City's General Plan. The situation is as follows: Acres/1,000 Residents Existing Situation 3.2 City's Adopted Standard 10.0 Margarita Area Concept Plan 25.3 , Given current financial realities the City is not able to commit immediately to raise its park standard above the existing 3.2 acres/1,000 residents, although the long term target is to move towards 10.0 acres per 1,000 residents. As a matter of public policy it would be inappropriate to commit to a higher standard of service to a newly annexed until this same standard can be supported Citywide. Accordingly the fiscal analysis assumes that the full inventory of park land in the Airport Area will=be developed immediately. It is assumed that the City will maintain park land at the existing ratio of 32 acres per 1,000 residents in the Airport Area until the Citywide standard can be increased. The increased standard beyond the City's target (i.e., 25.3 acres per 1,000 residents in the Margarita Area Concept Plan compared to the city's goal of 10.0 acres per 1,000 residents) represents a standard for the Airport Area that would not be available Citywide for the foreseeable future. If the residents and other landowners in the Margarita Area decide that this augmented standard should be maintained,it is assumed that the cost of maintenance will be financed locally by Airport Area landowners. Similarly, if the landowners in the Airport Area wish to move towards the goal of 10.0 acres per 1,000 residents in advance of the time when the city can support this improvement throughout the entire City, local landowners could approve a benefit assessment district for an interim period, to move from a standard of 32 acres per 1,000 residents to a standard of 10.0 acres per 1,000 residents. 2. Estimate of Annual Expenditures The estimating relationships described above were applied to the "Status Quo" and to the future land use assumptions described in Chapter II. The result is shown in Table III-2. , As noted above, the expenditure estimates are more than a "projection" or even a forecast. They represent a commitmentby the City Administrative Officer and the City's management ' team that services will be provided at a total cost not to exceed the amount shown. Page 16 City Council Workshop Edition w7s.o 1 San Luis Obispo Airport Area F$scal impact Analysis Table 111-2 ESTIMATE OF CITY EXPENDITURES San Luis Obispo Airport Area Fiscal Impact Analysis 11-fab-94 1104 AN • itatua-VON • with Deacriytion Of 1hpamditure Item • Aenwation • Year 1 Year 2 Year 3 Year 4 Year S Year 10 Year 15 icy Pretaet•••" • $0 • $29,200 $50,300 $86,600 $115,600 $160,200 $270,500 $350,200 .ed environmeetal Safety (mete 1) • $50,000 • $21,200 $62,500 163,000 $86,000 $102,000 $196,000 $260,400 Y11>mspaRzaSS® :ad Signal --letenamce • $67,200 • 816,600 $28,800 $63,200 $37,606 $72,000 $146,000 $107,200 tion Planning • $1,000 • $900 $1,600 12.600 $3.200 $3,900 57,300 $9,900 CMXMU a SOCYAL Smv2Cn San Md ran • $300 • $600 1900 $1,100 $1.500 $11600 $3,300 $6,500 Recreation Programs • $0 • $2,600 $3,100 $7.640 $10,100 $12,300 $33,800 $31,500 Maintenance Services • f0 • $5,100 $10,300 f13,x6363 $24,100 $36,400 $68,86363 $60,200 al Services • $200 • $ 00 1900 $1,300 $1,700 $3,000 $3,900 $3,200 lwma- ( an +moi_) • $300 • $5500 $1,000 $1,300 $1,900 $2,600 $6,900 $5,200 0VZLOPI Planing - other Shen Development Review (Note 21 $2,000 • $1,800 $3,500 $5,200 $7.000 $8,500 $16,600 $21,700 . Eaildlag and Safety - Code Enforcement • $2,000 • $600 $700 $1,104 $1.600 $1,800 $3,400 $4,500 ital MOP caveman Program Management • $2.0$0 • $2,900 $3,700 $5,500 1$6,300 $$0.100 $13,600 $35,000 ty Pcawsim $o $1,700 $3,600 $6,000 $6,700 23.700 $15,700 $25,800 (10g®p0:y (not* 3) • $19.900 • $13,000 $25,900 $36,300 $51,300 $52,700 $121,600 6160,200 >®B>m174AE9 • $144.900 • $94.600 $1661500 $200,200 $373,200 $459,600 $064,600 $1,169,900 ten+ An additional nae-tim coat of $50,000-75,000 will 6e incurred to eoppert tract fire inspector for 12-19 menthe. This individaml will Provide the tional staff support requird to bring the Airport Area up to the City& Standard fire Protection. (21 A ea♦tim inv..sment of $63,000 shunld he budgeted for adding the Airport Area into the City a mapping program. laCentral fova¢asamt erpmatore were caleolated based on the erLting . of General Goaernamnt erpendltaree to the total mat of operating programs. .ratio in 15.946. Neuron Argon mcID -'J a Associate. �]C:\P\1933\S ,-1.MZ3($l1XPBNnrfmn) City Council Workshop Edition Page 17 34375.43 1 San Lias Obispo Airport Area Fiwal Impact Analysis B. Revenues to the City As noted above, a city's revenues can be affected by land use and economic development policies. The major determinants, however, are economic forces, State laws and local , ordinances. 1. Sources of Revenue Appendix A to the present report describes in detail the revenues that will accrue to the City of San Luis Obispo if annexation takes place. The most significant revenues are property tax revenues, sales tax revenues and those revenues shared among all local governments in California that respond to formulae enacted in State law. Of great importance,the revenue estimates in the present report respond to State laws and regulations as of Fiscal Year. 1993/94. In view of the fact that these laws and regulations I have changed—and changed to the detriment of local government in California—during the last two fiscal years, and given that the State of California has by no means solved its budget difficulties, it would be imprudent to assume that local governments have seen the last of fiscal adversity. This point is discussed further in Chapter IIID. beginning on page 21. 2. Assumed Tax-Sharing Agreement With San Luis Obispo County I A property-tax-sharing agreement must be reached with San Luis Obispo County before annexation can take place. Traditionally,the agreement between San Luis Obispo County and the cities in the County has included two provisions. First, San Luis Obispo County retains the entire base property tax amount that it collected prior to annexation. Second, Property Tax Apportionment Factors for the County and for the annexing city are adjusted so that the city receives a percentage of the change in property tax (i.e., the Annual Tax Increment) that equals the city's average percentage, throughout its jurisdiction. This traditional arrangement was assumed for purposes of the Airport Area fiscal analysis. I 1 Page 18 City Council Workshop Edition w�sa ' San Luis Obispo Airport Area Fiscal impact Analysis C. The Fiscal Impact on the City of San Luis Obispo The estimate of revenues to the City of San Luis Obispo is summarized in Table III-3. This - exhibit also shows the fund balance (i.e., annual revenues minus the estimate of annual ' expenditures that was presented in Table III-2) for the City's General Fund. The General Fund is supported wholly or in part by tax revenues. The City's Enterprise Funds (i.e., Water Fund, Sewer Fund, Parldng Fund,Transit Fund, and Golf Course Fund) are,by City policy, supported from user charges or from revenues that are available solely for the purposes of the Fund. Enterprise Funds were excluded from the fiscal analysis. Revenues and expenditures for Enterprise Funds will be approximately equal each fiscal year and will not affect the City's tax base. There is no guarantee that user charges for the Airport Area will be equal to the present ' user charges in the existing City. If, for example, the source of water to serve the Airport Area proves to have a higher cost-per-acre foot than is currently the case, the City reserves the right to recover this cost from those who benefit from the more expensive water supply, rather than assigning a portion of this higher cost to existing City rate-payers. 1. Short-Term Fiscal Impact If the Airport Area is annexed, the period after annexation but before growth and development begins would produce an annual fiscal surplus to San Luis Obispo. The Airport Area has a pre-existing base of commercial and industrial activity that would generate significant revenues for the City. The City is in a position to provide police and fire protection and other public services at a modest increase in costs. Accordingly, an annual surplus would result. 