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Home My WebLink AboutLAFCO: North of I-10 File 511 f' rr t N� f � � ?M' Wohlmuth, John From: Aylaian, Lauri Sent: Wednesday, January 04, 2012 1:24 PM To: Gibson, Paul Cc: Wohlmuth, John; Prusinowski, Karen; 'Nicole Criste' Subject: RE: Annexation Report Paul, Thanks for your comments. I can respond to a couple of your items, but then I want to schedule a meeting with you, John, and Nicole so that we can go over everything together. I'll try to set up something for later this week. In the meantime, by comments to your Revenues Comments #2 and #3 and to your Expenditures Comment #4 are: Our current housing inventory is about 37,000 units, not 20,000. About 21% of those housing units are in multi- family properties (apartments), which you may want to deduct for property tax transfer purposes (but I'm not sure). • None of Sun City is in Indio's Sol. It's all in ours. The Bermuda Dunes issue is one that we brought up with the City Council. We explained that LAFCO staff won't recommend approval without including Bermuda Dunes, and we suggested that that area be included in the study. The Council expressly told us not to include it, so we're studying a concept that we know will never be supported by LAFCO staff. Whether or not the LAFCO Commission would ever approve an annexation without Bermuda Dunes — I just don't know. LA Lauri Aylaian Director of Community Development City of Palm Desert 73-510 Fred Waring Drive Palm Desert, CA 92260 760.346.0611 phone 760776.6417 fax From: Gibson, Paul Sent: Tuesday, January 03, 2012 10:12 AM To: Aylaian, Lauri Cc: Wohlmuth, John; Prusinowski, Karen Subject: Annexation Report Lauri: Here is my comments on the revenues for the report: Interest rate is calculated on total revenue collected, however, based on expense being more than revenue there would be no additional interest earnings. Secondly, interest rate is too high if for some reason you still want to have interest you should only use 1% interest rate for the first five years. Property Tax transfer is still too high. Current revenue is equal to 110% of City with a housing market of 20,000 units. With only 5000 units in this area, I would assume only % of what the city currently received this past year of: 400,000 which would equate to 100,000 not 400,000? In reviewing the assumptions for this area it notes Sun City Palm Desert? I thought a good majority of the area of Sun City is within Indio sphere of influence? 4. Development Impact fee: Draliage is based on specific drainage plans and you cannot assume that we would receive anything under this annexation. Other fees I am not sure if we would have this problem on City Boundaries. 5. Sales Tax should be based on 1 % less State take away of .25 for net amount of .75%. Not sure what development is creating this sales tax? Here is my comments on the expenditures: 1. Still feel that the General Government cost are too high, however, do not have a recommendation on how much they should be lowered. Should include: code enforcement, parks, lighting, animal control, planning/development review. Also should include costs for General Liability, elections costs. 2. Police and fire look reasonable. 3. Roads looks reasonable under current costs. 4. This does not account for LAFCO requirement to not have islands like Bermuda Dunes? How do we handle that issue? From: Aylaian, Lauri Sent: Wednesday, December 28, 2011 9:46 AM To: Wohlmuth, John; Gibson, Paul Subject: FW: Status Report John and Paul, Here's the draft report. I'm trying to finish my review of it today, but please take your time and get comments back to me when you can. Give my regards to George and Ringo, LA Lauri Aylaian Director of Community Development City of Palm Desert 73-510 Fred Waring Drive Palm Desert, CA 92260 760.346.0611 phone 760776.6417 fax From: Nicole Criste[ma iIto: ncriste@terranovaplanning.com] Sent: Tuesday, December 27, 2011 1:16 PM To: Aylaian, Lauri Subject: Re: Status Report Lauri, Please find attached the revised report, exhibits and tables. The numbers have changed, but not significantly. Both scenarios still operate in the red. I am reviewing also, as Andrea sent this early this morning, and I wanted you to have it right away. 2 I have also provided comments to Paul's earlier email in red below. I. No additional revenue should be added for ambulance, you have all the revenue for fire. Noted. 2. Interest rate assumption is too high, 4.39% over five years. Most likely will be .5% over the five years. This report should not be overly optimistic. The report uses the County's prescribed rate: the average over the most recent 25 years. The analysis cannot be geared to particularly bad (now) or particularly good (2006) rates, as it is meant to show "average" performance over the long term. 3. Property Transfer Tax is equal to the entire city amount, should only be around 100,000. We have calculated the transfer tax correctly based on the assumptions called for in the County guide. I cannot explain the discrepancy, other than that current economic conditions have significantly impacted transfers, and the City is probably not seeing an average rate at this time. 4. How did you come up with 300k for hotel revenue? There will not be any future hotel in the first five years! No investors wanting to build in this environment. What hotel is currently located in this sphere? Motel 6? There are currently two hotels in the Sun City area. We averaged their rates and estimated based on 65% occupancy (annualized). We also predicted 250 additional rooms because of the land use designations around the Classic Club, which call for hotel. 5. Roadway maintenance looks extremely low, especially when you consider that the county does not maintain streets. Roadway maintenance is based on the total current expenditure in the budget for "Public Works — Street Maintenance" and "Street Repairs & Maintenance" in the budget, divided by the total miles of City streets. 6. 1 agree with you that a General Government looks high, however, some things that will go up due to this annexation are: Liability Insurance, elections, Code Enforcement, Animal Control, traffic light maintenance, landscaping costs, parks that will be added. Noted. 7. How many police officers are we assuming? Is there a substation on that side of the freeway? We did not assume a number of officers. We assumed a per capita cost for police services based on the current contract, divided by the current population. 8. 1 assume that we would take over the fire station that the County currently operates? That assumption is correct. Please give me a call if you have any questions. Nicole Nicole Sauviat Criste Principal r 11 L -J TERRA NOVA PLANNING & RESEARCH, INC.® 42635 Melanie Place, Ste 101 PALM DESERT, CA. 92211 (760) 341-4800 FAX#: 760-341-4455 E-Mail: ncriste@terranovaplanning.com From: Lauri Aylaian <IavlaianPcitvofpalm desert.ore> Date: Sat, 24 Dec 2011 17:11:31-0800 To: Nicole Criste <ncriste@terra nova plannine.com> Subject: RE: Status Report This weekend?? You do remember that it's Christmas, don't you? Knock it off and go home and celebrate. Tuesday is fine. Sent from my Windows Phone From: Nicole Criste Sent: Friday, December 23, 2011 8:19 AM To: Aylaian, Lauri Subject: Status Report Lauri, We are finishing the shifting of land uses, and associated calculations between scenario A and scenario B. Although I had hoped that we would have it to you today, we will need a little time this weekend to get it finished. You will have the report on Tuesday. Nicole Nicole Sauviat Criste Principal r 7 TERRA NOVA PLANNING & RESEARCH, INC.@ 42635 Melanie Place, Ste 101 PALM DESERT, CA. 92211 (760)341-4800 FAX#: 760-341-4455 E-Mail: ncriste@terranovaplanning com 0 v x PiSi�at' A za 0 w lossW IL V4, A- woft-� qjwv*. if - lot A Val m 9 33.5 Acres 653-290-015-3 22.6 Acres 653-270-023-8 40 Acres 653-290-002- i 22.5 Acres 653-300-030-6 Ov 5.15 Acres 653-30"31-7 I '*4mw -W M E5 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation FISCAL IMPACT ANALYSIS for POTENTIAL ANNEXATION to the CITY OF PALM DESERT Table of Contents I. Introduction, Project Description and Demographics A. Introduction B. Project Description 1. Scenario A Annexation Area 2. Scenario B Annexation Area C. City of Palm Desert Demographics II. Potential Revenue Sources A. General Fund B. Special Revenue Funds 1. Annual Revenues 2. One -Time Revenues C. Investment Income III. Potential Costs A. General Fund B. Special Revenue Funds IV. Build out Assumptions A. Build out Phasing B. Land Use Designations C. Build out Calculations V. Cost/Revenue Analysis A. Cost/Revenue Summaries B. Conclusions 1. Scenario A 2. Scenario B 1 M In LIST OF EXHIBITS Exhibit 1: Scenario A Annexation Boundary Map Exhibit 2: Sphere -of -Influence Map Exhibit 3: Specific Plans Map Exhibit 4: Land Use Map Exhibit 5: Scenario B Annexation Boundary Map LIST OF TABLES Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Table 1: Scenario A Developed Acreage Table 2: Scenario A Vacant Acreage Table 3: Scenario B Developed Acreage Table 4: Scenario B Vacant Acreage Table 5: Average Value of New Construction in Palm Desert Table 6: Components of the 8.75% Sales & Use Tax Table 7: Low -Income Housing Mitigation Fees Table 8: Child Care Facilities Impact Mitigation Fees Table 9: Total Potential Costs/Revenues Summary Table — Scenario A Table 10: Developer Impact Fees Revenues — Scenario A Table 11: Total Potential Costs/Revenues Summary Table — Scenario B Table 12: Developer Impact Fees Revenues — Scenario B LIST OF APPENDICES Appendix A: Scenario A Detailed Cost and Revenue Tables Appendix B: Scenario B Detailed Cost and Revenue Tables 2 Terra Nova/City of Palm Desert Fiscal Impact Analvsis. Potential Annexation CITY OF PALM DESERT POTENTIAL ANNEXATION FISCAL IMPACT ANALYSIS I. INTRODUCTION, PROJECT DESCRIPTION AND DEMOGRAPHICS A. Introduction This Fiscal Impact Analysis is being prepared at the request of the Palm Desert City Council, which has received requests from property owners north of Interstate-10 (I-10) to consider annexation into the City limits. At the City's request, this report includes analysis of two scenarios (a detailed description is provided in section I.B., below): 1) Scenario A: the annexation of Sun City and land to the west that is within the City's sphere - of -influence, extending southerly across the Interstate 10 and railroads rights -of -way to the existing City limits, and 2) Scenario B: the annexation of Scenario A, and a larger expanse of land to the west extending to Cook Street, and southerly across the Interstate 10 and railroads rights -of -way to the existing City limits. The Riverside County Local Agency Formation Commission (LAFCO) is responsible for approving annexations proposed by cities in Riverside County. A comprehensive fiscal analysis is an integral part of this consideration, and Riverside County's "Guidelines to Preparing Fiscal Impact Reports" has been used as a basis for the analysis provided herein. This analysis addresses the costs and revenues that can be expected to be generated through build out of the potential annexation areas. The values, current revenues and costs associated with existing development have been calculated, and are assumed to occur immediately upon annexation. In addition, build out assumptions have been made for lands currently vacant in both scenarios. 3 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Both scenarios are analyzed in five year increments. Given that a significant portion of the parcels in scenario A are already developed, a ten-year build out period is assumed. Many of the IS ALJ parcels in scenario B are vacant, and therefore, a twenty-year build out period is assumed for that scenario. Land use and acreage data were obtained from Riverside County Assessor's parcel rolls 1. „ � (October 2011), aerial photography (June 2011), and the Palm Desert GIS Department. � ��_.} Revenue and cost factors were obtained from a variety of sources, including the City of Palm Desert 2011-12 budget, Palm Desert Comprehensive Annual Financial Report, Palm Desert staff, Riverside County Transportation Commission, and the State of California. Factors from the Riverside County "Guide to Preparing Fiscal Impact Reports," adjusted for inflation, have also been used. The analysis applies the appropriate revenue and cost factors to existing development and undeveloped land in the annexation areas using land use designations assigned by Palm Desert and Riverside County. The revenue and cost categories used to develop this fiscal analysis are described in Sections II and III of this document, respectively. Assumptions associated with each annexation scenario are described in Section IV. The cost/revenue analysis for each scenario is provided in Section V. Both costs and revenues throughout this analysis are calculated in current dollars. No inflation adjustment has been made. Although costs and revenues will rise over the build out period of the annexation areas, the ratio of costs to revenues is not expected to change significantly. As a result, the analysis in constant dollars is representative of the framework of costs and revenues likely to be experienced by the City throughout the build out of both scenarios, and beyond. 4 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation B. Project Description The purpose of this fiscal analysis is to consider the potential financial impacts to the City of Palm Desert resulting from two potential annexation scenarios: 1) annexation of 2,181± acres encompassing Sun City, a resort residential community north of the City of Palm Desert, and adjacent parcels located north of the existing City limits to Avenue 38; and 2) annexation of 2,988± acres, including those described in Scenario A, and additional land to the west extending just beyond Cook Street. Under both scenarios, it is assumed that all lands from the existing City limits northerly, including the Interstate 10 and railroad rights -of -way, would be included in the annexation. All land considered in both scenarios is currently under the jurisdiction of Riverside County. Some land is currently in the City's sphere -of -influence. 1. Scenario A Annexation Area Scenario A involves annexation of Del Webb's Sun City, an age -restricted resort -residential community north of Palm Desert, which encompasses ±1,600 acres and includes a population of approximately 9,000 residents. Sun City is generally bounded by the City of Indio on the east, I- 10 and Varner Road on the south, Washington Street on the west, and Frances Way on the north. The annexation boundary also includes land immediately south of Sun City, consisting of the Union Pacific Railroad and I-10 corridors, and ±39 acres adjacent to the southeast corner of Sun City. The boundary encompasses an additional 580± acres to the west, generally bounded by Avenue 38 on the north and the I-10 and railroad corridors on the south. Exhibit I illustrates the boundaries of Scenario A. Land in this area is currently under the jurisdiction of Riverside County and contained within the Palm Desert sphere -of -influence (SOI). Please also see Exhibit 2 for SOI boundaries. Two Specific Plans (SP) are located within the boundaries of Scenario A. Both are shown as approved and still in effect in the Riverside County database. Each is described below and shown in Exhibit 3. • SP-281, Del Webb Sun City, is located in the eastern half of the annexation area. It contains approximately 1,600 acres and 4,985 residential units, golf course and other recreational amenities, community facilities, and retail commercial uses near the I- 10/Washington Street interchange. SP-281 is nearly 100% developed. • The Mirasera Specific Plan is generally bounded by Avenue 38 on the north, Varner Road on the south, and existing business park development on the east. It encompasses approximately 190 acres. Of these, 178.5 acres are located in the potential annexation area. Land use designations include high and very high density residential, business park, mixed use, hotel and commercial retail. Open space designations include a village green, parks and trails. The remaining 11.3 acres are located outside of the annexation area, immediately north of Avenue 38; these are undevelopable acres designated for drainage channel right-of-way. The parcels are currently vacant, with the exception of one manufactured unit owned by Mirasera. 5 In cm Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Exhibit 1 Scenario A Boundary Map M en Terra Nova/City of Palm Desert Fiscal. Impact Analysis, Potential Annexation Exhibit 2 Sphere -of -Influence Map Terra Nova/City of Palm Desert Fiscal Impact Analvsis> Potential Annexation Exhibit 3 Specific Plans Map 8 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation A land use map for both Scenarios A and B is provided in Exhibit 4 and serves as a basis for the following developed vs. vacant acreage calculations. The Scenario A annexation area encompasses a total of 2,181± acres. Of these, 1,485± are developed, and 696± are vacant/undeveloped. Table 1, below, describes developed acreage by land use category. Table 1 Scenario A - Developed Acreage Existing Existing Existing Dwelling Square Hotel Existing Land Use Designation Acreage Units Footage Rooms Population SP-281 Single -Family Residential 792.0 4,985 SF -- -- 9,000' SP-281 Golf Course 435.3 -- -- -- -- SP-281 Commercial 29.0 -- 277,912 -- -- SP-281 Commercial (Hotel) 2.2 -- 50,0004 72 -- Riv. Co. Commercial Retail 21.1 -- 202,205 -- -- Riv. Co. Commercial (Hotel) 1.4 -- 40'0004 82 -- Riv. Co. Comm./Tourist (RV Park) 26.3 -- -- -- -- Riv. Co. Industrial - Light 56.6 -- 542,409 -- -- SP-281 Fire Station 3.5 -- -- -- -- I-10 Corridor 79.2 -- -- -- -- Railroad Corridor 38.8 -- -- -- -- Total: 1,485.4 4,985 SF 1,112,526 154 9,000 Includes 4,869 detached units and 116 attached units. Source: Paul Brady, Sun City Palm Desert Community Association, October 2011. SF= single-family dwelling unit 2 Assumes that commercial & industrial building square footage covers 22% of the lot, with the remainder of the lot available for access roads, parking, landscaping, and other ancillary uses. 3 Paul Brady, Sun City Palm Desert Community Association, Oct. 2011. 4 Estimate for 72-room and 82-room hotels. The Scenario A annexation area also includes 696± acres of vacant/undeveloped land. Table 2, below, describes how vacant acreage could develop in the future based on assigned land use designations. All land use designations within Sun City/SP-281 and Mirasera Specific Plan were assigned by Riverside County. Parcels within the Palm Desert sphere -of -influence are assumed to develop consistent with the land use designations assigned in the Palm Desert General Plan. M Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Table 2 Scenario A - Vacant Potential Potential Potential Dwelling Square Hotel Potential Land Use Designation Acreage Units Footage Rooms" Population Non -Developable SP-281 Community Association 271.0 -- -- -- -- Public Utility (1ID, CVWD) 18.1 -- -- -- -- Public Agency (County, State) 5.3 -- -- -- -- Riv. Co. Open Space/Water 10.4 -- -- - -- Mirasera Open Space/Parks/Roads 39.5 -- -- -- -- Non-Developable Subtotal: 344.3 Developable PD Medium Density Residential (4-10 du/ac) 113.3 849 SF -- -- 1,765 Riv. Co. Medium -High Density Resid.(5-8 du/ac) 30.8 184 SF -- -- 382 Mirasera High Density Residential (12 du/ac) 22.6 203 SF -- -- 422 Mirasera Mixed Use Residential (16 du/ac) 10.5 126 MF -- -- 262 Mirasera Very High Density Resid. (20-25 du/ac) 66.4 1,24.5MF -- - 2,589 SP-281 Commercial 3.0 -- 28,750 -- -- PD Community Commercial 10.7 -- 102,540 -- - PD Industrial — Business Park 28.0 -- 268,330 -- -- PD Industrial — Light 26.6 -- 254,913 -- -- Mirasera Commercial Retail 17.6 -- 168,664 -- -- Mirasera Mixed Use Hotel 3.1 -- 100,000 1.50 -- Mirasera Office/Business Park 18.8 -- 180,164 -- -- Developable Subtotal: 351.4 Total: 695.7 2,607 1,103,361 150 5,420 Assumes future residential development occurs at 75% of the maximum density permitted. SF = single-family dwelling unit. MF = multi -family dwelling unit. 2 Assumes future commercial & industrial building square footage will cover 22% of the lot, with the remainder of the lot available for access roads, parking, landscaping, and other ancillary uses. Hotel square footage estimate based on available acreage. 3 Hotel room estimate based on single hotel and available acreage. 4 Based on Palm Desert average of 2.08 persons/household (2010 U.S. Census). As described in the tables above, the Scenario A annexation area currently contains 4,985 dwelling units and a population of approximately 9,000. If buildout occurs according to the land use designations currently assigned, the annexation area could contain a total of 7,592 dwelling units and 14,420 residents at buildout. Commercial, business park, and industrial square footage could nearly double, from 1,112,526 square feet to 2,215,887 square feet. Similarly, the number of hotel rooms could increase by 50%, from 154 to 304 rooms. 10 on En Exhibit 4 Land Use Map Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation 11 fir►` Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation 2. Scenario B Annexation Area Under Scenario B, the annexation area is expanded to include all of Scenario A (described above) and additional lands to the west, for a total of 2,988± acres. This annexation area is generally bounded by Palm Desert's existing City limits on the south, the Coachella Valley Preserve on the north, the City of Indio on the east, and the western boundary of the Center Pointe Specific Plan on the west. The boundaries of Scenario B are shown in Exhibit 5. Land in Scenario B is currently under the jurisdiction of Riverside County. That portion described in Scenario A, south and east of Frank Sinatra Drive (extended), is located within the Palm Desert SOI. That portion further west, north and west of Frank Sinatra Drive (extended) is located within the Cathedral City SOI. Please refer to Exhibit 2 for SOI boundaries as they pertain to the annexation area. In addition to SP-281 and the Mirasera Specific Plan described in Scenario A, two other Specific Plans, approved by Riverside County and still in effect, are located in Scenario B. Exhibit 3 illustrates the boundaries of each Specific Plan, and each is described below. • SP-225, Center Pointe, is located at the western edge of the annexation area. It encompasses 215 acres and was approved for golf course, residential, business ark, and commercial development. Nearly half (6 acres) is now developed with a private high school. This analysis assumes the remainder of the Specific Plan will develop as originally approved. • SP-151, North Star Commerce Center and Golf Club, is located along the I-10 corridor in the western portion of the annexation area. It consists of 460 acres and was approved for golf course, business park, and b ghway.. cammerclal . velop ludin r_ otels and motels. The golf course and clubhouse (The Classic Club) have been built, another parcel contains a gravel/construction site, and the remaining acreage is undeveloped. 12 cm rn Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Exhibit 5 Scenario B Boundary Map 13 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation The Scenario B annexation area encompasses a total of 2,988± acres. Of these, 1,987± are developed, and ±1,001 are vacant/undeveloped. Please refer to Exhibit 4 for a land use map, which serves as a basis for the following developed vs. vacant acreage calculations. Table 3 Scenario B - Develoned Acreage Existing Existing Existing Dwelling Square Hotel Existing Land Use Designation Acreage Units' Footage2 Rooms Population Inside Scenario A: SP-281 Single -Family Residential 792.0 4,985 SF -- -- 9,000 SP-281 Golf Course 435.3 -- -- -- -- SP-281 Commercial 29.0 -- 277,912 -- -- SP-281 Commercial (Hotel) 2.2 - 50,0004 72 -- Riv. Co. Commercial Retail 21.1 - 202,205 -- -- Riv. Co. Commercial (Hotel) 1.4 - 40'0004 82 -- Riv. Co. Comm./Tourist (RV Park) 26.3 -- -- -- -- Riv. Co. Industrial - Light 56.6 -- 542,409 -- -- SP-281 Fire Station 3.5 -- -- -- -- I-1.0 Corridor 79.2 -- -- -- -- Railroad Corridor 38.8 -- -- -- -- Outside Scenario A: Single -Family Residential 1.3 1 SF -- -- 2 SP-151 Golf Course/Facilities 271.2 -- -- -- -- SP-151 Gravel/Construction. Facility 32.2 -- -- -- -- SP-225 Private School 96.0 -- -- -- -- SP-225 RV Storage 5.2 -- -- -- -- Agriculture 9.3 -- -- -- -- I-10 Corridor 52.8 -- -- -- -- Railroad Corridor 34.1 -- -- -- -- Total: 1,987.5 4,986 1,112,526 C_ 154 ? 9,002 1 Includes 4,869 detached and 116 attached units in Sun City, and one detached unit outside Sun City.9F = single-family dwelling unit. Assumes commercial and industrial buildings cover 22% of the lot, with the remaining area available for access roads, parking, landscaping, and other ancillary uses. 3 Includes an estimated 9,000 residents in Sun City (provided by Paul Brady, Sun City Community Assoc., Oct. 2011), and one additional dwelling unit at 2.08 persons/household (2010 U.S. Census). 4 Estimate for 72-room and 82-room hotels. Scenario B also includes approximately 1,001 acres that are vacant/undeveloped. Table 4 describes how vacant acreage could develop in the future based on assigned land use designations. Where Specific Plans have been approved by Riverside County, those land use designations are applied, as it is assumed that upon annexation, the City would honor the provisions of the approved Specific Plans. Parcels outside the Specific Plans have been assigned land use designations in the City's General Plan. 14 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Table 4 Scenario B - Vacant Land Use Designation Acreage Potential Potential Potential Dwelling Square Hotel Potential Units Footage2 Rooms3 Population Non -Developable Inside Scenario A: SP-281 Community Association 271.0 -- -- -- -- Public Utility (IID, CVWD) 18.1 -- -- -- -- Public Agency (County, State) 5.3 -- -- - -- Riv. Co. Open Space/Water 10.4 -- -- -- -- Mirasera Open Space/Parks/Roads 39.5 -- -- -- -- Outside Scenario A: SP-225 Regional Circulation 6.4 -- - -- -- Non-Developable Subtotal: 350.7 Developable Inside Scenario A: PD Medium Density Residential (4-10 du/ac) Riv. Co. Medium -High Density Resid.(5-8 du/ac) Mirasera High Density Residential (12 du/ac) Mirasera Mixed Use Residential (16 du/ac) Mirasera Very High Density Resid. (20-25 du/ac) SP-281 Commercial PD Community Commercial. PD Industrial - Business Park PD Industrial - Light Mirasera Commercial Retail Mirasera Mixed Use Hotel Mirasera Office/Business Park Outside Scenario A: 113.3 849 SF -- -- 1,765 30.8 184 SF -- -- 382 22.6 203 SF -- -- 422 10.5 126 MF -- -- 262 66.4 1,245MF -- -- 2,589 3.0 -- 28,750 -- -- 10.7 -- 102,540 -- -- 28.0 -- 268,330 -- -- 26.6 -- 254,913 -- -- 17.6 -- 168,664 -- -- 3.1 -- 100,000 150 -- 18.8 -- 180,164 -- -- PD Low Density Residential (0-4 du/ac) 72.0 216 SF -- -- 449 SP-151 Service Commercial 30.8 -- 295,162 -- -- SP-151 Service Commercial (Hotel) 3.0 -- 200,000 250 -- SP-151 Business Park 103.0 -- 987,070 -- -- SP-225 Medium -Density Residential (8 du/ac) 9.0 54 SF -- -- 112 SP-225 Golf Course 13.6 -- -- -- -- SP-225 Commercial 26.1 -- 250,121 -- -- SP-225 Business Park 41.0 -- 392,911 -- -- Developable Subtotal: 649.9 Total: 1000.6 2,877 3,228,625 400 5,981 Assumes future residential development will occur at 75% of the maximum density permitted. SF = single-family dwelling unit. MF = multi -family dwelling unit. 2 Assumes future building square footage will cover 22% of the lot, with the remainder of the lot available for access roads, parking, landscaping, and other ancillary uses. Hotel square footage based on 2 hotels and available acreage. Estimates based on available acreage for highway -serving hotel land uses. 4Based on Palm Desert average of 2.08 persons/household (2010 U.S. Census). 15 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation As shown in the tables above, the Scenario B annexation area currently includes 4,986 dwelling units and a population of approximately 9,002. If future buildout occurs according to currently assigned land use designations, the annexation area could contain an estimated 7,863 dwelling units and 14,983 residents. Commercial, business park, and industrial square footage could increase by 190% from 1,112,526 square feet to 3,228,625 square feet. The number of hotel rooms could increase by 260%, from 154 to 554 rooms. C. City of Palm Desert Demographic Profile The population of the City of Palm Desert increased from 23,252 in 1990 to 41,155 by 2000, according to U.S. Census data. This represents an increase of approximately 76.9%. Census data for 2010 report a population of 48,445, representing an increase of 17.7% over the last decade. Palm Desert's 2011 population, as estimated by the California Department of Finance, is 49,111 residents. The City is also home to a significant seasonal population that is not factored into permanent population data. The City's General Plan indicates that the City's 1999 seasonal population was estimated at between 21,000 and 28,225 residents, and the City currently estimates its seasonal population to be 32,000. The median age in Palm Desert in 1990 was 42.3 years, which increased to 48.0 years in 2000. By 2010, the median age had increased to 53.0 years. The number of housing units in the City was 18,248 in 1990 and 28,021 in 2000. This figure reached 37,073 by 2010. The 2010 Census reports that 28.1% of housing units in the City are for seasonal, recreational, or occasional use, further illustrating the importance of the seasonal population to the local economy. In 1990 there were an average of 2.18 persons per household in Palm Desert; by 2000, the average was 2.13. The 2010 Census indicates there is now an average of 2.08 persons per household in Palm Desert. The median household income in Palm Desert in 1990 was $37,315. This had risen by approximately 29.4% in 2000, to $48,316. The 2010 Census has not, as of this writing, released household income data; however, the City estimates its current median household income to be $59,728.2 The 1990, the U.S. Census reported that the median housing unit value in Palm Desert was $172,600. By 2000, this figure increased by 9.5%, to $189,100. In the second quarter of 2011, the median new home price in Palm Desert was $249,123, and the median value of an existing home was $278,996.3 1 City's website, Demographic Information, accessed October 25, 2011. 2 Ibid. 3 ,Inland Empire Quarterly Economic Report," prepared for WRCOG by John Husing, PhD., October 2011. 16 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation CITY OF PALM DESERT POTENTIAL ANNEXATION FISCAL IMPACT ANALYSIS II. POTENTIAL REVENUES FROM ANNEXATION Annexation of either Scenario A or Scenario B has the potential to generate revenues to the City of Palm Desert. These revenues include taxes and fees based on real estate values, consumer spending, and per capita allocations from other agencies, among others. This analysis focuses on recurring revenues that the City would expect to receive on an annual basis. One-time fees from Developer Impact Fees are also included. Revenues will include monies that will be available through the General Fund, and can be spent for any activities or services allowed under the General Fund, and revenues that are restricted for spending on specific, predetermined services. All revenue sources are identified as being either restricted fund or General Fund revenues. A. General Fund The General Fund is the general operating fund of the City that accounts for all financial resources typically associated with government, except those which must be accounted for in restricted funds. General Fund revenues include property tax, property transfer tax, sales tax, transient occupancy tax and motor vehicle in -lieu fees. These revenue sources, as they relate to development in the proposed annexation area, have been estimated in this fiscal impact analysis. Property The County of Riverside collects property tax annually at a rate of 1% of assessed valuation. Property tax revenues are allocated between the County, the jurisdiction in which the land is located (if other than the County), and a variety of other public agencies. The City of Palm Desert is a No -Low Property Tax City and receives 0% of the County's 1 % collection for land within its original boundaries. However, under current State law, the City receivess77% of the County's 1 % collection on lands annexed after 1978. Property tax revenues go to the City's 17 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation General Fund. Should annexation of Scenario A or B occur, the City would receive 7% of the I % property taxes collected for the area. It is important to note that property tax revenues will be reduced due to the City's mandated contributions to Education Revenue Augmentation Funds (ERAF). In fiscal year 1992, the State of California required cities and towns to shift a percentage of their property tax revenues to a countywide ERAF account to fund public schools. Based on prior annexations into the City of Palm Desert, the City receives approximately half (3.5%) of the 7% of property tax revenue collected by the County, and the remaining 3.5% is contributed to ERAF.4 In this analysis, properties flagged as "exempt" in Riverside County Assessor's parcel records are not included in property tax revenue calculations. In the annexation areas, these properties are largely owned by CVWD, California Department of Transportation (CalTrans), the County of Riverside, and Sun City Palm Desert Community Association. Additional properties owned by Nwt � non-profit organizations receive tax exemptions an or�ions. These include 90.4 acres owned by Xavier High School and 245.33 acres (Classic Club golf course, maintenance building, and clubhouse) owned by the Berger Foundation.5 Property tax revenue calculations have been adjusted to account for these cases. The fiscal analysis assumes that all taxable properties within the annexation areas are taxed at a rate of 1% of valuation, and the collection rate is 1.00%. Future development in the potential annexation area will include residential, commercial and quasi -industrial development. In order to determine property value, and associated property tax generation for this development, a number of sources were utilized. The following table describes the average values of new residential, commercial and industrial development in Palm Desert. 