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Home My WebLink AboutReport-Land Use/Fiscal Impacts-North Sphere-Bermuda Dunes CITY OF PALM DESERT DEPARTMENT OF COMMUNITY DEVELOPMENT STAFF REPORT REQUEST: RECEIVE AND FILE LAND USE AND FISCAL IMPACTS REPORT FOR THE NORTHERN SPHERE OF INFLUENCE (EXPANDED) AND BERMUDA DUNES AREA, CONTINUING DISCUSSION AND ACTION ON THE MATTER TO 12 SEPTEMBER 2013 SUBMITTED BY: Lauri Aylaian, Director of Community Development DATE: 22 August 2013 CONTENTS: Land Use and Fiscal Impacts for the Northern Sphere of Influence (Expanded) and Bermuda Dunes Areas, prepared by Terra Nova Planning & Research, dated July 2013 Recommendation By Minute Motion, receive and file "Land Use and Fiscal Impacts for the Northern Sphere of Influence (Expanded) and the Bermuda Dunes Areas," prepared by Terra Nova Planning & Research, Inc., and continue the matter to the meeting of 12 September 2013, at which time a staff recommendation will be made and public testimony on the matter can be heard. Backqround This staff report introduces an analysis concerning the potential for financially optimizing the annexation into Palm Desert of Bermuda Dunes, Sun City, and adjoining areas both within and outside of Palm Desert's current sphere of influence. This analysis was requested by the City Council, and witl be of interest to many people and businesses in Bermuda Dunes, Sun City, and the Thousand Palms area. Because of the length of the report, that complexity of the analyses, and the agenda deadline, it's likely that not all interested parties will be able to fully review the report before the 22 August 2013 City Council meeting. Consequently, staff is requesting that the City Council receive and file the report, but that no action be taken until the City Council meeting scheduled for 12 September 2013. At the request of the City Council, a study session can be scheduled before that meeting to allow for an in-depth presentation of the material contained in the report. Staff Report Land Use and Fiscal Impact Report 22 August 2013 Page 2 of 2 Environmental Review Accepting the staff recommendation on this item does not constitute a project as defined by the California Environmental Quality Act (CEQA). Therefore, no environmental review is required. Submitted by: � CITY COUNt'II�C1'ION APPROVED DFNiL� RECEIVED OTHER Lauri Aylaian, Community Development irec Es G �/ . � � NOEsr ABSENTs ABSTAINs rovaL• VERIFIED BYs �O�iw�l o�Fi�e w�t6t�Cit� rk's Of�icf g rove , inc u in e sche u in of a Stud�� Session on Thursday, September 12, 2013, hn M. Wohlmuth, City Manager at 2:0o p.m. 4=0 (Harnik ABSENT) g:\planning\lauri aylaian�staff reportsGsun city and bermuda dunes annexation fiscal analysis 8-22-13.doc LAND USE AND FISCAL IMPACTS FOR THE NORTHERN SPHERE OF INFLUENCE (EXPANDED) AND BERMUDA DUNE5 AREAS Prepared for City of Palm Desert 73-510 Fred Waring Drive Palm Desert, CA 92260 Prepared by r \ � � Terra Nova Planning & Research, Inc.� 42635 Melanie Place, Suite 101 Palm Desert, CA 92211. July 2013 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas Tabte of Contents I. Introduction and Purpose......................................................................................................3 II. Summary of Current Conditions.........................................................................................5 A. Bermuda Dunes...............................................................................................................................7 B. Jack Ivey Ranch............................................................................................................................ 13 C. Northern Sphere Area.................................................................................................................. 15 D. Entire Study Area.........................................................................................................................18 III. Alternative Land Use Scenario.........................................................................................21 A. Assumptions..................................................................................................................................21 B. Required Land Use Changes.......................................................................................................21 C. Capital Improvement Costs.........................................................................................................25 IV. Conclusion...........................................................................................................................28 List of Tables TABLE 1 BERMUDA DUNES LAND USES�VAC.4NT AND DEVELOPED�..........................................................................8 TABLE Z COSTS/REVENUES SUNIMARY TABLE BERMUDA DLNES-E�ISTING DEVELOPMENT�FY ZOO7/OS�...........9 TABLE 3 BERMUDA DUNES VACANT ACREAGE DEVELOPMENT ASSUMPTIONS AT BUILD OUT..............................lO TABLE 4 COSTS/REVENUES SUMNL4RY TABLE BERMUDA DtiNES-FUTURE DEVELOPMENT..................................11 TABLE S COSTS/REVENUES SUNINIARY TABLE BERMUDA DUNES-EXISTING+FUTURE DEVELOPMENT...............12 TABLE(JACK I VEY RANCH LAND USES�VACANT AND DEVELOPED�......................................................................13 TABLE 7 IVEY RANCH COUNTRY CLUB VACANT ACREAGE......................................................................................13 TABLE H COSTS/REVENUES Sl7MMARY TABLE IVEY R.ANCH-EXISTTNG-F-FUTURE DEVELOPMENT.......................14 T.ABLE 9 NORTHERN SPHERE AREA-DEVELOPED ACREAGE...................................................................................15 TABLE10 NORTHERN SPHERE ARE.A-V.ACANT ACREAGE.......................................................................................16 T.ABLE 11 COSTS/REVENUES SUNiNIARY TABLE NORTHERN SPHERE AREA-EXISTING+FUTURE DEVELOPMENT .............................................................................................................................................................................17 TABLE 12 COSTS/REVENUES SUMIVLARY TABLE NORTHERN SPHERE AREA-F BER1�fUDA DUNES-}IVEY RANCH..IS T.4BLE 13 COSTS/REVENUES SUMM.4RY T.4BLE HYPOTHETICAL L.AND USE SCENARIO.........................................24 TABLE 14 BERMUDA DUNES INFRASTRUCTURE IMPROVEMENTS*...........................................................................Z6 TABLE 15 NORTHERN SPHERE AREA INFRASTRUCTURE IMPROVEMENTS...............................................................27 List of Exhibits EXHIBITl: STUDY AREA BOUNDARY............................................................................................................................6 EXHIBIT2:CURRENTLY APPROVED LAND USE.........................................................................................................20 EXHIBIT 3:HYPOTHETICAL LAND USE.......................................................................................................................23 APPENDIX A: FISCAL IMPACT ANALYSIS METHODOLOGY........................................28 APPENDIX B: DETAILED TABLES (Available at the Planning Department) 2 