2. Mid-Term Fiscal Impact The Airport Area continues to produce a fiscal surplus after annexation,when growth and development begins to occur. Additional tax revenues would more than cover the costs to extend public services at the City's existing standard for providing public services. City Council Workshop Edition Page 19 wiso San Luis Obispo Airport Area Fiscal Impact Analysis r Table 1113 ESTIMATE OF CITY REVENUES AND FUND BALANCES San Luis Obispo Airport Area Fiscal Impact Analysis ' 1 lls2494 11:14 W I • with • Ri 1Maeription Of Revenue Ito • lmasatlm • !ass 1 Year I !eas 1 Saes 4 !eas S Year 10 Year 13 TAX RBvBB= Was a Use Tanas • $371,000 • $33,700 $70,700 8104,600 $130,300 $160,300 $322,300 $414,000 yrnP�Yessiast ln!an • $0 • $32,000 $49,000 $94,000 $120,000 $129,100 $259,900 $335.300 Trayse9 Yu + $0 • $0 $0 $0 $o Eo $0 $o lrasehir Sas • $41,900 • $6,600 $9,200 $13,700 $10,500 $22,908 $45,800 561,:00 guaSases las �..L • $129,600 • $3,400 $7,100 $10,700 $14,700 $17,000 i35,700 593,900 Businestuitr Been Tom • $143.400 • $15,300 $30,500 $45,400 $61.500 $79.300 $132,600 $205,900 Beal property Transfer Tan • j0 • $12.000 $13,200 $13.!00 $23,700 $12,500 $20,000 $17,900 Taw - Tax aavanne • $605.500 • $103,600 6195,700 8282.300 $366.900 $426,900 $037,100 $1.009,200 rnm law FORFBITMM vehicle toe. Fim • $300 • $400 $900 $1,300 81,70o $2,200 $4.100 $5,200 other Hass and Forfeitures • i400 • 8600 $1.200 $1,000 $2,300 $2.800 $5,400 $7,000 Total - Fier and Forfeitures • 0700 • 01.000 $2.100 $3,100 $4,000 ;4,900 $9,500 812,300 S09V851!l0HS AM GUNy.B Rater vehicle Ir.-130 • $5,900 • $41600 $37,100 $25,000 $32,600 $39,200 $70,760 $95,600 Gasoline lea Subsections, • $2,300 • $3.500 $6,700 $9.400 $111800 $13,600 $20,700 $21,300 Total - Babountinus and Grasts • $8.100 • $12.100 $23.800 $34,400 $44.400 $52,800 $93,400 $107,100 Interest Sarnia" • $20,400 • $3,500 $6,600 $2,600 $12,500 $14,900 $20,100 $36.300 WELL � $713,100 • $120,200 8228.200 $729,400 $427,800 $509,400 $966,100 51,244,500 TML BW®I19B66 (Ftaa!able III-2) • 5144,900 • S94,400. $180,500 $280,200 $373,200 $455,800 5884,000 $1,165,500 wr RNVMM (Zxv�) • $370,200 • 823000 $39,700 $49,200 $54,600 $33,600 5811300 $79,300 status Quo not Revenue (yganne) + • $570,200 $570,200 $370,200 $570,200 $570.200 $570,200 5570,200 BBT RBynam (BFp6B®) 4$119] BTLTOB am • • $5961000 $609,900 $419,400 $624.800 $623,800 $651,900 $649,500 , i 1 [l]C,V\1933%6=B A-1.ID33(IFIBCIL 080Ll8) Page 20 City Council Workshop Edition 30WAS San Luis Obispo Airport Area Fiscal Impact Analysis D. Impact Monitoring and Mitigation In general,techniques of economic forecasting have not proved to be as reliable as (say)the - techniques employed by astronomers or physicists. Further, as noted above, recent history in California verifies that the fiscal situation of cities and counties is particularly vulnerable to the State of California's budget process. Accordingly, it is accepted practice when economic forecasts are to be used (in part) to guide a policy decision,to evaluate the extent to which a decision is still a sound one, even though economic forecasts prove to be different from actual future results. Similarly, it is accepted practice to consider, at the outset, the steps that could be taken to avoid adverse consequences if economic forecasts proved to be optimistic. 1. Sources of Vulnerability Two specific sources of vulnerability were considered,with respect to the proposed Airport Annexation. The first was vulnerability to market forces. The second source was further inroads on the property tax base of cities and counties, to shift property tax to school districts and ease the burden on the State General Fund. The decision about whether to annex the Airport Area was&oA considered to be particularly vulnerable to future increases in cost to provide services. It is possible to conjecture about future events that would increase the cost to provide services (e.g., State-mandated changes in wage and hour regulations affecting public safety personnel). The increasingly tight limits under which cities and counties are operating in California suggests that mandated cost increases will =t be supported politically. Further, the commitment of the City Administrative Officer and the management team to control costs (measured in real dollar terms) that is described on page 12 suggests that vulnerability to cost increases is not as serious as vulnerability to revenue deficiencies. Deficiencies in Commercial Development. The development forecast presented in Chapter II.l3. provided a reasonable balance between residential development and commercial development in the Airport Area. Figure III4 illustrates the extent to which the cumulative fiscal balance for the first five years after growth and development begin in the Airport Area would decline as commercial and industrial development decline from the cumulative estimate of 175,000 sq.ft. that is anticipated to occur in the first five years after development begins. It should be understood that Figure III4 represents a worst case regarding the impact of a decline in successfully attracting commercial land uses. The exhibit is based on the assumption that,if the commercial development did not occur, then the property tax and the sales tax that was forecast to be generated by the commercial development would not occur. City Council Workshop Edition Page 21 wW.a San Luis Obispo Airport Area Fiscal Impad Analysis This is a very conservative assumption. San Luis Obispo is a regional center. If shoppers were not able to shop in the Airport Area, and if employers did not locate in the Airport Area, a significant number of each might well conduct their commercial transactions - elsewhere in San-Luis Obispo, and the net fiscal effect would be less pessimistic than that shown in Figure III4. Diversion of Property Tax. Figure III-5 illustrates the effect of a continued diversion of property tax away from cities and counties by the State of California. If the past two years is precedent, this effect is a dollar-for-dollar diversion away from local governments, to relieve what formerly had been an obligation of the State of California General Fund. 2. Responses to Adverse Fiscal Impacts ■ In spite of uncertainty, the City is not helpless if it decides to annex the Airport Area, and ' if the actual fiscal impacts prove less positive than indicated by the forecasts in the present report. It is recommended that, if annexation takes place, the City monitor actual fiscal impacts on a year-by-year basis. If adverse impacts are experienced, then corrective action can be taken. The annual monitoring program would both measure expenditures to serve the Airport Area and revenues generated by the Airport Area. Both sets of measurements would be carried out as part of ongoing City administrative procedures and would require only a modest staff effort The level of detail of the expenditure monitoring program will depend on whether the City continues to develop the "persons served"concept and monitors case load generated by each land use category in the Airport Area. Experience in other jurisdictions indicates that two of the most significant expenditure items — police and fire services — can be monitored continuously by making modest adjustments to existing programs where calls for service are translated into the appropriate response of either the Police or Fire Department. In other cases (e.g., Park Maintenance and Recreation Programs), the extent of availability of , opportunity can be monitored by means of reporting on park acres maintained and recreation programs offered. From time to time and for special purposes, a user survey or resident survey can be carried out to gauge actual use, level of satisfaction, etc. Revenues can be monitored by observing the variables that determine amount of revenues that will be collected. Property tax revenues can be monitored directly from the records of the San Luis Obispo County Auditor-Controller. Vehicle license fee revenues and fuel tax revenues can be monitored by observing the variables (e.g., population, taxable assessed value)that are incorporated into State law and that determine the City of San Luis Obispo's share of these revenues. Taxable retail sales in the Airport Area can be monitored,based Page 22 City Council Workshop Edition wa.o i Sen Luis Obispo Airport Area FSscal Impact Analysis on annual records that can be made available to the City by the California