4 Paul Gibson, Director of Finance/City Treasurer, City of Palm Desert, personal communication, October 27, 2011. 5 Based on property tax information provided by Mike Rover, Rover Armstrong, Berger Foundation representative, personal communication, November 29, 2011. 18 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Table 5 Average Value of New Construction in Palm Desert Type of Development Average Value Single-family Residential $249,123/unit Multi -family Residential $104,425/unit Commercial Lodging $110/sq. ft.Z or $68,512/room3 Commercial General/Retail $73/sq. ft. Office/Professional $169/sq. ft. Industrial $54/sq. ft. Golf Course $40,43 1 /acre 4 Source: 2nd quarter 2011 median new home value, "Inland Empire Quarterly Economic Report," prepared for WRCOG by John Husing, Ph.D., October 2011. Includes value of land and structure. 2 Based on building permit data provided by the Palm Desert Building & Safety Department, Nov. 2011. Includes value of structure only. s Based on comparable existing highway -serving hotel in the annexation area, per Riv. Co. Assessor's records, Oct. 2011. 4 Based on average of multiple developed golf course parcels in annexation area, per Riv. Co. Assessor's records, Oct. 2011. All other values are based on building permit data provided by the Palm Desert Building and Safety Department, November 2011. Includes value of structure only. Property Transfer Tax Property Transfer Tax revenues are generated when a change of property ownership occurs. For analysis purposes, estimated Property Transfer Tax revenues are calculated according to the instructions provided in the Riverside County "Guide to Preparing Fiscal Impact Reports." Factors set forth in the Guide include a tax rate of $1.10 per $1,000 (or 0.11%) of the unencumbered property value. The County retains 50% of the tax, and 50% is transmitted to the City in which the sale occurred.b Upon the sale of a new unit, 100% of the unit's market value is subject to the property transfer tax. Upon change of ownership of an existing unit, the unencumbered value (assume average is 80%) of the property is subject to the property transfer tax. Change in ownership is assumed to begin in the fourth year of the project, and 10% of existing residential properties are assumed to change ownership per year. Property values are stated in year 2011 dollars. The average value of existing residential units in Sun City is $364,653.' For existing units outside Sun City, and future residential units, an average value of $249,123 is used (see table above for source). A resale rate of I % is assumed for single-family development. As discussed in Section III, this analysis assumes no re -sales during the build out timeframe for commercial and industrial development, as such sales are infrequent and sporadic. As a result, the analysis is more conservative, and revenues to the City from property transfer tax are likely to be higher than represented herein. 6 Assessor's Office, County of Riverside, personal communication, November 9, 2011. 7 Riverside County Assessor's parcel data, October 2011. 19 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Sales Tax Sales tax in Riverside County is collected at a rate of 8.75% by the State of California. The table below describes how sales tax revenues are allocated among public agencies. Table 6 Components of the 8.75 % Sales and Use Tax Rate Jurisdiction 7.25% State of California 1.00% Local (City/County) 0.50% Riverside County Transportation Commission Source: "Detailed Description of the Sales and Use Tax Rate," California State Board of Equalization; and Palm Desert Budget 2010/11, p. 2-2. Of the sales tax collected by the State, one percent (1.0%) is allocated to the jurisdiction in which the sale occurred. The fiscal analysis estimates total taxable sales that could be generated from commercial development at build out of each proposed annexation scenario, then calculates 1 % of taxable sales to determine how much sales tax revenue would be generated to the City. The fiscal model addresses taxable sales generated by existing and potential future development for each annexation scenario. Where taxable sales for existing development are known, actual figures are used. This includes annual taxable sales of $2.46 million generated by restaurants-offEl- golf pro shops within the boun aries 4 Sun City.8 aru+y sly "4A d PWA Where taxable sales are unknown, the analysis uses assumptions to estimate taxable sales. The analysis assumes that future retail commercial development will result in 22% lot coverage, and 90% of the net floor space will be dedicated to the sale of taxable goods. Average annual sales estimators from the Urban Land Institute's (ULI) 2008 "Dollars and Cents of Shopping Centers" are applied to the number of square feet dedicated to taxable sales. All existing and future commercial development in the annexation areas is considered Neighborhood Commercial in this analysis. The fiscal analysis calculates sales tax generation for Neighborhood Commercial development, based on the following ULI definition: • "Neighborhood Commercial" development includes neighborhood scale shopping centers conveniently located near residential areas, and a variety of smaller commercial centers, specialty retail shops and personal service businesses. These centers sell merchandise for daily living, such as food, drugs, and hardware. This type of development generates an annual average of $326.13 per square foot in taxable sales. In both scenarios, some lands are designated for "business park" development. It is expected that these lands will develop with a mix of light industrial and office uses. Although small amounts of sales tax revenue are likely to be generated by this development, the amount is expected to be negligible. As a result, business park and industrial development is assumed to generate no taxable sales in this analysis. 8 Paul Brady, Sun City Palm Desert Community Association, personal communication, October/November 2011. 20 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Transient Occupancy Tax Transient Occupancy Tax (TOT) is collected from individuals when they occupy a hotel or motel room. In Palm Desert, TOT is collected at a rate of 9%. Potential TOT revenues are based on the number of hotel/motel rooms that are or could be constructed on annexation lands, the average nightly room rate charged, and the average occupancy rate. There are currently two hotels with a combined total of 154 hotel rooms in the annexation areas. The room rates at these properties are lower than the current average room rate in the City. Therefore, room rates have been calculated at $95.00 per night. In addition, annualized occupancy has been assumed to be 65%. �9 Wed J�� I�'Ob'^^ � t�'�►i� � h�.�,,.aut� Approximately 3 acres are designated for future hotel/motel develop0ment in SP-151, and this analysis assumes that two 125-room hotels will be constructed on these parcels in the future. An additional 3.1 acres are designated for one hotel/motel in the Mirasera Specific Plan, and this analysis assumes the hotel/motel will contain 150 rooms. Room rates for future development, particularly future development located near the Classic Club golf course, are expected to be consistent with current City average room rates of $145.00/night. This was determined using total hotel room sales for 2009/10 ($76 million), total number of hotel/motel rooms in Palm Desert (2,216), and an estimated occupancy rate of 65%. This rate is an average that reflects both the world -class hotels that characterize Palm Desert's resort and tourism industry, and more modest hotels/motels located throughout the city. As tourism activity can be expected to fluctuate seasonally in the region on an annualized basis, a 65% occupancy rate is conservative. The annexation areas contain 26.3 acres of developed RV Park parcels. In the City of Palm Desert, RV parks generate TOT revenue only during the high -tourism season from January through April, and only from visitors leasing for fewer than 30 days.9 Given the specific and limited nature of these parameters, this fiscal model does not estimate TOT revenue from RV parks. The analysis is conservative, as some TOT revenue from RV parks will be generated, and actual revenues will be higher than shown. Motor Vehicle In -Lieu Fees Motor Vehicle In -Lieu Fees, or Motor Vehicle License Fees, are taxes on ownership of a registered vehicle. They are collected by the State of California and allocated to local jurisdictions on a monthly basis. These fees are levied on motorists in -lieu of a local property tax. During FYI 0/11, the City of Palm Desert received $167,177 in motor vehicle in -lieu fees.10 The State uses a City population figure of 52,067, which translates to $3.21 per capita annually. 9 Paul Gibson, Director of Finance/City Treasurer, City of Palm Desert, personal communication, December 2011. to Compilation of Motor Vehicle In -Lieu data from State Controller's Office, July 2010-June 2011. 21 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Other Revenue Sources Not Addressed The General Fund includes other revenue sources that will fiot be affected directly by annexation or will be one-time fees, and therefore, are not addressed in this analysis. These include timeshare mitigation fees, business license taxes, building and grading permit fees, plan check fees, and franchise fees. Timeshare development is not anticipated in the annexation area, so revenues from timeshare mitigation fees are not applicable to this project. Business license taxes will increase with annexation; however, these revenues are highly variable and development - specific, and estimates are not considered useful to this analysis. Building/grading permit fees and plan check fees are also based on specific development plans, which are determined at the time a project is proposed. B. Special Revenue Funds Special Revenue Funds are used to account for revenues/expenditures that are legally restricted for specific purposes. Each Special Revenue Fund that will be impacted by annexation is described below. 1. Annual Revenues The following Special Revenue Funds receive recurring revenues on an annual basis. Highway User Gas Tax Fund The State of California imposes a per gallon tax on all gasoline purchases. A portion of these revenues are allocated to counties and cities throughout the state. During FYI 0/11, the City of Palm Desert received $1,216,771 in Gas Tax revenue, or $23.37 per capita annually.I I Measure A Funds Of the 8.75% sales tax collected in Riverside County, 0.50% is contributed to the Measure A Fund for regional and local transportation projects. Of Measure A funds available countywide, approximately 24% is distributed to the Coachella Valley region.12 These funds are further allocated for specific purposes: 50% for State highways and regional road improvements, 35% for local streets and roads, and 15% for transit (Sunline Transit Agency). Of the 35% for local streets and roads, about 20% goes to the City of Palm Desert. This percentage is ase on a formula that accounts for Palm Desert's total number of dwelling units and total taxable sales. Fire Fund The City's Fire Fund receives revenue from two sources: 1) Proposition A Fire Tax, and 2) Structural Fire Tax. Each is described below. In 1982, the residents of Palm Desert approved the Proposition A Fire Tax for upgrading the City's fire protection and prevention capabilities. Revenues are restricted for the purposes of obtaining, furnishing, operating and maintaining fire protection/prevention services, equipment 11 Compilation of Highway Users Tax data from State Controller's Office, July 2010-June 2011. 12 Andrea Zureick, Riverside County Transportation Commission, personal communication, November 1, 2011. 22 Ift Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation and apparatus. Annual residential tax rates range from $30 per vacant residential lot, to $45 for rental apartments with 4+ units, to $60 per single-family dwelling unit. Non-residential rates are $60 for buildings equal to or less than 2,600 sq. ft. For larger non-commercial buildings, rates are building -specific and based on a formula that calculates fire flow requirements by square footage and takes into account the use of fire -resistive construction materials.13 This analysis estimates future Proposition A Fire Tax revenues for residential units, vacant parcels, and smaller non-commercial buildings. However, it does not attempt to project tax revenues for larger non-commercial buildings, given that the parameters required to project these revenues are building -specific and unknown at this time. Therefore, this analysis is conservative, and actual Proposition A Fire Tax revenues are expected to be higher than shown. The second revenue component of the Fire Fund is the Structural Fire Tax. For land not in a redevelopment area (this includes the proposed annexation areas), tax revenues are 5.87% of the 1 % property tax collected by Riverside County.14 They are remitted to the City's Fire Fund and restricted for the purpose of providing fire protection and prevention services. 2. One -Time Revenues The following Special Revenue Funds receive one-time revenues as a direct result of new development. These are typically paid to the City at the time building permits are issued. New development in the potential annexation areas would be required to contribute to these funds. Existing development would not pay these fees. Because they are one-time rather than recurring annual fees, they are not included in Cost/Revenue Summary Tables for the annexation scenarios. Instead, they are summarized separately in Table 10 for Scenario A, and Table 12 for Scenario B. New Construction Tax Fund Revenues to this fund are from taxes collected upon application for a building permit for the construction of any new building, addition or trailer space in the city. Funds are restricted for the acquisition and development of public facilities, such as parks, playgrounds and public structures. Fees are $0.40 per square foot. Art in Public Places Fund This fund is reserved for maintaining public artwork throughout the City. For residential development, the fee is 0.25 of 1 % valuation of the structure; individual single-family dwellings not in a development are exempt for the first $100,000. For non-residential development, the fee is 0.50 of I % valuation of the structure. Low Income Housing Mitigation Fee Fund 13 Rates provided by Mark Dana, Willdan Financial, November 3, 2011. 14 "Comprehensive Annual Financial Report," City of Palm Desert Finance Department, June 30, 2010, page 186. 23 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Revenues from this fund pay for projects and programs that benefit low and moderate income households. All commercial development must pay this fee at the issuance of building permits, according to the fee schedule below. Table 7 Low Income HousinE Mitigation Fees Development Type Fee General Mixed Commercial $1.00/sq. ft. Professional Office $0.50/sq. ft. Industrial $0.33/sq. ft. Resort Hotel $1,000/room Non -Resort Hotel $620/room Source: Palm Desert Building & Safety Department. Child Care Program Fund This fund is used for the purpose of providing child care programs. Fees are collected for all new non-residential square footage according to the fee schedule below. Table 8 Child Care Facilities Impact Mideation Fees Development Type Fee Light Industrial $0.47/sq. ft. Hotel/Visitor Uses $0.77/sq. ft. Retail/Service Commercial $0.90/sq. ft. Office Uses $1.15/sq.ft. Source: Palm Desert Building Department. Traffic Signals Fund Revenues to this fund are collected for residential, commercial and industrial developments either at the time grading permits are paid or prior to the approval of the final map. Fees for residential development are $50 per unit. Fees for commercial development are $500 per 1,000 sq. ft. of building area, and fees for industrial development are $500 per acre.15 Planned Drainage Fund Drainage impact fees are collected to fund off -site drainage improvements.16 Fees are dependent upon the location of development, as described below: • South of Whitewater River = $4,000/acre • Between Whitewater and Sand Ridge = $1,500/acre • Between Sand Ridge and I-10 = $1,000/acre 15 Palm Desert Department of Public Works. 16 Ibid. 24 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation No fee has been established for land in the potential annexation areas (north of I-10). Since the annexation areas are most closely located to I-10, this analysis uses the $1,000/acre fee shown above. Park and Recreation Facilities Fund This fund is restricted for expenditures related to park development, maintenance and equipment. Fees are collected for residential subdivisions only, according to the following formula.17 Fee = (# of D.U.'s)(2.149)(5) X Current Land Value Per Acre 1,000 Other Funds Other Special Revenue Funds identified in the City Budget are impacted by new development, but do not apply to the annexation area. Landscape/Lighting District Funds only apply to specific neighborhoods or regions of the City for the purpose of providing landscape and lighting maintenance. These districts are established upon voter approval, and residents in the potential annexation area will contribute to such a fund only upon voter approval.'s Such funds are revenue -neutral and will not generate "extra" revenue for the City. New development in the potential annexation area will also generate revenues that are collected by the City, but transferred to other agencies. These include, but are not limited to, TUMF mitigation fees transmitted to CVAG, school impact fees remitted to the appropriate school district, and Strong Motion Instrumentation Program (SMIP) fees transmitted to the State. C. Investment Income The fiscal analysis assumes that the City will receive investment earnings on all annual revenues. To project potential investment earnings, the fiscal model applies the historical average interest rate of the 90-Day Treasury Bill. During the 25-year period from 1985 through 2010, the average interest earned on the 90-Day Treasury Bill was 4.39%.19 The fiscal model calculates investment income for all annual revenues calculated in this report. 17 Ibid. 18 Lauri Aylaian, Community Development Director, City of Palm Desert, personal communication, October 26, 2011. 19 Average historical interest rate determined using data from Table B.3, "Riverside County Guide to Preparing Fiscal Impacts Reports," January 1995; and "3-Month Treasury Constant Maturity Rates," from the Federal Reserve Board of Governors, as provided by The Financial Forecast Center. 25 *AW *W# Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation CITY OF PALM DESERT POTENTIAL ANNEXATION FISCAL IMPACT ANALYSIS III. POTENTIAL COSTS FROM POTENTIAL ANNEXATION A. Potential Costs to the General Fund Annexation of developed and undeveloped acreage north of I-10 will not only generate additional revenues, but will also generate additional municipal costs. There will be expenditures for general government services, as well as the expansion and/or extension of infrastructure, utilities, roads and other public services, particularly public safety. The fiscal model projects the City's costs of providing general government services, public safety, and transportation/roadway maintenance to lands in the annexation area. Costs of General Government Costs of General Government are funded through the City's General Fund. Costs associated with general government include city-wide services, such as employee salaries and benefits, postage, printing, travel, equipment maintenance and repairs, contract services, computers, vehicles and other items necessary for the day-to-day functioning of government. They also include public and community services, such as code compliance and animal control, as well as municipal and support services. The City's 2011/12 Budget allocates $20,334,774 for the above -referenced general government services. This does not include expenditures for police protection and roadway maintenance, which are discussed and calculated separately below. For residential development, this fiscal analysis translates the costs of general government to a per capita figure. Given the City's 2011 population of 49,111, the annual cost of providing general government services to City residents is approximately $414 per capita. This factor is then applied to the projected build out population of the annexation areas. The result is the 26 NVA100 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation estimated cost of providing general government services to residents living in the annexation areas. In order to capture costs for provision of General Government to commercial and industrial development, it was necessary to derive factors based on a per acre or per square foot basis. No such factors were available through the City. Therefore, this analysis uses factors provided in the Riverside County Guide, adjusted for inflation, to arrive at costs based on year 2011 dollars. Costs of Police Protection The same method used to calculate general government costs has been used to project costs of providing law enforcement services to existing and future residents in the annexation areas. The City contracts with the Riverside County Sheriff's Department for a wide range of police services, including patrol, traffic management, investigations, school resource programs, crime prevention, bike patrol and communications. The 2011/12 City Budget allocates $16,647,638 for police protection services. With a 2011 population of 49,111 residents, this equates to approximately $339 per resident annually. The fiscal model applies this per capita factor to the projected build out population of the annexation areas. Like General Government costs, to estimate the costs of providing police protection to commercial and industrial development, this analysis uses factors provided in the Riverside County Guide, adjusted for inflation. Costs of Roadway Maintenance Costs associated with repairing and maintaining future paved public roads in the annexation area are calculated using a per road mile cost factor. The 2011/12 Budget allocates $4,867,200 for street maintenance and resurfacing, which includes equipment, supplies, and personnel salaries/benefits. With 159 paved public road miles in Palm Desert, this translates to $30,611 per road mile. Scenario A: Should annexation of Scenario A occur, maintenance of private roads within the gates of Sun City will continue to be the responsibility of the homeowners association. Outside of Sun City, there are three areas that currently include, or can be developed to include, paved roads: 1) existing paved roads, 2) future paved roads in the Mirasera Specific Plan, and 3) future paved roads elsewhere in the annexation area. Existing road miles are estimated at 10.5 miles and include Washington Street, Varner Road, 381h Avenue, 40th Avenue, and local roads that provide access to commercial and light industrial development near the I-10/Washington Street interchange. Buildout of the Mirasera Specific Plan will result in the construction of approximately 3.0 paved road miles. In addition, there are another 141.28 vacant acres available for development in Scenario A. To estimate the number of future road miles that could be constructed on these acres, the fiscal model uses a known road mile per square mile factor. There are currently 159 paved public road miles in the City of Palm 27 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Desert, and the existing City limits cover 25.5 square miles.20 This equates to an average of 6.2 road miles per square mile of land area. Therefore, at buildout, these 141.28 vacant acres (0.22 square miles) are projected to include approximately 1.5 paved road miles. At buildout, all of Scenario A could include an estimated total of 15.0 paved road miles. These estimates do not include commercial driveways, interior parking lots or other paved facilities that would be located on private property and be privately maintained. To project future roadway maintenance costs in Scenario A, the fiscal model applies the City's costs of $30,611/road mile to these 15.0 road miles. Scenario B: The same methodology described above is used to project road maintenance costs for Scenario B. At buildout, Scenario B is projected to include: 1) 15.0 miles of paved roadways located within Scenario A boundaries, described above; 2) ±3.5 miles of paved roadways currently existing outside Scenario A (largely limited to western Varner Road and Cook Street), and; 3) future roads constructed outside Scenario A during buildout, which are estimated below. There are approximately 301 vacant acres (0.47 square miles) outside Scenario A that could be built out to include paved roadways. Applying the ratio of 6.2 road miles per square mile of land area, this equates to 2.9 paved road miles. When added together with the miles described above, Scenario B is projected to include approximately 21.4 paved road miles at buildout. The fiscal model applies the City's costs of $30,661/roadmile to these 21.4 road miles to estimate future maintenance costs. B. Potential Costs to the Fire Fund Annexation will also generate additional expenditures for fire and ambulance services. The City contracts with the Riverside County Fire Department for these services, which are accounted for in the Fire Fund (rather than the General Fund). The 2011/12 City Budget allocates $9,207,045 for Fire Fund expenditures. Costs of Fire Protection Services — Scenario A Parcels in Scenario A are currently served by Fire Station 81 on Washington Street, just north of Avenue 38. Upon annexation, the City would assume operation of this facility and its fire engine. The annual operating costs for this fire station are approximately $1.5 million .21 The station is adequately equipped, and no new or upgraded equipment, facilities or personnel would be required upon annexation. These operating costs will be assumed by the City under both Scenarios A and B. Costs of Fire Protection Services — Scenario B 20 "Comprehensive Annual Financial Report," City of Palm Desert Finance Department, June 30, 2010, page 201. 21 Dorian Cooley, Division Chief, CALFIRE/Riverside County Fire, communication, November 14, 2011. 28 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation The eastern portion of Scenario B is served by Fire Station 81, as described above. Upon annexation, the City would assume annual costs of approximately $1.5 million for the operation of this fire station. The western portion of the annexation area in the vicinity of the Classic Club is currently served by a combination of three fire stations: 1) Station 71 in north Palm Desert, 2) Station 35 in Thousand Palms, and 3) Station 81 at Sun City (described above). A new fire station is planned in the north Palm Desert/College Park area, which is expected to directly serve this portion of the annexation area and other areas in northern Palm Desert.22 However, no construction date has been set; construction is expected to occur several years in the future. Because the actual costs of providing fire protection services to the western portion of the annexation area are unknown at this time, the fiscal model estimates future costs on a per capita basis. The City's 2011-12 Budget allocates $9,946,973 for Fire Fund expenditures. With a current City population of 49,111 residents, this equates to $203 per resident annually. The model applies this per capita figure to the potential buildout population of all land outside the Scenario A boundaries. Costs of Ambulance Services Because the annexation area includes a stretch of I-10 extending from Cook Street to Washington Street, costs associated with providing ambulance services to emergency incidents on I-10 must be considered. Between 2006 and 2010, the Fire Department responded to 372 traffic collisions along I-10 between Monterey Avenue and Washington Street.23 This equates to an average of 74 incidents per year. Fire Department data gathered for the I-10 corridor in neighboring Indio show that, over a 3-year period, an average of 54% of traffic accidents resulted in patient transport via ambulance.24 The Fire Department considers this a reasonable assumption for that portion of I-10 that would be annexed into Palm Desert. This means that, each year, ambulance personnel could expect to respond to an average of 40 emergency incidents on 1-10 in the annexation area. Ambulances would also provide emergency services to residents and development elsewhere in the annexation area. At the City's direction, a medic unit could be added to Fire Station 81 near Sun City. According to the Fire Department, first -year start-up costs for a medic unit total approximately $190,000.25 This includes the costs of an ambulance ($140,000), medic equipment ($40,000), and incidentals, such as radios and shoreline ($10,000). Annual operating costs for one ambulance staffed by 6 firefighter II medics are $940,944. These costs would be assumed by the City under both Scenarios A and B. 22 Ibid. 23 Data provided by Dorian Cooley, Division Chief, CALFIRE/Riverside County Fire, communication, October 12, 2011. 24 Dorian Cooley, Division Chief, CALFIRE/Riverside County Fire, communication, October 25, 2011. 25 Dorian Cooley, Division Chief, CALFIRE/Riverside County Fire, communication, October 13, 2011. 29 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation CITY OF PALM DESERT POTENTIAL ANNEXATION FISCAL IMPACT ANALYSIS IV. BUILDOUT ASSUMPTIONS AND COST/REVENUE ANALYSIS The build out assumptions used to calculate costs and revenues associated with potential annexation are presented in this section. A. Build Out Phasing This analysis assumes a 10-year build out projection for Scenario A. Nearly 68% of this annexation area is already built out. Where future development could occur, this analysis assumes an even distribution of development over the 10-year period. The analysis has been conducted in constant 2011 dollars; therefore, the relative costs and revenues will be as calculated at build out of the annexation area, regardless of exactly when build out occurs. A larger portion of the Scenario B annexation area is vacant and can accommodate future development. Therefore, this analysis assumes a 20-year build out for Scenario B. Depending on market conditions, growth and development in the City and the annexation area will rise and fall. An even distribution of development in 5-year increments has been assumed for the 20-year build out period. The analysis has been conducted in constant 2011 dollars; therefore, the relative costs and revenues will be as calculated at build out of the annexation area, regardless of when this occurs. That is to say that although inflationary and recessionary factors will affect the City's revenues and costs over time, the relative cost of providing services, the relative amount of revenues generated within the annexation area, and the surplus or shortfall to the City, are represented in this analysis. 