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas I. Introduction and Purpose This report has been prepared for the City of Palm Desert, to analyze the land use and fiscal implications of future annexation of lands in and adjacent to the City's northern Sphere of Influence. The data and assumptions made in the report tie directly to prior work completed for the project area in the last several years. The purpose of this report is to determine how the land use pattern in the study area would need to be amended to result in a `revenue neutral' or revenue positive' cash flow for the City. This report also addresses the infrastructure improvement requirements of the study area, and how they could be addressed financially. The following summary of prior actions and activities is useful in understanding the progression of the analysis, and is provided in chronological order. Project History In 2007, the City considered a feasibility analysis relating to the costs and revenues associated with the annexation of the community of Bermuda Dunes, which abuts the City at its northeastern boundary. The analysis considered the costs and revenues associated with the annexation of these lands. In addition, the Public Works Department completed an analysis of the potential infrastructure costs of improving roads, drainage facilities and sanitary sewers in the area, due primarily to the lack of capital improvements provided by the County in the past. The results of the analysis were presented to the City Council in October, 2007. After considering the costs associated with both governmental operations and infrastructure improvements, the City tabled further consideration of annexation of the Bermuda Dunes area. In 201 l, the City considered the feasibility of annexation of the northern Sphere of Influence, located north of the railroad and Interstate highway rights of way, and asked for analysis of not only the Sphere area, but areas west of the Sphere, extending westerly to the eastern boundary of the Jack Ivey Ranch. Fiscal impaet analyses were prepared for both areas, and presented to the City Council in early 2012. The Public Works Department also prepared an estimate of infrastructure improvement costs, including arterial roadways and storm drainage. After considering the costs and revenues associated with governmental operations and infrastructure improvements, the City tabled further consideration of either annexation scenario. Between 2010 and 2012, several laws came into effect that affect the manner in which the Local Agency Formation Commission (LAFCo) considers annexation applications. Two of these laws have a direct bearing on the City's northern Sphere. First, LAFCos are now required to include (or add) unincorparated `islands' (defined to be areas that are surrounded by incorporated cities on the majority of their boundaries) in nearby annexation requests, if the annexation request would leave the `island' unincorporated. Terra Nova staff consulted with LAFCo staff regarding the Bermuda Dunes area, and concluded that 3 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas Bermuda Dunes would be considered an island, and would be added to a northern Sphere annexation request, if such an application were filed. Second, LAFCos are now required to identify "disadvantaged unincorporated communities" (DUCs), and must include them in annexation requests filed in proximity to the DUCs. There are three DUCs in the community of Thousand Palms, with the furthest easterly being the Jack Ivey Ranch. Based on discussion with LAFCo staff, Terra Nova recommended to the City that Ivey Ranch be included in the analysis of any area for potential annexation. In 2012, LAFCo completed a Sphere of Influence amendment for the City of Cathedral City, which extended its Sphere from DaVall Drive on the west, to the western end of Palm Desert's Sphere of lnfluence. The boundary was determined in large part by the commitment made by the LAFCo Board to keep Thousand Palms as one unit, and not divide it between multiple cities when the time came for annexation. In May of 2013, the City of Palm Desert considered the previously prepared fiscal impact analyses, the extension of the Cathedral City Sphere, and the repeated requests of land owners in the Sun City area, and the Berger Foundation, and requested further analysis of the area. The request focused not on an update of the data, but rather on how the annexations could be made "revenue neutral"or"revenue positive." This report presents the results of that analysis, and provides information on both land use changes necessary to achieve the desired results, and to pay for the capital improvements required in both areas. It is important to note that no market feasibility analysis was conducted as part of this task. Therefore, it is not known whether the land uses assigned to the properties in this report can be supported by market growth. 4 Terra Nova/Ciry of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas II. Summary of Current Conditions This report relies on previously completed analyses, and additions completed by Terra Nova to address the scope of work. Three geographic areas were studied: Bermuda Dunes, the Jack Ivey Ranch and immediately adjacent lands to the west, and the area described as Scenario B in previous analyses, which included the City's Sphere of Influence north of Interstate 10, and lands to the west of the Sphere up to the eastern boundary of Jack Ivey Ranch. This area, previously referred to as "Scenario B," is identified as the Northern Sphere Area in this report. The study area boundary is shown in Exhibit 1. In total, the study area now encompasses 4,944.4 acres. For each geographic area, an analysis of the costs and revenues associated with existing development has been prepared, either from existing sources or, in the case of the Jack Ivey Ranch area, new analysis was completed as part of this study. Vacant lands were then considered for future development, based on the County's General Plan land use designation, adopted Specific Plans in the County, and Palm Desert General Plan land use designations, as applicable. A cost and revenue analysis was conducted, based on a 20 year build out (actual build out may take more or less than 20 years). The spreading of development shows the progression of costs and revenues, and helps to determine whether a particular level of development is necessary to achieve revenue neutrality. Finally, the existing development and vacant land analyses were combined, to determine the total costs and revenues for each geographic area, and for the study area as a whole. To maintain a consistent approach, the analysis methodology was not altered from the 2011 analysis completed for the City, with one exception. Franchise Tax revenues, which had not been included in the 2011 analysis, were included in all analyses presented in this report. Franchise taxes are paid by utility companies for use of the City's right-of-way. Currently, they are collected from waste, gas, cable, and electric providers and total $2.8 million annually in General Fund revenues. Given the City population of 48,445 (2010 Census), this equates to annual revenues of $57.79 per capita. This per capita assumption was used for all geographic areas, assuming that once annexed to the City, the same fees would apply. A description of the analysis methodology can be found in Appendix A. 5 , '�� a._ _ � I �`° ,.