State Board of Equalization. - The annual fiscal impact monitoring program is not an end in itself. The results of this monitoring program should lead to an appropriate course of action. The City of San Luis Obispo is not committing itself to bear indefinitely the fiscal impacts of a decision made (presumably in 1994), if the future fiscal impact is not to the City's advantage. An appropriate response to adverse fiscal impacts (if this occurs) will depend on the cause of any adverse impacts. As. one example, if the monitoring program revealed that commercial development was not keeping pace with residential development, then an appropriate response would be to amend the City's growth management policies. Supplemental limitations could be placed on the permitted rate of residential development if the conclusion was reached that commercial development was not keeping pace with residential development. As an example, if demand for residential development were strong, then residential developers would find it in their best interest to arrange joint ventures with commercial developers. Appropriate profit-sharing arrangements or write-downs of the cost of commercial land could be negotiated privately between residential and commercial developers. Under such an arrangement, the market potential of residential development could be realized,but the commercial development that assures a fiscal balance would also occur. If, at a particular point in time, the residential market was not strong enough to support joint ventures,then residential development would be deferred until the marketplace would produce a fiscal balance that prevents a decline in San Luis Obispo's tax base. City Council Workshop Edition Page 23 X175.3 i San Leas Obispo Airport Area Fiscal hnpad Analysis ' Figure M4 SENSITIVITY TO AMOUNT OF COMMERCIAL DEVELOPMENT Tbausands of Dollars 700 680 ........................ ... .. ......................... .......... Y 1660 ........................................ ... ............ ........... 7777`7� YW ........................ ................................. ....... 0% 10% 20% 30% 40% 50% 60% 70% 80% 9096 100% Badactlan of Business Park Space Source:Angus McDonald&Associates i Note: 1) Reduction is measured from the 15-year target of an additional 525,000 sq. ft. of commercial and industrial buildings in the Airport Area. r Page 24 City Council Worksbop Edition , soap San Luis Obispo Airport Area Fiscal Impact Analysis Figure M-5 SENSITIVITY TO DIVERSION OF PROPERTY TAX Thoamdo of Dollars 690 ....... . . . ... ... ...... ..................... . . . .. . .. ....... . . ...... Vp ..... .. . . .... ...... . . . ...... ....... . . ...... ...... .. . ............. $� 650 ..... ....... . . ......... . . . .............. . 2 630 .................... . ... . ....... . . ......... . . . .. . ........... . . 610 ..... . . .. . ...-- S90 ......... . ........ . . . ........... .. ......... .... . ......... . .. .... 570 .......... .....•---........ ....... . . ......... . . .... ... ..... . .... � 2% 4% 6% 8% 10% 1296 14% Possible M daetion of Properly Mm From State Reanocatlon SoareG Ann Me OMM&Assodata Notes: 1) This exhibit is not a prediction that the State of California will continue to solve its own budget problems by reducing the property tax share to local government. It is an illustration of the effect of any further diversion,if this diversion takes place. City Council Workshop Edition Page 25 3073.0 San Lads Obispo Airport Area Fiscal]mpad Analysis IV. NEXT STEPS IN THE EVALUATION PROCESS The present chapter attempts to put the results of the fiscal impact analysis into perspective and then provides a discussion of considerations other than fiscal impact that should be evaluated before a decision about annexation is made. A. Significance of the Fiscal Impact Analysis The fiscal impact analysis has confirmed that the City of San Luis Obispo has the capacity to serve the Airport Area without imposing an additional burden on city taxpayers. This conclusion is contingent on the City adopting the Growth Monitoring And Impact Mitigation Program that was described in Chapter IIID. The Airport Area will not necessarily produce a positive fiscal balance for the City unless actual future events resemble the assumptions used in this report B. Considerations Other Than Fiscal Impact Given the consultants' conclusion that the Airport Area can be served without producing a negative fiscal impact, it is important to consider factors other than fiscal impact that may affect the decision about annexing the Airport Area. 1. Land Use Controls In The Airport Area Research and interviews conducted during the present study confirmed what has generally been understood for several years. The development potential of the Airport Area is significant. If the Airport Area is not annexed by the City of San Luis Obispo there is a high probability that development will take place under standards applicable in the unincorporated area of San Luis Obispo County. The choice before the City may well be whether to manage growth in the Airport Area under City standards or to be an observer as growth occurs, beyond direct City control. A strategy to annex the Airport Area sometime in the future after additional development has taken place will almost certainly add to City costs. The City's standards for public service delivery are higher,in some cases,than the standard applicable in the unincorporated area of San Luis Obispo County. An example cited previously was preventive inspections by the City Fire Department. If development occurs that is not up to City standards,then this development will constitute a pre-existing deficiency at the time that annexation is attempted. Any plan to finance public improvements and public services for new development in the area that is then Page 26 City Council Workshop Edition 30710 # San Luis Obispo Airport Area Fiscal Lnpact Analysis 1 proposed for annexation will have to acknowledge these existing deficiencies must be remedied from San Luis Obispo's General Fund and cannot be charged against future ' development in the area being annexed. 2. Required Commitment of City Staff On August 24, 1993, the City of San Luis Obispo conducted a City Council Workshop on fiscal and financial issues pertaining to annexation. The experience of all of the invited speakers tended to confirm the assertion that the process of extending City services to undeveloped areas depends critically on involvement of senior City staff. The involvement of consultants may be useful but, however expert and dedicated are the consultants, they leave the City when the assignment is over. The City's management team must be both supportive of and highly knowledgeable about the public facilities financing plan and(in the present case) the fiscal monitoring and mitigation program that will be key to a successful annexation. ' An intensive,"hands-on"involvement of the City's management team is recommended,if the City decides to adopt a Specific Plan and a Public Facilities Implementation Plan(PFIP) for the Airport Area. Given that the management team is already fully occupied, it may be necessary to augment City staff temporarily. (The cost of this augmentation can be recovered from the financing techniques that are incorporated into the Public Facilities 1 Implementation Plan.) The recommendation is not that additional staff be hired temporarily to work on the Specific Plan/Public Facilities Implementation Plan. Instead temporary staff should be assigned to existing departmental duties. Senior City staff could then be assigned to provide leadership and personal involvement,while the Specific Plan/Public Facilities Implementation Plan are ' being prepared. 