30 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation B. Land Use Designations The annexation areas are currently under the jurisdiction of Riverside County, and much of the land contained within them is part of County -approved Specific Plans (see Exhibit 3). Where a Specific Plan has been approved, it is assumed that future build out will occur in accordance with the land use designations provided in the Specific Plan. Where development has taken place that is contrary to the original Specific Plan, as in the case of Xavier School in SP-225, existing development overrides the original Specific Plan. However, it is assumed that vacant land will. still develop in accordance with the original Specific Plan. Where no Specific Plan exists, build out is assumed to occur in accordance with the Palm Desert General Plan land use map. C. Build out Calculations Residential For all residential land use categories, it is assumed that 25% of the currently vacant lands so designated would be needed for ancillary facilities, including streets, parking areas, parks and community open space. Based on this assumption, the development potential for these lands is equivalent to 75% of the maximum allowable density. Land designated for up to 12 dwelling units per acre is assumed to result in the development of single-family dwelling units, whether detached or attached. Land designated for 16 units per acre and higher is assumed to accommodate multi -family units. Scenario A: PD Medium Density Residential (4-10 du/ac) • 424.5 single-family units constructed in each five-year period, for a total of 849 units at build out • Average value = $249,123 per unit Riv. Co. Medium -High Density Residential (5-8 du/ac) • 92 single-family units constructed in each five-year period, for a total of 184 units at build out • Average value = $249,123 per unit Mirasera High Density Residential (12 du/ac) • 101.5 single-family units constructed in each five-year period, for a total of 203 units at build out • Average value = $249,123 per unit Mirasera Mixed Use Residential (16 du/ac) • 63 multi -family units constructed in each five-year period, for a total of 126 units at build out • Average value=$104,525 per unit Mirasera Very High Density Residential (20-2.5 du/ac) • 622.5 multi -family units constructed in each five-year period, for a total of 1,245 units at build out 31 'NO, err Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation • Average value = $104,425 per unit Scenario B: PD Low Density Residential (0-4 du/ac) • 54 single-family units constructed in each five-year period, for a total of 216 units at build out • Average value = $249,123 per unit PD Medium Density Residential (4-10 du/ac) • 212.2 single-family units constructed in each five-year period, for a total of 849 units at build out • Average value = $249,123 per unit Riv. Co. Medium -High Density Residential (5-8 du/ac) • 59.5 single-family units constructed in each five-year period, for a total of 238 units at build out • Average value = $249,123 per unit Mirasera High Density Residential (12 du/ac) • 50.7 single-family units constructed in each five-year period, for a total of 203 units at build out • Average value = $249,123 per unit Mirasera Mixed Use Residential (16 du/ac) • 31.5 multi -family units constructed in each five-year period, for a total of 126 units at build out • Average value=$104,525 per unit Mirasera Very High Density Residential (20-25 du/ac) • 311.2 multi -family units constructed in each five-year period, for a total of 1,245 units at build out • Average value = $104,425 per unit The average housing value for single-family units is based on the "Inland Empire Quarterly Economic Report' (October 2011). The average value for multi -family units is based on recent new multi -family residential construction in the City of Palm Desert. For residential property transfers, an annual resale rate of 1 % change of ownership has been applied to single-family detached and attached units. These represent statistical averages that may be assumed to occur over the life of the annexation area, well beyond the build out year. This analysis also assumes that property transfer tax will begin in the 41' year of development (no resales in the first three years). The population of Sun City is estimated at 9,000 by the Sun City Palm Desert Community Association.26 The population of other dwelling units, existing and future, is based on 2010 U.S. Census data which indicates there are 2.08 persons/household in the City of Palm Desert. Commercial, Hotel, Business Park, and Industrial 26 Paul Brady, Sun City Palm Desert Community Association, November 2011. 32 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Commercial, business park, and industrial designations assume that building square footage will cover 22% of the lot. The remaining acreage accounts for driveways, surface parking lots, stormwater retention/detention facilities, and similar ancillary facilities. The following sub -sections summarize assumptions used to calculate various revenues that could be generated by build out of the annexation area. Commercial Scenario A: • 149,977 square feet developed in each five-year period, for a total of 299,9.54 square feet at build out. • Per square foot value of $73, based on recent new commercial (general retail) construction valuation in the City of Palm Desert. Scenario B: • 211,309 square feet developed in each five-year period, for a total of 845,237 square feet at build out. • Per square foot value of $73, based on recent new commercial (general retail) construction valuation in the City of Palm Desert. The analysis assumes no revenues from transfer of commercial properties in the annexation area and, therefore, provides for a more conservative analysis of projected revenues. Hotel Scenario A: • 25,000 square feet developed in each five-year period, for a total of 100,000 square feet at build out. • Per square foot value of $110, based on recent new hotel construction valuation in Palm Desert; or room value of $68,512, based on comparable existing highway -serving hotel development in the annexation boundary. Scenario B: • 75,000 square feet developed in each five-year period, for a total of 300,000 square feet at build out. • Per square foot value of $110, based on recent new hotel construction valuation in Palm Desert; or room value of $68,512, based on existing, comparable, highway -serving hotel development in the annexation boundary. The analysis assumes no revenues from transfer of hotel properties in the annexation area. This assumption provides for a more conservative analysis of projected revenues. Business Park Scenario A: • 224,247 square feet developed in each five-year period, for a total of 448,494 square feet at build out • Average value of $169 per square foot, based on recent new office/business park construction valuation in Palm Desert. 33 mow' 14000 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Scenario B: • 457,118 square feet developed in each five-year period, for a total of 1,828,475 square feet at build out. • Average value of $169 per square foot, based on recent new office/business park construction valuation in Palm Desert. The analysis assumes no revenues from transfer of business park properties in the annexation area. This assumption provides for a more conservative analysis of projected revenues. Light Industrial Scenario A: • 127,456.5 square feet developed in each five-year period, for a total of 254,913 square feet at build out. • Average value of $54 per square foot, based on recent new industrial construction valuation in Palm Desert. Scenario B: • 63,728 square feet developed in each five-year period, for a total of 254,913 square feet at build out. • Average value of $54 per square foot, based on recent new industrial construction valuation in the City of Palm Desert. The analysis assumes no revenues from transfer of light industrial properties in the annexation area. This assumption provides for a more conservative analysis of projected revenues. 34 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation CITY OF PALM DESERT POTENTIAL ANNEXATION FISCAL IMPACT ANALYSIS V. Cost/Revenue Analysis A. Cost/Revenue Summaries The following conclusions are based on the assumptions described above. It should be noted that all amounts are in Year 2011 dollars and are subject to rounding. For Scenario A, the total projected annual costs and revenues to the City over each five-year phase of the 10-year build out period are shown in Table 9. This table also shows the total costs and revenues that are projected annually at build out of the annexation area. For Scenario B, these costs and revenues for the 20-year build out period are shown in Table 11. It should be noted that the cost/revenue summaries do not include revenues from developer impact fees, which are one-time fees that occur at the time permits are pulled. These projections are shown in Table 10 for Scenario A and Table 12 for Scenario B. All of the tables in this section are summary tables. More detailed calculations for each revenue and cost category can be found in Appendices A and B. 35 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Table 9 Total Potential Costs/Revenues Summary Table Annexation Scenario A Build out Phase Phase I (Yrs 1-5) Phase I1 (Yrs 6-10) ANNUAL REVENUES General Fund: Property Tax $825,878 $926,206 Property Transfer Tax $541,879 $603,304 Sales Tax $1,874,090 $2,314,298 Transient Occupancy Tax $544,596 $776,804 Motor Vehicle In -Lieu Fees $37,600 $46,299 Total Annual General Fund Revenue at Phase Build out: $3,824,042 $4,666,910 Restricted Funds: Highway Users Gas Tax $273,740 $337,075 Measure A Funds $15,472 $19A40 Prop. A Fire Tax $377,532 $449,663 Structural Fire Tax $1,385,115 $1,553,380 Total Annual Restricted Fund Revenue at Phase Build out: $2,052,1.30 $2,359,558 Totals: Total Annual Revenues at Phase Build out: $5,876,172 $7,026,468 Historic Average Interest Rate, 90-day Treasury Bill: 4.39% 4.39% Anticipated Interest on Revenues: $257,964 $308,462 Total Annual Revenues with Interest at Phase Build out: $6,134,136 $7,334,930 ANNUAL COSTS General Fund. General Government $4,858,003 $5,993,713 Police Protection $4,014,933 $5,004,825 Roadway Maintenance $390,290 $459.165 Total Annual General Fund Costs at Phase Build out: $9,263,227 $11,457,703 Restricted Funds: Fire Protection $1,500,000 $1,500,000 Ambulance Services $940,944" $940,94426 Total Annual Restricted Fund Costs at Phase Build out: $2,440,9446 $2,440,94426 Totals: Total Annual Costs at Phase Build out: $11,704,171 $1.3,898,647 Projected Annual Cashtlow at Phase Build out: -$5,570,035 -$6,563,717 27 Does not include one-time (year 1) start-up ambulance costs of $190,000. 36 M CM Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Table 10 Developer Impact Fee Revenues (One Time Only)' Annexation iePnnrin A Build out Phase Phase I (Yrs 1-5) Phase II (Yrs 6-10) New Construction Tax $1,002,772 $1,002,772 Art in Public Places Fund $888,517 $888,517 Low Income Housing Mitigation Fee $350,661 $350,661 Child Care Program Fund $491,268 $491,268 Traffic Signals Fund $171,814 $171,814 Planned Drainage Fund $175,700 $17.5,700 Parks & Recreation Facilities Fund $1,609,120 $1,609,120 Total Developer Impact Fee Revenues at Phase Build out: $4,689,852 $4,689,852 ueveioper impact tees occur only once, at the time the unit is permitted. 37 In cm Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Table 11 Total Potential Costs/Revenues Summary Table Annexation Scenario R Build out Phase Phase I (Yrs 1-5) Phase I1 (Yrs 6-10) Phase III (Yrs 11-15)s TPhase IV 16-20) ANNUAL REVENUES General Fund: Property Tax $882,029 $903,515 $985,000 $1,066,316 Property Transfer Tax $473,617 $479,325 $485,032 $490,739 Sales Tax $2,078,761 $2,698,991 $3,319,220 $3,939,446 Transient Occupancy Tax $621,998 $931,610 $1,241,221 $1,550,832 Motor Vehicle In -Lieu Revenue $33,702 $38,512 $43,317 $48,106 Total Annual General Fund Revenue at Phase Build out: $4,030,108 $5.051.951 $6,073,790 $7,095,439 Restricted Funds: Highway Users Gas Tax $245,363 $280,378 $315,364 $350,227 Measure A Funds $17,642 $22,672 $27,881 $33,091 Prop. A Fire Tax $346,294 $385,328 $424,361 $463,395 Structural Fire Tax $1,380,410 $1,517,074 $1,653,737 $1,790,115 Total Annual Restricted Fund Revenue at Phase Build out: $1,989,529 $2,205,451 $2,421,344 $2,636,828 Totals: Total Annual Revenues at Phase Build out: $6,019,637 $7,257,402 $8,495,134 $9,732,267 Historic Average Interest Rate, 90-day Treasury Bill: 4.39% 4.39% 4.39% 4.39% Anticipated Interest on Revenues: $264,262 $318,600 $372,936 $427,247 Total Annual Revenues with Interest at Phase Build out: $6,283,899 $7,576,002 $8,868,071 $10,159,514 ANNUAL COSTS General Fund: General Government $4,361,259 $4,988,300 $5,615,341 $6,240,704 Police Protection $3,633,531 $4,177,883 $4,722,235 $5,265,212 Roadway Maintenance $485,184 $541,815 $598,451 $655,082 Total Annual General Fund Costs at Phase Build out: $8,479,974 $9,707,998 $10,936,028 $12,160,998 Restricted Funds: Fire Protection $1,528,907 $1,557,408 $1,585,910 $1,614,411 Ambulance Services $940,944" $940,94427 $940,94427 $940,94421 Total Annual Restricted Fund Costs at Phase Build out: $2,469,85127 $2,498,35227 $2,526,85427 $2,555,35527 Totals: Total Annual Costs at Phase Build out: $10,949,825 $12,206,350 $13,462,881 $14,716,353 Projected Annual Cashllow at Phase Build out: -$4,665,927 -$4,630,348 -$4,594,811 -$4,556,839 28 Does not include one-time (year 1) start-up ambulance costs of $190,000. 38 CM M Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Table 12 Developer Impact Fee Revenues (One time only)' Annexation SrPnnrin R Build out Phase Phase I (Yrs 1-5) Phase II (Yrs 6-1.0) Phase III (Yrs 11-15) Phase IV (Yrs 16-20) New Construction Tax $754,413 $754,413 $754,413 $754,413 Art in Public Places Fund $714,297 $714,297 $714,297 $714,297 Low Income Housing Mitigation Fee $522,899 $522,899 $522,899 $522,899 Child Care Program Fund $803,567 $803,567 $803,567 $803,567 Traffic Signals Fund $182,442 $182,442 $182,442 $182,442 Planned Drainage Fund $250,150 $250,150 $250,150 $250,150 Parks & Recreation Facilities Fund $953,415 $953,415 $953,415 $953,415 Total Developer Impact Fee Revenues at Phase Build out: $4,181,183 $4,181,183 $4,181,183 $4,181,183 Developer impact tees occur only once, at the time the unit is permitted. 39 *rr Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation B. Conclusions 1. Scenario A Annexation of Scenario A will add an estimated 14,420 residents to the City of Palm Desert. The area is partially developed, and some costs and revenues will be realized almost immediately. Build out of land in Scenario A could potentially generate $7.3 million annually in revenues by the end of the 10-year build out timeframe. The largest single revenue generator is expected to be local Sales Tax ($2.3 million annually at 10-year build out), which is related to the second highest revenue source, Structural Fire Tax ($1.5 million annually at 10-year build out). These revenues are dependent upon commercial sales tax volume in the annexation area. The costs associated with serving this new area and its population are projected to be approximately $13.8 million annually at the end of the 10-year build out period. The most significant costs are those from General Government operations ($5.9 million annually at 10- year build out), closely followed by those from Police Protection ($5.0 million annually at 10- year build out). As such, build out of the area is expected to result in an annual revenue shortfall of approximately $5.5 million at the end of the first five-year period. The shortfall is projected to grow to $6.5 million by the end of the second five-year period. This is, in part, associated with the high percentage of residential development in the area and the costs of providing services to residents, and a comparatively small percentage of commercial sales tax -generating development. Residential lands comprise nearly 47% of the entire annexation area, and commercial lands account for 4%. Developer impact fee (DIF) revenues are projected to be $4.6 million at phase build out of each phase. This assumes that development occurs evenly over the 10-year build out period. The highest sources of DIF revenue will be from the New Construction Tax and the Park & Recreation Facilities Fund, which will benefit from the future construction of new single-family and multi -family dwelling units in the annexation area, particularly those in the Mirasera Specific Plan. 2. Scenario B Annexation of Scenario B will result in a population increase of approximately 14,983 to the City of Palm Desert. The area is partially built out; some costs and revenues will be generated immediately, and others will be realized over the build out period. Projected annual revenues at the end of the 20-year build out period are projected to be approximately $10.1 million. The largest revenue source will be local Sales Tax ($3.9 million annually), followed by Structural Fire Tax ($1.7 million annually) and Transient Occupancy Tax ($1.5 million annually). 40 Terra Nova/City of Palm Desert Fiscal Impact Analysis Potential Annexation At the end of the 20-year build out period, annual costs are projected to be $14.7 million. As with Scenario A, the highest costs are associated with providing General Government services ($6.2 million) and Police Protection ($5.2 million) to existing and future residents. Build out of Scenario B is expected to generate an annual revenue shortfall of approximately $4.6 million at the end of the first five-year build out period. However, the shortfall is projected to fall slightly to $4.5 million at the end of the fourth five-year period. Like Scenario A, residential development accounts for a much greater percentage of land in the annexation area (37%) than commercial development (5%), and sales tax -generating opportunities are limited. One-time revenues resulting from Developer Impact Fees in Scenario B are expected to be $4.1 million at build out of each phase, assuming development occurs evenly over the 20-year build out period. These revenues will constitute a significant revenue source to the City over the 20- year build out period, but they are one-time revenues that will be realized only as new development occurs. 41 r5 M FISCAL IMPACT ANALYSIS FOR POTENTIAL ANNEXATION to the CITY OF PALM DESERT Prepared for City of Palm Desert 73-510 Fred Waring Drive Palm Desert, CA 92260 Prepared by A r �9 L -A Terra Nova Planning & Research, Inc.® p4 v 42635 Melanie Place, Suite 101 w Palm Desert, CA 92211 December 2011 In en Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation FISCAL IMPACT ANALYSIS for POTENTIAL ANNEXATION to the CITY OF PALM DESERT Table of Contents I. Introduction, Project Description and Demographics A. Introduction B. Project Description 1. Scenario A Annexation Area 2. Scenario B Annexation Area C. City of Palm Desert Demographics II. Potential Revenue Sources A. General Fund B. Special Revenue Funds 1. Annual Revenues 2. One -Time Revenues C. Investment Income III. Potential Costs A. General Fund B. Special Revenue Funds IV. Build out Assumptions A. Build out Phasing B. Land Use Designations C. Build out Calculations V. Cost/Revenue Analysis A. Cost/Revenue Summaries B. Conclusions 1. Scenario A 2. Scenario B 1 09 cm LIST OF EXHIBITS Exhibit 1: Scenario A Annexation Boundary Map Exhibit 2: Scenario B Annexation Boundary Map Exhibit 3: Sphere -of -Influence Map Exhibit 4: Specific Plans Map LIST OF TABLES Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Table 1: Scenario A Developed Acreage Table 2: Scenario A Undeveloped/Vacant Acreage Table 3: Scenario B Developed Acreage Table 4: Scenario B Undeveloped/Vacant Acreage Table 5: Average Value of New Construction in Palm Desert Table 6: Components of the 8.75% Sales & Use Tax Table 7: Low -Income Housing Mitigation Fees Table 8: Child Care Facilities Impact Mitigation Fees Table 9: Total Potential Costs/Revenues Summary Table — Scenario A Table 10: Developer Impact Fees Revenues — Scenario A Table 11: Total Potential Costs/Revenues Summary Table — Scenario B Table 12: Developer Impact Fees Revenues — Scenario B LIST OF APPENDICES Appendix A: Scenario A Detailed Cost and Revenue Tables Appendix B: Scenario B Detailed Cost and Revenue Tables 2 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation CITY OF PALM DESERT POTENTIAL ANNEXATION FISCAL IMPACT ANALYSIS I. INTRODUCTION, PROJECT DESCRIPTION AND DEMOGRAPHICS A. Introduction This Fiscal Impact Analysis is being prepared at the request of the Palm Desert City Council, which has received requests from property owners north of Interstate-10 (I-10) to consider annexation into the City limits. At the City's request, this report includes analysis of two scenarios (a detailed description is provided in section I.B., below): 1) Scenario A: the annexation of Sun City and limited acreage immediately adjacent to it, extending southerly across the Interstate 10 and railroads rights -of -way to the existing City limits, and 2) Scenario B: the annexation of Scenario A, and a larger expanse of land to the west extending to Cook Street, and southerly across the Interstate 10 and railroads rights -of -way to the existing City limits. The Riverside County Local Agency Formation Commission (LAFCO) is responsible for approving annexations proposed by cities in Riverside County. A comprehensive fiscal analysis is an integral part of this consideration, and Riverside County's "Guidelines to Preparing Fiscal Impact Reports" has been used as a basis for the analysis provided herein. This analysis addresses the costs and revenues that can be expected to be generated through build out of the potential annexation areas. The values, current revenues and costs associated with existing development have been calculated, and are assumed to occur immediately upon annexation. In addition, build out assumptions have been made for lands currently vacant in both scenarios. 9i vr0 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Both scenarios are analyzed in five year increments. Given that most of the parcels in scenario A are already developed, a ten-year build out period is assumed. Many of the parcels in scenario B are vacant, and therefore a twenty-year build out period is assumed for that scenario. Land use and acreage data were obtained from Riverside County Assessor's parcel rolls (October 2011), aerial photography (June 2011), and the Palm Desert GIS Department. Revenue and cost factors were obtained from a variety of sources, including the City of Palm Desert 2011-12 budget, Palm Desert Comprehensive Annual Financial Report, Palm Desert staff, Riverside County Transportation Commission, and the State of California. Factors from the Riverside County "Guide to Preparing Fiscal Impact Reports," adjusted for inflation, have also been used. The analysis applies the appropriate revenue and cost factors to existing development and undeveloped land in the annexation areas using land use designations assigned by Palm Desert and Riverside County. The revenue and cost categories used to develop this fiscal analysis are described in Sections II and III of this document, respectively. Assumptions associated with each annexation scenario are described in Section IV. The cost/revenue analysis for each scenario is provided in Section V. Both costs and revenues throughout this analysis are calculated in current dollars. No inflation adjustment has been made. Although costs and revenues will rise over the build out period of the annexation areas, the ratio of costs to revenues is not expected to change significantly. As a result, the analysis in constant dollars is representative of the framework of costs and revenues likely to be experienced by the City throughout the build out of both scenarios, and beyond. 4 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation B. Project Description The purpose of this fiscal analysis is to consider the potential financial impacts to the City of Palm Desert resulting from two potential annexation scenarios: 1) annexation of 1,640± acres encompassing Sun City, a resort residential community located north of the City of Palm Desert, and limited acreage immediately adjacent to Sun City, and 2) annexation of 2,972± acres, including those described in Scenario A and additional land to the west. Under both scenarios, it is assumed that all lands from the existing City limits northerly, including the Interstate 10 and railroad rights -of -way, would be included in the annexation. All land considered in both scenarios is currently under the jurisdiction of Riverside County. Some land is currently in the City's sphere -of -influence. 1. Scenario A Annexation Area Scenario A involves annexation of Del Webb's Sun City, an age -restricted resort -residential community north of Palm Desert, which encompasses ±1,600 acres and includes a population of approximately 9,000 residents. Sun City is generally bounded by the City of Indio on the east, I- 10 and Varner Road on the south, Washington Street on the west, and Frances Way on the north. The annexation boundary also includes land immediately south of Sun City, consisting of the Union Pacific Railroad and I-10 corridors, and ±39 acres adjacent to the southeast corner of Sun City. Exhibit 1 shows the boundaries of Scenario A. Land in this area is currently under the jurisdiction of Riverside County and contained within the Palm Desert sphere -of -influence (SOI). Please also see Exhibit 3 for SOI boundaries. M M Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Exhibit 1 Scenario A Boundary Map Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation The Scenario A annexation area encompasses a total of ±1,640 acres. Of these, ±1,304 are developed, and ±336 are vacant/undeveloped. Table 1, below, describes developed acreage in the annexation area. Table 1 Cranarin A AnnPsratinn Area >>PvPlnnpd Avrvane Existing Existing Existing Dwelling Square Hotel Existing Land Use Designation Acreage Units Foota a Rooms Population Residential 792.0 4,985 SF -- -- 9,000 Commercial 27.6 -- 277,912 -- -- Commercial - Hotel 3.6 -- 90,0004 154 -- Golf Course 435.3 -- -- -- Fire Station 3.5 -- -- -- -- I-10 Corridor/Rams 25.9 -- -- -- -- Railroad Corridor 16.7 -- -- -- -- Total: 1,304.6 4,985 SF 367,912 1.54 9,000 Includes 4,869 detached units and 116 attached units. Source: Paul Brady, Sun City Palm Desert Community Association, October 2011. SF= single-family dwelling unit 2 Paul Brady, Sun City Palm Desert Community Association, Oct. 2011. s Assumes that commercial building square footage covers 22% of the lot, with the remainder of the lot available for access roads, parking, landscaping, and other ancillary uses. 4 Estimate for 72-room and 82-room hotels. The Scenario A annexation area also includes vacant/undeveloped land. Table 2 describes how vacant acreage could develop in the future based on assigned land use designations. All land within Sun City is considered part of Specific Plan 281(SP-281), and land use designations for these parcels were assigned by Riverside County. Parcels within the City of Palm Desert's sphere -of -influence have been assumed to develop consistent with the land use designations assigned in the Palm Desert General Plan. Parcels not within the City's SOI have been assumed to develop based on the land use designations assigned in Riverside County's General Plan. Table 2 CrPn5iAn A Annnvatinn Area Varnnt AerPaue Land Use Designation Acreage Potential Dwelling Units Potential Square Footage Potential Population Non -Developable Community Association 271.0 -- -- -- Public Utility (IID, CVWD) 16.4 -- -- -- Public Agency (County, State) 5.3 -- -- Open Space/Water 10.4 -- -- Non -Developable Subtotal: 303.1 -- -- -- Developable Medium -High DensityResidential (5-8 du/ac) 30.8 184 SF -- 383- Commercial 2.0 -- 19,166 -- Developable Subtotal: 32.8 184 SF 19,166 383 Total: 335.9 184 SF 19,166 383 Assumes future residential development occurs at 75% of the maximum density permitted. SF = single-family dwelling unit. 2 Based on 184 dwelling units with 2.08 persons/household (2010 U.S. Census). s Assumes future commercial building square footage will cover 22% of the lot, with the remainder of the lot available for access roads, parking, landscaping, and other ancillary uses. 7 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation 2. Scenario B Annexation Area Under Scenario B, the annexation area is expanded to include all of Scenario A (described above) and additional lands to the west, for a total of 2,972.53 acres. This annexation area is generally bounded by Palm Desert's existing City limits on the south, the Coachella Valley Fringe -toed Lizard Preserve on the north, the City of Indio on the east, and the western boundary of the Center Pointe Specific Plan on the west. The boundaries of Scenario B are shown in Exhibit 2. Land in Scenario B is currently under the jurisdiction of Riverside County and located within both the Palm Desert SOI and the Cathedral City SOI. That portion of the annexation area that lies south and east of Frank Sinatra Drive (extended) is located in the Palm Desert SOI. Lands lying north and west of Frank Sinatra are located in Cathedral City's SOI. See Exhibit 3 for SOI boundaries as they pertain to the annexation area. Three Specific Plans (SP) approved by Riverside County are located in Scenario B. Exhibit 4 illustrates the boundaries of each Specific Plan, and a description of each is provided below. • SP-225, Center Pointe, is located at the western edge of the annexation area. It encompasses 215 acres and was approved for golf course, residential, business park, and commercial development. Nearly half (96 acres) is now developed with a private high school. This analysis assumes the remainder of the Specific Plan will develop as originally approved. • SP-151, North Star Commerce Center and Golf Club, is located along the I-10 corridor in the western portion of the annexation area. It consists of 460 acres and was originally approved for golf course and highway commercial development, including hotels and motels. The golf course and clubhouse have been built; the remaining acreage is undeveloped. • SP-281, Del Webb Sun City, is located along the eastern edge of the annexation area. It contains approximately 1,600 acres and 4,985 residential units, golf course and other recreational amenities, community facilities, and retail commercial uses near the I- 10/Washington Street interchange. SP-281 is nearly 100% developed. 0 cm M Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Exhibit 2 Scenario B Boundary Map M En Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Exhibit 3 Sphere -of -Influence Map 10 V9 cm Exhibit 4 Specific Plan Map Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation ll Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation The Scenario B annexation area encompasses a total of 2,972± acres. Of these, 1,945± are developed, and ±1,027 are vacant/undeveloped. Table 3, below, describes developed acreage in the annexation area. Table 3 Srennrin R Annexatinn Area lnevelnned Acreage Land Use Designation Acreage Existing Dwelling Units Existing Square Footage Existing Hotel Rooms Existing Population Residential 793.3 4,986 SF -- -- 9,002 Commercial 49.3 -- 485,867' -- Commercial - Hotel 3.6 -- 90,000 154 Light Industrial 56.8 -- 544,325' -- Golf Course 693.0 -- -- Agriculture 9.3 -- -- -- -- Fire Station 3.5 -- -- -- -- Private School 96.0 -- -- - -- RV Storage 5.2 - -- - -- I-10 Corridor/Rams 157.9 -- -- -- -- Railroad Corridor 76.9 -- -- -- -- Total: 1,944.8 4,986 SF 1,120,192 154 9,002 Includes 4,869 detached and 116 attached units in Sun City, and one detached unit outside Sun City. SF = single-family dwelling unit. 2 Includes an estimated 9,000 residents in Sun City (provided by Paul Brady, Sun City Community Assoc., Oct. 2011), and one additional dwelling unit at 2.08 persons/household (2010 U.S. Census). 