-"� �i; . � �..�� . �iaii��,,�� r ',�� x ... , ' - .� �..'��'.� i ,w� `P� � � ,��w -� �^'"� �Y + , ,� ! i , � � .� ' � f S :�a�-.�`4 i .a `^s9r�� "i -�', i_.. R'. � .�_ T-..�i" �,,..,� ; ��, 6 '�. r _. 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Source: lm� 2q3 ......, .� . .[�W F+ ._ � - m ��'�-,- . � � 2`.-{� �'`" ' � �. ._..._,_ "-.v :- c '., , am�t9 �, Lmd Uae and Fi�cal Impacb for t6e 1Vorl6em Sphere of Influeem(Eip�nded)md Bermude Dunea Anu '��;�- L JTERRANOVA� S�dyA�.Bo�od.� -�, a %�°'st"�'��a. Palm Ihxrt,Cdifornia � Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas A. Bermuda Dunes The community of Bermuda Dunes abuts the City at its northeastern boundary. Bermuda Dunes is bounded by Washington Street on the west, the railroad right of way on the north, the Jefferson Street interchange on the east, and the City of La Quinta on the south (extending as far south as Fred Waring Drive for the southern boundary of the Bermuda Dunes golf course). Bermuda Dunes is primarily a residential community, although the Washington Street corridor has been developed with commercial office and retail projects, and some high density residential projects as well. Business park and industrial lands are partially developed along the railroad right of way, as is the Bermuda Dunes Airport. The Bermuda Dunes Airport is a privately owned facility catering to general aviation. Expansion of the airport is precluded by surrounding development, although the airport does have remaining capacity. The Riverside County Airport Land Use Commission, which has jurisdiction over the airport from a safety and land use perspective, has prepared a number of plans for the airport, including its Land Use Plan and a Compatibility Plan. The latter document dictates land use safety zones that limit the intensity of development based on proximity to the airport, in order to protect the public in the event of an accident. These regulations also have an impact on the potential land uses likely to develop adjacent to the airport in the future. The Compatibility Plan also states that only small business jets can land at the airport, due to obstruction zone limitations'. Therefore, although the number of flights may increase, the types of aircraft using the airport are unlikely to change, and large jet aircraft will not be able to land at Bermuda Dunes in the future. These limitations will affect the airport's expansion potential. According to the Bureau of the Census (2011), there are 7,047 people living in Bermuda Dunes, and a total of 3,927 housing units, 2,885 of which are occupied. The land uses in the Bermuda Dunes area are summarized in Table 1, below. As shown in the Table, Bermuda Dunes is largely developed (86% of lands are developed), and little vacant land remains for development in the future. 1 Riverside County Airport Land Use Compatibility Plan,prepared by the Riverside County Airport Land Use Commission,October 2004. 7 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas Table 1 Bermuda Dunes Land Uses (Vacant and Develo ed) General Plan Code General Plan Descri tion Develo ed Vacant Total Very Low Density VLDR Residential 119.9 14.1 134.0 EDR Estate Density Residential 105.8 39.8 145.6 LDR Low Densit Residential 22.8 5.9 28.7 MDR Medium Density Residential 553.7 78.1 631.8 HDR Hi h Densit Residential 135.5 9.9 145.4 CR Commercial Retail 53A l 1.9 64.9 CO CommercialOffice 8.0 4.0 12.0 CT Commercial Tourist 1.8 03 2.0 LI Light Industrial 106.6 49.8 156.4 OS-R O en S ace-Recreation 206.8 0 206.8 Grand Total 1,313.9 214.0 1,527.8 Note: Acrea e does not include 258.8 acres of street right of wa . In 2007, the City contracted with MuniFinancial for the preparation of a fiscal itnpact analysis for the Bermuda Dunes community. For purposes of this report, no changes were made to this analysis. Given the economic slowdown of recent years, the reduction in property values and City budgets, the calculations in that report are expected to be representative of current costs and revenues, even without adjustment for inflation. The MuniFinancial report included the costs and revenues associated with the annexation of the Bermuda Dunes area, and determined that operational costs would exceed revenues by $5.6 million annually. For projections associated with build out of Bermuda Dunes, it has been assumed that existing developed lands would continue in their current use. This results in a constant-dollar loss, if the City were to annex the area, of$5.6 million annually through build out, as shown in Table 2. 8 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas Table 2 Costs/Revenues Summary Table Bermuda Dunes-existing development, FY 2007/OS' Build out Phase Phase I Phase II Phase III Phase�V (Yrs 1-5) (Yrs 6-10) (Yrs 11-15) (Yrs 16-20) ANNUAL REVENUES General Fund: Property Tax $244,122 $244,122 $244,122 $244,122 Property Transfer Tax $36,394 $36,394 $36,394 $36,394 Sales Tax $707,100 $707,100 $70�,100 $707,100 Transient Occupancy Tax(from hotels/motels) $128,108 $128,108 $128,108 $128,108 Transient Occupancy Tax(from timeshares) n/a n/a n/a nla Annual Timeshare Fees n/a n/a n/a n/a Motor Vehicle In-Lieu Revenue $t54,199 $154,199 $154,199 $154,199 Franchise Tax $106,012 $106,012 $106,012 $106,012 Miscellaneous Revenue` $212,787 $212,787 $212,787 $212,787 Total Annual General Fund Revenue at Phase $1 588,722 $1,588,722 $1,588,722 $1,588,722 Build out: ' Restricted Funds: Highway Users Gas Tax $53,584 $53,584 $53,584 $53,584 Measure A Funds3 n/a n/a n/a n/a Prop.A Fire Ta1 $153,221 $t 53,221 $153,22 I $153,22 I Structural Fire Tax $169,619 $169,619 $169 619 $169 619 Total Annua!Restricted Fund Revenue at Phase g376,424 $376,424 $376,424 $376,424 Build out: Totals: Total Annual Revenues at Phase Build out: $1,965,146 $1,965,146 $1,965,146 $1,965,146 Historic Average Interest Rate,90-day Treasury Bi114: n/a n/a n/a n/a Anticipated Interest on Revenues: $379,658 $379,658 $379,658 $379,658 Total Annual Revenues with Interest at Phase $2�344,804 $2,344,804 �2,344,504 $2,344,804 Build out: ANNUAL COSTS General Fund: General Government $3,659,922 $3,659,922 $3,659,922 $3,659,922 Police Protection $1,729,459 $1,729,459 $1,729,459 $1,729,459 Roadway Maintenance $1,513,770 $1,513,770 $1,513,770 $1,513,770 Total Annual General Fund Costs at Phase $6 903,151 $6,903,151 $6,903,151 $6,903,151 Suild out: ' Restricted Funds: Fire Protection $1,075,480 $1,075,480 $1,075,480 $1,075,480 Ambulance Services n/a n/a n/a n/a Total Annual Restricted Fund Costs at Phase $1,075,480 $1,075,480 $1,075,480 $1,075,480 Build out: Total Annual Costs at Phase Build out: $7,978,631 $7,978,631 $7,978,631 $7,978,631 Projected Annual Cashflow at Phase Build out: -$5,633,827 -55,633,827 -$5,633,827 -S5,633,827 ' From Tables 1 and 2,Eahibit C,"Bermuda Dunes Anneaation Feasibility Report,"MuniFinancial,Sept.2007. Z Includes revenue from'bther"tar.es,business licenses,grants&subventions,ffnes&forfeitures,and contributions from private sources-bonds. 