3. The ]Implications of Development-Related Financing In the 1990'x, there is a simple reality regarding sources of money to pay for public improvements that will serve new development. In sharp contrast to the past, neither the State of California nor the Federal government are in a position to provide financing for public improvements. In the face of a 30.7-position staff reduction, entering the present fiscal year, the City of San Luis Obispo is hardly in a position to use General Fund revenues to pay for public improvements to serve new development. As a practical matter, the only money to pay for public improvements must come from the increase in land values that occur because land has the potential to be developed. City Council Workshop Edition Page 27 30MAD San Lids Obispo Airport Area Fiscal Impact Analysis Development-related financing has two forms. Public improvements can be financed on a "pay-as-you-go" basis, using development impact fees collected at or near the time of development. This is the preferred financing technique unless large and expensive improvements are required early in the development process. If development impact fees will not produce adequate cash flow,then a form of"pay-as-you- j use" financing must be considered. Tax-free municipal bonds are sold to investors and the proceeds of the bond sale are used to pay for major public improvements. The landowners (future residents and business owners) repay the bonds over a period of 15-25 years. The merits of"pay-as-you-go" or "pay-as-you-use" financing should be discussed fully, if the City decides to prepare a Specific Plan/Public Facilities Implementation Plan for the Airport Area. The point of the present discussion is = to guide the selection of a means of financing. The point of the present discussion is that, if a decision is made to annex the ' Airport Area, financing for public improvements will denrend on development. It can be expected that this development will be subject to the design guidelines and other conditions incorporated into the Specific Plan. The City's existing growth management policies will be ' applicable and (as noted previously) it is strongly recommended that additional growth policies be adopted to assure a continuing fiscal balance from the Airport Area. Nonetheless, financing for the roads sewer, drainage and other public improvements to serve the airport will depend on development actually taldng place. The City should decide that development - albeit development that is fully subject to City controls, standards and guidelines - is acceptable, before the City decides to proceed with the Airport Area annexation. j 1 1 i i Page 28 City Council Workshop Edition Sas o San Luis Obispo Airport Area Fiscal Impact Analysis APPENDIX A. METHODOLOGY AND ASSUMPTIONS San Luis Obispo Airport Area Fiscal Impact Analysis 1 A. General 1. Continuity Of Legal And Institutional Constraints The analysis was based on assumptions about intergovernmental municipal finance applicable as of January 1, 1994. The analysis assumes the constraints and limitations of Proposition 13. While there are court cases pending that would significantly affect property taxes in California, any assumptions other than present law is highly speculative. 2. Cost And Revenue Inflation ' The fiscal analysis is presented in terms of dollars with January 1, 1994 purchasing power. While the results are presented in constant January 1, 1994 dollars, both the general rate ' of inflation and the rate of property value appreciation affect property tax revenues. The general rate of inflation is assumed to be four percent (4.0%) per year,and property values are assumed to increase at the rate of general inflation 3. Time Period For Analysis For the purposes of the fiscal analysis a development forecast was prepared which makes assumptions about the amount and timing of growth in the Airport Area. The forecast is shown in Table A-1. The development forecast was prepared after extensive discussions with landowners in the Airport Area and discussions with builders and developers who are active in the Central ' Coast market area. The forecast is aggressive,but is considered by the consultant team to be achievable, assuming a continuing recovery in the State and regional economies. B. General Fund Revenues 1. Property Tax The process of estimating increases in property tax revenue is extremely complex. This is a direct result of the interaction of the legal constraints imposed by Proposition 13 and Assembly Bill 8, and the market forces affecting the price and turnover of property. Proposition 13 (1978) limits property taxes to one percent (1.0%) of the Taxable Assessed Value (TAV) of real and personal property. Increases in the TAV of a given property may not exceed two percent (2.0%) per year unless the property experiences a change in ownership, or taxable improvements are added to the property. If the property is sold the City Council Workshop Edition Page 29 San Obispo Airport Area Fiscal Impact Anal-~;s yA e e ee w nn a •� e e ee e e o0 n nw y^ aMse ea ee a ee wN ww ee o 00 n nn i� ayee ea ee a ee ri w N w w O O O O O M w O O O M ti a a O w n N M a O O O O a O O O O O n M M1 N N N ++ O O O O O O N � 111 111 I1 n na n ye A�ee ea ee a ee .� ww Nw ee o 00 en we a ee n a a O y w wa n M I�w "':Z2 wn oe a en a erA ee En n^ y. Aeee ea ea a ee .1Nn Nw ye a ee QI +i A e n ne N yn Awoo oa ee a ee nw nn we a ee a as n n. M1 , ye aeee ea oe a o0 wnn nn ee a ee Ly n n.1 N Qa �1�i �a rein n ee n nite L� �•r� �1y ~ ^ e e 111 C^ 0 ^ ^w •• vn n oe a 00 ee P P. m yw +^oo ee a ee .N ee a ee �Ca ee a ee n ww yN eee N N O O O O O O M 111 M O n wr M O O O O O O O O V, wne we a ee „ M e e e n as n nn • P y O O .n O N o o e O e o na• ee GS$ wM O. Aa n P A. . a A Z s wNw s .e. 111 g.At .] , d!y s.a.wa•.3a uyy. n l99E� � i Page 30 City Council Workshop Edition 3dr" San Luis Obispo Airport Area Fiscal Impact Analysis ' TAV is adjusted by the County Assessor to the property's then current fair market value. If the property is improved the TAV is adjusted only on the improved portion of the property. The effect of this anomaly is that the property tax revenue flowing to a + jurisdiction from a particular property will most likely decline, in real terms, over time. For example,if the increase in the market value of a single family home is the same as the rate of inflation then the real purchasing power of the property tax revenue from this residence declines over time unless: (1) The rate of inflation is less than, or equal to, two percent (2.0%) per year, or, (2) The property changes ownership each and every year. This phenomenon is true for all land uses, in all jurisdictions, throughout the state of California. In light of the above discussion,it is clear that the property turnover rate plays an important role in estimating the amount of property tax revenue that will be generated from a new development project. The turnover rates and market values used in the analysis are shown for each distinct land use category in Table A-2. It should be noted that the turnover of vacant land and the ability of some homeowners to transfer their property tax basis when they purchase a replacement home was not considered in the analysis. In addition, the analysis assumes the market value of residential and non-residential property will increase at the same rate as inflation. Again, the inflation rate is assumed to be four percent (4.0%) per year. An algorithm was constructed by Angus McDonald&Associates that estimates future TAV. ' The algorithm simulates the process in any given year in which; • the TAV of those properties which change hands,as reflected in the turnover rate, rises to the then current market value, and • the TAV of the properties that were not sold increases by two percent(2.0%). For each distinct land use category a multiplier is calculated that captures the effect of the general price level inflation,real estate inflation,and the turnover rate of a typical property. The multiplier is, in effect, a probability coefficient in which the probability of the TAV increasing to the market value is a function of the turnover rate and the probability of the TAV increasing by two percent (2.0%) is one minus the turnover rate. This multiplier is used to adjust the TAV created by new development to account for the effects of Proposition 13. City Council Workshop Edition Page 31 30MA San Luis Obispo Airport Area Fiscal Impact Analysis Table A-2 ' MARKET VALUE AND TURNOVER RATE ASSUMPTIONS San Luis Obispo Airport Area Fiscal Impact Analysis , 08-Feb-94 01:11 PN Annual Estimated Turnover Turnover Market Rate Rate Land Use Category Unit Lot Size Value (Percentage) (Years) Residential Lor Density - Category 1 (8,000 aq ft lot) Dwelling Unit $275,000 10.08 10 Low Density - Category 2 (6,000 eq ft lot) Dwelling Unit $200,000 10.09 10 Lor Density - Category 3 (4,000 aq ft lot) Dwelling Unit $150,000 12.59 8 Medium Density - Sero Lot Line Dwelling