3 Assumes commercial and industrial buildings cover 22% of the lot, with the remaining area available for access roads, parking, landscaping, and other ancillary uses. 4 Estimate for 72-room and 82-room hotels. Scenario B also includes approximately 1,027 acres that are vacant/undeveloped. Table 4 describes how vacant acreage could develop in the future based on assigned land use designations. Where Specific Plans have been approved by Riverside County, those land use designations are applied, as it is assumed that upon annexation, the City would honor the provisions of the approved Specific Plans. Most parcels outside the Specific Plans are within the City's SOI, and have been assigned land use designations in the City's General Plan. A limited number of parcels outside the Specific Plans are not within the City's SOI, and have been assumed to develop under the land use designations assigned in Riverside County's General Plan. 12 E5 ru Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Table 4 CrPnnria R Annexatinn Area Vacant Acreaee Land Use Designation Acreage Potential Dwellin Units Potential Square Foota e2 Potential Hotel Rooms Potential Po ulation3 Non -Developable Community Association 271.0 -- -- -- -- Public Utility (IID, CVWD) 16.4 -- -- -- -- Public Agency (County, State) 5.3 -- -- -- Open Space/Water 10.4 - - -- Non -Developable Subtotal: 303.1 -- -- -- Developable Low Density Residential (0-4 du/ac) 67.1 201 SF -- -- 418 Medium Density Residential (4-10 du/ac) 204.2 1,531 SF -- -- 3,184 Medium -High Density Residential (5-8 du/ac) 39.8 238 SF -- -- 495 High Density Residential (10-22 du/ac) 55.9 922 MF -- -- 1,917 Commercial 69.1 -- 622,197 -- -- Commercial - Hotel 3.0 -- 337,500 250 - Business Park 243.9 -- 2,337,341 -- Light Industrial 27.8 -- 266,412 -- -- Golf Course 13.6 -- -- -- -- Developable Subtotal: 724.6 1,970 SF 922 MF 3,563,450 250 6,014 Total: 1,027.7 2,892 3,563,450 250 6,014 Assumes future residential development will occur at 75% of the maximum density permitted. SF = single-family dwelling unit. MF = multi -family dwelling unit. 2 Assumes future building square footage will cover 22% of the lot, with the remainder of the lot available for access roads, parking, landscaping, and other ancillary uses. Hotel square footage based on estimated 1,350 square feet per room (extra square footage accounts for lobby, offices, hallways, mechanical rooms, etc.) Based on 2.08 persons/household (2010 U.S. Census). 13 L"i CM C. City of Palm Desert Demographic Profile Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation The population of the City of Palm Desert increased from 23,252 in 1990 to 41,155 by 2000, according to U.S. Census data. This represents an increase of approximately 76.9%. Census data for 2010 report a population of 48,445, representing an increase of 17.7% over the last decade. Palm Desert's 2011 population, as estimated by the California Department of Finance, is 49,111 residents. The City is also home to a significant seasonal population that is not factored into permanent population data. The City's General Plan indicates that the City's 1999 seasonal population was estimated at between 21,000 and 28,225 residents, and the City currently estimates its seasonal population to be 32,000.1 The median age in Palm Desert in 1990 was 42.3 years, which increased to 48.0 years in 2000. By 2010, the median age had increased to 53.0 years. The number of housing units in the City was 18,248 in 1990 and 28,021 in 2000. This figure reached 37,073 by 2010. The 2010 Census reports that 28.1 % of housing units in the City are for seasonal, recreational, or occasional use, further illustrating the importance of the seasonal population to the local economy. In 1990 there were an average of 2.18 persons per household in Palm Desert; by 2000, the average was 2.13. The 2010 Census indicates there is now an average of 2.08 persons per household in Palm Desert. The median household income in Palm Desert in 1990 was $37,315. This had risen by approximately 29.4% in 2000, to $48,316. The 2010 Census has not, as of this writing, released household income data; however, the City estimates its current median household income to be $59,728.2 The 1990, the U.S. Census reported that the median housing unit value in Palm Desert was $172,600. By 2000, this figure increased by 9.5%, to $189,100. In the second quarter of 2011, the median new home price in Palm Desert was $249,123, and the median value of an existing home was $278,996.3 1 City's website, Demographic Information, accessed October 25, 2011. 2 Ibid. 3 ,Inland Empire Quarterly Economic Report," prepared for WRCOG by John Husing, PhD., October 2011. 14 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation CITY OF PALM DESERT POTENTIAL ANNEXATION FISCAL IMPACT ANALYSIS II. POTENTIAL REVENUES FROM ANNEXATION Annexation of either Scenario A or Scenario B has the potential to generate revenues to the City of Palm Desert. These revenues include taxes and fees based on real estate values, consumer spending, per capita allocations from other agencies, among others. This analysis focuses on recurring revenues that the City would expect to receive on an annual basis. One-time fees for the Transportation Uniform Mitigation Fee and Developer Impact Fees are also included. Revenues will include monies that will be available through the General Fund, and can be spent for any activities or services allowed under the General Fund; and revenues that are restricted for spending on specific, predetermined services. All revenue sources are identified as being either restricted fund or General Fund revenues. A. General Fund The General Fund is the general operating fund of the City that accounts for all financial resources typically associated with government, except those which must be accounted for in restricted funds. General Fund revenues include property tax, property transfer tax, sales tax, transient occupancy tax and motor vehicle in -lieu fees. These revenue sources, as they relate to development in the proposed annexation area, have been estimated in this fiscal impact analysis. Property Tax The County of Riverside collects property tax annually at a rate of 1% of assessed valuation. Property tax revenues are allocated between the County, the jurisdiction in which the land is located (if other than the County), and a variety of other public agencies. The City of Palm Desert is a No -Low Property Tax City and receives 0% of the County's 1% collection for land within its original boundaries. However, under current State law, the City receives 7% of the County's 1% collection on lands annexed after 1978. Property tax revenues go to the City's 15 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation General Fund. Should annexation of Scenario A or B occur, the City would receive 7% of the I % property taxes collected for the area. It is important to note that property tax revenues will be reduced due to the City's mandated contributions to Education Revenue Augmentation Funds (ERAF). In fiscal year 1992, the State of California required cities and towns to shift a percentage of their property tax revenues to a countywide ERAF account to fund public schools. Based on prior annexations into the City of Palm Desert, the City receives approximately half (3.5%) of the 7% of property tax revenue collected by the County, and the remaining 3.5% is contributed to ERAF.' In this analysis, properties flagged as "exempt" in Riverside County Assessor's parcel records are not included in property tax revenue calculations. In the annexation areas, these properties are largely owned by CVWD, California Department of Transportation (CalTrans), the County of Riverside, and Sun City Palm Desert Community Association. Additional properties owned by non-profit organizations receive tax exemptions and/or reductions. These include 90.4 acres owned by Xavier High School and 245.33 acres (Classic Club golf course, maintenance building, and clubhouse) owned by the Berger Foundation.5 Property tax revenue calculations have been adjusted to account for these cases. The fiscal analysis assumes that all taxable properties within the annexation areas are taxed at a rate of 1 % of valuation, and the collection rate is 100%. Future development in the potential annexation area will include residential, commercial and quasi -industrial development. In order to determine property value, and associated property tax generation for this development, a number of sources were utilized. The following table describes the average value of new residential, commercial and industrial development in the Palm Desert. 4 Paul Gibson, Director of Finance/City Treasurer, City of Palm Desert, personal communication, October 27, 2011. 5 Based on property tax information provided by Mike Rover, Rover Armstrong, Berger Foundation representative, personal communication, November 29, 2011. 16 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Table 5 Average Value of New Construction in Palm Desert Type of Development Average Value Single-family Residential $249,123/unit Multi -family Residential $104,425/unit Commercial Lodging $110/sq. ft.2 or $68,512/room3 Commercial General/Retail $73/sq. ft. Office/Professional $169/sq. ft. Industrial $54/sq. ft. Golf Course $40,431/acre4 Source: 2°d quarter 2011 median new home value, "Inland Empire Quarterly Economic Report," prepared for WRCOG by John Husing, Ph.D., October 2011. Includes value of land and structure. 2 Based on building permit data provided by the Palm Desert Building & Safety Department, Nov. 2011. Includes value of structure only. s Based on comparable existing highway -serving hotel in the annexation area, per Riv. Co. Assessor's records, Oct. 2011. 4 Based on average of multiple developed golf course parcels in annexation area, per Riv. Co. Assessor's records, Oct. 2011. All other values are based on building permit data provided by the Palm Desert Building and Safety Department, November 2011. Includes value of structure only. Property Transfer Tax Property Transfer Tax revenues are generated when a change of property ownership occurs. For analysis purposes, estimated Property Transfer Tax revenues are calculated according to the instructions provided in the Riverside County "Guide to Preparing Fiscal Impact Reports." Factors set forth in the Guide include a tax rate of $1.10 per $1,000 (or 0.11 %) of the unencumbered property value. The County retains 50% of the tax, and 50% is transmitted to the City in which the sale occurred.6 Upon the sale of a new unit, 100% of the unit's market value is subject to the property transfer tax. Upon change of ownership of an existing unit, the unencumbered value (average 80%) of the property is subject to the property transfer tax. Change in ownership is assumed to begin in the fourth year of the project, and 10% of existing residential properties are assumed to change ownership per year. Property values are stated in year 2011. dollars. The average value of existing residential units in Sun City is $364,653.' For existing units outside Sun City, and future residential units, an average value of $249,123 is used (see table above for source). A resale rate of 1 % is assumed for single-family development. As discussed in Section III, this analysis assumes no re -sales during the build out timeframe for commercial and industrial development, as such sales are infrequent and sporadic. As a result, the analysis is more conservative, and revenues to the City from property transfer tax are likely to be higher than represented herein. 6 Assessor's Office, County of Riverside, personal communication, November 9, 2011. 7 Riverside County Assessor's parcel data, October 2011. 17 CM In Terra Nova/City of Palm Desert Fiscal Imoact Analvsis. Potential Annexation Sales Tax Sales tax in Riverside County is collected at a rate of 8.75% by the State of California. The table below describes how sales tax revenues are allocated among public agencies. Table 6 Components of the 8.75 % Sales and Use Tax Rate Jurisdiction 7.2.5% State of California 1.00% Local (City/County) 0.50% Riverside County Transportation Commission Source: "Detailed Description of the Sales and Use Tax Rate," California State Board of Equalization; and Palm Desert Budget 2010/1.1, p. 2-2. Of the sales tax collected by the State, one percent (1.0%) is allocated to the jurisdiction in which the sale occurred. The fiscal analysis estimates total taxable sales that could be generated from commercial development at build out of each proposed annexation scenario, then calculates 1 % of taxable sales to determine how much sales tax revenue would be generated to the City. The fiscal model addresses taxable sales generated by existing and potential future development for each annexation scenario. Where taxable sales for existing development are known, actual figures are used. This includes annual taxable sales of $2.46 million generated by restaurants and golf pro shops within the boundaries of Sun City.8 Where taxable sales are unknown, the analysis uses assumptions to estimate taxable sales. The analysis assumes that future retail commercial development will result in 22% lot coverage, and 90% of the net floor space will be dedicated to the sale of taxable goods. Average annual sales estimators from the Urban Land Institute's (ULI) 2008 "Dollars and Cents of Shopping Centers" are applied to the number of square feet dedicated to taxable sales. All existing and future commercial development in the annexation areas is considered Neighborhood Commercial in this analysis. The fiscal analysis calculates sales tax generation for Neighborhood Commercial development, based on ULI definitions: • "Neighborhood Commercial" development includes neighborhood scale shopping centers conveniently located near residential areas, and a variety of smaller commercial centers, specialty retail shops and personal service businesses. These centers sell merchandise for daily living, such as food, drugs, and hardware. This type of development generates an annual average of $326.13 per square foot in taxable sales. In Scenario B, some lands are designated for "business park" development. It is expected that these lands will develop with a mix of light industrial and office uses. Although small amounts of sales tax revenue are likely to be generated by this development, the amount is expected to be negligible. As a result, business park or industrial development is assumed to generate no taxable sales in this analysis. 8 Paul Brady, Sun City Palm Desert Community Association, personal communication, October/November 2011. 18 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Transient Occupancy Tax Transient Occupancy Tax (TOT) is collected from individuals when they occupy a hotel or motel room. In Palm Desert, TOT is collected at a rate of 9%. Potential TOT revenues are based on the number of hotel/motel rooms that are or could be constructed on annexation lands, the average nightly room rate charged, and the average occupancy rate. There are currently two hotels with154 hotel rooms in the annexation areas, in two hotels. The room rates at these properties are lower than the current average room rate in the City. Therefore, room rates have been calculated at $95.00 per night. In addition, annualized occupancy has been assumed to be 65%. Approximately 3 acres are designated for hotel/motel development in SP-151, and this analysis assumes that two 125-room hotels will be constructed on these parcels in the future. Room rates for future development, particularly future development located on the golf course, are expected to be consistent with current City average room rates of $145.00/night. This was determined using total hotel room sales for 2009/10 ($76 million), total number of hotel/motel rooms in Palm Desert (2,216), and an estimated occupancy rate of 65%. This rate is an average that reflects both the world -class hotels that characterize Palm Desert's resort and tourism industry, and more modest hotels/motels located throughout the city. As tourism activity can be expected to fluctuate seasonally in the region on an annualized basis, a 65% occupancy rate is conservative. Motor Vehicle In -Lieu Fees Motor Vehicle In -Lieu Fees, or Motor Vehicle License Fees, are taxes on ownership of a registered vehicle. They are collected by the State of California and allocated to local jurisdictions on a monthly basis. These fees are levied on motorists in -lieu of a local property tax. During FY10/11, the City of Palm Desert received $167,177 in motor vehicle in -lieu fees.9 The State uses a City population figure of 52,067, which translates to $3.21 per capita annually. Other Revenue Sources Not Addressed The General Fund includes other revenue sources that will not be affected directly by annexation or will be one-time fees, and therefore, are not addressed in this analysis. These include timeshare mitigation fees, business license taxes, building and grading permit fees, plan check fees, and franchise fees. Timeshare development is not anticipated in the annexation area, so revenues from timeshare mitigation fees are not applicable to this project. Business license taxes will increase with annexation; however, these revenues are highly variable and development - specific, and estimates are not considered useful to this analysis. Building/grading permit fees and plan check fees are also based on specific development plans, which are determined at the time a project is proposed. B. Special Revenue Funds Special Revenue Funds are used to account for revenues/expenditures that are legally restricted for specific purposes. Each Special Revenue Fund that will be impacted by annexation is described below. 9 Compilation of Motor Vehicle In -Lieu data from State Controller's Office, July 2010-June 2011. 19 `rr Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation 1. Annual Revenues The following Special Revenue Funds receive recurring revenues on an annual basis. Highway User Gas Tax Fund The State of California imposes a per gallon tax on all gasoline purchases. A portion of these revenues are allocated to counties and cities throughout the state. During FYI 0/11, the City of Palm Desert received $1,216,771 in Gas Tax revenue, or $23.37 per capita annually.W Measure A Funds Of the 8.75% sales tax collected in Riverside County, 0.50% is contributed to the Measure A Fund for regional and local transportation projects. Of Measure A funds available countywide, approximately 24% is distributed to the Coachella Valley region." These funds are further allocated for specific purposes: 50% for State highways and regional road improvements, 35% for local streets and roads, and 15% for transit (Sunline Transit Agency). Of the 35% for local streets and roads, about 20% goes to the City of Palm Desert. This percentage is based on a formula that accounts for Palm Desert's total number of dwelling units and total taxable sales. Fire Fund The City's Fire Fund receives revenue from two sources: 1) Proposition A Fire Tax, and 2) Structural Fire Tax. Each is described below. In 1982, the residents of Palm Desert approved the Proposition A Fire Tax for upgrading the City's fire protection and prevention capabilities. Revenues are restricted for the purposes of obtaining, furnishing, operating and maintaining fire protection/prevention services, equipment and apparatus. Annual residential tax rates range from $30 per vacant residential lot, to $45 for rental apartments with 4+ units, to $60 per single-family dwelling unit. Non-residential rates are $60 for buildings equal to or less than 2,600 sq. ft. For larger non-commercial buildings, rates are building -specific and based on a formula that calculates fire flow requirements by square footage and takes into account the use of fire -resistive construction materials.12 This analysis estimates future Proposition A Fire Tax revenues for residential units, vacant parcels, and smaller non-commercial buildings. However, it does not attempt to project tax revenues for larger non-commercial buildings, given that the parameters required to project these revenues are building -specific and unknown at this time. In this regard, this analysis is conservative, and actual Proposition A Fire Tax revenues are expected to be higher than shown herein. The second revenue component of the Fire Fund is the Structural Fire Tax. For land not in a redevelopment area (this includes the proposed annexation areas), tax revenues are 5.87% of the 10 Compilation of Highway Users Tax data from State Controller's Office, July 2010-June 2011. 11 Andrea Zureick, Riverside County Transportation Commission, personal communication, November 1, 2011. 12 Rates provided by Mark Dana, Willdan Financial, November 3, 2011. %ni Terra Nova/City of Palm Desert Fiscal Impact Analvsis, Potential Annexation 1 % property tax collected by Riverside County.13 It is remitted to the City's Fire Fund and restricted for the purpose of providing fire protection and prevention services. 2. One -Time Revenues The following Special Revenue Funds receive one-time revenues as a direct result of new development. These are typically paid to the City at the time building permits are issued. New development in the potential annexation areas would be required to contribute to these funds. Existing development would not pay these fees. Because they are one-time rather than recurring annual fees, they are not included in Cost/Revenue Summary Tables for the annexation scenarios. Instead, they are summarized separately in Table 10 for Scenario A, and Table 12 for Scenario B. New Construction Tax Fund Revenues to this fund are from taxes collected upon application for a building permit for the construction of any new building, addition or trailer space in the city. Funds are restricted for the acquisition and development of public facilities, such as parks, playgrounds and public structures. Fees are $0.40 per square foot. Art in Public Places Fund This fund is reserved for maintaining public artwork throughout the City. For residential development, the fee is 0.25 of 1% valuation of the structure; individual single-family dwellings not in a development are exempt for the first $100,000. For non-residential development, the fee is 0.50 of 1 % valuation of the structure. Low Income Housing Mitigation Fee Fund Revenues from this fund pay for projects and programs that benefit low and moderate income households. All commercial development must pay this fee at the issuance of building permits, according to the fee schedule below. Table 7 Low Income Housine MitiLyation Fees Development Type Fee General Mixed Commercial $1.00/sq. ft. Professional Office $0.50/sq. ft. Industrial $0.33/sq. ft. Resort Hotel $1,000/room Non -Resort Hotel $620/room Source: Palm Desert Building & Safety Department. 13 "Comprehensive Annual Financial Report," City of Palm Desert Finance Department, June 30, 2010, page 186. 21 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Child Care Program Fund This fund is used for the purpose of providing child care programs. Fees are collected for all new non-residential square footage according to the fee schedule below. Table 8 Child Care Facilities Impact Mitieation Fees Development Type Fee Light Industrial $0.47/sq. ft. Hotel/Visitor Uses $0.77/sq. ft. Retail/Service Commercial $0.90/sq. ft. Office Uses $1.15/sq.ft. Source: Palm Desert Building Department. Traffic Signals Fund Revenues to this fund are collected for residential, commercial and industrial developments either at the time grading permits are paid or prior to the approval of the final map. Fees for residential development are $50 per unit. Fees for commercial development are $500 per 1,000 sq. ft. of building area, and fees for industrial development are $500 per acre. la Planned Drainajize Fund Drainage impact fees are collected to fund off -site drainage improvements.15 Fees are dependent upon the location of development, as described below: • South of Whitewater River = $4,000/acre • Between Whitewater and Sand Ridge = $1,500/acre • Between Sand Ridge and I-10 = $1,000/acre No fee has been established for land in the potential annexation areas (north of I-10). Since the annexation areas are most closely located to I-10, this analysis uses the $1,000/acre fee shown above. Park and Recreation Facilities Fund This fund is restricted for expenditures related to park development, maintenance and equipment. Fees are collected for residential subdivisions only, according to the following formula.16 Fee = (# of D.U.'s)(2.149)(5) X Current Land Value Per Acre 1,000 Other Funds Other Special Revenue Funds identified in the City Budget are impacted by new development, but do not apply to the annexation area. Landscape/Lighting District Funds only apply to specific 14 Palm Desert Department of Public Works. 15 Ibid. 16 Ibid. 22 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation neighborhoods or regions of the City for the purpose of providing landscape and lighting maintenance. These districts are established upon voter approval, and residents in the potential annexation area will contribute to such a fund only upon voter approval. 1' Such funds are revenue -neutral and will not generate "extra" revenue for the City. New development in the potential annexation area will also generate revenues that are collected by the City, but transferred to other agencies. These include, but are not limited to, TUMF mitigation fees transmitted to CVAG, school impact fees remitted to the appropriate school district, and Strong Motion Instrumentation Program (SMIP) fees transmitted to the State. C. Investment Income The fiscal analysis assumes that the City will receive investment earnings on all annual revenues. To project potential investment earnings, the fiscal model applies the historical average interest rate of the 90-Day Treasury Bill. During the 25-year period from 1985 through 2010, the average interest earned on the 90-Day Treasury Bill was 4.39%.18 The fiscal model calculates investment income for all annual revenues calculated in this report. 1' Lauri Aylaian, Community Development Director, City of Palm Desert, personal communication, October 26, 2011. is Average historical interest rate determined using data from Table B.3, "Riverside County Guide to Preparing Fiscal Impacts Reports," January 1995; and "3-Month Treasury Constant Maturity Rates," from the Federal Reserve Board of Governors, as provided by The Financial Forecast Center. 23 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation CITY OF PALM DESERT POTENTIAL ANNEXATION FISCAL IMPACT ANALYSIS III. POTENTIAL COSTS FROM POTENTIAL ANNEXATION A. Potential Costs to the General Fund Annexation of developed and undeveloped acreage north of I-10 will not only generate additional revenues, but will also generate additional municipal costs. There will be expenditures for general government services, as well as the expansion and/or extension of infrastructure, utilities, roads and other public services, particularly public safety. The fiscal model projects the City's costs of providing general government services, public safety, and transportation/roadway maintenance to lands in the annexation area. Costs of General Government Costs of General Government are funded through the City's General Fund. Costs associated with general government include city-wide services, such as employee salaries and benefits, postage, printing, travel, equipment maintenance and repairs, contract services, computers, vehicles and other items necessary for the day-to-day functioning of government. They also include public and community services, such as code compliance and animal control, as well as municipal and support services. The City's 2011/12 Budget allocates $22,317,397 for the above -referenced general government services. This does not include expenditures for police protection and roadway maintenance, which are discussed and calculated separately below. For residential development, this fiscal analysis translates the costs of general government to a per capita figure. Given the City's 2011 population of 49,111, the annual cost of providing general government services to City residents is approximately $454 per capita. This factor is then applied to the projected build out population of the annexation areas. The result is the 24 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation estimated cost of providing general government services to residents living in the annexation areas. In order to capture costs for provision of General Government to commercial and industrial development, it was necessary to derive factors based on a per acre or per square foot basis. No such factors were available through the City. Therefore, this analysis uses factors provided in the Riverside County Guide, adjusted for inflation, to arrive at costs based on year 2011 dollars. Costs of Police Protection The same method used to calculate general government costs has been used to project costs of providing law enforcement services to existing and future residents in the annexation areas. The City contracts with the Riverside County Sheriff's Department for a wide range of police services, including patrol, traffic management, investigations, school resource programs, crime prevention, bike patrol and communications. The 2011/12 City Budget allocates $16,647,638 for police protection services. With a 2011 population of 49,111 residents, this equates to approximately $339 per resident annually. The fiscal model applies this per capita factor to the projected build out population of the annexation areas. Like General Government costs, to estimate the costs of providing police protection to commercial and industrial development, this analysis uses factors provided in the Riverside County Guide, adjusted for inflation. Costs of Roadway Maintenance Costs associated with repairing and maintaining future paved public roads in the annexation area are calculated using a per road mile cost factor. The 2011/12 Budget allocates $4,867,200 for street maintenance and resurfacing, which includes equipment, supplies, and personnel salaries/benefits. With 159 paved public road miles in Palm Desert, this translates to $30,611 per road mile. The vast majority of land in Scenario A is already developed, and roads are already built. Maintenance of private roads within the gates of Sun City will continue to be the responsibility of the homeowners association. Outside of Sun City, there are an estimated 3.5 miles of paved roads, largely limited to Washington Street and Varner Road, but also including local roads that provide access to commercial development. This estimate does not include commercial driveways, interior parking lots or other paved facilities that would be located on private property and be privately maintained. To project future roadway maintenance costs in Scenario A, the fiscal model applies the City's per road mile costs to these 3.5 miles. For Scenario B,.there are approximately 10.5 existing paved road miles. This includes 3.5 miles on land within Scenario A boundaries (described above), and approximately 7 miles elsewhere, including Varner Road, Cook Street north of I-10, and roads within the light industrial area at the northwest corner of I-10 and Washington Street. 25 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation As build out occurs on currently vacant lands in Scenario B, additional paved roads will be constructed. The fiscal model estimates future road miles by using a known road mile per square mile factor. There are currently 159 paved public road miles in Palm Desert, and the existing City limits cover 25.5 square miles.19 This equates to an average of 6.2 road miles per square mile of land area. The fiscal model applies this factor to all acreage outside Scenario A to estimate the number of paved road miles anticipated at build out. B. Potential Costs to the Fire Fund Annexation will also generate additional expenditures for fire and ambulance services. The City contracts with the Riverside County Fire Department for these services, which are accounted for in the Fire Fund (rather than the General Fund). The 2011/12 City Budget allocates $9,207,045 for Fire Fund expenditures. Costs of Fire Protection Services The eastern portion of the annexation area, which includes Sun City, is currently served by Fire Station 81 on Washington Street, just north of Avenue 38. Upon annexation, the City would assume operation of this facility and its fire engine. The annual operating costs for this fire station are approximately $1.5 million.20 The station is adequately equipped, and no new or upgraded equipment, facilities or personnel would be required upon annexation. These operating costs will be assumed by the City under both Scenarios A and B. The western portion of the annexation area in the vicinity of the Classic Club is currently served by a combination of three fire stations: 1) Station 71 in north Palm Desert, 2) Station 35 in Thousand Palms, and 3) Station 81 at Sun City (described above). A new fire station is planned in the north Palm Desert/College Park area, which is expected to directly serve this portion of the annexation area and other areas of northern Palm Desert.21 However, no construction date has been set, and construction is expected to occur several years in the future. Costs of Ambulance Services Because the annexation area includes a stretch of I-10 extending from Cook Street to Washington Street, costs associated with providing ambulance services to emergency incidents on I-10 must be considered. Between 2006 and 2010, the Fire Department responded to 372 traffic collisions along I-10 between Monterey Avenue and Washington Street.22 This equates to an average of 74 incidents per year. Fire Department data gathered for the I-10 corridor in neighboring Indio show that, over a 3-year period, an average of 54% of traffic accidents resulted in patient transport via ambulance.23 The Fire Department considers this a reasonable assumption for that portion of I-10 that would be annexed into Palm Desert. This means that, each year, ambulance personnel could expect to respond to an average of 40 emergency incidents 19 "Comprehensive Annual Financial Report," City of Palm Desert Finance Department, June 30, 2010, page 201. 