'Measure A revenues were not identified by MuniFinancial. °Interest rate was not identified by MuniFinancial. 5 Total annual costs do not include$I 805 047 in Capital Improcements shown on MuniFinaucial report E�ibit C Table 2 9 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas In order to determine the costs and revenues of vacant lands, build out projections for vacant lands in Bermuda Dunes were developed by land use category. These assumptions are summarized in Table 3, below. The land uses used are those identified in the Riverside County General Plan (consistent with the land use assumptions used in 2007). Table 3 Bermuda Dunes Vacant Acreage Development Assumptions at Build Out Potential Potential Potential Dwetling Square Hotel Potential Land Use Designation Acreage Units' FootageZ Rooms Population3 Estate Density Residential(2 ac.min.) 39.8 19 SF -- -- 39 Very Low Density Residential(1 ac.min.) 14.1 14 SF -- -- 29 Low Density Residential(%s ac.min.) 59 10 SF -- -- 20 Medium Density Residential(2-5 du/ac) 78.1 331 SF -- -- 688 High Density Residential(8-14 du/ac) 9.9 117 SF -- -- 243 Commercial Retail 11.9 -- 114,040 125 -- CommercialOffice 4.0 -- 38,333 -- -- Commercial Tourist 0.3 -- 2,875 -- -- Light Industrial 49.8 -- 477,243 -- -- Total: 213.8 491 632,491 125 1,019 Assumes future residential development will occur at 85%of the malimum density permitted. Where minimum density is 1 acre or greater,assumes future development will occur at 100%of the permitted density. SF=single-family dwelling unit.MF=multi-family dwelling unit. �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. 3 Based on Palm Desert average of 2.08 persons/household(2010 U.S. Census). Based on these build out assumptions, the fiscal model was completed to determine the potential costs and revenues associated with build out of vacant lands in Bennuda Dunes. The summary results of this analysis are shown in Table 4'. An even development pattern was assumed over a 20 year build out. As shown in Table 4, the build out of the vacant lands in Bermuda Dunes will result in a small annual negative cash flow. This is primarily associated with the fact that much of the vacant land in the Bermuda Dunes area is expected to develop in non-residential land uses, which generate more revenue and result in lower costs than residential development. , `Detailed analysis tables for all cost and revenue categories are found in Appendix B.The Appendis is available from the Planning Department in either paper or electronic format. 10 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas Table 4 Costs/Revenues Summary Table Bermuda Dunes-future development Build out Phase Phase I Phase II Phase III Phase IV (Yrs 1-5) ��'rs 6- (Yrs 11- (Yrs 16- 10) 15) 20) ANNUAL REVENUES General Fund: Property Tax $14,325 $28,649 $42,974 $5'7,304 Property Transfer Tas $3,474 $3,707 $3,940 $4,173 SalesTas $85,792 $171,584 $257,376 $343,168 Transient Occupancy Ta�(from hotels/motels)' $0 $253,561 $253,561 $253,561 Transient Occupancy Ta�(from timeshares)� $0 $0 $0 $0 Annual Timeshare Fees� $0 $0 $0 $0 Motor Vehicle In-Lieu Revenue $824 $1,647 $2,471 $3,295 Franchise Tax $14,830 $29,660 $44,490 $59,230 Total Annual General Fund Revenue at Phase Build out: $119,245 $488,809 $604,813 $720,731 Restricted Funds: Highway Users Gas Taa $5,997 $11,994 $17,991 $23,989 Measure A Funds $721 $1,441 $2,162 $2,883 Prop.A Fire Ta� $7,905 $15,810 $23,715 $31,620 Structural Fire Tax $24,025 $48,049 $72,074 $96,107 Total Annual Restricted Fund Revenue at Phase Build oat: $38,647 $'77,295 $115,942 $154,598 Total Annual Revenues at Phase Build out: $157,892 $566,104 $720,755 $875,330 Historic Average Interest Rate,90-day Treasury Bill: 4.39% 4.39% 4.39% 4.39% Anticipated Interest on Revenues: $6,931 $24,852 $31,641 $38,427 Total Annual Revenues with Interest at Phase Build out: $164,824 $_590,95b $752,396 $913,756 ANNUAL COSTS General Fund: General Government $73,943 $147,886 $221,535 $295,479 Police Protection $94,844 $189,687 $284,531 $379,375 Roadway Maintenance $45,917 $91,833 $137,751 $183,668 Total Annual General Fund Costs at Phase Build out: $214,703 $429,407 $643,818 $$58,521 Restricted Funds: Fire Protection $51,830 $103,660 $155,490 $207,320 � Ambulance Services� 0 0 0 0 Total Annual Restricted Fund Costs at Phase Build out: $51,830 $103,660 $155,490 $207,320 Total Annual Costs at Phase Build out: $266,533 $533,067 $799,308 $1,065,841 Projected Annual Cashflow at Phase Build out: -5101,710 $57,889 -$46,911 -$152,085 'One new hotel was assumed to occur within the vacant Commercial acreage,totaling 125 rooms. z Asswnes ambulance services in place. Finally, the costs and revenues for both existing development and build out conditions were combined, to determine the total costs and revenues for Bermuda Dunes for both developed and vacant lands. The total anticipated shortfall at build out, assuming development consistent with current land use designations, will total $5.8 million annually. ll Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas Table 5 Costs/Revenues Summary Table Bermuda Dunes-existing+ future development Build out Phase Phase I Phase II Phase Ill Phase IV (Yrs 1-5) (Yrs 6-10) (Yrs I1-15) (Yrs 16-20) ANPdUAL REVENUES General Fund: Property Ta� $258,447 $272,771 $287,096 $301,426 Property Transfer Tax $39,868 $40,101 $40,334 $40,567 Sales Tat $792,892 $878,684 $964,476 $1,050,268 Transient Occupanc}�TaY(from hotels/motels) $128,108 $381,669 $381,669 $381,669 Transient Occupancy Tax(from timeshares)� n/a n/a n/a n/a Annual Timeshare Fees' n/a n/a n/a nJa Motor Vehicle In-Lieu Revenue $155,023 $155,846 $156,670 $157,494 Franchise Tax $120,842 $135,672 $150,502 $165,242 Miscellaneous Revenue` $212,787 $212,787 $212,787 $212,787 Total Annuai General Fund Revenue at Phase g1,707,967 $2,077,531 52,193,535 $2,309,453 Build out: Restricted Funds: Highway Users Gas Ta,s $59,581 $65,578 $71,575 $77,573 Measure A Funds $721 $1,441 $2,162 $2,883 Prop.A Fire Tas $161,126 $169,031 $176,936 $184,841 Structural Fire Tax $193,644 $217,668 $241,693 $265,726 Total Annual Restricted Fund Revenue at Phase $415,071 $453,719 $492,366 $531,022 Build out: Total Annual Revenues at Phase Build out: $2,123,038 $2,531,250 $2,685,901 $2,840,476 Historic Average Interest Rate,90-day Treasury Bi113: n/a n/a n/a n/a Anticipated Interest on Revenues: $386,589 $404,510 $411,299 $418,085 Total Annual Revenues with Interest at Phase $Z�_509,628 $2,935,760 $3,097,200 53,258,560 Build out: ANNUAL COSTS General Fund: General Government $3,733,865 $3,807,808 $3,881,457 $3,955,401 PoliceProtection $1,824,303 $1,919,146 $2,013,990 $2,108,834 Roadway Maintenance $1,559,687 $1,605,603 $1,651,521 $1,697,438 Total Annual Generat Fund Costs at Phase Build $��117,854 $7,332,558 $7,546,969 $7,761,6'72 out: Restricted Funds: Fire Protection $1,127,3t0 $1,179,140 $1,230,970 $1,282,800 Ambulance Services4 n/a n/a n/a n/a Total Annual Restricted Fund Costs at Phase $1,127,310 $1,179,140 $1,230,970 $1,282,800 Build out: Total Annual Costs at Phase Build out: $8,245,164 $8,511,698 $8,777,939 $9,044,472 Projected Annual Cashflow at Phase Build out: -$5,735,537 -$5,575,938 -$5,680,738 -55,785,912 �No timeshare development is located in Bermuda Dunes or anticipated in the future. 