Unit $150,000 12.59 8 Medium Density - Townhouses Dwelling Unit $140,000 12.59 8 Medium Density - Housing Authority Site Dwelling unit $125,000 20.09 5 Medium High Density - Townhouses Dwelling Unit $130,000 20.09 5 High Density - Rowhouses Dwelling Unit $90,000 20.01 5 Residential over Commercial Dwelling Unit $80,000 20.01 5 Non-Residential Neighborhood Commercial Square Foot $73 5.01 20 , Business Park Square Foot $95 5.01 20 Source: Angus McDonald i Associates. [A]C:\P\1933\19333?TA%.WK3($PTAY ASUMPTZON) Page 32 City Council Workshop Edition 3099 San Luis Obispo Airport Area F.ccsl Impact Analysis a. Property Tax Apportionment Factors 1) Tax Rate Areas And The Use of Property Tax Apportionment Factors A Tax Rate Area (TRA) is defined in §95 of the Revenue and Taxation Code as: ' A specific geographic area all of which is within the jurisdiction of the same combination of local agencies and school entities for the current fiscal year. ' Every year the San Luis Obispo County Assessor measures the change in TAV in each TRA in the County. Under the limits imposed by Proposition 13, one percent of the annual change in TAV represents the total change in property tax that will be shared among the ' taxing agencies within each TRA. This change in total property tax revenue is referred to as the "Annual Tax Increment" in §97 of the Revenue and Taxation Code. The San Luis Obispo County Auditor-Controller has calculated a Property Tax Apportionment Factor (PTAF), or Annual Tax Increment Factor, for each agency serving a particular TRA. PTAFs are defined in§97.5 of the Revenue and Taxation Code and have the following characteristics; • The sum of the PTAFs for all the taxing agencies within each TRA will be 1.0. • The PTAF for each agency indicates the percent of the total Annual Tax Increment that will be distributed to the agency from that particular TRA. In other words, the PTAFs control the share of the property tax revenues generated from the change in TAV that will be distributed to each agency. ' The property tax revenue an agency receives in any given year,is equal to the total property tax revenue it received in the prior year plus the agency's share I of the current year's Annual Tax Increment. This calculation is performed for each TRA. 2) Property Tax Apportionment Factors In The San Luis Obispo Airport Area In calculating the property tax flowing to the City an average PTAF of 15.0% was used. This figure was based on the rate applicable to the Broad Street Annexation with appropriate adjustments to reflect the property tax shifts brought on by the State. City Council Workshop Edition Page 33 703A i San Luis Obispo Airport Area Fiscal Imps Sys 2. Real Property Transfer Tax (Documentary Transfer Tax) Autho i : Revenue and Taxation §11901 et. seq. Administering Agency: San Luis Obispo County. , Description: Real property sales, and resales,within the San Luis Obispo Airport Area will be taxed by the County at the rate of$35 per $500 of property value. As this area will be annexed to the City of San Luis Obispo, one-half of the property transfer tax will flow to the City. The following assumptions were used in the estimate of transfer tax; , (1) All property is transferred free of any lien or encumbrance. , (2) Sales, and resales, of anything other than a final product was not considered. (3) All property is transferred under circumstances in which the transfer tax would , be applicable. (4) The same assumptions regarding turnover rates and property values used in the property tax calculation (as shown in Table A-2) were used to calculate the Real Property Transfer Tax. Use Of Revenues: Unrestricted. 3. Transient Occupancy Tax Authority Revenue and Taxation §7280 and §7281. , Administering_Agency: City of San Luis Obispo. , Description: The Transient Occupancy Tax is imposed for the privilege of occupying a room,or rooms, or other living space,in a hotel,inn, tourist home or house, motel, or other lodging unless the occupancy is for more than thirty (30) days. The current Transient Occupancy Tax rate imposed by the City of San Luis Obispo is ten percent (10.0%). The proposed project does not include any uses that would directly produce Transient Occupancy Tax. Page 34 City Council Workshop Edition waa San Lids Obispo Airport Area Fiscal Impact Analysis Use Of Revenues: Unrestricted. r4. Sales Tax In general, sales or use taxes are imposed on the retail sale or the use of tangible personal property in California. Items excluded from taxation include property that is purchased for resale,food for home consumption and prescription medicines. Since the initial enactment ' of sales and use tax laws in California in 1933 numerous other exemptions and exclusions have been granted that remove the liability for tax on certain types of property and organizations. In general, services are excluded from taxation, although services incidental ' to the sale of tangible personal property are usually taxable. All cities and counties in the state levy a basic one percent sales tax and have the option to ' levy additional sales taxes under certain circumstances. Sales and use tax revenues are collected by the California State Board of Equalization. The Board of Equalization allocates the local portion of these revenues to the appropriate local governments. The local portion of sales tax revenues generally are allocated according to the location of the sale rather than residence or business location of the purchaser. (Exceptions occur for certain items and for taxes imposed on the use of property.) Table A-3 SAN LUIS OBISPO COUNTY SALES TAR RATES San Luis Obispo Airport Area Fiscal Analysis State 6.00% City- local rate 1.00% County transportation rate 0.25% Total Sales Tax Rate - San Luis Obispo County 7.25% Source: State Board of Equalization. Sales and Use Tax revenues were estimated for only the following component: • Sales tax revenues that would derive from the taxable sales by new residents ' that are forecast to be included within the City's new corporate limits. City Council Workshop Edition Page 35 707!.0 San Luis Obispo Airport Area V=9 Impact Analysis i Sales tag revenues from new residents were estimated based upon a sales tax per capita figure of$135.74. This figure was derived using the 1993/94 budgeted amount of$5,959,000 and an existing population of 43,900. 5. Utility Users Tax and Franchise Fees The City of San Luis Obispo currently levies a Utility Users Tax at the rate of 5.0% applied to gross receipts for gas,electricity,water,cable television and telephone. The revenue from the Airport Area was estimated based average residential usage rates which yielded approximately $115 per household per year of Utility User Tax flowing to the City. See Table A4 for these calculations. , The non-residential utility users tax generation rate was derived by estimating that portion of the existing city utility users tax revenue and developing a per square foot multiplier. See , Table A-5 for these calculations. The City of San Luis Obispo currently levies a Franchise Tax (the rates are summarized in ' Table A4) applied to the gross receipts for gas,electricity,water,cable television and waste disposal. The revenue from the Airport Area was estimated based average residential usage rates which yielded approximately $35 per household per year of Franchise Fee revenue flowing to the City. See Table A4 for these calculations. The non-residential Franchise Fee revenue generation rate was derived by estimating that , portion of the existing city Franchise Fee revenue and developing a per square foot multiplier. See Table A-5 for these calculations. 