20 Dorian Cooley, Division Chief, CALFIRE/Riverside County Fire, communication, November 14, 2011. 21 Ibid. 22 Data provided by Dorian Cooley, Division Chief, CALFIRE/Riverside County Fire, communication, October 12, 2011. 23 Dorian Cooley, Division Chief, CALFIRE/Riverside County Fire, communication, October 25, 2011. 26 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation on I-10 in the annexation area. Ambulances would also provide emergency services to residents and development elsewhere in the annexation area. At the City's direction, a medic unit could be added to Fire Station 81 near Sun City. According to the Fire Department, first -year start-up costs for a medic unit total approximately $190,000.14 This includes the costs of an ambulance ($140,000), medic equipment ($40,000), and incidentals, such as radios and shoreline ($10,000). Annual operating costs for one ambulance staffed by 6 firefighter II medics are $940,944. These costs would be assumed by the City under both Scenarios A and B. 24 Dorian Cooley, Division Chief, CALFIRE/Riverside County Fire, communication, October 13, 2011. 27 stir+ Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation CITY OF PALM DESERT POTENTIAL ANNEXATION FISCAL IMPACT ANALYSIS IV. BUILDOUT ASSUMPTIONS AND COST/REVENUE ANALYSIS The build out assumptions used to calculate costs and revenues associated with potential annexation are presented in this section. A. Build Out Phasing This analysis assumes a 10-year build out projection for Scenario A. Nearly all of this annexation area is already built out, and only a few pockets of vacant land are available for future development. Where future development could occur, this analysis assumes an even distribution of development over the 10-year period. The analysis has been conducted in constant 2011 dollars; therefore, the relative costs and revenues will be as calculated at build out of the annexation area, regardless of exactly when build out occurs. A substantial portion of the Scenario B annexation area is vacant and can accommodate future development. Therefore, this analysis assumes a 20-year build out for Scenario B. Depending on market conditions, growth and development in the City and the annexation area will rise and fall. An even distribution of development in 5-year increments has been assumed for the 20-year build out period. The analysis has been conducted in constant 2011 dollars; therefore, the relative costs and revenues will be as calculated at build out of the annexation area, regardless of when this occurs. That is to say that although inflationary and recessionary factors will affect the City's revenues and costs over time, the relative cost of providing services, the relative amount of revenues generated within the annexation area, and the surplus or shortfall to the City, are represented in this analysis. 28 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation B. Land Use Designations The annexation areas are currently under the jurisdiction of Riverside County, and much of the land contained within them is part of County -approved Specific Plans (see Exhibit 4). Where a Specific Plan has been approved, it is assumed that future build out will occur in accordance with the land use designations provided in the Specific Plan. Where development has taken place that is contrary to the original Specific Plan, as in the case of Xavier School in SP-225, existing development overrides the original Specific Plan. However, it is assumed that vacant land will still develop in accordance with the original Specific Plan. Where no Specific Plan exists, build out is assumed to occur in accordance with the Palm Desert General Plan land use map, which applies land use designations to the City's SOI. Where no Specific Plan exists, and land is outside the City's SOI, land use designations from Riverside County's General Plan (Western Coachella Valley Land Use Plan) are applied. C. Build out Calculations Residential For all residential land use categories, it is assumed that 25% of the currently vacant lands so designated would be needed for ancillary facilities, including streets, parking areas, park and community open space. Based on this assumption, the development potential for these lands is equivalent to 7.5% of the maximum allowable density. Land designated for Low (0-4 du/ac), Medium (4-10 du/ac), and Medium -High (5-8 du/ac) Density residential development is assumed to result in the development of single-family dwelling units, whether detached or attached. Land designated for High Density (10-22 du/ac) residential uses is assumed to accommodate 100% multi -family units. Low Density Residential Scenario B only: • 50 single-family units constructed in each five-year period, for a total of 201 units at build out. • Unit value at $249,123 per unit. Medium Density Residential Scenario B only: • 383 single-family units constructed in each five-year period, for a total of 1,531 units at build out. • Unit value at $249,123 per unit. pm Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Medium High Density Residential Scenario A: • 92 single-family units constructed in each five-year period, for a total of 184 units at build out. • Unit value of $249,123 per unit. Scenario B: • 124 single-family units constructed in each five-year period, for a total of 495 units at build out. • Unit value of $249,123 per unit. High Density Residential Scenario B only: • 230 multi -family units constructed in each five-year period, for a total of 922 units at build out. • Unit value of $104,425 per unit. For residential property transfers, an annual resale rate of 1 % change of ownership has been applied to single-family detached and attached units. These represent statistical averages that may be assumed to occur over the life of the annexation area, well beyond the build out year. This analysis also assumes that property transfer tax will begin in the 4`h year of development (no resales in the first three years). The population of Sun City is estimated at 9,000 by the Sun City Palm Desert Community Association.25 The population of other dwelling units, existing and future, is based on 2010 U.S. Census data which indicates there are 2.08 persons/household in the City of Palm Desert. Commercial, Hotel, Business Park, and Industrial Commercial, business park, and industrial designations assume that building square footage will cover 22% of the lot. This accounts for driveways, surface parking lots, stormwater retention/detention facilities, and similar ancillary facilities. The following sub -sections summarize assumptions used to calculate various revenues that could be generated by build out of the annexation area. Commercial Scenario A: • 9,583 square feet developed in each five-year period, for a total of 19,166 square feet at build out. 25 Paul Brady, Sun City Palm Desert Community Association, November 2011. 30 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation • Per square foot value of $73, based on recent new commercial (general retail) construction valuation in the City of Palm Desert. Scenario B: • 155,549 square feet developed in each five-year period, for a total of 622,197 square feet at build out. • Per square foot value of $73, based on recent new commercial (general retail) construction valuation in the City of Palm Desert. The analysis assumes no revenues from transfer of commercial properties in the annexation area. This assumption provides for a more conservative analysis of projected revenues. Hotel Scenario B only: 0 84,375 square feet developed in each five-year period, for a total of 337,500 square feet at build out. • Per square foot value of $110, based on recent new commercial (general retail) construction valuation in the City of Palm Desert. Per room value of $68,512, based on existing, comparable, highway -serving hotel development in the annexation areas. The analysis assumes no revenues from transfer of hotel properties in the annexation area. This assumption provides for a more conservative analysis of projected revenues. Business Park Scenario B only: • 584,335 square feet developed in each five-year period, for a total of 2,337,341 square feet at build out. • Per square foot value of $169, based on recent new commercial (general retail) construction valuation in the City of Palm Desert. The analysis assumes no revenues from transfer of business park properties in the annexation area. This assumption provides for a more conservative analysis of projected revenues. Light Industrial Scenario B only: • 66,603 square feet developed in each five-year period, for a total of 266,412 square feet at build out. • Per square foot value of $54, based on recent new commercial (general retail) construction valuation in the City of Palm Desert. The analysis assumes no revenues from transfer of light industrial properties in the annexation area. This assumption provides for a more conservative analysis of projected revenues. 31 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation CITY OF PALM DESERT POTENTIAL ANNEXATION FISCAL IMPACT ANALYSIS V. Cost/Revenue Analysis A. Cost/Revenue Summaries The following conclusions are based on the assumptions described above. It should be noted that all amounts are in Year 2011 dollars and are subject to rounding. For Scenario A (annexation of Sun City and limited adjacent acreage), the total projected annual costs and revenues to the City over each five-year phase of the 10-year build out period are shown in Table 9. This table also shows the total costs and revenues that are projected annually at build out of the annexation area. For Scenario B (annexation of Sun City and additional lands to the west), these costs and revenues for the 20-year build out period are shown in Table 11. It should be noted that the cost/revenue summaries do not include revenues from developer impact fees, which are one-time fees that occur at the time permits are pulled. These projections are shown in Table 10 for Scenario A and Table 12 for Scenario B. All of the tables in this section are summary tables. More detailed calculations for each revenue and cost category can be found in Appendices A and B. 32 cm M Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Table 9 Total Potential Costs/Revenues Summary Table Annexation Scenario A Build out Phase Phase I (Yrs 1-5) Phase 1I (Yrs 6-10) ANNUAL REVENUES General Fund: Property Tax $680,122 $688,424 Property Transfer Tax $414,377 $420,617 Sales Tax $868,501 $896,629 Transient Occupancy Tax $312,387 $312,387 Motor Vehicle In -Lieu Fees $29,507 $30,119 Total Annual General Fund Revenue at Phase Build out: $2,304,894 1 $2,348,175 Restricted Funds: Highway Users Gas Tax $214,822 $219,274 Measure A Funds $7,295 $7,532 Prop. A Fire Tax $305,520 $311,100 Structural Fire Tax $1,140,661 $1,154,584 Total Annual Restricted Fund Revenue at Phase Build out: $1,668,298 $1,692,490 Totals: Total Annual Revenues at Phase Build out: $3,973,192 $4,040,665 Historic Average Interest Rate, 90-day Treasury Bill: 4.39% 4.39% Anticipated Interest on Revenues: $174,423 $177,385 Total Annual Revenues with Interest at Phase Build out: $4,147,615 $4,218 050 ANNUAL COSTS General Fund: General Government $4,176,256 $4,262,849 Police Protection $3,131,380 $3,196,442 Roadway Maintenance $107,139 $107,139 Total Annual General Fund Costs at Phase Build out: $7,414,775 $7,566,429 Restricted Funds: Fire Protection $1,500,000 $1,500,000 Ambulance Services $940,94426 $940,94426 Total Annual Restricted Fund Costs at Phase Build out: $2,440,9446 $2,440,94426 Totals: Total Annual Costs at Phase Build out: $9,855,719 $10,007,373 Projected Annual Cashflow at Phase Build out: -$5,708,103 -$5,789,323 26 Does not include one-time (year 1) start-up ambulance costs of $190,000. 33 M E5 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Table 10 Developer Impact Fee Revenues (One Time Only) Annexation Scenario A Build out Phase Phase I (Yrs 1-5) Phase II (Yrs 6-10) New Construction Tax $95,833 $95,833 Art in Public Places Fund $60,796 $60,796 Low Income Housing Mitigation Fee $9,583 $9,583 Child Care Program Fund $8,625 $8,625 Traffic Signals Fund $9,392 $9,392 Planned Drainage Fund $16,400 $16,400 Parks & Recreation Facilities Fund $99,676 $99,676 Total Developer Impact Fee Revenues at Phase Build out: $300,305 $300,305 ' Developer impact fees occur only once, at the time the unit is permitted. 34 En Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Table 11 Total Potential Costs/Revenues Summary Table Annexation Scenario B Build out Phase Phase I (Yrs 1-5) Phase 11 (Yrs 6-10) Phase III (Yrs 11-15) Phase IV (Yrs 16-20) T ANNUAL REVENUES General Fund. Property Tax $833,737 $926,741 $1,019,745 $1,112,597 Property Transfer Tax $487,404 $494,033 $500,506 $507.135 Sales Tax $1,961,326 $2,447,242 $2,933,159 $3,301,663 Transient Occupancy Tax $505,894 $699,401 $892,908 $1,086,41.5 Motor Vehicle In -Lieu Revenue $33,727 $38,563 $43,393 $48,203 Total Annual General Fund Revenue at Phase Build out: $3,822,088 $4,605,981 $5,389,712 $6,056,014 Restricted Funds: Highway Users Gas Tax $245,556 $280,763 $315,942 $350,938 Measure A Funds $16,475 $20,557 $24,639 $27,734 Prop. A Fire Tax $347,333 $389,715 $432,098 $474,480 Structural Fire Tax $1,398,296 $1,554,277 $1,710,258 $1,865,984 Total Annual Restricted Fund Revenue at Phase Build out: $2,007,659 $2,245,312 $2,482,936 $2,719,136 Totals: Total Annual Revenues at Phase Build out: $5,829,747 $6,851,293 $7,872,648 $8,775,150 Historic Average Interest Rate, 90-day Treasury Bill: 4.39% 4.39% 4.39% 4.39% Anticipated Interest on Revenues: $255,926 $300,772 $345,609 $385,229 Total Annual Revenues with Interest at Phase Build out: $6,085,673 $7,152,065 $7,872,648 $8,775,150 ANNUAL COSTS General Fund: General Government $4,788,342 $5,479,555 $6,170,767 $6,860,139 Police Protection $3,654,346 $4,205,138 $4,755,929 $5,305,345 Roadway Maintenance $420,136 $518,856 $617,583 $716,305 Total Annual General Fund Costs at Phase Build out: $8,862,825 $10,203,549 $11,544,280 $12,881,789 Restricted Funds: Fire Protection $1,500,000 $1,500,000 $1,500,000 $1,500,000 Ambulance Services $940,94427 $940,94427 $940,944" $940,944" Total Annual Restricted Fund Costs at Phase Build out: $2,440,9442' $2,440,94421 $2,440,94427 $2,440,94417 Totals: Total Annual Costs at Phase Build out: $11,303,769 $12,644,493 $13,985,224 $15,322,733 Projected Annual Cashflow at Phase Build out: -$5,21.8,096 -$5,492,428 -$6,112,576 -$6,547,583 27 Does not include one-time (year 1) start-up ambulance costs of $190,000. 35 CM CM Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation Table 12 Developer Impact Fee Revenues (One time only)' Annexation Scenario B Build out Phase Phase I (Yrs 1-5) Phase II (Yrs 6-10) Phase III (Yrs 11-15) Phase IV (Yrs 16-20) New Construction Tax $1,083,345 $1,083,345 $1,083,345 $1,083,345 Art in Public Places Fund $1,008,448 $1,008,455 $1,008,461 $1,008,467 Low Income Housing Mitigation Fee $518,446 $518,446 $518,446 $518,446 Child Care Program Fund $917,252 $917,252 $917,252 $917,252 Traffic Signals Fund $164,587 $164,587 $164,587 $164,587 Planned Drainage Fund $256,925 $256,925 $256,92.5 $256,925 Parks & Recreation Facilities Fund $958,385 $958,385 $958,385 $958,385 Total Developer Impact Fee Revenues at Phase Build out: $4,907,389 $4,907,395 $4,907,402 $4,907,408 Developer impact fees occur only once, at the time the unit is permitted. 36 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation B. Conclusions 1. Scenario A Annexation of Scenario A will add an estimated 9,383 residents to the City of Palm Desert. The area is largely developed, and costs and revenues will be realized almost immediately. Build out of land in Scenario A could potentially generate $4.2 million annually in revenues by the end of the 10-year build out timeframe. The largest single revenue generator is expected to be Structural Fire Tax ($1.15 million annually at 10-year build out), which is dependent upon the second highest revenue source, local Sales Tax ($896,629 annually at 10-year build out). These revenues are dependent upon commercial sales tax volume in the annexation area. The costs associated with serving this new area and its population are projected to be approximately $10.0 million annually at the end of the 10-year build out period. The most significant costs are those from General Government operations ($4.26 million annually at 10- year build out), closely followed by those from Police Protection ($3.1.9 million annually at 10- year build out). As such, build out of the area is expected to result in an annual revenue shortfall of approximately $5.8 million at the end of the 10-year build out period. This is, in part, associated with the high percentage of residential development in the area and the costs of providing services to residents, and a comparatively small percentage of commercial sales tax -generating development. Residential lands comprise nearly 50% of the entire annexation area, and commercial lands account for 2%. Developer impact fee (DIF) revenues are projected to be $300,305 at phase build out of each phase. This assumes that development occurs evenly over the 10-year build out period. DIF revenues will be limited given the fact that land in the annexation area is largely developed already. The highest sources of DIF revenue will be from the New Construction Tax and the Park & Recreation Facilities Fund, which will benefit from the future construction of new single- family dwelling units southeast of Sun City. 2. Scenario B Annexation of Scenario B will result in a population increase of approximately 15,016 to the City of Palm Desert. The area is partially built out; some costs and revenues will be generated immediately, and others will be realized over the build out period. Projected annual revenues at the end of the 20-year build out period are projected to be approximately $8.8 million. The largest revenue source will be local sales tax ($3.3 million annually), followed by Structural Fire Tax ($1.9 million annually) and property tax ($1.1 million annually). 37 Terra Nova/City of Palm Desert Fiscal Impact Analysis, Potential Annexation At the end of the 20-year build out period, annual costs are projected to be $1.5.3 million. As with Scenario A, the highest costs are associated with providing General Government services ($6.7 million) and Police Protection ($5.3 million) to existing and future residents. Build out of Scenario B is expected to generate an annual revenue shortfall of approximately $6.5 million at the end of the 20-year build out period. Like Scenario A, residential development accounts for a much greater percentage of land in the annexation area (39%) than commercial development (4%), and sales tax -generating opportunities are limited. One-time revenues resulting from Developer Impact Fees in Scenario B are expected to be $4.9 million at build out of each phase, assuming development occurs evenly over the 20-year build out period. This is significantly higher than those generated by build out of Scenario A, and is due to the fact that Scenario B has 724.6 vacant but developable acres, while Scenario A has only 32.8 acres available for future development. These revenues will constitute a significant revenue source to the City, but are one-time revenues that will be realized only as new development occurs. 38 cm OFFICE 7�» Nov 15 P1 2+ 3 FAX CovEA SHED" T FrOw line v..••w WE Pro -Toms Mayor 1000 Pallas J$. Stoves& � 11(760) 4os•�s9 � -740 pate rest: Al c U Times $ft$: NfAmber at pyw iwelt►dtag cover pwgc: TatG I T o F 6/k�► �3 �- _s_0/V G/ -ry Coup c/,- ,Tme"y o�c�uvci4.-,ors -76,0-3`/6-06t/ _._.. .. Fox: 0 0s�� lrteare CNtiM our i llitGZNiT REVttw IMPAM4FMIr R!FLY RECYC'4F pk060 replx that you Move ctevived this FOX, ; Tberlc you — -------- Malt: (.✓rs. G. � UMW /v LC li?' r/e fY S , yeY tt � �-y � s so�,� o� /�LG 61.E scn•� yc .� CA. 922?b 73-6'73lBrosdmAur U scan a s De;ign by 18 9tar� m I'At-H CA Aq t-IO(L d Ce�bt/YC:��- J'Ltd- M4--5 �C 76 0 -3 Y3 /IA✓4 y0A /-ry v 'F4I 1h/ I'M ©A/C % 6- i ,e- LJ) S l3 <- eA5 o T 1"pa S ►./ e- S v a r (olt! r y� f/V 0 ) n! DI !l t UA4S rl C' �/1.��1 SV 7-Y I.S/,14 fro t.) 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Miraloma Avenue Anaheim, CA 92806 714.854.1890 a `me W I NZLER&7,KELLY January 8, 2008 Sun City Palm Desert Community Association 38180 Del Webb Blvd. Palm Desert, CA 92211 Attn: Board of Directors Dear Members of the Board, Winzler & Kelly is pleased to submit the attached Preliminary Feasibility Analysis for the proposed incorporation of Sun City Palm Desert. As indicated in the report, the opportunity exists for a potential incorporation of the Sun City Palm Desert community under the parameters ' outlined. As always, we are available to assist you in any way we can as you proceed further in this process. ' Sincerely, Gary Thompson, Project Manager Attachment: Preliminary Feasibility Study 1 11 11 11 11 11 11 ' 3531 E. Miraloma Avenue, Anaheim, CA 92806 tel 714.854.1890 fax 714.854.1895 ana@w-and-k.com www.w-and-k.com 1 a* INTRODUCTION This Preliminary Feasibility Study for the proposed incorporation of Sun City Palm Desert has been prepared at the request of the Sun City Palm Desert Community Association (SCPDCA). Recent decisions by the City of Palm Desert to remove the community from that city's sphere of influence, coupled with recent and planned future retail and business development activity adjacent to the community, has provided an opportunity for self governance that heretofore did not exist. The Board of Directors of the SCPDCA has expressed an interest in studying the feasibility for the community to incorporate into a city as the most desired self governance option. The purpose of this preliminary study is to provide a general "snapshot" of the anticipated revenues and expenditures that would be applicable to the proposed city, and to provide a basis for the SCPDCA to determine whether it is warranted proceeding further with a more formal analysis and application process. It should be noted that all findings reached with regard to this study are predicated on the information made available to Winzler & Kelly by the SCPDCA, and other sources, utilizing basic forecasting assumptions for formulating current and future projections. The data utilized for the review, should be considered very preliminary and subject to moderate to significant variation. In order to fully assess the viability of the proposed incorporation at a much greater level of detail, a formal Initial Feasibility Study, suitable for submittal with an incorporation application will need to be developed. BOUNDARY OPTIONS AND SCENARIOS Two boundary alternatives were identified by the SCPDCA for study. The analysis of each boundary alternative will provide a basis for the SCDPCA to make determinations of desired boundaries that reflect the community goals and objectives of incorporating logical communities of interest and long term fiscal viability. It should be noted that further boundary alternatives may be required for study by the Riverside County Local Agency Formation Commission (LAFCO) as part of a formal application process. Exhibits One and Two depict each of the two boundary alternatives. Option One The Option One boundary includes all of the Sun City Palm Desert planned community, and the adjacent retail and business park areas north of the 1-10 freeway. This area is generally bounded by the City of Indio to the east, the 1-10 freeway to the south, and unincorporated area to the north and west. This boundary option also encompasses all undeveloped area south of �. 38th Avenue between Washington Street and the 1-10 freeway. This area includes the recreational vehicle dealership on Varner Road, the future Mirasera planned community residential & retail/business park development, and a smaller future home development near the intersection of 38th Avenue and the 1-10 freeway. (See Exhibit 1) Option Two The Option Two boundary includes all of the Option One territory, and additionally, extends the western border to Cook Street/Chase School Road, and the northern border to Calle Tosca. The Option Two boundary includes the future Avanterra planned community residential & retail/business park development (formerly the NorthStar Ranch development), and the Bob Hope Chrysler Classic Golf Course and Classic Club. (See Exhibit 2) M Projection Scenarios for each Option There are four scenarios included in this preliminary study, attached as Exhibits 3 through 6. Two scenarios are included for each boundary option. Each option includes a scenario assuming the extension of the AB 1602 Motor Vehicle License Fee (MVLF) backfill, and one assuming the loss of this revenue. Discussions related to each of these scenarios follow further below. ASSUMPTIONS 44 This preliminary feasibility study and fiscal projections have been prepared under the general requirements of the Cortese -Knox -Hertzberg Local Government Reorganization Act of 2000, the Governor's Office of Planning and Research Guidelines for Incorporations, and LAFCO's locally to adopted Policies and Procedures for Incorporations. Reference documents utilized for this study include: • Local area information provided by the SCPDCA including assessed valuation, and hotel/motel and retail/business park information. • Future development and planning information for the Mirasera and Avanterra Planned Communities. • Retail sales and marketing information from InfoUSA. • Preliminary data and reference information from the HDL Companies, the League of California Cities, California City Finance, the State Department of Finance, the State Controller's Office, and the County of Riverside. • Recent Comprehensive Fiscal Analyses for the communities of Wildomar and Menifee Valley. • Budget information for the cities of Indian Wells, Canyon Lake and Palm Desert. • Interviews with city engineering and public works directors, and contractors servicing contract cities. With all municipal incorporations comes a transfer of certain service responsibilities for the new city. These responsibilities include general government, law enforcement, traffic control and accident investigation, fire protection, construction and maintenance of local streets, street lighting, code enforcement, land use planning and regulation, building inspection, animal control, and parks and recreation services. This study analyzes the forecasted ability of the proposed city to provide these municipal services over an extended period of time. An Effective Date of Incorporation of July 1, 2009 is assumed for the fiscal projections. This date + was selected developing the preliminary projections, and to depict the maximum amount of Transition Service requirement the county would be obligated to provide to the new city. Timing of further studies and proceedings as part of an incorporation application process may effect the actual Effective Date of Incorporation, and the Transition Service period. The fiscal projections include a compilation of the forecasted revenues and expenditures of the proposed new city for the first ten years of operation. Projections of revenues and expenditures for a period of 10 years forward are forecasted in order to gauge long term sustainability. The analysis is limited to a presentation of information in the form of a forecast based on estimated base year costs/revenues, using the best information available for this level of study. There may be differences between the forecasts and actual results because events and circumstances frequently do not occur as expected, and those differences can be material. A F M We 3% general annual inflation rate has been included in the forecast. It should be noted that any future studies required as part of an application for incorporation will require extensively more detailed information to be provided by the County and other servicing agencies, and could result 4, in material changes in the projections. Revenue Neutrality, discussed further below, has not been included in the forecast models, although will need to be addressed in any future studies that would result as part of an incorporation application process. Additionally, assumption scenarios have been made for each boundary option addressing the provisions of the AB 1602 MVLF backfill to new cities. One scenario for each boundary option assumes that MVLF backfill will be available. The other scenario for each boundary option assumes that the backfill will not be available. Further discussion follows below concerning the impact of the MVLF backfill on the boundary scenarios. Proposition 218, approved by California voters in 1996, amended the state Constitution by adding Article XIII C and D to the tax limitation provisions adopted by Proposition 13. The purpose of Proposition 218 was to close existing loopholes in Proposition 13 which was allowing local governments to increase fees, charges and assessments without a public vote, rather than increasing general and specific property taxes which do require a vote. Proposition 218 does not have a direct impact on the conclusions in the preliminary study, as no "revenue „ enhancements" such as new taxes, fees, charges, or assessments are included. However, as is discussed further in this study, the Option One boundary would require an analysis of potential revenue enhancements in order to achieve fiscal viability. FISCAL ANALYSIS There are two primary categories of revenues and expenses that are presented in the fiscal projections- General Fund, and Road Fund. Additionally, other types of dedicated revenues such as AQMD & COPS grants, and TUMF fees are available to cities. However, dedicated revenue sources are not included in the study since due to their nature they are considered revenue neutral against the overall fiscal complexion of the city. General Fund revenues are all general purpose revenues received that are allowed under state ift law to be utilized for any purpose, including services normally paid for with restricted revenues. Additionally, some restricted revenues dedicated for certain services are included in the General Fund. General Fund expenditures are all expenditures that are allowed under state law to be funded with unrestricted revenues, and some restricted General Fund revenues dedicated for specific General Fund services. Examples of General Fund revenues and expenses restricted to certain services would be structural fire fund property tax for fire protection, and planning and building/safety fees for development services. Road Fund revenues are all revenues received that are restricted under state law to be utilized for road related purposes only. This includes ordinary maintenance, which involves shoulder ' maintenance, curb maintenance, signing and striping, pothole repair, traffic signal maintenance and street sweeping. Road Fund expenditures are all expenditures for the road services identified above. The forecast does not include significant long term special maintenance, such as asphalt overlays, major storm drain repairs, and damaged and deteriorated road reconstruction, as these are considered capital improvement projects generally funded by project specific grants. Additionally, site inspection of the existing road infrastructure indicates 40 that the area is well maintained and not subject to any significant repair requirements in the near future. EM IM r" *rw 40 The forecast includes projections of new development for the Mirasera and Avanterra projects based on the best information currently available concerning their status. Additionally, there is one residential project included that is located between these two master planned oft developments. The forecast projects development over a 10 year period. Our forecasts include a reduction in the projected residential, retail and commercial development by 20%. The reduction factor is included to ensure a conservative level of sensitivity in the future forecast. 