2 Includes revenue from"other"taaes,business licenses,grants&subventions,fines&forfeitures,and contributions from private sources-bonds. 'Interest rates used aze different on the eaisting development report and future development report. 'Ambulance costs are included in Northern Sphere Area. �2 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas B. Jack Ivey Ranch On the western end of the study area, the Jack Ivey Ranch, and vacant lands immediately adjacent to it, were added to the boundary. These lands were included because the Ranch is identified as a DUC by LAFCo, and an annexation application by the City would result in a requirement to include this DUC within the boundary, because of its adjacency. The Ranch is fully developed, and the vacant lands are proposed for higher density residential development in the County's General Plan. The vacant lands were included to "square offl' the annexation area, and follow parcel lines. The land uses within this area are summarized in Table 6. As shown in the table, the only remaining vacant lands are designated for residential development in the future. There are currently 384 units in this area, and an estimated population of about 770 people. Table 6 Jack Ivey Ranch Land Uses Vacant and Develo ed General Plan Code General Plan Descri tion Develo ed Vacant Totai MDR Medium Densit Residential 53.4 2.4 55.8 HDR Hi h Densitv Residential 8.0 62.9 70.9 OS-R O en S ace-Recreation 49.4 49.4 Grand Total 110.9 65.3 176.2 Note:Acrea e does not include 14.9 acres of street ri ht of way. In order to develop a build out scenario for the Ranch, land use assumptions were completed and are depicted in Table 7. Table 7 Ivey Ranch Country Club Vacant Acreage Potential Potential Potential Dwelling Square Hotel Potential Land Use Designation Acreage Units' Footage2 Rooms2 Population3 Medium Density Residential(5-8 du/ac) 2.4 16 SF -- -- 33 High Density Residential(8-14 dulac) 62.9 748 SF -- -- 1 555 Total: 65.3 764 SF -- -- 1,588 Assumes future residential development will occur at 85%of the maximum density permitted. SF=single-family dwelling unit.MF=multi-family dwelling unit. 'No commercial,industrial,or hotel/motel development is anticipated on these vacant pazcels. ;Based on Palm Desert avera�e of 2.08 persons per household(�010 U.S. Census). Using the existing development data, and the build out assumptions shown in Table 7, a cost revenue model was developed for the area. Its conclusions are shown in Table 8. As shown in this Table, the build out of the Ranch will result in an operational shortfall of $1.4 million annually. Immediately following annexation, the City would expect to see a shortfall of about $720,000 annually. 13 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas Table 8 Costs/Revenues Summary Table Ivey Ranch - existing+ future development Build out Phase Phase I Phase II Phase III Phase IV (Yrs 1-5) (Yrs 6-10) (Yrs 11-15) (Yrs 16-20) ANNUAL REVENUES General Fund: Property Ta� $41,469 $58,141 $74,813 $91,485 Property Transfer Tax $8,180 $8,599 $9,018 $9,437 Sales Taa� $970 $970 $970 $970 Transient Occupancy Tax(from hotels/motels)` $0 $0 $0 $0 Transient Occupancy Tax(from timeshares)� $0 $0 $0 $0 Annual Timeshare Fees` $0 $0 $0 $0 Motor Vehicle In-Lieu Revenue $1,277 $2,553 $3,830 $S,107 Franchise Tax $69,100 $92,084 $1]5,068 $138,051 Total Annual General Fund Revenue at Phase g120,996 $162,347 $203,699 $24_5,050 Build out: Restricted Funds: Highway Users Gas Tas $27,944 $37,238 $46,533 $55,82'7 Measure A Funds4 $0 $0 $0 $0 Prop.A Fire Tax $35,550 $47,010 $58,470 $69,930 Structural Fire Tax $69,�77 $97 538 $125 500 $153 461 Total Annual Restricted Fund Revenue at $t33,071 $181,787 $230,503 $279,218 Phase Build out: Total Annual Revenues at Phase Build out: $254,067 $344,134 $434,201 $524,269 Historic Average Interest Rate,90-day Treasury 4.39% 4.39% 4.39% 4.39% Bill: AnUcipated Interest on Revenues: $11,154 $l5 107 $l9 061 $23 O15 Total Annual Revenues with Interest at Phase $265,220 $359,241 $453,263 �547,284 Build out: ANNUAL COSTS General Fund: General Government $337,191 $449,345 $561,500 $673,655 Police Protection $405,346 $540,170 $674,995 $809,819 Roadway Maintenance5 $0 $0 $0 $0 Total Annual General Fund Costs at Phase g�42,537 $989,516 $1,236,495 $1,483,474 Build out: Restricted Funds: Fire Protection $242,642 $323,290 $403,938 $484,585 Ambulance Servicesb $0 $0 $0 $0 Total Annual Restricted Fund Costs at Phase $242,642 $323,290 $403,938 $484,_58.5 Build out: Totai Annual Costs at Phase Build out: �985,1'79 $1,312,805 $1,640,432 �1,968,059 Projected Annoal Cashflow at Phase Build out: -5719,959 -5953,564 -$1,187,170 -$1,420,775 'Includes eaisting gift shop sales. '`No hotels,motels,or timeshares eaist or aze anticipated in ivey Ranch. 'Measure A funds are derived from sales tax and commercial development which does not occur in ivey Ranch and is not anticipated in the future. 5 Roads in hey Ranch are pri�ate and will continue to be pricately maintained. �Ambulance costs were projected as part of Northern Sphere Area. 14 Terra Nova/Ciry of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas C. Northern Sphere Area The Northern Sphere Area boundary is consistent with the area studied in 2011 that was then identified as "Scenario B," and encompasses lands in the City's Sphere of Influence north of Interstate 10, as well as lands to the west of the Sphere, and currently in Cathedral City's Sphere of Influence. These lands have a wide range of land use designations, as shown in Tables 9 and 10. There are four approved Specific Plans in the Northern Sphere Area: • SP 281 is the Sun City Specific Plan • SP 343 is the Classic Club Specific Plan • SP 225 is the Berger Foundation Specific Plan for lands west of Cook • SP 338 is the Mirasera Specific Plan Tabte 9 Northern Sphere Area-Developed Acreage Existing Existing Existing Dwelling Square Hotel Existing Land Use Designation Acreage LJnitst FootageZ Rooms Population3 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. Ca 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 -- -- -- __ 1-10 Corridor 79.2 -- -- -- __ Railroad Corridor 38.8 -- -- -- __ Single-Family Residential 1.3 1 SF -- -- 2 SP-343 Golf Course/Facilities 245.9 -- -- -- __ SP-225 Private School 96A -- -- -- __ SP-225 RV Storage 5.2 -- -- -- -- Agriculture 9.3 -- -- -- __ I-10 Corridor 52.8 -- -- -- __ Railroad Corridor 34.1 -- -- -- __ Total: 1,930.0 4,986 1,112,526 ]54 9,002 Includes 4,869 detached and 116 attached units in Sun Ciry, and one detached unit outside Sun Cit}. SF = single-family dwelling unit. z Assumes commercial and industrial buildings cover ??% of the lot, with the remaining area available for access roads, �arking,landscaping,and other azicillary uses. Includes an estimated 9,000 residents in Sun City (pro��ided by Paul Brady, Sun City Community Assoc., Oct. 2011), and one additional dwelling unit at 2.08 persons/household(2010 U.S.Census). �Estimate for 72-room and 82-room existing hotels at Washington and Varner. 