6. Business Tax Authori : Government Code §37101. Administering_Agena: City of San Luis Obispo. Description: The Business License Tax in the City of San Luis Obispo was enacted only for ' revenue raising purposes. The current tax rate is $50 per $100,000 of gross receipts and is applicable to all businesses. The estimate prepared for the Airport Area was prepared based on a $0.10 per square foot multiplier. The multiplier was derived based on the 1993/94 budgeted amount of $754,200 and an estimated existing non-residential square footage of , 7,402,000. Use Of Revenues: Unrestricted. ' Page 36 City Council Workshop Edition i soa.a San Luis Obispo Airport Area Fiscal.Lnpad Analysis Table A4 DERIVATION OF UTILITY USERS TAX AND FRANCHISE FEES FROM HOUSEHOLDS San Luis Obispo Airport Area Fiscal Impact Analysis 11-Pab-96 1L]a a ' lnnual Asawal Utility tete Franchise BP utilityPraehiw Rate Pee Rat" Revenue, Per Users Fes Generation Generation Dwciption of Utility Household !a lata Rat" Per Household Per Household ' Bleetricity $172 5.001 1.006 $39.65 $7.73 Gan $309 5.001 1.006 $19.65 $3.99 Cable Talesiaies (550 Market Sham) $199 5.001 5.006 $5.65 $3.63 1620 5.061. $21.00 waatterr $600 5.001 2.006 $30.00 $12.00 waste Disposal $96 6.009 $5.75 Totals - ler Household $2.676 $116.55 $36.93 ' Sources Angus McDonald a Associates. [A]Cs\P\19]3\B0DG=2.M97(1 Table A-5 ' DERIVATION OF UMITY USERS TAX AND FRANCHISE FEES From Non-Residential Space San Luis Obispo Airport Area Fiscal Impact Analysis 11-Feb-94 1104 AM Utility Franchise Dwciptlm Uesrs Tax yam Midyear 1993/96 Budget Review $2,600.000 $770,600 lasting Residential Population 63,900 63,900 P,,w.c.m. Pa0u.ehold (Intimate) 2.0 2.9 ' Bsiating Bouwhelds 15,679 13,679 Intiasted Residential Portion 11.793,902 $566,066 Bstionted One Residential portion $906,099 $232,596 Intimated Mon-Res Bgoar'a Peet (1) 7,602,000 7,602,000 ' Intimate Mon-now Per square root $0.109 $0.031 Annual Pavww Intimate woo-Ras par Bqu Foot $2.17 10.63 aomel Utility Coat (1) source amiatiag son-residential square footage is Urban Decisions Byst®, County Bmlwaa Patterns 5s 3 Asgm McDonald a Associates. [l]Cs\D\1937\B®SCI52.9H]{lDUf�BBS► ' City Council Workshop Edition Page 37 3ans,o San Luis Obispo Airport Area Fiscal impact Analysis , 7. Vehicle Code Fines , Vehicle Code Fines were estimated based on a per capita multiplier of $1.71. This , multiplier was derived from the 1993/94 budgeted amount of $75,100 and an existing population of 43,900. S. Other Fines and Forfeitures , Other Fines and Forfeitures were estimated based on a per capita multiplier of$2.28. This multiplier was derived from the 1993/94 budgeted amount of $100,000 and an existing population of 43,900. 9. Motor Vehicle License Fees , ut o i : Article XIX, Section 3 of the California Constitution and the Revenue and , Taxation Code §10751 and §11005. Administering Agency: Collected by the State Department of Motor Vehicles and ' distnbuted by the State Controller. Description: Motor vehicle license fees are collected by the State Department of Motor Vehicles in-lieu of local property taxes. Pursuant to §110015 of the Revenue and Taxation Code, 2433% of these revenues are deposited into the Vehicle License Fee Account of the Local Revenue Fund. These moneys are allocated to Counties, and several cities, as ' described in Welfare and Institutions§17604. Article 9 of the Welfare and Institutions code includes a provision that the local agency must deposit an amount at least equal to their allocation of Vehicle License Fee revenue distributed under §17604 to the local health and welfare trust fund in order to receive their allocation from the Sales Tax Account of the Local Revenue Fund. The remaining funds are allocated under Revenue and Taxation Code §11005 as follows; (a) 81.25% of the revenue is allocated to cities and counties. (1) 50% to cities, and allocated in proportion to population. (2) 50% to counties, and allocated in proportion to population. (b) 18.75% allocated to cities and counties. , (1) Allocation first to "no and low"property tax cities pursuant to Revenue and Taxation Code §11005(1)(A). Page 38 City Council Workshop Edition , xnso San Lads Obispo Airport Area Fiscal Impact Analysis (2) The remainder of the 18.75% after the allocation in (b)(1) is allocated to counties, and cities and counties, in proportion to population. The allocation of the 81.25% was estimated based on a per capita multiplier of$3357, this ' is the 1993/94 per capita estimate from the State Controllers office. Use Of Revenues: Unrestricted with the exception of the 24.33% distributed under Welfare and Institutions §17600 et. seq. ' 10. Use Of Money And Property ' The City will earn a return on the investment of idle monies. Idle monies consist of money deposits in a Reserve Fund and monies that are received in advance of expenditure requirements. Revenue from this source depends upon the size of the reserve and the rate ' of return earned. The estimate is based on an annual three percent (3.0%) real rate of return on the total revenue generated in the Airport Area. C. Fuel Tax Revenues 1. Highway Users Taxes - Tax Rates. As a result of the passage of Proposition 111 (June 1990) the $0.09 per gallon tax under the ' Motor Vehicle Fuel License Tax Law (beginning with §7301 of the Revenue and Taxation code and applicable to gasoline) and the $0.09 per gallon tax under the Use Fuel Tax Law (beginning with§8601 of the Revenue and Taxation code and applicable to diesel fuel)were both increased to $0.14 per gallon effective in August of 1990. Each tax rate was increased by$0.01 every January 1 through 1994, at which time each rate reached its current level of $0.18 per gallon. The following sections detail the apportionment of highway users tax revenue from the applicable sections of the Streets and Highways Code. 2. §2105. In July 1989, SB 300 amended§2105 to the Streets and Highways code to detail the method of apportionment for the additional highway users tax revenue generated by the passage of ' Proposition 111. (a) County ' City Council Workshop Edition Page 39 xns a 1 San Luis Obispo Airport Area Fiscal Impact Analysis ' Each county, including a city and county, in California is apportioned an ' amount based on 115% of the amount in excess of $0.09 per gallon as imposed under the Motor Vehicle Fuel License Tax Law (gasoline) and the , Use Fuel Tax Law (diesel fuel). As a result,beginning in 1991, $0.00690 per gallon from each of the applicable taxes is apportioned under §2105. The apportionment methodology applicable to counties under §2105 is as follows: , (1) $1.0 million is apportioned in proportion to §2104 and §2106 received in the prior year. (2) $1.0 million is apportioned based on (a) and (b) below: (a) $750,000 is apportioned based on the proportion of fee-paid ' and exempt vehicles in the county to the fee-paid and exempt vehicle registration in the state. , (b) $250,000 is apportioned based on the proportion of the number of road miles maintained by the county to the number of road ' miles maintained by counties in the state. (3) Determine a factor for each county, determined as the higher amount calculated in (1) or (2) divided by the sum of the higher amounts for all of the counties. (4) The amount to be apportioned to counties is the factor as determined 1 in (3) multiplied by the remaining amount to be apportioned to counties. , (b) City Each city,including a city and county, in California is apportioned an amount based on 115% of the amount in excess of$0.09 per gallon as imposed under the Motor Vehicle Fuel License Tax Law (gasoline) and the Use Fuel Tax ' Law (diesel fuel). As a result, beginning in 1991, $0.00690 per gallon from each of the applicable taxes is apportioned under §2105. The apportionment methodology applicable to cities under §2105 is as follows: (1) The proportion that the city population bears to the total population , of all the cities in the state. 3. §2106. Page 40 City Council Workshop Edition , 34MAD San Lads Obispo Airport Area Fiscal Impact Analysis Under the Streets and Highways §2106, the net revenue from $0.0104 of the $0.18 per gallon tax imposed on gasoline is apportioned to the cities and counties in California. The following sections detail the apportionment of this revenue source. + (a) Each month $400 is apportioned to each city, including city and county, and $800 is apportioned to each county, including city and county. (b) $30,000 per month is transferred to the Bicycle Lane Account in the State ' Transportation Fund. (c) The remaining funds are apportioned as follows: ' (1) A base amount is calculated for each county using the same proportions of fee-paid and exempt vehicle registration as calculated ' for §2104[d]. (2) The ratio of Taxable Assessed Value (TAV) in the county outside of incorporated cities to total TAV subject to local taxes is applied to the base amount as calculated in (1) above. The resulting amount is distributed to the county. N (3) The difference between the base amount calculated in (c)(1) and the amount distributed as calculated in (c)(2) is apportioned to the cities ' in that county in proportion that the population of each city bears to the total population of all cities in the county. 