460 Total planned development for the three projects combined is approximately 4,600 residential units, 1.1 million square feet of retail use, 1.4 million square feet of other office/light industrial use, and over 500 hotel rooms. General Fund Discussion Primary revenue sources available to each boundary option are Property Tax, Sales Tax, Motor Vehicle License Fees (MVLF) and Transient Occupancy Tax (TOT). These four revenue sources comprise the bulk of the unrestricted General Fund revenues. A portion of the Property Tax included in the General fund is dedicated to Fire Protection services. Primary expense categories include General Government (Administrative Services), Law Enforcement and Fire Protection. Community Development and Engineering/Building & Safety revenues and expenses are forecast based on future development projections, generally will fluctuate with development, and are mostly 100% offset by fees. As indicated in Exhibits 3 through 6, the General Fund revenue to expense ratio is greatly enhanced for boundary Option Two over boundary Option One. As indicated in the Exhibits, insufficient General Fund revenues accrue to support the projected expenses in Option One. Although the four key revenue sources are relatively strong in relation to the area, the cost of law enforcement and fire protection are too substantial to overcome. For Option Two, the additional revenues associated with the planned future development of the Avanterra project overcome this issue. Road Fund Discussion Primary revenue sources for road maintenance are state fuel taxes, sales tax on fuel products (Prop 42), and Measure A sales tax allocations. Projected road maintenance costs include all regular/routine maintenance requirements anticipated to be conducted including, repairs, storm drain catch basin maintenance, curb and gutter maintenance, road and median landscape maintenance services and street sweeping. It should be noted that as the majority of the current residential street infrastructure is privately maintained, the overall cost of road maintenance to the city is reduced. As indicated in Exhibits 3 through 6, each boundary option scenario indicates substantial capacity to fund all city responsible road related maintenance, and accrue significant reserves for future long term capital maintenance projects. Coupled with the ability to acquire project specific grant funds for road improvements, the study indicates that there are no road related funding issues for the foreseeable future. Transition Year & County Repayment The Transition Year is the time period from the Effective Date of Incorporation until the end of the Fiscal Year in which the incorporation occurs. During this period of time, the County continues to provide municipal services for the new city while the city establishes its service provision plan, and engages the necessary resources for beginning service responsibility at the 4 fir+% beginning of the next fiscal year. During this same period, the city receives many of the revenues that will accrue to the city on a continuous basis, thus allowing for the ability to be able to absorb the service responsibility. The city may opt at anytime during the transition period to assume service responsibility from the County for any service that it desires to transition early. At the end of the Transition Period, all municipal service responsibility transfers from the county to the new city. The new city will be responsible for repayment of the net costs of services provided by the county during the Transition Period, generally in deferred payments over 5 years with interest. For the purposes of this study, an assumed full fiscal year of Transition Year services has been forecast. The actual length of the Transition Year would ultimately be dependent upon the timing of the Effective Date of Incorporation, established as part of the incorporation application process. For purposes of this study, an "Effective Date" of July 1, 2009 is assumed. This optimizes SCPDCA's options by allowing for the maximum transition period of one year. POTENTIAL ISSUES Revenue Neutrality In the early 1990's, the State of California enacted legislation designed to lessen the negative fiscal impacts incorporations might have on counties and other affected agencies. Revenue neutrality requires the incorporation to result in a "similar exchange" of both revenue and service responsibility between the proposed city, the county, and any other affected agency. Prior to the passage of the revenue neutrality legislation, the ability of an area to support municipal level services was the prime financial criteria used in evaluating a proposed new city. Limited analysis was conducted to determine the impacts to counties or other affected agencies containing incorporating communities. Counties were losing annual revenue surpluses from these previously unincorporated areas due to the inherent nature of the cost of county services being provided to these areas as being less than the revenues received. However, the revenue neutrality statute was vaguely written and was fairly silent on the method of calculating financial impacts, or the process for determining the impacts of revenue neutrality. The legislation establishing revenue neutrality did not set forth any well defined parameters for what should be included in the calculations for determining the prior year's fiscal data, for the method of repayment to the county, or for the duration of fiscal impacts. Subsequent legislation has since better defined this calculation criteria, and the Governor's Office of Planning & Research has issued guidelines to assist LAFCO's in making determinations concerning revenue neutrality. A provision within the legislation does allow for counties and incorporating communities to negotiate a mutual revenue neutrality mitigation agreement. For both Options One and Two, the preliminary studv indicates that there will be revenue neutrality mitigation issues to be resolved with the county. The final revenue neutrality mitigation 40 level is determined through negotiation as part of the incorporation application process, therefore no estimate of revenue neutrality has been included in the preliminary study. The assumption for this study is that a satisfactory level of revenue neutrality can be negotiated with the county that will not materially affect our findings. AB 1602 Sunset Provision Prior to 2004, all cities received Motor Vehicle License Fees on the full 2% valuation of the vehicles, and new cities received an additional population subvention based on 3 times the number of registered voters for the first seven years after incorporation. In 2004, the legislature �r 5 W7 17 implemented what was termed the "VLF Swap" in which the valuation fee was lowered to .65%, and the resultant loss of city revenue was "swapped" with an augmentation of Property Tax. However, the new legislation failed to include provisions for newly incorporating cities to receive the Property Tax backfill that existing cites were now receiving. In order to correct this situation, AB 1602 was signed into law in 2006, providing a formula that restores most of the previous VLF funding, and provides a sliding scale population based subvention increase for the first 5 years after incorporation. Two Types of MVLF revenues are now available to newly incorporating cities. The Basic Subvention is based on the statutory formula that allocates a portion of the .65% valuation fee to each city based on population. The proposed city will receive this subvention as do existing cities today, however will not receive the property tax swap revenue. The AB 1602 Subvention allocates to new cities on a continuous basis, an additional FY 2004 Base Year allocation of $50 per capita, adjusted annually based on statewide population and VLF revenue growth. In addition, for the first 5 years after incorporation, population for purposes of this revenue allocation is calculated based on a downward annual sliding scale starting at 150% of the city's population, fixed annually by the State Department of Finance for each year. In the 6tn and subsequent years, the actual city population is utilized. As a component of AB 1602, a provision was inserted into the legislation that provides that the additional subvention to new cities "sunsets", or expires, on July 1, 2009. Essentially, any new city that does not incorporate prior to July 1, 2009, will only receive the minimal basic subvention, but will not receive the additional adjusted per capita allowance. For Option One, the preliminary study indicates that the loss of the AB 1602 revenue subvention will render the option fiscally infeasible. For Option Two, the preliminary study indicates that the loss of the AB 1602 revenue subvention would require the city to secure supplemental revenues for the first four years to be fiscally feasible. Unless the provisions of AB 1602 are extended, incorporation prior to July 1, 2009 must occur. Potential Future Fire Station Not included in the preliminary study is the potential for an additional fire station that could be located within either of the Option boundaries. Currently, the county does not include a new fire station in their future planning, however, based on the level of anticipated development, and the county's criteria for service delivery, a future fire station may be required. Based on the projections, it is not likely that an additional fire station would be included in the Option One boundary area, however, there is a likelihood that one could be included in the Option Two boundary. The cost of construction of a future fire station is normally funded through development impact fees, however, operational costs become the responsibility of the city. For Option Two, sufficient revenue surpluses exist to absorb the cost of operating a future fire station, dependent upon timing. 1.1 III FINDINGS & CONCLUSIONS Based on the preliminary information available and applying reasonable industry standards and assumptions for projection of future revenue and expenditure growth, the following findings are made: • The existing tax base with the recent additions of the retail and business park development adjacent to the Sun City Palm Desert community provide for a greater foundation for potential incorporation than has existed at any time before. Timing and progress of the future planned community developments are a critical aspect of long term sustainability. Major modifications or delays in these planned projects could have a significant material effect on the forecast projections. • The fiscal projections show a relatively strong diversification of the revenue base between the four major General Fund revenue streams identified above, indicating the ability to better sustain a downturn in any one revenue stream as compared to other cities that are heavily dependent on one revenue such as sales tax. • General Fund revenues to expense ratios, and reserve capacities, are sustained at an acceptable level only under boundary Option Two, with the MVLF backfill. • Road Fund revenues to expense ratios and reserve capacities far exceed accepted standards in all scenarios. Based on the above findings, the following conclusions are drawn: Option 1 — This option is not fiscally viable. Further, the projections indicate that this option is not viable within the forecast period. Current and future projections for Option One, either with or without the extension of AB 1602, do not support a finding of feasibility at any time within the next ten years. Although the projections indicate a positive General Fund surplus in the first year, the ensuing years experience significant annual General Fund deficit spending. This deficit spending could not be overcome without significant revenue enhancements, such as additional taxes or fees, which 110 can only be imposed subject to the requirements of Proposition 218. Additionally, as indicated previous, the impacts of revenue neutrality have not been included. a, Recommendation: It is recommended that if the SCPDCA desires to proceed toward a potential incorporation application, that Option One be eliminated from future study, unless consideration is given to studying potential revenue enhancements to offset revenue shortfalls. 7 Option 2 — This option is fiscally viable. If AB 1602 is extended, or the incorporation occurs prior to July 1, 2009, and revenue neutrality can be mitigated sufficiently, this option is fiscally viable within the forecast period. �r With the inclusion of the AB 1602 MVLF backfill the forecast indicates a moderate to strong finding of fiscal feasibility. Projections of General Fund annual revenue surpluses exceed the minimally accepted standards in the first three years of the projection, growing at a significantly " higher rate in later years. With the exclusion of the AB1602 MVLF backfill the forecast is not fiscally viable unless 4" supplemental funding is secured. After the first year of positive General Fund surplus, significant annual deficit spending is projected to occur until Year 5, when positive annual surpluses begin to accrue. Preliminary analysis of the projected base year revenues and expenses indicate that a revenue neutrality mitigation requirement will require negotiation. This impact cannot be quantified at this 40 level of study, and thus is not included. Recommendation: It is recommended that the SCPDCA seriously consider proceeding toward potential incorporation, and that Option 2 be considered for further study in consultation with LAFCO and the county with respect to timing of the process. Key considerations include: • Setting goals and schedules to achieve an "Effective Date of Incorporation" no later than June 30, 2009. • The County of Riverside will sponsor the application for incorporation as an "affected agency" vice a time consuming petition process. • Conceptual agreement by LAFCO and the County, that the formal Initial Feasibility Study, the Comprehensive Fiscal Analysis, and the procedural process, can be streamlined to meet the June 30, 2009 timeline constraint. • The County will support providing transition services for one full year, regardless of the end of fiscal year requirement, subject to reimbursement. • Negotiations will be successful with regard to potential revenue neutrality mitigation issues. An incorporation date of June 30, 2009 is feasible subject to the above. 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LL C C ✓1 cn ✓; rn a F 7 C lim am 05 M CITY OF PALM DESERT BERMUDA DUNES ANNEXATION FEASIBILITY REPORT SEPTEMBER 2007 EMuniFinancial Corporate Office Qgice I.ocalions 27368 Via Industria Anaheim, CA Suite 110 Lancaster, CA Temecula, CA 92590 Los :Angeles Regional Office Tel: (951) 587-3500 Seattle, WA Tel: (800) 755-MUNI (6864) Fax: (951) 587-3510 www.muni.com Oakland, CA Phoenix, AZ Sacramento, CA San Diego, CA Bermuda Dunes Municipal Servile and Initial FisialFeasiN&y Review TABLE OF CONTENTS ExecutiveSummary ...............................................................................................................3 Introduction....................................................................................................................... 3 Background....................................................................................................................... 3 Purposeof Study...............................................................................................................4 2. Population, Employment, and Land Use..........................................................................5 DevelopmentTrends......................................................................................................... 5 Regional Development Trends....................................................................................5 3. Analysis and Methodology............................................................................................... 6 MunicipalServices............................................................................................................ 6 Cost of Services Methodology........................................................................................... 7 Operatingand Capital Costs....................................................................................... 7 Service Level Assumptions......................................................................................... 7 PerCapita Method...................................................................................................... 7 CaseStudy Method.....................................................................................................8 4. Revenue Analysis..............................................................................................................9 PropertyTax............................................................................................................... 9 AssessedValue..........................................................................................................9 SalesTax.................................................................................................................... 9 PropertyTransfer Tax...............................................................................................10 TimeshareMitigation Fee..........................................................................................10 GasTax....................................................................................................................10 Transient Occupancy Tax.........................................................................................10 BusinessLicenses.................................................................................................... 10 OtherRevenues..............................................................................................................11 FranchiseTaxes and Fees........................................................................................ 11 TrafficFines.............................................................................................................. 11 InterestIncome.........................................................................................................11 Development Fees and Fees for Services.................................................................11 VehicleLicense Fees................................................................................................11 City of Palm Desert Special Taxes and Assessments...............................................12 5. Expenditures....................................................................................................................13 GeneralFund............................................................................................................13 Costsof Service........................................................................................................ 13 Capital improvements and Related Maintenance...................................................... 13 6. Initial Fiscal Review........................................................................................................14 KeyAssumptions............................................................................................................. 14 Fiscal Neutrality Not Addressed................................................................................14 Conclusion...................................................................................................................... 14 Exhibit A — Public Infrastructure Analysis...................................................................... A-1 ExhibitB — Boundary Map................................................................................................ B-1 Exhibit C — Tables of Revenues and Expenditures......................................................... C-1 Exhibit D — List of Commercial Properties...................................................................... D-1 Munil'tnancial 2 Bemluda Dunes Muniapal Service and Initial Fiscal Feasibility Review EXECUTIVE SUMMARY Introduction Bermuda Dunes is an unincorporated area, identified as a census -designated place (CDP), located in southwestern Riverside County, adjacent to the cities of Palm Desert and La Quinta. CDPs are delineated to provide data for established areas of a population that are identifiable by name, but are not legally included under the laws of the state in which they are located. This CDP's name originated from the Bermuda Dunes Country Club, a golf course community, which initially opened in 1962 and was the former site of the Bob Hope Chrysler Golf Classic. The boundaries of the Bermuda Dunes community are generally the area along the Interstate 10 Freeway to the north, excluding the Indio city limits, the boundary of the City of Indio to the east, Fred Waring Drive and the La Quinta city Waits to the south, and Washington Street from bred Waring to the Interstate 10 Freeway to the west. Most of the area is still of a semi -rural nature, and similar to other areas of the Coachella Valley, is predominantly residential (refer to Exhibit "B"). The City of Palm Desert has been asked by the Riverside County Local Agency Formation Commission (LAFCO) to determine whether it would be feasible for the Bermuda Dunes area to be annexed to the City. In order to make this determination the City has engaged Munihinancial to undertake a fiscal feasibility analysis of the financial impact to the City of annexing this area. Prior to determining whether to pursue annexation, the City wants to ascertain the fiscal standing of the Bermuda Dunes community. This report will focus on City services that will be provided within the Bermuda Dunes area, the forecasted cost of those services, and the revenues that could reasonably be expected to be available to fund those services. This Report will focus on a compilation of the forecasted revenues and expenditures of the annexation area projected to Fiscal Year 2009-10 using a range of potential fiscal impacts. Based upon 2000 census data, the population of the Bermuda Dunes community was determined to be 6,229. The subject area is comprised of approximately 3.2 square miles of territory. At the time of this Report's creation, the number of structures or dwelling units in the proposed annexation area included approximately 1,827 single family residential units, 28 apartments, 653 condominiums, 71 commercial properties, an 18 hole golf course and clubhouse, and a 34 unit hotel. Background 1 The County of Riverside is currently responsible for policymaking and administration; law enforcement, animal control, planning and land use regulation, building inspection, flood control and the maintenance and improvement of roads. Street lighting services within the Bermuda Dunes area arc currently provided through County Service Area No. 121. The landscaped median located along 42nd Street between Limahall Road and Glass Drive is currently being maintained by Riverside County through a special assessment district formed pursuant to the 1972 Lighting and Landscape Act. Upon annexation, the City would administer the special district and the assessments would be transferred to the City and detached from the County. WuniFinancial Bermuda Dunes Afuiddpal.Service and Lulial Fiscal Feasibik7y Review Water is currently supplied in the Bermuda Dunes area by the Myoma Dunes Water Company and the Coachella Valley Water District. Upon annexation, the Myoma Dunes Water Company and Coachella Valley Water District will continue to supply water to the Bermuda Dunes area as the services are currently in place. Sewer services are currently provided by main line services owned by CNrWD and on -site septic systems. Sewer lines currently exist at Fred Waring Drive, Washington Street, and 42nd Avenue. The County of Riverside currently provides fire protection and police services to the Bermuda Dunes community. The law enforcement facilities currently responsible for the Bermuda Dunes area arc the Palm Desert and Indio substations. Upon annexation, the City of Palm Desert will provide the fire and police protection services through contracts with the County of Riverside. The County of Riverside currently maintains the roads within the Bermuda Dunes area. Upon annexation, the City of Palm Desert will be required to maintain the existing roads. As part of the proposed annexation, the City will require that roads and other existing infrastructure facilities be brought up to existing City of Palm Desert standards. :Many of the General Fund revenues and expenditures were either calculated on a per capita basis, a marginal cost basis using actual budget figures from the City of Palm Desert, or a case study methodology. Purpose of Study I The purpose of the study is to evaluate the fiscal feasibility of the annexation of the Bermuda Dunes area to the City of Palm Desert. The study will provide a basis for the policy discussion that I.AFCO, the Count}, the City of Palm Desert, other affected public agencies, and community groups will need to conduct in order to reach a decision on the future governance of the Bermuda Dunes community. MuniFinancial *4010, *mope Bermuda Nunes Annexation Fiscal Feasibility S 2. POPULATION, EMPLOYMENT, AND LAND USE The initial fiscal analysis is based on estimates of existing and projected population, employment, and land use. 'Phis chapter describes how these estimates were developed for the Bermuda Dunes community. Regional Development Trends Over the past decade, Bermuda Dunes began capturing a share of the residential and related commercial development being attracted to the Inland Empire region of eastern Riverside County. This development is being driven by the continued population growth in the California economy, a state that has grown by 2.3 million residents (over six percent) since 2000 in spite of the recent economic slow down. The State has consistently attracted new residents at about the same rate of 500,000 per year since World War 11. The Inland Empire/Coachella Valley offers a competitive alternative for development demand within the Los Angeles, Orange and San Diego regions. The coastal counties have become increasingly urban and generally high land prices are limiting development potentials. The Inland Empire/Coachella Valley offers substantial supplies of developable land and available infrastructure capacity. Critical to the region's growth has been a well -developed highway network that includes east -west routes between the coastal urban areas and destinations throughout the southwest, and north -south routes between Inland Fmpire/Coachella Valley communities and to destinations in northern California and the northwest. As described above, the Bermuda Dunes community straddles Intrastate 10, the major cast -west highway in the region. Growth within Inland Empire communities generally follows a path typical of California suburban development. Residential "exurbs" connected to far off job centers gradually grow into their own independent economic regions. The first phase is driven by workers from job centers near the coast seeking affordable housing and is accompanied by residential -serving commercial development. The second phase is characterized by commercial, office, and industrial development such as warehousing and distribution centers that desire large sites and that do not need an urban location. The final phase includes attraction of professionals and other higher -income households with more expensive residential development, and eventually the office parks that house the companies they work for. Operating within the sub-rcgional market of southwestern Riverside County, Bermuda Dunes is experiencing the first phase of this regional growth pattern. Residential development is placing more demand on available land supply while commercial development is supporting the local community and does not provide a rcgional exchange of commerce. Munit,inancial Bermuda Dunes Alunitipal Service and Initial Fiscal Featibilily Review I ANALYSIS AND METHODOLOGY The purpose of this chapter is to detertnine the municipal public services that would be affected by the proposed annexation and estimate the cost to the City of providing such services. Specifically this chapter will: 1. Develop reasonable assumptions regarding the services likely to be transferred from affected public agencies serving the Bermuda Dunes area to the City of Palm Desert; Z. For those services transferred to the City of Palm Desert, develop a method for estimating costs for purposes of the initial fiscal review 3. Identify any capital improvements necessary to bring the area of Bermuda Dunes up to the standards of the City of Palm Desert. Municipal Services Municipal services are local (less -than -countywide) public services typically provided to developed areas by cities, counties, special districts, and private utilities. Common types of municipal services include land use regulation, parks and recreation, public safety, roads, and utilities. Services provided countywide such as the courts, jails, and state and federal health and social programs are not considered municipal services for the purposes of this study because they would not be transferred to the City of Palm Desert. The following considerations were used to determine what services should be transferred the City of Palm Desert: ♦ Statutory requirements: State law requires the cities provide the following services, though they can be provided by contract with another endty: general legislative functions, land use planning and regulation, law enforcement, animal control, and maintenance of roads and other property owned by the city. ♦ Local control: A primary objective of an annexation is to provide the community with greater local control. Consequently, if it is feasible to transfer a service without significandy affecting the effectiveness or efficiency of service delivery, then the service typically is transferred. ♦ Extended service territories: Some services rely on broad infrastructure networks that are currently provided by an agency with a service territory that extends far beyond the local community. For Bermuda Dunes, these services include cable television, electricity, flood control, gas, water, and wastewater utilities. These services typically are not transferred because of the inefficiencies associated with a new, smaller agency delivering the service to a limited service area. ♦ Current city policy: All services currently provided by the City of Palm Desert are transferred to the Bermuda Dunes community under this annexation scenario. .tiluniFinaniial *MOW Ntfto Bermuda Duna ,19unhipal5ervice and Initial Fiscal heasibilio, Review Cost of Services Methodology The current (fiscal year 2007-08) costs of services to the Bermuda Dunes community are estimated for purposes of the initial fiscal review in Chapter G. General elements of the methodology for estimating costs are described in this section. Detailed comments are provided in the sections that follow by type of service. Operating and Capital Costs This study focuses on ongoing (operating and maintenance) costs required in order to provide public services to the Bermuda Dunes community. Ongoing costs are typically the focus of fiscal reviews because of the need for public agencies to generate a balanced budget continually on an annual basis. This level of analysis is appropriate for an initial fiscal review such as the current study. A more thorough discussion of capital costs is included as Exhibit "A" at the end of this Report. Service Level Assumptions One critical assumption in estimating service costs is the level of service provided to the community. This study uses the following approach. ♦ Annexation: The costs of services transferred to the City of Palm Desert are based on the City's current (fiscal year 2007-2008) level of service and not the current level or cost of service provided by the County. Service levels for some services are higher than current unincorporated levels of service, and therefore costs will typically be higher as well. Capital costs associated with bringing existing public facilities in Bermuda Dunes up to current City of Palm Desert standards are considered separately. Per Capita Method A per capita modeling method is used to estimate many service costs (and revenues) for the City of Palm Desert and the County of Riverside. Per capita cost factors represent the current average citywide (or countywide) cost of service. This approach is used for services that likely would not vary substantially from current average costs when delivered to the Bermuda Dunes community. For service costs that could vary substantially from current average costs a case study method is used (see below). Per capita cost factors are based on (1) current (fiscal year 2007-2008 budget) costs and (2) current citywide or countywide service populations. Per capita factors are calculated by dividing total expenditures for a given service by the appropriate service population. Service population includes current residents and employment. Employment is weighted depending on the specific service in order to reflect the service demand of one employee relative to one resident. Multiplying per capita cost factors by a specific service population provides an estimate of the additional costs associated with serving that population. For this study, the per capita cost was calculated for certain budgeted items, and extended to the population within Bermuda Dunes to determine the cost associated with the proposed annexation for that item. Long-range planning studies, such as this, typically use a common weighting across all services and revenues analyzed on a per capita basis that have both a resident and employee component. Gathering and analyzing data