15 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas Table 10 Northern Sphere Area- Vacant Acreage Potential Potential Potential Dwelling Square Hotel Potential Land Use Designation Acrea�e Units� Footage2 Rooms Population3 Non-Developable 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 -- -- -_ __ SP-338 Open Space/Parks/Roads 39.5 -- -- -- __ SP-225 Regional Circulation 6.4 -- -- -- __ Non-Developable Subtotal: 350.7 Developable PD Medium Density Residential(4-]0 du/ac) 113.3 963 SF -- -- 2,003 Riv. Co.Medium-High Density Resid.(5-8 30.8 209 SF -- -- 434 du/ac) SP-338 High Densiry Residential(12 du/ac) 22.6 230 SF -- -- 478 SP-338 Miaed Use Residential(16 du/ac) 10.5 142 MF -- -- 295 SP-338 Very High Density Resid. (20-25 66.4 1,411MF -- -- 2,934 du/ac) 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 -- -- SP-338 Commercial Retail 17.6 -- 168,664 -- -- SP-338 Mi�ed Use Hotel 3.1 -- ]00,000 150 -- SP-338 Office/Business Park 18.8 -- 180,164 -- -- PD Low Density Residential(0-4 du/ac) 72A 244 SF -- -- 507 SP-343 Deluxe Golf-View Hotel 17.6 -- 350,000 350 -- SP-343 Resort Golf-View Villas(7.4 du/ac) 7.3 46 SF -- -- 96 SP-343 Resort Timeshares(21.7 du/ac) ]0.0 184 MF -- -- 383 SP-343 Golf-View Condos(16.6 du/ac) 33.2 468 MF -- -- 973 SP-343 Mited Use Retail Village(4.14 du/ac) 36.2 127 MF 346,912 -- 264 SP-343 Industrial Park 69.6 -- 666,991 -- -- SP-343 Elecutive Office 16.0 -- 153,331 -- -- SP-343 Community Commercial 20.0 -- 100,000 -- -- SP-225 Medium-Density Residential(8 du/ac) 9.0 61 SF -- -- 126 SP-225 Golf Course 13.6 -- -- -- __ SP-225 Commercial 26.1 -- 250,121 -- -- SP-225 Business Park 41.0 -- 392,911 -- -- Developable Subtotal: 723.0 Total: 1073.7 4,085 3,363,627 500 8,493 'Assumes future residential development will occur at 85%of the maximum density permitted.SF=single-fantily dwelling unit.MF=multi- family dwelling unit. Z Assumes future buitding square footage �vill cocer 22°'0 of the tot, with the retnainder of the lot available for access roads, parking, landscaping,and other ancillary uses.Exception is SP-343 Community Commercial,where the Specific Plan calls for a maximwn of 100,000 sq. ft. at build out, which is less than 22% lot coverage. Hotel square footage is estimated for one 150-room hi�hway-serving hotel in Mirasera,and one 350-room resort hotel in SP-343. 'Based on Palm Desert average of 2.08 persons/household(2010 U.S.Census). The Northern Sphere Area studied in 2011 was not altered from its original analysis, with the exception of the addition of Franchise Tax fees, as explained above. The fiscal model was altered to add Franchise Taxes, and resulted in the fallowing costs and revenues, as shown in Table 11. l6 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas Table 11 Costs/Revenues Summary Table Northern Sphere Area- existing+ future development Buildout Phase Phase I Phase II Phase III Phase IV (Yrs 1-5) (Yrs 6-10) (Yrs 11-15) (Yrs 16-20) ANNUAL REVENUES General Fund: Property Ta� $828,051 $915,581 $1,003,111 $1,092,730 Properry Transfer Tax $99,321 $100,819 $102,317 $103,815 Sales Tax $2,351,230 $3,082,812 $3,814,394 $4,545,977 Transient Occupancy Tax(from hotels/motels) $699,401 $1,086,415 $1,473,429 $1,860,443 Transient Occupancy Ta1(from timeshares) $27,600 $55,200 $82,800 $110,400 Annual Timeshare Fees $69,000 $138,000 $207,000 $276,000 Motar Vehicle In-Lieu Fees $35,720 $42,544 $49,368 $56,192 Franchise Tax $643,076 $765,927 $888,777 $1,011,628 Total Annuai Gen.Fund Revenue at Phase Build out: $4,753,399 $6,187,297 $7,621,196 $9,057,184 Restricted Funds: High�vay Users Gas Tal $260,057 $309,737 $359,417 $409,097 Measure A Funds $19,750 $25,896 $32,041 $38,186 Prop.A Fire Tax $362,310 $417,360 $472,410 $527,460 Structural Fire Ta� $1,390,525 $1,537,325 $1,684,125 $1,834,430 Total Annual Restricted Revenue at Phase Build out: $2,032,642 $2,290,318 $2,547,993 $2,809,174 Total Annual Revenues at Phase Buildout: $6,786,041 $8,477,615 $10,169,189 $11,866,358 Historic Average Interest Rate,90-Day Treasury Bill: 4.39% 4.39% 4.39% 4.39% Anticipated Interest on Revenues: $297,907 $372,167 $446 427 $520 933 Total Annual Revenues w/Interest at Phase Build out: g��pg3,948 $8,849,783 $10,615,617 $12,387,291 ANNUAL COSTS General Fund: General Government $3,152,797 $3,759,641 $4,366,485 $4,973,329 Police Protection $3,847,211 �$4,605,243 $5,363,275 $6,121,307 Roadway Maintenance $508,143 $587,731 $667,327 $746,916 Total Annual General Fund Costs at Phase Build out: $'7,508,151 $8,952,616 $10,397,087 $11,8a1,553 Restricted Funds: Fire Protection $1,615,994 $1,731,582 $1,847,171 $1,962,759 Ambulance Services' $940,944 $940,944 $940,944 $940,944 Total Annual Restricted Costs at Phase Build out: $2,556,938 $2,672,526 $2,788,115 $2,903,703 Total Annual Costs at Phase Build out: $10,065,089 $11,625,142 $13,185,202 $14,745,256 Projected Annual Cashtlow at Phase Build _$2�981,141 -$2,775,359 �2,569,585 -$2,357,964 out: 'Does not include one-time(year 1)start-up ambulance costs of$19Q000. 17 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas As shown in the Table, although the net deficit is reduced as the area builds out, the City can still � expect a negative cash flow as a result of annexation of the Northern Sphere Area (as originally studied). D. Entire Study Area In order to determine what the costs and revenues would be of the expanded study area, all three geographic areas' costs and revenues were combined. The results of this analysis are shown in Table 12. As shown in the Table, the City can expect an initial shortfall of$9.3 million annually, and a build out shortfall of$9.6 million annually if the study area develops according to existing land use designations. The single largest contributor is the Bermuda Dunes area, which represents 60% of the shortfall, while accounting for 31% of the land area. This is due to the concentration of residential development, the relatively small amount of commercial retail development, and the lack of significant potential for hotel development. It should be noted that historically the cost of police protection has increased more rapidly - especially after an annexation -- than all other costs of providing services. This study assumes that all costs stay the same relative to one another. In the event that annexation is considered further, the escalation of the cost of police protection should be analyzed in greater depth, using information obtained from previous annexations. Table 12 Costs/Revenues Summary Table Northern Sphere Area + Bermuda Dunes+Ivey Ranch Build out Phase Phase I Phase II Phase IIl Phase IV (Yrs 1-5) (Yrs 6-10) (Yrs 11-15) (Yrs 16-20) ANNUAL REVENUES General Fund: Property Taa $1,127,966 $1,246,493 $],365,020 $1,485,641 Property Transfer Tax $147,369 $149,519 $151,669 $153,819 Sales Ta� $3,145,092 $3,962,466 $4,779,841 $5,597,215 Transient Occupancy Tax(from hotelslmotels) $827,509 $1,468,084 $1,855,098 $2,242,1 12 Transient Occupancy Ta�(from timeshares) $27,600 $55,200 $82,800 $110,400 Annual Timeshare Fees $69,000 $138,000 $207,000 $2'76,000 Motor Vehicle In-Lieu Revenue $192,020 $200,944 $209,868 $218,792 Franchise Tax $833,018 $993,682 $1,154,347 $1,314,921 Miscellaneous Revenue' $332,032 $212,787 $212,787 $212,787 Total Annual General Fund Revenue at Phase $6,701,606 $8,427,176 $10,018,429 $11,611,688 Build out: Restricted Funds: Highway Users Gas Tal $347,582 $412,554 $477,526 $542,497 Measure A Funds $20,471 $27,337 $34,203 $41,069 Prop.A Fire Tat $558,986 $633,401 $707,816 $782,231 Structural Fire Tax $1,653,746 $1,852,532 $2,051,318 $2,253,617 18 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas Total Annual Restricted Fund Revenue at Phase $2�580,7$5 $2,925,823 $3,270,862 $3,619,414 Build out: Total Annual Revenues at Phase Build out: $9,282,391 $11,352,999 $13,289,292 $15,23],102 Historic Average Interest Rate,90-day Treasury Bi112: n�a n/a n/a n/a Anticipated Interest on Revenues: $695,650 $791,785 $876,788 $962,033 Total Annual Revenues with Interest at Phase $9,978,041 $12,144,784 $14,166,080 $16,193,136 Build out: ANNUAL COSTS General Fund: General Government $7,223,853 $8,016,795 $8,809,443 $9,602,385 Police Protection $6,076,860 $7,064,560 $8,052,260 $9,039,960 Roadway Maintenance $2,067,829 $2,193,334 $2,318,848 $2,444,354 Total Annual General Fund Costs at Phase Build $�5,368,542 $17,274,689 $19,180,551 $21,086,699 out: Restricted Funds: Fire Protection $2,985,946 $3,234,012 $3,482,078 $3,730,144 Ambulance Services3 $940,944 $940,944 $940,944 $940,944 Total Annual Restricted Fund Costs at Phase g3,926,890 $4,174,956 $4,423,022 $4,671,08& Build out: Total Annual Costs at Phase Build out: $19,295,432 $21,449,645 $23,603,573 $25,757,787 Projected Annual Casbflow at Phase Build out: -59,317,391 -$9,304,8b1 -$9,437,493 -$9,564,651 'Includes revenue from"other"taaes,business licenses,grants&subventions,6ues&forfeitures,and contributions from private sources-bonds,as caiculated for Bermuda Dunes e�isting development by MuniFinancial. �Interest rates are different in the eaisting development report for Bermuda Dunes(prepared by MuniFinancial)and other reports(prepared by Terra Nova). 'Does not include one-time(yeaz 1)start-up ambulance costs of$]9Q000. 19 �� - � � �.. � �' '"'�. � _ �,, �' �. �� - �� f : �, �,�� °,,��+ .;.� i � ,,� ��,, �� , �� - _ ry �,�� ' �'� � ��. � L-�. � - ,• ,,� � _ ��•.. ° �C' �` .. C �� 7 . t' .,h� - ,/i-j _ .. .. _ �: I � � w. .'`�y� J � u� � , �i 4u. � � � �� ° � F � ' �y,� ci'"-`�5� � ""°r m"'° ; n�.J �. i t� ��y'++' . LEGEND � r� � �� ,�9 ,� �t� � � n. y : s-q�..�.��y,'� A�<,� _ l f ��'�3 I��""�� . �_�� -�� . RESIDENTi.�I. ..�N��" �r �- � °� ':y.e� �4 � �� a � �, � Residrntial � ,S� � �� x ��i'' ` e"''Y,�'�,-.. �-1 ��.�. N� �a�� `� +�y� 'I County Hi�eh Dcnsi��Rcsi�ential a� b "�� ' t {' � �"'�.- ��- q �ii t ..�,=�: -.: a"e ., a ,n ^.". .,a.. i .,� � . . COMM1IERCtAL � , ,�,'"� . �p�:IdY1'4NiM S,�r�'CaI - a �� T :� ; • � �y'� �s,� �� V � ��--1 +K$^ '� ,� — Commereial 'k. r ,w �C�9"�`y. ��='�. � � � �' i • � y y�, .«:_,- �� ,... 0 HaNmCommereialTwrist &f�^ i�..,��, -s.�kr�.,d "�. - ��' '��ryyl5 ..�. x.(„ �� .��„� �4 � �s.r. ��• i � �,,� �tl'mAl4,��' � � h+'^'�! ,..-r �4, � �.. 1\iDUSTRInL ... �N'�� (�, �{,� ,d{�ry • � S Busini.ss('nYV: ° ��.�'1'�� `.,�.��y�r � — LigMlndusinoi _x J-S''"��:,} ��...; �. � � Q�'a�,h1 4�� . '^�S.1 �� 5 a..�,�'t �` .R, � r `� i-�W'' "' _ w 'h� .�,' ^ ��._—_�J �_— . \ LtiSTITt"TI()\AL .,�7 - . � ^ . � —� ._, . .,.. +vu ?.'- �, ��'�--� R '.�'t§t#%J. . . - I�itutionni;Pu61kF»cilit ,4� yg st �� ..�'�6 , � , }t� ��A I w 7',.�ti��$�$��'� ' ... � ��I f� a. OPE\SPACE a ��:.""��^ "' . 1 . ! �,� '�... . s �,. - �P�,fIC11It11(C �� -�,��/Tj �. 1`�� 1� + Y- �iY�X ,.,.�n "'>"5 _ �lO��r�O11f5t♦ •` , . "� � �i �• -.� #��° '�� t � � PublicPark ("�I��": +n�al„pq s,��A ^� ��t.�i`� ,e9.R � .-��y,�^-� �',� �:�' . [_] water"Includes2'Iacrcsownevlby � � r ..� � ' � e�' � � ' �� 5im Cicv Communny Asux at �p q� d�"b�,� ""1�� `'q j . • .' � - ' � � '� pda�o . � � ^ R p• N Swrc�G�ods I�qe,LU �, tl j�'��,'f¢�ip,��k �g��'�«irvi v 7w��r.. �� T:'� X`.�L�� '�'��.:+e ry�y5 a : t L8C'y �� : y a�, S r, Lw�d Gse and 6iacal lmpacta for ihe NoMern Sphcre of 1n0uentt(Eipanded)end Bermuda Dunes Are�s � •"�� L J TERRA NOVA� Cumently Approved L�d Uu �--��y� ❑ �a�dnd`�°`. Palm Deaert,Cdifornia �� Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas III. Alternative Land Use Scenario This section addresses the potential changes that can be applied to future development to result in a `revenue neutral' or `revenue positive' cash flow for the City. Exhibit 2 shows the land use designations in the study area as they are currently approved. A. Assumptions In order to provide the City with a complete picture of the study area's development potential, Terra Nova was asked to consider changes to the land use pattern in the study area. To that end, the assumption was made that any land use designation on vacant land could be changed, including those land use designations in any of the four adopted Specific Plans. The properties selected for change from one land use to another were spread across the entire study area, and are based on location and size. That is to say, for example, that converting small lots designated low density residential in the center of the Bermuda Dunes area would be unrealistic and would probably never materialize. Converting industrial lands on Country Club Drive to retail commercial, however, could occur. Changes were made to the Bermuda Dunes area and to the Northern Sphere Area. There are insufficient lands available in the Ivey Ranch area to make a significant change in the shortfall in this area. Several assumptions were made in the selection of properties, in addition to size and location: • Residential development, particularly higher density residential development, has a greater impact on costs for the City, due to the rapid increase in population (and their need for City services). • Commercial office, business park and industrial development may have a relatively low demand for services, but are also low revenue producers, since they only generate property tax far the City. • Commercial retail development generates sales and use tax, which is a significant revenue source for the City. • Hotel development generates transient occupancy tax, which is a significant revenue source for the City. As a result of these assumptions, properties were identified that had the best potential for revenue generation, and residential properties were considered for lower densities, in order to reduce the build out population. B. Required Land Use Changes A hypothetical land use scenario was developed to reflect the assumptions described above. The resulting changes in land uses are shown on Exhibit 3. The changes assumed for purposes of analysis included: 2l Terra Nova/Ciry of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas • The conversion of 41 acres of Business Park lands to Commercial Retail (expansion of the commercial lands immediately south) on the west side of Cook Street in the SP-225. • The conversion of 96.2 acres of Light Industrial lands to Commercial Retail along the north side of Varner Road, in SP-343 and SP-338. • The conversion