4. §2107. Under the Streets and Highways §2107, the net revenue from $0.01315 of the $0.18 per ' gallon tax on gasoline and a $0.0259 of the $0.18 per gallon tax on diesel fuel are apportioned to the cities, and cities and counties, in California. From the revenues collected, snow removal costs equal to one-half of the amount incurred in excess of$5,000, as detailed in the report filed pursuant to §2152,is apportioned to those cities who had such costs and filed pursuant to §2152. The remaining amount of revenue is apportioned based on the proportion that the total population of the city bears to the total population of all the cities in the state. ' S. §2107.5. Under the Streets and Highways §21075, revenue is allocated to cities based on population as detailed in the following section: City Comuil Workshop Edition Page 41 3075.0 San Luis Obispo Airport Area Final Impact Analysis , (a) Population over 500,000 $202000 ' (b) Population 100,000 to 500,000 102000 (c) Population 50,000 to 99,999 7,500 (d) Population 25,000 to 49,999 63000 ' (e) Population 20,000 to 24,999 5,000 (f) Population 15,000 to 19,999 42000 (g) Population 10,000 to 14,999 37000 ' (h) Population 5,000 to 9,999 22000 (i) Population less than 5,000 12000 , D. - Ongoing Expenditures As discussed in Chapter III, expenditure estimates were either based on case studies by the ' responsible Department Heads or were based on the current cost per person served. The City's net cost per person served is summarized in Table A-6. ' Table A-6 ' EXPENDITURE MULTIPLIERS San Luis Obispo Airport Area Fiscal Impact Analysis 22 14 JAM ' 11x4 AM Population 43,900 aaployent 22,152 , Total list Cwt WB ®9 9s arsons Notal Of A mall F.eeer. Factors Persons Not Ad•in Of Admin Function Descriptio Relationship Residents maployo Served cwt coat Cwt Multiplier police protection Parse Served 1.0 0.5 55,476 $5,494,700 $004,400 $5.192.500 $92.00 Transportation planning Dereans Served 1.0 0.5 55,476 $144,000 so $144,000 $2.60 Son and you Pmvons served 1.0 0.0 42,900 $65,100 $o $05,100 $1.40 Recreationprograe pereone Served 1.0 0.5 55,476 $652,100 $391,200 $454,450 $0.22 cultural sardiow persons Served 1.0 0.5 55,476 $75,000 $0 $75.900 $1.]7 Social Service (Human Relations) Ramona served 1.0 0.5 55,479 $07,200 $0 $07,200 $1.57 Planning - Other man Development Reis Persons Barred 1.0 0.5 55,476 $415,000 $200,700 $214.650 $5.07 Building and Safety - Cods Rag orcoent persons served 1.0 0.5 55,476 $65,000 $o $65,000 $1.17 CID Ranageeut pers®s served 1.0 0.5 55,476 $507,600 $o $507,600 $9.15 Camwity Promotion persons served 1.0 0.5 55,476 $201,200 $o $201,200 $3.42 Fire and Rovlrswsetal Safety persons served 1.0 0.5 55,476 $2.004,000 $212,400 $2,777,600 $66.10 street and signal maintenance Per LO Bile Ufa da Ufa n/a a/a n/a $144.00 , Maintenance Services Per Capita a/a a/a n/a Ufa Ufa Ufa $19.70 Sources Angus McDonald 6 Associates. [A]Ct\P\1922\RgpsQi2.MM(#COST-PB-IPB} Page 42 City Council Workshop Edition ' 3075,3 ' San Lads Obispo Airport Area Fiscal Impact Analysis REFERENCES R-1 Fugro-McClelland (West) Inc. 1992 LAND USE ELEMENTICIRCULATION ELEMENT UPDATES. (DRAFT ENVIRONMENTAL IMPACT REPORT) Prepared ' for City of San Luis Obispo. Ventura: January, 1993. R-2 RRM Design Group. MARGARITA AREA CONCEPT PLAN (Preliminary Draft). ' San Luis Obispo: January 1992. R-3 San Luis Obispo, City of. 1993-95 FINANCIAL PLAN/APPROVED 1993-94 ' BUDGET. San Luis Obispo: July 1, 1993. R4 San Luis Obispo,City o£ GENERAL PLANLAND USE ELEMENT(HearingDraft). ' San Luis Obispo: February, 1992. R-5 San Luis Obispo, City o£ LAND USE ELEMENT& CIRCULATION ELEMENT ' UPDATES (Draft Environmental Impact Report Supplement). San Luis Obispo: September, 1993. R-6 San Luis Obispo, City of. PLAN FOR SERVICES FOR THE AIRPORT AREA ANNEXATION. San Luis Obispo: ' R-7 San Luis Obispo, City o£ COUNCIL AGENDA REPORT - SUBJECT. BROAD STREET AAWMTTON, by Ken Hampian. Sari Luis Obispo: November 17, 1992. R-8 Urban Research Associates. INDUSTRIAL SECTOR ANALYSIS - SAN LUIS OBISPO COUNTYAIRPORTAREA INDUSTRIAL SPECIFIC PLAN,by Ray Young, Ph.D. Prepared for County of San Luis Obispo. Fullerton: July, 1986. R-9 Willdan Associates. PRELIMINARY SPECIFIC PLANANALYSIS FOR THE SAN LUIS OBISPO COUNTYAIRPORTAREA SPECIFIC PLAN. Prepared for County of San Luis Obispo, City of San Luis Obispo and Airport Area Property Owners. San Luis Obispo: April 1988. ' City Council Workshop Edition Page 43 3amou FEB - 22 - 94 TUE 1 2 : 1 1 SAN LUIS O B I S P O CAO P . 01 T E c - 9Y FEB 2 2 1994 MEETING ?� AGENDA � DATEZ _fTEM# CITY CLERK LUIS OBISPO.C.', FUNDAMENTAL. TIMING PROBLEMS WITII THE AIRPORT FISCAL IMPACT ANALYSIS Submitted by Councilman Settle 1. THE PROPERTY OWNERS ARE ASKED TO GIVE CONCEPTUAL, APPROVAL. OF THE AIRPORT ANNEXATION (IN MARCH) BEFORE FIACILITiES FINANCING PIAN (IN SEPT). THIS IS WRONG AND MUST BE REVERSED. 2. STAFF GAVE AN INADEQUATE, SCOPE. OF WORK TO MCDONALD AND ASSOCIATES BY NOT COVERING TOPICS SUCH AS INFRASTRUCTURE FINANCING. 3. NO ANNEXATION SIIOUI.D BE ADOPTED WITHOUT NEGOTIATIONS FIRST BEING COMPLETED WITH REGARD TO PROPERTY AND SALE TAX DISTRIBUTION BETWEEN THE CITY AND COUNTY. d. METHOD OF FINANCING WATER, SEWER AND OTHER SERVICES MUST BE CLARIFIED BEFORE ANY ANNEXATION. ALSO WHAT ARE THE COSTS OF ACQUIRING WATER ON BOTH EXISTING TAXPAYERS AND AIRPORT PROPERTY OWNERS. 5. IMPACT OF AIRPORT ANNEXATION ON CIRCULATION WITHIN THE CITY MAY RESULT IN REDUCTION TO "D" AND "E" TRAFFIC LEVEL FROM A STANDARD OF "B." 6. NO ANNEXATION SHOULD TAKE PLACE BEFORE A SPEC{I+IC PLAN IS APPROVED. FOrLMGMTTEAm CDDj ❑ FIN ❑ FIRE ❑ PVN G ❑ POLI ❑ REC❑ UTIL 0 PERS ZrCAO ❑ Fj MEFTING �P�x GENDA CrACAO ❑ FIq / ATTORNEY ❑ PDAl. '=z -9 S/iTEM # El"CLER!UORIG ❑ P ' ❑ MGMT TEAM ❑ R ❑ c WD FILE ❑ USAN LUIS OBISPO AIRPORT AREA ❑ PEFISCAL IMPACT ANALYSIS ANGUS MCDONALD & ASSOCIATES FOR SAN LUIS OBISPO February 1994 CRITIQUE AND COMMENTS BY COUNCILMAN ALLEN SETTLE 1. Report deals with property and sales tax proceeds to the city upon annexation and not with infrastructure costs such as water and sewer costs (p. 1). The city of 43,000 people has a 43,000,000 million dollar debt on water and sewer bonds as of this date and supplemental infrastructure costs and financing impact on the existing service capacity must be addressed to have a fully valid report. While water and sewer services are enterprise funded, the modification and costs of plant facilities must be evaluated to properly consider how the buildout potential in the city will impact existing city taxpayers. 2. Assumptions made are not necessarily valid. Page 2 summary assumes that a source of water can be available at acceptable costs and no criteria is provided as time and what is acceptable costs. Those property owners in the airport may wait ten years or more before water becomes available and the cost should be referenced in that time frame, otherwise the airport property owners may annex to the city only to find- they are not able to develop for an indefinite time and yet pay taxes and bond costs because of this service shortage. The question must be examined further as .to whether, during this time period, the Airport Area would be a net loss to the tax base! 3. Figure I-2 on page 5 does not back up the statement on page 3 that there is a significant surplus of revenues over expenditures since the cost of providing interum services is not addressed. For example, new police substation or fire station facililties are need and in the case of fire to meet the four minute response time. Page 14 suggests the entire airport is within the four minute response time which is not true. What is the amount of the "significant budget increase for preventive inspections?" Is it the $75,000 plus referenced on Table 11I-2, p. 17. 