on service demand, such as police and fire call data by type of land use, is a time -intensive and costly effort. Prior analysis of service demand data has not generated any common factors that seem to apply consistently across multiple jurisdictions. Furthermore, the MuniFinarmial ,*Age Bermuda llnnes Aluniapal Service and Inaiall-iscal Fearibiht , &mew choice of a weighting factor does not affect results significantly because (1) costs and revenues receive similar weights so net fiscal impacts change little if weighting factors change, and (2) most significant costs and revenues are analyzed individually using a case study analysis and typically do not rely on weighting factors. For these reasons, this study assumes a reasonable weighting factor and applies the factor consistently across all costs and revenues that have both a resident and employment component. For the purposes of this study we use a weighting factor of 0.24 employees per resident. This weighting is based on the number of work hours per week (40) divided by the total number of hours in a week (168) to reflect the demand placed by businesses on municipal services relative to residents. This weighting factor assumes that businesses primarily demand public services during business hours while demand by residents is more constant throughout a 24-hour period. Employment data for the City of Pahn Desert and Bermuda Dunes was obtained from the California Employment Development Department. Based on fourth quarter data of 2006, there were 30,652 employees that worked in the City of Palm Desert and 2,944 employees in Bermuda Dunes. Case Study Method A case study method is used for those costs that are not estimated using the per capita method described above. The case study method is applicable to costs that could vary substantially from average costs to deliver the same level of service. For this proposed annexation, a case study approach was used to address budgeted items that could not be calculated based on population, and also for capital improvement costs that would be necessary to bring the existing infrastructure within Bermuda Dunes up to City of Palm Desert standards and maintain that infrastructure going forward. Munihnancial �%r Bermuda Dunes,Wunitipal Service and Initial Fiscal Feasibiliq Review 4. REVENUE ANALYSIS This section describes the approach used to estimate additional revenues for the City of Palm Desert as a result of the proposed Bermuda Dunes annexation Property Tax Property tax estimates are based on a projection of real property assessed value multiplied by a local public agency's share of the one percent as valorem property tax, called a tax allocation factor (TAF). Only assessed property value within a jurisdiction generates property tax for that jurisdiction. For example, in an incorporated area the city general fund, county general fund, the public school district, and possibly separate fire and library district funds would each have a TAF that in sum would equal the one percent tax. TAFs may vary by tax rate area within a jurisdiction and are calculated by the County Auditor -Controller. The methodology used in this study to estimate property tax is explained below. Assessed Value Assessed value is the value carried on the property tax rolls for calculating property taxes. Market value is typically higher than assessed value because Proposition 13 limits annual increases in assessed value to two percent until the property is resold. Assessed value is multiplied by the one percent property tax rate and then by the tax allocation factor (TAF) applicable to the public agency to calculate property tax revenue. The general fund TAF that a city receives from the county general fund from an annexation area is subject to negotiation between the city and the county. The amount is not determined by a statutory formula. The County of Riverside and the City of Palm Desert initially agreed to exchange property taxes upon annexations into the City at a rate of twenty-five percent (251/6) of the County's share of the annexed property- tax revenue. However, in 1992 the State of California enacted legislation that shifted a portion of the financial responsibility for funding education to local agencies through a shift of property tax revenues to "educational revenue augmentation funds" (F,RAF). As such, rRAF shifts have resulted in renegotiations between the City and the County on the exchange of property taxes upon annexations. For this Report, and based upon discussions with the City's Finance Department, we assume that the City will receive three and a half percent of the County's share of the annexed property tax revenue, based on negotiations between the City and County for the Palm Desert Greens and Suncrest Country Club annexation that occurred in 2003 (Annexation No. 37). In addition, the allocation of property tax revenue between the County and City for properties located in Bermuda Dunes that are identified as a part of a redevelopment area of the County may be negotiated separately, which could ultimately further reduce the amount of property tax revenue that the City would receive as identified in this Report. Since it is not known what the result of the negotiations would be, we assumed that the City would receive the same share of the property tax revenue as Annexation No. 37, which is a conservative assumption. Sales Tax The State Board of Equalization (SBOF-) provided sales tax data for reporting businesses with operating addresses in Bermuda Dunes. The SBOE supplied the data based on a list of addresses, which were obtained through a variety of research and verification methods. .LluniFinanaal Bermuda Dunes ,Llanicipal Setme and lnilial t'iscal easibikto Review Bermuda Dunes is anticipated to attract additional neighborhood and community retail to serve local residents and businesses, but is unlikely to attract regional retail development, therefore, a conservative escalation was applied to the sales tax revenue provided by the SBO> . Similar to the property taxes, the allocation of sales tax generated by properties located in Bermuda Dunes that are identified as being within a redevelopment area of the County would also be determined through City and County negotiations. As such, the amount of sales tax identified within this Report may be higher than the amount the City of Palm Desert would actually receive upon annexation, which will be determined through negotiations between the City and County. Property Transfer Tax Property transfer tax revenues are estimated using the average resale value of property within the Bermuda dunes areas that occurred in the past three years. The average price point of sale was then used to estimate future sales based on the current condition of the real estate market and historical sales in the area. Upon annexation, the County and the City of Palm Desert would evenly split the current County unincorporated area rate of $1.10 per $1,000 of value on each real estate transaction. Timeshare Mitigation Fee In 1989, the City Council of Palm Desert passed a "Zoning Ordinance that established standards and related fees for developing timeshare developments within the City. It is not anticipated that there will be and, timeshare developments built within Bermuda Duncs at this time and no revenue has been considered for this Report. Gas Tax Gas tax (highway users tax) revenue is a subvention collected by the state and allocated to cities and counties based on a statutory formula. The gas tax plays an important role in increasing revenues for annexing cities without generating a negative fiscal impact on counties. The State subvention formula for gas tax does not adjust the share of statewide revenue allocated to counties because of an annexation. Annexed areas receive gas tax revenue from the share of statewide revenue allocated to cities. Thus, counties are able to transfer costs for road maintenance to the annexing city while still retaining this revenue source. Transient Occupancy Tax The Bermuda Dunes area has one thirty-four (34) room hotel, which would be subject to the City of Palm Desert Transient Occupancy Tax (TOT) rate of 99/o. The revenue that may be generated upon annexation through the TOT was estimated based on the average daily room rate equal to $185 and a typical occupancy factor of 75%. Business Licenses The City of Palm Desert collects business license revenue based on the total amount of gross sales a business generates. For this Report, the amount of sales tax generated within Bermuda Dunes was used to calculate the total amount of gross sales generated within Bermuda Dunes. The calculated amount was then evenly distributed to all business to determine the average amount of gross sales on a per business basis. The business license fee related to the calculated average gross sales per business was then used to determine the amount of revenue the City would collect for business licenses. A4unil'inanaal 10 Bermuda Dunes,Wunidpa!Service and 1nitiaiFisca!Feasibility Review Other Revenues For the City of Palm Desert, annexation area revenues are based on revenues currently collected citywide by the City. Collection of these revenues would be extended at current rates to the annexation area. In all cases, the calculation of other revenues is based on a per capita analysis using FY 2007-2008 budgeted revenues. Details by revenue type are discussed below: Franchise Taxes and Fees This revenue is generated through franchise agreements for services such as solid waste collection. Both the City of Palm Desert and the County (in the unincorporated area only) collect franchise taxes and fees. The City of Palm Desert is assumed to collect the same revenue on a per capita basis from the annexation area that it currently collects citywide. Traffic Fines The City of Palm Desert is assumed to receive the same revenue per capita for Bermuda Dunes that it currently generates citywide. Interest Income Interest earnings on general fund balances generate interest income. The City of Palm Desert is assumed to generate the same revenue per capita for Bermuda Dunes that it currently generates citywide. Development Fees and Fees for Services Fees imposed by the City for development and services are calculated to offset the actual costs for additional infrastructure caused by new development and the actual cost of providing a particular service. 'Therefore, this revenue source is not included in revenue projections for the Bermuda Dunes annexation. Vehicle License Fees The vehicle license fee is a tax on ownership of a registered vehicle, which is a percentage of the value of a vehicle paid by owners to the Department of Motor Vehicles. The percentage has recendy been reduced from 2% of the ear's value to 0.65%. Vehicle license fee (VTJT revenue is collected by the state and allocated to cities and counties based on a statutory formula. Similar to the gas tax, VLF plays an important role in increasing revenues for incorporating or annexing cities while reducing the potential negative fiscal impacts on counties. The State subvention formula for VLF does not adjust the share of statewide revenue allocated to counties because of an annexation. Annexed areas receive their VLF revenue from the share of statewide revenue allocated to cities. Thus, counties are able to transfer service costs while still retaining a major revenue source. The additional population in an annexation area would increase the City's per capita VLF revenue. MuniFinandai I I IM iM Bemuda Dunes Annexation Fiscal Feasibility Study City of Palm Desert Special Taxes and Assessments The City of Palm Desert currently levies a special tax referred to as the Prop A Fire Tax, which was approved by at least 2/3rds of the registered voters in 1980. The tax is levied against all properties within the City to fund a portion of the fire protection and prevention services provided by the City through contract with the County. The rates approved by the voters are as follows: $48.00 per Single -Family Residence $36.00 per ;Multi -Family Residence S48.00+ per Commercial (based on size of structure) S24.00 per Vacant Parcel The citywide special tax would be extended to the annexation area to fund the same services. A parcel database of the Bermuda Dunes area was created and the amount of revenue that would be generated from the Fire Tax was calculated based on the rates identified above. To fund services for individual subdivisions, the City anticipates establishing landscape and lighting districts and assessment districts in new subdivisions as they develop in Palm Desert, as it does in the Ciry currently. Muni Financial 12 14+rrr Hemiuda Dunes Municipal Service and Initial 1-is,-al Feasibilil , Review 5. EXPENDITURES General Fund The Bermuda Dunes community is located in southwestern Riverside County. Bermuda Dunes has a population of about 6,229 based on the 2000 census and covers an area approximately 3.5 square miles. The community currently receives general government services from the County. General government functions arc provided primarily from the County's administration building in the City of Riverside and include: ♦ Administration (CFO) ♦ Land use planning ♦ Clerk ♦ Finance (Assessor, Treasurer, Au(litor) ♦ Human resources ♦ Information technology ♦ Legal ♦ Legislative (Board of Supervisors) ♦ Risk management These functions are critical to the operation of a local public agency and therefore are fully transferred to the City of Palm Desert upon annexation. Other services such as police and fire are also transferred, but in this case, police and fire services are contracted back to the County at the level of services established by the city of Palm Desert. Costs of Service All general government service costs for the City of Palm Desert and the County of Riverside arc estimated using either a per capita method or case study approach as described in the Cost ojJervices Melhodology section, above. City costs are based on the extension of general government services to the annexation area. Capital improvements and Related Maintenance As part of this Report, capital facility needs were identified to determine the cost necessary to bring Bermuda Dunes existing basic infrastructure up to the standards of the City of Palm Desert, upon annexation. Unincorporated areas tend to have lower existing facility standards compared to the policy objectives of annexing cities. The capital improvements addressed in this section include storm drain facilities, sewer facilities, street improvements, and maintenance related to such improvements. The expected annual costs associated with these improvements are summarized below. Sanitary Sewers................................................................... 294,397 StormDrains...................................................................... 746,667 New Street Improvements ............................................... 283,983 Traffic Signals..................................................................... 480,000 Road Maintenance........................................................ $1, 511770 Total Expected Annual Cost ....................................... 53,318,817 Attached, as Kxhibit "A", is a detailed description of the necessary capital improvements and related cost identified above. N uniFinanaal 13 M M Bermuda Dunes Annexation Fiscal 6. INITIAL FISCAL REVIEW The purpose of the initial fiscal review is to provide estimates of the net fiscal impacts on the local agency from potential changes in governance. Net fiscal impacts are the ongoing revenues that would become available to the City of Palm Desert net of the City's operating costs associated with serving the annexation area. lKey Assumptions Phis section describes several key assumpuons not addressed in prior chapters. Most cost factors such as salary rates, non -personnel costs, and per capita costs include a one percent annual real increase (before inflation). For personnel costs, this increase reflects standard public agency compensation policies that provide increases for length of service (often called "step" increases). 'These increases can average five percent annually in addition to cost -of -living increases (inflation), but when a new employee is hired the salary drops back to the first step. Tying non - personnel costs to this same real rate of increase integrates a small degree of conservatism in the estimates. Assuming a one percent real increase in costs (before inflation) is reasonable based on analysis of other cities. Fiscal Neutrality Not Addressed State law requires that LAFCO cannot approve the annexation without either demonstrating that the impact on an affected agency is fiscally neutral, or in this case, receiving the approval of the agency. This initial fiscal review does not address the fiscal neutrality requirement. The issue would be appropriately addressed at the next stage during the completion of a comprehensive fiscal analysis required by statute prior to an annexation. Conclusion If the annexation of Bermuda Dunes into the City of Palm Desert is pursued, the impact of the fiscal neutrality requirement on the County will require evaluation. This study indicates that the annexation of Bermuda Dunes to the City of Palm Desert would result in a negative fiscal impact to the City approximately equal to 57,454,100 in fiscal year 2007/2008, S7,727,037 in fiscal year 2008/2009, and 58,008,212 in fiscal year 2009/2010. 'Ilzerefore, additional revenues would be necessary for the City to mitigate the potential negative financial impact caused by the proposed annexation. Munif inancia! 14 �wrT Bermuda Dunes �1 funiciipal.Sewi e and Initial Fiscal Feasibili!y Review EXHIBIT A - PUBLIC INFRASTRUCTURE ANALYSIS Water, sewage disposal, natural gas, electrical, telephone, cable T.V., internet, flood control and public streets are basic amenities and services necessary for an acceptable quality of life for residents in an area. These services are provided by a combination of regulated public utilities, special districts and local government. A city should consider what responsibility it will have in providing these services to the area. For the Bermuda Dunes area, natural gas, electricity, telephone, cable T.V. and internet services will be provided by specific regulated public utilities, resulting in no additional burden on city funds. Some of the earlier developments within the Bermuda Dunes area have been served with existing overhead electrical and communication facilities. Newer developments are typically served by underground equipment. The undergrounding of the existing overhead electrical and communication facilities has been desirable in other areas of the City of Palm Desert, but has typically been accomplished through assessment district funding mechanisms, with no additional cost burden to the City. Since utility undergrounding is primarily an aesthetic benefit, and not a required improvement to an area, and results in no cost to the City, we will focus on water, sewer, flood control and street improvements and maintenance. In annexing any area, a city should consider the costs of service for the area compared with the revenues to be received from the area proposed for annexation. If the revenues exceed the cost of services, then funds are available to provide additional improvements and/or services. On the other hand, the cost of services, which include the maintenance of the infrastructure i.e. sewers, water mains, streets and flood control systems, often exceeds the revenues received from the area. This can result in an additional burden on residents within the existing city boundaries. Residents in any developed area expect certain infrastructure improvements, and the locally responsible governing bodies are expected to provide these services. The basic services to be considered are water, sanitation, flood control and streets. Water and sanitary sewers serving properties in the Bermuda Dunes area are owned and operated by the Coachella Valley Water District (CVWD). CVWD is also empowered to provide major flood control protection. I lowever, the local governing body installs local storm drains. These local drains transfer storm water from streets and carry it underground in pipes or culverts, or in aboveground channels. Storm water removed from streets makes them safer and less costly to maintain. WATER Buildings may not be constructed on properties without domestic water and adequate fire protection. C\I\XD provides the necessary water supply and delivery systems to provide this service. New properties are required to pay the cost of water main extensions to serve specific properties. These mains are then dedicated at no cost to CV\X`D for their repair and maintenance in perpetuity. Therefore, there is no additional cost to the City for water service to an area. SEWAGE DISPOSAL/SANITARY SEWERS Buildings on properties within the Bermuda Dunes area are either served by public sanitary sewers owned and operated by CV\,w, or by individual on -site systems, i.e. septic tanks and seepage pits or leach fields. Many of the earlier buildings were served by individual on -site systems prior to the availability of public sewers. For new development, particularly subdivisions of larger parcels into smaller residential lots, or parcels with multiple buildings, public sewers are typically a requirement imposed by the local jurisdiction and/or the Department of llealth Services. Ultimately all MuniFinamial A- i EWA cm Bermuda Duna Municipal Service and Initial.Fiscal Feasibility Review properties will be connected to public sanitary sewers owned, operated and maintained by CVVGD. As with the installation of water mains, property owners will pay the cost of installation of the sewers and then dedicate them to CVWD. Although the City of Palm Desert will not be responsible for the cost of providing sanitary sewers to serve existing properties which currently have on -site disposal systems, they will be involved in establishing improvement districts to provide for the installation of sanitary sewers and the assessment of the cost of these to the individual properties being served. There may be some expectation by property owners that the City will fund all or some portion of the cost of the sewers. Approximately one-half of the Bermuda Dunes area is currently served by sewers. In order to serve the entire area, approximately 92,400 linear feet of sanitary sewer pipe would need to be installed. The estimated cost of this installation in 2007 dollars is as follows: Sewerpipe..................................................................... S5,220,600 Manholes............................................................................. 584,000 Contingencies.................................................................. 1,260.920 Sub-total......................................................................... S7,065,520 Design, inspection and incidentals...............................1,766.380 Total estimated cost ..................................................... $8,831,900 Includes individual lateral to the street right-of-way line but does not include the cost of connecting on -site building sewers to the street lateral. The above costs are submitted without benefit of detailed design to determine the size of pipe or its depth. Actual costs could be higher or lower depending on final design plans, and as mentioned, would likely be borne by property owners. l lowever, the above estimated cost does provide an order of magnitude and significance of the installation of public sanitary sewers to serve the area. FLOOD CONTROLJFLOODING The Bermuda Dunes area has been the subject of previous studies most notably the "Bermuda Dunes Area Drainage Study' completed in September 1997. The study concluded, "Because current FE,NiA mapping does not identify area within the study boundaries as subject to flooding deeper than one (1) foot, during a 100-year storm, it is generally held that as development proceeds responsibly, there will continue to be little threat of inundation of structures." Although structures, existing and future, will not be inundated if development proceeds responsibly, local street flooding does and will occur. Streets that arc not passable during storm flows do not allow residents to access their dwellings or businesses in the area. A street free of flood waters is a qualit), of life and service level expectation of residents. The Bermuda Dunes Drainage Study identifies Drainage Area "A", which is between Washington Boulevard on the west, Jefferson Street on the cast, Interstate 10 on the north and Avenue 42 on the south. It also includes an area south of Avenue 42 between Glass Drive and Jefferson Street. It indicates storm drain improvements to be constructed in Washington Street, Yucca bane, Starlight Lane, Adams Street, Igem-dtagc Drive and Avenue 42. The estimated cost of these improvements in 1997 dollars is $9,059,000. The outlet for this system is an open un-named channel that is a part of the regional system in the Mid Valley Storm Water Project. The estimated cost in 1997 dollars of this un-named channel outlet for the Bermuda Dunes area is 52,550,413. To provide a complete 1LIuniFinanaal A-2 Bermuda Dunes Munhipal Senire and Initial Fiscal reasibilit), Review functioning system to remove storm water from the streets is thus a combination of the construction of storm drains in the Bermuda Dunes area, and construction of the un-named outlet channel, a total cost of $16,115,000 in 2007 dollars. This cost estimate does not include the cost of right-of-way acquisition for the unnamed channel since this would require a study in and of itself once the actual design is completed. Approximately 75% of the area included in this annexation stud), is designated "Non -Tributary" in the Bermuda Dunes Area Drainage Study. This means that the area contributes no storm water runoff to the streets, and ultimately to the proposed storm drains to serve the area. This is justified in the Drainage Study with; "In general, the major land use category, resort residential, if properly developed, will cause a reduction of storm water runoff. Further, field reconnaissance performed within the study limits indicates the existence of numerous small to medium size retention basins which could cause similar reduction of peak runoff." The City has indicated that this reduction in runoff is problematic. Areas west of Washington Street in the City were also designated as non -tributary, but the City is experiencing runoff from these areas to the surrounding streets. To further quantify the effects of this situation would require a new analysis and review of the Bermuda Dunes Area Drainage Study, which is beyond the scope of this report. However, some recognition of this fact should be included in the study. Any runoff from the non -tributary area would flow either to the Area "A" storm drains or to the Area " E" storm drains. Area "F" serves the City of La Quinta and would be their responsibility. Storm drains for Area "A" may need to be increased to double their current capacity. Ilowevcr, doubling the capacity would only increase the size by 50%. 'Therefore, we have included an additional 50% to the cost of the current proposal for Area "A". Again, we believe this to be a conservative estimate since much of the area already retains much of the runoff on the site, which is far less than we would expect from areas without onsite retention. Thus the cost of the storm drains to serve the Bermuda Dunes Annexation Area may be as much as $22,400,000 in 2007 dollars. STREETS The maintenance of public streets is one of the most significant cost burdens that a city must weigh when considering a proposed annexation area. We will only consider publicly dedicated, or to be dedicated streets. Private streets, whether gated or un-gated, are not a city responsibility. As discussed previously for water and sanitary sewer systems, the installation of streets is usually a requirement for new development to proceed. Unlike new water and sewer systems, which are owned and maintained by CV)VD, new public streets will be owned and maintained by the City at the City's expense. Therefore, for the Bermuda Dunes area, we must consider the cost of maintaining existing paved streets, and anticipate the cost of maintaining those streets that will be installed for new development. Currently there are approximately 19 centerline miles of fully or partially improved public streets within the Bermuda Dunes area. These are divided into a little over four and one-half miles of major highways such as Washington Street, Country Club etc. There are slightly over four miles of secondary or collector streets such as Adams Street, Yucca Lane etc. The largest group is local streets, which account for more than 10 miles of the total. We expect that there will be six miles of new streets added to the area as large parcels are subdivided into buildable lots, which will all need their own street frontage to be created for access to the new lots. The end result will be an area containing slightly over 25 centerline miles of streets. There are substantially more paved streets in the Bermuda Dunes area, but as we indicated above, these added streets are private, and the City has no responsibility for the cost of their maintenance. AluniFinamial A-3 Bermuda Dunes Municipal Service and Ini[ial Fiscal Feasibility Review There are a number of existing public streets with full street improvements, curb gutter, sidewalks and streetlights. Among these streets are areas with only minimal improvements, two lanes of pavement for vehicular traffic. A city can anticipate that as new development installs full street improvements, there will be a desire to have full improvements constructed along the entire street length, including the areas with minimal improvements. Because the existing developed areas cannot be conditioned to install the improvements across their property, these improvements oftentimes arc installed by the city at its expense. 'Therefore, we need to include the cost of full street improvements in these existing developed areas. Examples of these areas include Yucca Lane, Avenue 41, and Darby Road. Some of the older existing developed areas such as Port Royal Avenue and Jamaica Sands Drive are improved with rolled curb and gutter rather than stand up curb and gutter, and are without sidewalks. Because the rolled curb and gutter currently provides adequate drainage for the streets, and they have functioned for years without sidewalks, we expect no additional improvements to be added to those areas. New Street Improvements Construction Cost ........................................................ $6,197,700 Contingencies..................................................................... 619,900 Sub-Total....................................................................... $6,817,500 Design, Inspection and Contingencies .............. ........ $1,702X0 Total Street Improvements ......................................... $8,519,500 As the vacant properties within Bermuda Dunes are developed, additional vehicle trips will be added to the streets and intersections. The more heavily traveled intersections will require the installation of new traffic signals to provide better traffic flow in the area. Based on the number of non - signalized intersections and anticipated increased traffic flow, we expect that there is a need for six (6) new signalized intersections over the next five (5) years. Each of these public streets, either existing or newly constructed, must be maintained on a regular basis to ensure that they arc drivable, and that they will not deteriorate to a point where they fail such as evidenced on portions of Starlight Lane. At failure the existing roadway must be removed. The generally accepted practice is to provide a regular program of maintenance before a street fails and must be reconstructed. The cost of reconstruction can be ten times the cost of regular maintenance. In addition to the cost of pavement maintenance, we must add the cost of maintaining and energizing traffic signals, maintaining the landscaping within the street right-of-way, the cost of signing and striping and street sweeping. Traffic signal lamps must be changed as necessary. Firing must be repaired and controllers serviced so that they operate as intended for traffic demands. Electricity is also an on -going additional cost serving the public streets. As new equipment is developed, traffic signals are often modified to keep up with modern technology. Signing fades and must be replaced as necessary. Traffic striping, especially with the environmentally friendly paints, fades and must be replaced on a regular basis. Landscaping within the roadway must be watered, weeded, trimmed and replaced as necessary. The cost of maintaining the landscaping is a City street cost. Currently the City annual expends $80,392 Mrrnthnanaal A4 Bermuda Dunes Alunidpal Service and Inilial Fiscal Feasibibl Review per square mile for landscaping maintenance. Bermuda Dunes encompasses approximately 3.5 square miles, extending the cost per square mile for the City to the Bermuda Dunes are results in an expected annual landscape maintenance cost of S281,370. Streets must be swept on a regular basis to keep debris out of the storrn drain system, to discourage places for the breeding of mosquitoes, and for the welfare of business and the residents who live in the area. There are a number of acceptable street maintenance schedules used by various jurisdictions. These may include a slurry seal, chip and seal and overlay of new asphalt pavement. The type of maintenance program depends as much on the past experience of the jurisdiction as any other factor. What is essential is that monies be set aside to be able to provide the maintenance before the street fails. For the purposes of this analysis, we suggest that the major and secondary highways be overlaid with one inch of rubberized asphalt on an eight -year cycle. To address the build up of the street section to unacceptable cross fall slopes and drainage, cold planing to remove asphalt build up is included. For local streets a one -inch asphalt rubber overlay on a 30 year cycle is acceptable. The extended cycle for local streets is possible because of the low volume of traffic on these streets. The annual expected cost of maintenance is a combination of pavement, signal, signing, striping, landscape maintenance and street sweeping. The estimated costs are detailed as follows: Pavement maintenance ................................................ S1,054,000 "Traffic Signals....................................................................... 85,000 Signing and striping............................................................. 35,000 Landscape maintenance.................................................... 281,370 Streetsweeping..................................................................... 58.400 Total Annual Road ;Maintenance Cost ...................... $1,513,770 The cost of providing infrastructure improvements and maintenance for the Bermuda Dunes area is a combination of those costs that are well defined and certain, and those that may be necessary, but are not certain. In addition, some costs are on going and annual in nature, and others are a one-time expenditure. In order to make a reasonable analysis, we need to make the assumption that one time costs could be funded over a 30-year period. We may then add the annual maintenance cost to the annualized cost of constructing the improvements. The 30-year period seems appropriate because infrastructure improvements may be bonded and funded over a 30-year period, the general plan for cities has a horizon of 30 years, and the infrastructure included in this study has a useful life in excess of 30 years. Therefore there will be some future 30-year span of time when annual maintenance and infrastructure payments will be combined. This combination of costs will be what the City could expect if it were to annex the Bermuda Dunes area. We will also rank them in the order of certainty to possibly. Road maintenance is a certainty, storm drains are probably a certainty, and sanitary sewers are possible but not certain. Munil~inanrial 11- i 0M CM Bermuda Dunes,Wunidpal Service and Initial i'iscal Feasibik'�, Review SUMMARY (ANNUAL COST) Sanitary Sewers.................................................................294,397 StormDrains...................................................................... 746,667 New Street Improvements ............................................... 283,983 Traffic Signals...................................................................480.000 ` RoadMaintenance ........................................................ 51.313.770 Total Expected Annual Cost ....................................... S3,318,817 1. As discussed in the Sewage Dijposall Sanitary Sewers- section of this exhibit, the cost of installing sewers would likely be borne by property owners in the affected area using an assessment district mechanism, and would not be the responsibility of the City of Palm Desert. 2. Traffic signal annual costs are calculated based on annual installments for an initial five-year period. The overall annual amount will be reduced by S480,000, beginning in year six. SUMMARY (BASED ON 30 YEAR TOTAL) Sanitary Sewers................................................................ 8,831,900 StormDrains.................................................................22,400,000 '_view Street Improvements ............................................ 8,519,500 Traffic Signals.................................................................. 2,400,000 Road Maintenance......................................................S43.413,100 Total Expected 30 Year Cost .................................... S87,564,500 ;Wunif'inancial A-i XWO WON i�'�`'...�+�.: i�. :fit•' .r".'"'jj,.r�^',1 V5 m I � m338��3��moab�o�4�333� R Ri ^ g r" w � m ezzZ�So� BB�E'mn��'v333� a<aQQ ati.5! 4a n 8 W � � m N irvZZ��v�8amv8n �y�gibm l2�� eey a LR(e�pi, M p8O m um1 (7 OF� O w M< WLYi C � m m N 9 Q¢ Q n Q Q Q Q Q n n Q h n a a m a Q Q 3 3 Z m Z Z 3 ~2 t D e 01 0 v Z Z 10 07 °i 7 iv m�nm$� O otD �1G, C � i E w otmzz Z Z Z Z Z 3 0 a� d cc aY 33zm33333703��333� e - v E W � a„ pp �et Q Q Q N¢¢ Q Q Q N1 tmCf a m� lD V 1p Q Q Q� 333^3333zmoz A o N�333o 2.0 a z Z Z z z6 ----- Z Z Z N CD0 0 0 o O o O o N Y W G N _ " E W a a' � 0 3�3g�3�3�88�888go3�38 7M iA pj C r sss8888s�8888s8ss88 8 $ d a�g�i�i��35��n,o 7 U] N N M O 7 Y m u r � iL C m a >< d • e o 5 a E m m n � c c� E �+ m$' � C9 O V1 e m C Fn N H n o m W d N PCA 'J O � w �U) oQ mLZ a.a m c to m x add 5Qv o� 'L' g n a c r F- ¢ c��u¢vaiv'�a`a`rELo ibmc�fc>=c� n =mom z rn cm Bermuda Dunes t iscal Feasibik.�' Table 2: Ss99ics Po LAgbon E: snditums Per Calilta PALM DESERT BERMUDA DUNES 7007 ag S.- P.P. Faoson FT ZNM Pnhniari y E.p..diln.. E.p.nd0as P.1 R.idan18.a.d Eaplapa. 8aa.d FT AO7AM 8armuda 8...d. U..a FT SM1O B.laud. a.dga Readaal Ent Par R.W..1 Enb • Ea.ndiWw t. dialla Wan E.pMdilYw t.pandkwM Ow.. F.paMNww Gmarai F.Pd C47 Cou . 290.614]0 101 324 f 539 1 '22 S 3!6r818 t ]_9555 1 3525372 1 3511606 S 301557, Ccmmunay S-i.,; UY C:rm 5;I904 30 103 324 S:A 219 %W1170 645712 63 3E2 92 65.93715 6635441 L.grtNlx A&K:.y E390C ]0 103 024 1.1 026 687161 ?1345 7E61OE 795940 am 16 C.Y Ancnays D.no :/130C 30 1J0 0;A 2S2 061 16,7055: '76:60 17AM- '8.19750 189160E _.gx Sli.lx S1m 1 3A5,00C 30 1 ]0 0 2A 6 0A 1 A5 AM 7-1426842 A: 898 66 43.587 17 153A3 73 :aT Nanag.r 70C.3Nx 130 0 1227 295 76ASO'1 3571?9 D51213C 3855232 92.12098 :omnAnd7 SaYA•s• Admen 178E 90000 tM S9t 223709 •A 2,3709'4 23272462 242,10342 " ;• DKanm•A 1812 SSA CO : ]0 0 24 31 74 162 197.700 32 2242526 210.12E 7E 226.997 36 23G25 9E napand.rd MW BC 300 03 1 30 324 1 AO 334 6.725 M 90978 9715 5: '0107 17 :0--1I AS lunar R.so.'m 855: M 00 130 J 24 14 37 353 93268 42 10979 51 UaA7 33 135 033 00 11238E n 3arrrx S.mc.s 5EO3uM 103 J2A IC'6 2u 6329513 711961 7C174 74 7331488 76AS 46 blArmaim T.cMowg7 11C01AC 30 100 024 24 52 6Be 152717 EA :7.32287 IIG 36051 1768931, 1BA,12193 Ur.mpk lmar: lnsurx:9 25JDCM 130 069 035 024 2,'%35 71626 2912 ED 3029% 3.157M k swan;a 6AE9R JO IDO 0;A 1136 273 ?J 73392 332340 7875732 6'931;A AS:3307 A.dann Transla• 2F7-TF10C t30 .1 ?A A597 '1 f13 2%316;A 3?A771A 11R 7S4 J7 3716A'AS 3A5ONK. Pua. S.m 1:,2AC,6410J 1L 524 24S 36 5585 ISc_3271'; 15198 E7 i72913979 1 739 157 02 1E716E305 F.. D.panmam F,M 885567103 :J0 32A ISE J7 3722 965915&E :09564 51 10751W'7 1,119822 C2 16391054 ems RAyoixmr. 24C,JM DO I03 321 AA '01 26.'?756 29693A 914635 3.33215: 31543 AE Pw &,..I s,yn77ra6c_.N17 o- 3M J0 100 32A 1130 264 -_ .ra 8.1- -.-. �N'.Amw 3286.90L 30 103 324 575E 1301 SB 512 A 10.66633 3w 787E 415265 Ee 432 000 07 Rw StYat%4. . nc. 7.16DSC 30 100 02A 3E 26 913 ..._. r•Rnim. .... _. Pw Sum 7...4n 9 2300,00030 100 024 4z27 957-- Pw :DIP Yxd E3.51 70 107 021 :A6 035 9.:6751 'Z3308 10,: 46i '054336 I097450 P'2J Eonpmsm ♦ CCE 30 130 0;4 753 181 4690144 5320 C6 UZI 51 5432603 55,'.1537 DS - Puouc Bu Lng CILIA 6Ad 35C 3c 1 M 024 11 28 271 ?ow A7 972 CS 28253 3-18:.405 93 8A.E87 993 DS Pon.7l.Conmw :.C.r•tr 83.7mS 170 1EB 10.17932 1017932 1G90:W :1,31055 NPDES .10 We.•P.m SUOx 130 02A 088 321 6,453 nT 61861 6.M 27 631698 WISECc mmunn7 poindA 5 711, 9000 130 6iA %% 686 251 Cil-v 2513E!I 26$76 43 16o 916 43 "1 F!3't Markwg 117233703 t]0 :2A Y53 A93 127 E70 A5 to SJA AA 142.37A® 1AB 11260 15A 0815A Vnlori Irlormrtmn G.r..r 7C93S W I ] 7A 12 AI 2 % 77 2 & B n• 9I d6; CA 76 8357, 78 53 IEA 65 8r•dmg L SAN1T 3,T•710C 71 i a ] 24 5E 99 1161 i3 .13 31 AOf53 90 '93 ,F.7 21 AM Ot l M 115195 R1 �Urnm9 And Connunn.:. fiquIlnt I48.9K 30 103 ]2A 2::? 5ce 13196396 14,95742 IAGXI 37 15273B;7 15885362 Oac. a EnrgT Mans" A 3441UM 100 O;A 537 :A3 ?7*21 421522 Al 376G 4304350 1477857 DS Pan MinlMir;l :3BA,S3A ]U 100 ;782 173282 U 173262 AA :90265?2 187 A30 A3 DS Cmc Cr'N' plA t,A65 31tl S 1 U 29 54 - 1F<.O35 2C IEA D35 2C :3: 451 E2 159.;67 P'AI LAndacax Sem<es 211 790 CC t ]C Z 24 ? 92 9 t: - - :pe BMc. CAW. Ag.." Fundrg 975mo 0] 1T1 324 :7',1 A.:. 1053A629 12,.K 5< 118 Ar'329 123:8'12 '. 2814532 WK.— NO E.p.r7rwas' EE3156 UJ ;30 1-31 83DE535 - d3Lkii` 85 c12 P9 .-33 TOTAL: Gaaaral Fund 60.316.866110 tID 022 lAn37 731.10 5,a7A5Y,.42 590,3O5D9 f 6,464AGI 1 6.725.3% S 6.996.42E cWt.1 T.I.1 CM Annual CM M An Annual Cava Coss aws SPip. 522Gffi]a nF M M NA (.A NA 'd M M M.M.lad %4,]00 r. M. NA NA NA r.A NA .VA NA NA J•sgn. nspintY .In da.'Yat 1,76E,3w UJ %A NA NA NA NA NA NA NA NA :onag.ncus LMMA] `.A .M '.A N7. M NA '.A NA NA SaYiWl 8/31�OD0 S 751,397 1 294397 S 214,J87 ..3lwol lmprnr.m.ms fi'V.701: M NA NA %A NA NA NA NA NA M D.fgn, .mAprcuon 111WIV 1 17C2.DXM '.A NA hA NA NA NA NA NA NA : !'ganci.s ;19 Rf ]D M NA NA NA NA NA \A .M NA S.P T.I. E,519mas f M.M 1 MA3 5 MM3 Sim D'r 72.400 O90 NA NA 'JA W E.A V. 6 746,667 f 746A67 6 MAP 71Abc 3,9,0, 2.400AOSD0 NA NA ^JA M M M 1 401A00 1 460A00 f 4E0im ■air+ nla.d la CG.N.1 I.....eanta PAwn.A MAmo-n�ce 1>F.4JTi p a NA M NA M M "Cs' aC T M M 1.0E Sg1.15 fjom 10 U V1 N4 NA SA NA 86=I M M Sgr, ng an151np'g 3' ]IL JG .M "A ,M NA .\A NA 35=1 T M M L.Mic npr MAmirnanu A11 3?u T7 SA M M NA .M NA ;8:.37C I M M St••M Sw•gn9 SE AM NA M M NA .M NA r_A AJE1 T M M Sub Towl IpIJ.M.OE S 1517.Tro 1 173OS]3/ 6 1702.47111 Tow Caa Capital 6Aploa.InMa S 3,JI11.811 f 3, 10ADI 1 ISOI.S15 f 9,7pbro 6 IGMS.M S 10.503.163 - .. ToW t r?! W a E..wau.a •...c1 n tietb.Ya Yvan ry gpFr-0. hymn I1 t Aa.,07ti va a..�ae. � J,A]E tt S) SnAta Ch Jr IrY.Y.nbr_ur.I slppr.ry irn)Ja prAYl•. •raYave. YAVr�M hluniF'inanctal n cm Bermuda Dunes Fr}ral 1 `4 EXHIBIT D - SALES TAX REVENUE AND COMMERCIAL PROPERTY LIST STATE OF CALIFORNIA STATE BOARD OF EQUALIZATION RESEARCH AND STATISTICS SECTION. N9C, 67 460 N STREET. SACRAMENTO. CALIFORNIA PO BOX 942079. SACRAMENTO. CALIFORNIA 942790067 9164s5.0040 • FAX 916445 7119 WW W we U. QOY Mr. George J. Spitiotis Riverside LAFCO 3i350 Vine Street, Suite 110 Riverside, CA 92507-4277 Dear Mr. Spiliotis: r-1 �rJ SETT V T III Fm n.,w S. P— &Ll LEONARD S., Puw OnunnSq�+w 1e LYC✓~ELLE STEEL A10I CN Ealln P>R'�. LA 4-9— August 30, 2007 � a ow R"NDNJ MASIG F— Dn Per your Jury 23, 2007 letter request, the annual 2006 total 1% local sales tax revenue generated from the Bermuda Dunes commercial properties (list was provided by MuniFinancial) in the possible annexation area to the City of Palm Desert was $707,100. Attached is a list of businesses included in this study. Should you have any questions, or if t may be of any further assistance, please let me know. Sincerely, `ijlL II I. l/ L Wun-chi Wang Research Program Specialist Ww: ems Attachment cc: MuniFinancial Attn: Habib Isaac and Jennie Carter 27368 Via Industria, Suite 110 Temecula, CA 92590 AfuniFinanaal D-1 M E5 Bermuda Dunes t isra! Fearihilio� BUSINESS NMi1E r �Mu Sa Strad Smug City City p BERMUDA DUNES COUNTRY CLUB 42360 ADAMS ST BERMUDA DUNES 92203.8071 MURPH'S GASLIGHT 79860 AVENUE 42 BERMUDA DUNES 92203-1453 THE DESERT SUN 78078 COUNTRY CLUB OR BERMUDA DUNES 92203.8172 DUNN-EDWARDS PAINTS 75078 COUNTRY CLUB OR BERMUDA DUNES 92203-8172 JACK SAUTER GOODYEAR 78105 COUNTRY CLUB OR BERMUDA DUNES 92203.9202 VEROICON 79141 COUNTRY CLUB OR BERMUDA DUNES 92203.1282 TURF STAR 79253 COUNTRY CLUB OR BERMUDA DUNES 92203.1229 MACKLIN MIRROR 8 GLASS 79469 COUNTRY CLUB DR BERMUDA DUNES 92203-1206 INTERACCESS SYSTEMS 79521 COUNTRY CLUB OR BERMUDA DUNES 92203-1249 GOLF VENTURES WEST 79633 COUNTRY CLUB DR BERMUDA DUNES 92203.1290 ENGLAND'S REMODEL DOOR 79893 COUNTRY CLUB DR BERMUDA DUNES 92203-1290 EARLY LIGHTING 796W COUNTRY CLUB DR BERMUDA DUNES 92203.1280 HENRYS GLASS 8 MIRROR 79919 COUNTRY CLUB DR BERMUDA DUNES 92203-1279 CALIFORNIA DESERT NURSERY 7ww DARBY RD BERMUDA DUNES 92203.9665 VINTAGE NURSERY 78755 DARBY RD BERMUDA DUNES 92203.962I CAMERON NURSERY - TURF PRODUCTS 78M DARBY RD BERMUDA DUNES 92203-9205 HILLES UNION 76 40010 WASHINGTON AVE BERMUDA DUNES 922D3-9201 CARLS JR RESTAURANT 40050 WASHINGTON ST BERMUDA DUNES 92203.9201 LILTS CHINESE 40100 WASHINGTON ST BERMUDA DUNES 92203-9645 GEORGE'S PLACE 40100 WASHINGTON ST BERMUDA DUNES 92203-9644 JOE'S SUSHI 40100 WASHINGTON ST BERMUDA DUNES 92203.9645 CIRCLE K FOOD STORES 40100 WASHINGTON ST BERMUDA DUNES 92203-9640 PIZZA HUT 40100 WASHINGTON ST BERMUDA DUNES 92203-9644 SUBWAY SANDWICHES 40100 WASHINGTON ST BERMUDA DUNES 92203-9644 MARIO'S ITALIAN CAFE 40104 WASHINGTON ST BERMUDA DUNES 92203.9201 DAIRY OUEEN 41800 WASHINGTON ST BERMUDA DUNES 92203.8150 TROPICAL TANNING 418M WASHINGTON ST BERMUDA DUNES 92203.8150 KENTUCKY FRIED CHICKEN 41800 WASHINGTON ST BERMUDA DUNES 92203-8150 ONE PRICE OPTICAL 41800 WASHINGTON ST BERMUDA DUNES 92203.8160 SUB KING 41800 WASHINGTON ST BERMUDA DUNES 92203.8150 ESTRELLA'S BEAUTY SUPPLY 41800 WASHINGTON ST BERMUDA DUNES 9=-8150 MAIL BOXES ETC 41800 WASHINGTON ST BERMUDA DUNES 92203-8150 RITE AID 41300 WASHINGTON ST BERMUDA DUNES 92203.8150 WALGREENS 42010 WASHINGTON ST BERMUDA DUNES 92203-9610 WIENERSCHNITZEL 6 TASTEE FREEZE 42092 WASHINGTON ST BERMUDA DUNES 92203.8164 BIG - 0 TIRES 42096 WASHINGTON ST BERMUDA DUNES 92203.8164 SMOG DOG 42098 WASHINGTON ST BERMUDA DUNES 92203.8164 JUST JAVA COFFEE 42102 WASHINGTON ST BERMUDA DUNES 92203.8163 BLOCKBUSTER VIDEO 42140 WASHINGTON ST BERMUDA DUNES 92203.9611 RALPHS GROCERY CO. 42150 WASHINGTON ST BERMUDA DUNES 92203-9611 POST NET 42206 WASHINGTON ST BERMUDA DUNES 92203.8155 CITY LITES WOMEN'S APPAREL 42218 WASHINGTON ST BERMUDA DUNES 92203-8155 OREAMWORLD MATTRESS 42M WASHINGTON ST BERMUDA DUNES 92203.8155 JACK IN THE BOX 42250 WASHINGTON ST BERMUDA DUNES 92203.8155 HOME GOODS 42400 WASHINGTON ST BERMUDA DUNES 92203.8156 MuniFinaneia! D In M Phone (760) 347-3629 Fax (760) 347-4995 46780 Clinton St, Indio, CA 92201 CSL13 #273088 N C7 zi The Honorable Carlos L. Ortega and Respected Council Members r=) Palm Desert City Manager --r 73510 Fred Waring Palm Desert CA 92260 O 'n C7 -T7 October 10, 2007 _ > -- m Dear Staff and Council: My family owns six parcels of land in Bermuda Dunes totaling 11.2 acres. We are currently constructing a new industrial park building on 2 of those acres, to which we plan to move our business operations, Valley Plumbing Company. We are aware that there may be some consideration toward the annexation of the Bermuda Dunes area by either The City of La Quinta, The City of Indio, or The City of Palm Desert. If, and when this subject is brought to the table in the City of Palm Desert, please sound our desire to be annexed by the City of Palm Desert. Please also express our opposition to being annexed by the City of La Quinta or the City of Indio. Though I write this letter on behalf of my family, my business, and myself, I believe that I am of the same mind set as the majority of the property owners of Bermuda Dunes. I base this statement on the fact that, a few years ago, there was a vote by the property owners of Bermuda Dunes as to whether to become a part of Indio, La Quinta, or Palm Desert. The vast majority of the property owners voted to be named to be in the sphere of influence of The City of Palm Desert. Below, are a few reasons I believe the City of Palm Desert would benefit from the annexation of Bermuda Dunes. With the recent general plan amendments by the County of Riverside, and the re -designation of many parcels from residential to commercial and industrial, the county has greatly increased the potential of commercial retail and industrial sales in the area. That being the case, the Bermuda Dunes area ought to be very desirable to a city that would be looking prospectively into annexation of other areas. The inevitable commercial and industrial growth in our area will surely result in revenue from a larger tax base, sales tax, and annual licenses for each new and existing business in Bermuda Dunes. New conunercial and industrial developers would also foot the bill for infrastructure improvements such as road widening, sewer laterals, street lights, etc. We have also seen Riverside County, very recently, stepping up the level and frequency of improvements to the area. It is our understanding that there is a good possibility of further infrastructure installations and improvements that will be done in the near future, thereby relieving the eventual annexing body of those potential expenses. If you wish to discuss this, please feel free to contact me at any time on my cell phone at (760)399-6991. Sincerely, Rob Ferraud **4w W Page 1 of 1 Klassen, Rachelle From: Sarie Gonsalves [sari e@valley-plumbing.coml Sent: Wednesday, October 10, 2007 10:10 AM To: Klassen, Rachelle Subject: cityofpalmdesert.pdf - Adobe Reader Per your conversation with Rob this morning, I have attached a letter regarding Palm Desert and Bermuda Dunes. If you have any questions, please feel free to contact me. Thank you, Sarie Gonsalves Valley Plumbing Company 46780 Clinton Street Indio, CA 92201 (760) 346-4695 10/ 10/2007 Staff Report City of Palm Desert Spheres of Influence Review October 11, 2007 Page 2 of 3 of Palm Desert concerning an annexation proposal. The City initiated a fiscal analysis on the impacts of annexing Bermuda Dunes into the City. The analysis indicated revenues generated by the annexation would fall well below service expenditures. In March 1996, the City informed the Bermuda Dunes Community Council that Palm Desert did not encourage or support the annexation of Bermuda Dunes within the City. In September 2000, LAFCO recommended that the area of Bermuda Dunes south of 1-10 be within the Palm Desert SOI. However, LAFCO staff was concerned that this area could be relegated to permanent "island" status. Their recommendation was made with the hope that this would be the first step in opening up a new dialogue about annexation between residents, the County, and the City. The Riverside County Local Agency Formation Commission (LAFCO) is undertaking sphere of influence hearings for Coachella Valley cities, beginning with the western portion of the Valley. A sphere of influence is defined as a plan for the probable physical boundaries and service area of a local agency. At its April 12, 2007, meeting, the City Council indicated its desire to no longer retain the Del Webb Sun City sphere of influence. However, the Council directed staff to perform a fiscal feasibility analysis to ascertain the impacts of annexing the Bermuda Dunes sphere of influence. Munifinancial was retained to perform a fiscal feasibility study focusing on not only operating and maintenance costs required to provide general government services to Bermuda Dunes, but to also conduct a thorough analysis of capital costs with bringing exiting public facilities up to current City standards. This report was recently completed and indicated that annexing this region into the City of Palm Desert would result in a negative fiscal impact as follows: *ONGOING GENERAL GOVERNMENT SERVICES COSTS FISCAL YEAR COST FY 2007/2008 $7,454,100 FY 2008/2009 $7,727,037 FY 2009/2010 $8,008,212 *The costs of annual infrastructure maintenance are included in this total. Infrastructure maintenance costs are identified below. ANNUAL INFRASTRUCTURE MAINTENANCE COSTS MAINTENANCE CATEGORY COST *Sanitary Sewers $294,397 Storm Drains $746,667 New Street Improvements $283,983 "Traffic Signals $480,000 Road Maintenance $1,513,770 TOTAL EXPECTED ANNUAL COST $3, 318, 817 *Sewer installation costs would likely be borne by property owners, via an assessment district mechanism, and would not be the City's responsibility. These construction & maintenance costs are presented for clarification purposes. **Traffic signals annual costs calculated based on annual installment for a five-year period only. Staff Report City of Palm Desert Spheres of Influence Review October 11, 2007 Page 3 of 3 *COSTS TO CONSTRUCT PUBLIC INFRASTRUCTURE IMPROVEMENTS INFRASTRUCTURE COST Sanitary Sewers $8,831,900 Storm Drains $22,400,000 New Street Improvements $8,519,500 Traffic Signals $2,400,000 TOTAL EXPECTED 30 YEAR COST $42,151,400 `Costs are based on 2007 Dollars The County previously indicated the possibility of providing a considerable financial investment over two years for a major renovation of Bermuda Dunes' existing infrastructure. The sufficiency of this funding to bring Bermuda Dunes' streets, sidewalks, drainage systems, and infrastructure up to City of Palm Desert standards has not been determined. As this report indicates that additional revenues would be necessary for the City to mitigate the potential negative financial impact caused by annexing this region, staff cannot recommend annexing Bermuda Dunes and requests direction concerning retaining this sphere of influence. Submitted B Lauri Aylaian S pheK Y. A;rCn Director of Community Development Assistant toti Manager Approval: Carlos L. Orteo Ho er L. Cr City Manager ACM for D vel pment Services YOAIP�11-f Paul S. Gibson Director of Finance/City Treasurer Mark Greenwood, P.E. Director of Public Works REGULAR PALM DESERT CITY COUNCIL MEETING OCTOBER 11, 2007 XVI. OLD BUSINESS A. CONSIDERATION OF THE CITY OF PALM DESERT - BERMUDA DUNES SPHERE OF INFLUENCE REVIEW REQUEST FROM THE RIVERSIDE COUNTY LOCAL AGENCY FORMATION COMMISSION (LAFCO). * By Minute Motion, direct that LAFCO be informed that the City of Palm Desert does not wish to have Bermuda Dunes removed from its Sphere of Influence; although, Palm Desert does not wish to annex Bermuda Dunes at this point, but the City is not opposed to annexing the area in the future if it is financially feasible. 5_0 ._'xY CUB NCI:L ACTION: APPROVED RECEIVED DATE 1. '.3STAIN: `-7LIRIFIED BY: -:i_g? nel onFile DENIED OTHER C Clerk's Office TNt Potential Annexation Fiscal Analysis City of Palm Desert Scenario A: Costs/Revenues Summary Table Total Potential Costs/Revenues Summary Table Scenario A Buildout Phase Phase I Yrs 1-5 Phase II Yrs 6-10 ANNUAL REVENUES General Fund: Property Tax $825,878 $926,206 Property Transfer Tax $541,879 $603 304 Local Sales Tax $1,874 090 $2 314,298 Transient Occupancy Tax $544,596 $776,804 Motor Vehicle In -Lieu Fees $37,600 $46,299 Subtotal Annual General n Revenue Ph Bit $3,824, 442 $4,666,910 Restricted Funds: Highway Users Gas Tax $273,740 $337,075 Measure A $15,742 $1.9,440 Fire Fund - Prop. A Fire Tax $377,532 $449,663 Fire Fund - Structural Fire Tax $1 385,115 $1,553,380 Subtotal Annual Restr. Fund Revenue at Phase Buildout $2,052,130 $2,359,558 Total All Potential Revenues at Phase Buildouti $5,876,1721 $7,026,468 Interest Earnings: Historic Average Interest Rate on 90-Day Treasury Bills 4.39% 4.39% Anticipated Interest Earned on Revenues $257,964 $308,462 Total Potential Annual Revenue at Phase Buildout $6,134,136 $7,334,930 ANNUAL COSTS General Fund: Costs of General Government $4,858,003 $5,993,713 Costs of Police Protection $4,014,933 $5,004,825 Costs of Roadway Maintenance $390,290 $459,165 Subtotal Annual General Fund Costs at Phase Buildout, $9,263,227 $11,457,703 Restricted Funds: Costs of Fire Protection $1,500,000 $1,500,000 Co-,ts of Ambulance Service] $940,944 $940,944 Subtotal Annual Restricted Fund Costs at Phase Buildout $2,440,944 $2,440,944 Total Potential Annual Costs at Phase BWldoutl 1$11,704,171 $13,898,647 Potential Cashflow at Phase Buildout -$5 570 035 -$6 563 717 ' Does not include one-time (year 1) start-up ambulance costs of $190,000. Page 1 of 2 CM TN Potential Annexation Fiscal Analysis City of Palm Desert Scenario A: Costs/Revenues Summary Table CITY DEVELOPER IMPACT FEES REVENUES (One time only) New Construction Tax $1,002,772 $1,002,772 Art in Public Places Fees $888,517 $888,517 Low Income Housing Mitigation Fees $350,661 $350,661 Child Care Program Fees $491,268 $491,268 Traffic Signals Fees $171,814 $171,814 Planned Drainage Fees $175,700 $175,700 Park & Recreation Facilities Fees $1,609,120 $1,609,120 Total Potential Developer Impact Fee Revenues at Phase Buildoutl $4,689,852 $4,689,852 Page 2 of 2 In TT'' Potential Annexation Fiscal Analysis City of Palm Desert Scenario A: Costs/Revenues Summary Table Total Potential Costs/Revenues Summary Table Scenario A Buildout Phase Phase I Yrs 1-5 Phase II Yrs 6-10 ANNUAL REVENUES General Fund: Property Tax $680,122 $688,424 Property Transfer Tax $414 377 $420,617 Local Sales Tax $868,501 $896,629 Transient Occupancy Tax $312,387 $312,387 Motor Vehicle In -Lieu Fees 1 $29,507 $30,119 Subtotal Annual General Fund Revenue Pha,, $2,304,894 $2,348,175 Restricted Funds: Highway Users Gas Tax $214 822 $219,274 Measure A $7,295 $7,532 Fire Fund - Prop. A Fire Tax $305,520 $311,100 Fire Fund - Structural Fire Tax $1,140 661 $1 154 584 Subtotal Annual Restr. Fund Revenue at Phase Buildout $1,668,298 $1,692,490 Total All Potential Revenues at Phase Buildout $3,973,192 $4,040,665 Interest Earnings: Historic Average Interest Rate on 90-Day Treasury Bills 4.39% 4.39% Anticipated Interest Earned on Revenues $174,423 $177,385 Total Potential Annual Revenue at Phase Buildoutj $4,147,6151 $4,218,050 ANNUAL COSTS General Fund: Costs of General Government $4,176,256 $4,262,849 Costs of Police Protection $3,131,380 $3,196 442 Costs of Roadway Maintenance $107,139 $107,139 Subtotal $7,414,775 $7,566,429 Restricted Funds: Costs of Fire Protection $1 500,000 $1,500,000 Costs of Ambulance t $940,944 $940,944 Subtotal Annual Restricted Fund Costs at Phase Buildout $2,440,944 $2,440,944 Total Potential Annual Costs at Phase Buildouti $9,855,719 $10,007,373 Potential Cashflow at Phase Buildout 1 -$5 708103 -$5 789 323 1 Does not include one-time (year 1) start-up ambulance costs of $190,000. Page 1 of 2 M Tl,Potential Annexation Fiscal Analysis City of Palm Desert Scenario A: Costs/Revenues Summary Table CITY DEVELOPER IMPACT FEES REVENUES (One time only) New Construction Tax $95,833 $95,833 Art in Public Places Fees $60,796 $60,796 Low Income Housing Mitigation Fees $9,583 $9,583 Child Care Program Fees $8,625 $8,625 Traffic Signals Fees $9,392 $9,392 Planned Drainage Fees $16,400 $16,400 Park & Recreation Facilities Fees $99,676 $99,676 Total Potential Developer Impact Fee Revenues at Phase Buildout $300,305 $300,305 Page 2 of 2 En TI Potential Annexation Fiscal Analysis City of Palm Desert Scenario B: Costs/Revenues Summary Table Total Potential Costs/Revenues Summary Table Scenario B Buildout Phase Phase I Yrs 1-5 Phase II Yrs 6-10 Phase III (Yrs 11-15) Phase IV (Yrs 16-20) ANNUAL REVENUES General Fund: Property Tax $822,029 $903,515 $985,000 $1,066,316 Property Transfer Tax $473,617 $479,325 $485,032 $490,739 Local Sales Tax $2 078,761 $2,698,991 $3,319,220 $3,939,446 Transient Occupancy Tax $621,998 $931,610 $1,241,221 $1,550,832 Motor Vehicle In -Lieu Fees 1 $33,7021 $38,5121 $43,317 $48,106 Subtotal Annual General Fund Revenue at Phase Buildout $4,030,108 $5,051,951 $6,073,790 $7,095,439 Restricted Funds: Highway Users Gas Tax $245,363 $280,378 $315,364 $350,227 Measure A $17,462 $22,672 $27,881 $33,091 Fire Fund - Prop. A Fire Tax $346,294 $385,328 $424,361 $463,395 Fire Fund - Structural Fire Tax $1,380,410 $1,517,074 $1,653,737 $1,790,115 Subtotal Annual Restr. Fund Revenue at Phase Buildout $1,989,529 $2,205,451 $2,421,344 $2,636,828 Total All Potential Revenues at Phase Buildout $6,019,637 $7,257,402 $8,495,134 $9,732,267 Interest Earnings: Historic Average Interest Rate on 90-Day Treasury Bills 4.39% 4.39% 4.39% 4.39% Anticipated Interest Earned on Revenues $264,262 $318 600 $372,936 $427,247 Total Potential Annual Revenues at Phase Buildoull $6,283,899 $7,576,002 $8,868,071 $10,159,514 ANNUAL COSTS General Fund: Costs of General Government $4,361,259 $4,988,300 $5,615,341 $6,240,704 Costs of Police Protection $3,633,531 $4,177,883 $4,722,235 $5,265,212 Costs of Roadway Maintenance $485 184 $541,815 $598,451 $655,082 Subtotal Annnal General Fund Costs at Phase Buildoutl $8,479,9741 $9,707,998 $10,936,028 $12,160,998 Restricted Funds: Costs of Fire Protection $1,528,907 $1,557,408 $1,585,910 $1,614,411 Costs of Ambulance t $940,944 $940,944 $940,944 $940,944 Subtotal Annual Restricted Fund st t Ph Bit $2,469,851 $2,498,352 $2,526,854 $2,555,355 Total Potential Annnal Costs at Phase, Riffldmit $10,949,825 $12,206,350 $13,462,881 $14,716,353 Potential Cashflow at Phase Buildout -$4 665 927 -$4 630 348-$4,594,811-$4,556,839 Does not include one-time (year 1) start-up ambulance costs of $190,000. Page 1 of 2 LIMA CITY DEVELOPER IMPACT FEE REVENUES (One time only) TIsf'YePotential Annexation Fiscal Analysis City of Palm Desert Scenario B: Costs/Revenues Summary Table New Construction Tax $754,413 $754,413 $754,413 $754,413 Art in Public Places Fees $714,297 $714,297 $714,297 $714,297 Low Income Housing Mitigation Fees $522,899 $522,899 $522,899 $522,899 Child Care Program Fees $803,567 $803,567 $803,567 $803,567 Traffic Signals Fees $182,442 $182,442 $182,442 $182,442 Planned Drainage Fees $250,150 $250,150 $250,150 $250,150 Park & Recreation Facilities Fees $953,415 $953,415 $953,415 $953,415 Total Potential Developer Impact Fee Revenues at Phase Buildout 4,181,1831 $4,181,1831 $4,181,1831 $4,181,183 Page 2 of 2 05 TNPotential Annexation Fiscal Analysis City of Palm Desert Scenario B: Costs/Revenues Summary Table Total Potential Costs/Revenues Summary Table Scenario B Buildout Phase Phase I Yrs 1-5 Phase II Yrs 6-10 Phase III (Yrs 11-15) Phase IV (Yrs 16-20) ANNUAL REVENUES General Fund. Property Tax $833,737 $926,741 $1,019,745 $1,112,597 Property Transfer Tax $487,404 $494,033 $500,506 $507,135 Local Sales Tax $1,961,326 $2 447,242 $2,933,159 $3,301,663 Transient Occupancy Tax $505,894 $699 401 $892,908 $1,086,415 Motor Vehicle In -Lieu Fees 1 $33,7271 $38,5631 $43,393 $48,203 Subtotal Annual General Fund Revenue at Phase Buildout $3,822,088 $4,605,981 $5,389,712 $6,056,014 Restricted Funds: Highway Users Gas Tax $245 556 $280,763 $315,942 $350,938 Measure A $16,475 $20,557 $24,639 $27,734 Fire Fund - Prop. A Fire Tax $347,333 $389,715 $432,098 $474,480 Fire Fund - Structural Fire Tax $1,398,296 $1,554,277 $1,710,258 $1,865,984 Subtotal Annual Restr. Fund Revenue at Phase Buildout $2,007,659 $2,2451,312 $2,482,936 $2,719,136 Total All Potential Revenues at Phase Buildout $5,829,7471 $6,851,2931 $7,872,6481 $8,775,150 Interest Earnings: Historic Average Interest Rate on 90-Day Treasury Bills 4.39% 4.39% 4.39% 4.39% Anticipated Interest Earned on Revenues $255,926 $300,772 $345,609 $385,229 Total Potential Annual Revenues Phase Buildoutl $6,085,6731 $7,152,065 $7,872,6481 $8,775,150 ANNUAL COSTS General Fund: Costs of General Government $4,788,342 $5,479,555 $6,170,767 $6,860,139 Costs of Police Protection $3,654,346 $4,205,138 $4,755,929 $5,305,345 Costs of Roadway Maintenance $420,136 $518,856 $617,583 $716,305 Subtotal Annual General Fund Costs at Phase Ruildoutl $8,862,825 $10,203,5491 $11,544,2801 $12,881,789 Restricted Funds: Costs of Fire Protection $1,500,000 $1,500,000 $1,500,000 $1,500,000 Costs of Ambulance ' $940,944 $940,944 $940,944 $940,944 Subtotal Annual Restricted Fund Costs at Phase Buildout $2,440,944 $2,440,944 $2,440,944 $2,440,944 Total Potential Annual Costs at Phase Rijildmit $119303,769 $12,644,493 I I $13,985,224 $159322,733 Potential Cashflow at Phase Buildout 1 -$5 218 096 -$5 492 428-$6,112,576-$6,547,583 I Does not include one-time (year 1) start-up ambulance costs of $190,000. Page 1 of 2 TP4194 Potential Annexation Fiscal Analysis City of Palm Desert Scenario B: Costs/Revenues Summary Table CITY DEVELOPER IMPACT FEE REVENUES (One time only) New Construction Tax $1,083,345 $1,083,345 $1,083,345 $1,083,345 Art in Public Places Fees $1,008,448 $1,008,455 $1,008,461 $1,008,467 Low Income Housing Mitigation Fees $518,446 $518,446 $518,446 $518,446 Child Care Program Fees $917,252 $917,252 $917,252 $917,252 Traffic Signals Fees $164,587 $164,587 $164,587 $164,587 Planned Drainage Fees $256,925 $256,925 $256,925 $256,925 Park & Recreation Facilities Fees $958,385 $958,385 $958,385 $958,385 Total Potential Developer Impact Fee Revenues at Phase Buildouti $4,907,3891 $4,907,3951 $4,907,4021 $4,907,408 Page 2 of 2