4. On pager 4, the paragraph that references Figures I-2 and I-3 is made with inadequate facts to support the statements. References such as "comfortable fiscal surplus," and the "consultant team ser nth D SEB 2 2 1994 y:/o71* . CITY CLEX these results are reliable and that there can be a high level of confidence that the decision to annex the Airport Area will NOT place a burden on the existing City tax base" is simply a statement without adequate support. Of even greater concern is that statement that "The City Administrative Officer and city's management team projects the delivery of city services at a fixed cost per person served that did not increase as development took place" simply asserts a _conclusion that is not based on generally accepted conclusions of those doing reports on growth and development and this statement also has no foundation in fact. At no time in the report did the staff or consultant refer to work done on this same subject by other reseachers or publications. 5. More reference needs to be made on future consequences of take- backs of city revenue by the state government and new state mandates. 6. Since it is not the policy to take general fund tax money and pay for enterprise fund improvements, the revisions in Figures I-2 and I-3 are unlikely. If development pays it own way, no clear picture exists as to what the cost will be to the property owners, individually or collectively. Other studies have made reference to these costs and this report could have noted previous studies as initial projection to help guide the reader as well as property owners. 7. The statement that "owners of lands zoned for residential and commercial purposes could enter into joint ventures and/or profit sharing arrangements that would permit both land uses to proceed" needs to be clarified and examples given, particularly the type of debt instruments and financing availiable to these land owners. 8. It may not be true that the cost to provide public services is not sensitive to the specific location of development within the entire Airport Area. Sources other than city staff need to be used to determine this informaition. 9. Who were the individuals referenced to on page 10 that were "knowledgeable about demand and competing supply in the market area" that result in a conclusion that states this information is "considered to be realistic." Cite your sources! 10. On page 13, what constitutes "producitivity enhancements" with reference to cost-per-persons-served? 11. On page 13, does the "acceptable" level of service include other provisions such as waste water, solid waste managment and the like? Further, how is it possible to define "acceptable level of service" to mean the level of service provided by the County even after it is :- annexed to the city? This suggests that the city permit growth to occur at County standards even after annexation to the City! Then the following sentence states improvements in standards. were assumed where the city would require them which results in awkward and a rather confusing paragraph. 12. On Table I11-2, and statement at the bottom on p. 16, "the CAO and management team states that services w i 1 I be provided at a total cost not to exceed the amounts shown" is made without what criteria such statements were based. For example, what inflation or contingency factors were used, if any? 13. In Appendix A, can property tax revenues to the city be that reliable based on new state policies, county negotiations and Proposition 4 (Gann Initiative) proceed of taxes provisions? (Also referenced on page 18.) 14. The statement under item 2 on page 19 labeled "mid-term fiscal impact" needs further elaboration. It states, as fact, that revenues would more than cover costs to extend public services at the City's existing standards for providing public services. This generalization needs clarification as to terms and conditions not made clear by the category "mid-term." 15. On what basis can one make a statement as that on page 21 which states: "...to annex the Airport Area was not considered to be partilcularly vulnerable to future increases in cost to provide services?" Further, the statement that "increased state mandated costs may not be supported politically", as the report states, must recognize the fact that mandates can nevertheless can be imposed by the State and its agencies since local governments are administrative arms of the State. Moreover, the report should say that the City Council as well as the Administrative Officer and management team have a commitment to control costs. 16. On page 22, what constitutes "corrective action" if adverse fiscal impacts are experienced? Again on page 23 the statement "that the city is not committing itself indefinitely to fiscal impacts" is confusing and incorrect. Annexation is not a temporary status if it turns out to be a bad deal financially. The suggestion that we amend our growth management policies to adjust our policies is not very satisfactory after the fact. The State HCD has already noted that our growth managment program is not acceptable for the state to approve the city Housing Element commitment of building over 5000 houses. Again the report makes reference to "other jurisdictions" but fails to indicate which ones they- used to make their statements.-- Further, survey: research would not adequately solve the problems they address in this section. 17. More needs to be said on land use consequences on fiscal aspects to the airport annexation. Development in the airport under County control will not likely have the same density as if it were in the city. Additional information is needed on airport land use density and commercial development potential at the airport. Reference needs to be made about development transfer potential and open space uses and how to deal with property owners who wish to withdraw from the airport annexation. 18. With respect to "Next Steps" section, the report returns to broad generalizations such as the city can annex the airport "without imposing an additional burden on city taxpayers." The format should be changed to make these statements based on conditions that are clearly defined rather than throughout the report without foundation. 19. The McDonald report assumes the airport will only be an all or nothing option and makes no reference to incremental aspects of annexation. For example, the Margarita area may likey to separate out from the rest of the airport annexation. Incremental aspects need to be discussed in greater detail because they are probably easier to manage financially as well as getting funding institution support. 20. The major failure of this report is to simply assume the airport is financially viable to the city to annex without a good understanding of the impacts to the city and airport property owners of enterprise funded services such as water, sewer, transit and other costs. It is simplistic to say that there is an annual fiscal surplus to the city based on the assumption that the city annexes the area and then essentially does nothing and operates from the tax revenues of existing development. Proposed development by property owners could eliminate and exceed any surplus almost immediately. 21. The reports should acknowledge that the airport is but one expansion area and others may have an impact in the total service delivery costs and land use consequences. 22. Finally, there is a assumption made in section 2 under Next Steps entitled: Required Commitment of City Staff." It is a pedantic assertion to conclude_ that _"all of the invited speakers" stated that the process of extending City services to undeveloped areas depends critically on involvement of senior City staff. It also takes efforts on the part of the city council and considerable community involvement of taxpayers and voters who are concerned about the quality of life as well as the costs of government. In short,. the Angus McDonald report is simplistic at best and not a reliable basis to make major policy decisions. For the amount of time given to do this study, the level and completeness of analysis is that of an undergraduate student earning about a "C-" grade. We simply must demand the consultant document their assumptions and have a better understanding of the costs of extending services and calculating tax proceeds. It is not enough to say "if" and "then" statements in this report of 19 pages of actual analysis. The report conditions all major assumptions and thus conclusions can read both ways. While it is common knowledge that "only" the City Council must decide to continue the annexation processs, this report comes up short in trying to provide a good foundation to make this decision any easier for either the council, taxpayers or airport property owners.