of Very High Density lands to Medium Density Residential (5-8 units per acre) in SP-338. • The conversion of 113 acres of Medium Density Residential to Commercial Retai] east and west of SP-338. • The conversion of 22.6 acres of High Density Residential to Resort Hotel in SP-338. • The conversion of 49.8 acres of Light Industrial lands to Commercial Retail on the south side of Country Club Drive in Bermuda Dunes. • The conversion of 9.9 acres of High Density Residential to Low Density Residential in Bermuda Dunes. These changes result in a reduction in housing units, but most significantly, in an increase in retail square footage to 3.3 million square feet of retai( space (2 million more than currently approved), and in a total of 900 hotel rooms (400 more than currently approved). These changes are necessary to increase the sales tax and transient occupancy tax revenues to the Ciry. As a result of these changes, the study area would become revenue neutral when approximately 75% of the lands are developed, and would ultimately return a positive cash flow at build out. It is important to note that in the short term, it is impossible to generate sufficient revenue to create a revenue neutral environment, primarily because the Bermuda Dunes area generates such a large deficit currently. Considerable development will have to occur, particularly retail development, in order to generate the required revenues to offset those losses. It is also important to note that the actual development of these areas may be considerably faster than those assumed in this study, or may take many more than 20 years. Ultimately the market will determine the pace of development. It should be noted that historically the cost of police protection has increased more rapidly — especially after an annexation -- than all other costs of providing services. This study assumes that all costs stay the same relative to one another. In the event that annexation is considered further, the escalation of the cost of police protection should be analyzed in greater depth, using information obtained from previous annexations. Table 13 summarizes the costs and revenues associated with the implementation of the hypothetical land use scenario. 22 ��s� � �r,.�,�;� �r �` 3� 66.4 AC.Very llip,h Denaity Reaidenbd ��'',;3�' �r�� * . � to Medium Denaity Reeidential(5-S/AC) � ,,"'� . � r.-. f �� , - � we.�..�� .^`t �� 22.6 AC.Nigh Deneity ' + �,'. Residenriel to Resort Hotel � � y �,�� %' ' r a , �'yt�„'' �• � � �Zr:' f: .- g.. ��'�, �. � v1 1J@'�1�3'� , . � x� �`�,� 41 AC.Bu�iocat Park/ to Commercial � '� °�1 '�`" � . � �°�y. c #x.'� � .. 3r: c<�, i. � ,.7�� " ; ,,,� �^ I �c �* ��, � ".:� � i� '�' , ' ' ��{ ; �`>`� 962 AC.I,ight Industrinl 2. - � „y � r y �� y.`4y w" ; to CommercexC �� i � .�. �:. ,••••" .,rL� . �'.: n°� fr. LEGEND � r� .> + '� � ::�r� . ��'7f� '+1 �, � ��`�r'�� F�, '"�� + '�rt�w'� , �;. � r �� s9�� '- ,��0 4.�� .�i RESIDENTIAL � �q\,. R, n�j. � '�v..+W, j� ,r"�� ;�r. �� , 0 Residential \.AR� �� ,' �� r .: i F �.'"��,` �—�-L�_,s.. .�, '�.:. � �; ,� '�y> l t - iti i[n 1.... .�; �:�„� � �. founty High�ensiq�Resi�nnal ,'� �1 � ° �- . '� 49.8 C.Light Iadwtrirl � x �_ 32 1 t 3,: f n r tl � -Y 'fA�:. "��i,�'� � con��Fac�a�. ,. .� „� �. � �,��y � „'•`^��,,�'� � / �, (mulnplo�ite,) .�.+i' aA� �""�.. . k�x �*,�y . � ��.' +'�''.� to Commercipl — Commerc�ai •� ~•� •q�� AB4'M��v�. `� 0 f , t K ,. �F . wi 4. ..,�� 'ra "� ',,. � r L� RaelorComme�vialTouils� � ^'� a•'� qx X� 1 y �� ,1 . �' o:t7� � �:.; : :° u i� `Y, LtiDII5TR1aL � �.�*� 9.�(,'rll�ensi�Rraidential• � Buvness Park y ..' f� �� (multiple aitn) . ... :�M '�T.,� -__. . .s^e+r� � � � — Ligh�lodustnaf . e r,, r'�� 1 y.. lo[,ow Den�r[y Keaiden6£al , I�.. INSTITUTItlNAL ...� _.„e� ry q .,�r`�ax ��da y:;._ � i r, �__� -- � .w � � �..�r rk. i a �� em. 1!.__._�n.'�. ._.. �' 1 I — Inuinnional:Public Fncility �5 � � �� '�`"��.a..�r�' #,, ,;� } V OPE\SPACE "� �'��'-�q�..,� � �t�� -�� e„ �. i _ Agriculwre �;^' � .... ` � �� qq� 4 �s �' •_, � : , � �.`; � � � , — C�oIfCOurx• � : � ��a�.,��;p,� � � Z A ' rr ` �` 4 � Pobiu Park ��` '�rea,� ��4��a�� ¢a�� u k� ��:a� � 1 0 U Wnta•i�ludea?7lacresowneJby a'�'g , � �„y �s ,� '� i Sim Ciry Communny Aav�c ni z��K�. �i'i� � ��'4'N�,yM Wj9"�,'A'�,s�d�� s ,� � f.,.,� p�r,�Q�.,. f. .: ` �' LPa : � f ,� � � sw�cwdetm.F�� Y .. ��trsr '�'�."`�>��"�"'�;J.:�06,�.��,�''"" �-,�,. �a � e <tY, L � � <. �aty �, � Lend lise end Fiecal Itnpocb Cor lhc Northem Spherc of Influeece(F=panded)and Bermuda Dune�Areai � "�'� L J TERRA NOVA� ayPomce�i..oa u.< <�� ❑ n��q a n�a.ia. Palm De�erf,Cdifornia � 3 Terra Nova/City of Palm Desert Land Use and Fiscal lmpacts of the Northern Sphere&Bermuda Dunes Areas Table 13 Costs/Revenues Summary Table Hypothetical Land Use Scenario Build out Phase Phase I Phase II Phase IIl Phase IV (Yrs 1-5) (Yrs 6-10) (Yrs 11-15) (Yrs 16-20) ANNUAL REVENUES General Fund: Property Tax $1,099,409 $1,189,377 $1,279,346 $1,392,581 PropertyTransferTa� $135,408 $136,661 $137,914 $139,166 Sales Tal $4,138,919 $7,360,316 $10,581,713 $13,803,109 Transient Occupancy Ta�(from hotels/motels) $1,137,120 $1,833,746 $2,530,371 $3,226,996 Transient Occupancy Ta.�(from timeshares) $27,600 $55,200 $82,800 $110,400 Annual Timeshare Fees $69,000 $138,000 $207,000 $276,000 Motor Vehicle In-Lieu Revenue $190,824 $195,991 $201,159 $206,325 Franchise Tax $765,378 $858,402 $951,426 $1,044,360 Miscellaneous Revenue� $212,787 $212,787 $212,787 $212,787 Total Annual General Fund Revenue at Phase Build $��7�6,44_5 $11,980,480 $16,184,515 $20,411,726 out• Restricted Funds: Highway Users Gas Ta1 $320,229 $357,847 $395,466 $433,084 Measure A Funds $28,827 $55,887 $82,947 $110,006 Prop. A Fire Tax $532,342 $580,1 14 $627,885 $675,656 Structural Fire Tax $1,605,850 $1,756,740 $1,907,631 $2,097,543 Total Annual Restricted Fund Revenue at Phase Build $2�487,248 $2,750,587 $3,013,928 $3,316,289 out: Total Annual Revenues at Phase Build out: $10,263,693 $14,731,067 $19,198,444 $23,728,O14 Historic Average Interest Rate,90-day Treasury Bill'`: n/a n/a n/a n/a Anticipated Intereston Revenues: $743,964 $951,213 $1,147,331 $1,346,179 Total Annual Revenues with Interest at Phase Build �11,007,657 $15,682,281 $20,345,775 $25,074,194 out: ANNi7AL COSTS General Fund: General Government $6,896,924 $7,362,935 $7,828,654 $8,294,666 Police Protection $5,707,483 $6,325,806 $6,944,130 $7,562,453 Road�vay Maintenance $2,067,829 $2,193,334 $2,318,848 $2,444,354 Total Annual General Fund Costs at Phase Build out: $14,672,236 $15,882,075 517,091,631 $18,301,473 Restricted Funds: Fire Protection $2,975,707 $3,213,534 $3,451,361 $3,689,186 Ambulance Services3 $940,944 $940,944 $940,944 $940,944 Total Annual Restricted Fund Costs at Phase Build out: �3,916,651 $4,154,478 $4,392,305 $4,630,130 Totat Annual Costs at Phase Buiid out: $18,588,88'7 $20,036,553 $21,483,936 $22,931,604 Projected Annual Cashflow at Phase Build out: -$7,581,230 -$4,354,273 -$1,138,161 $2,142,590 'Includes revenue from"other"taaes,business licenses,grants&subventions,fines&for£eitures,and wntributions from private sources-bonds,as calculated for Bermuda Dunes eaisting development by MuniFinancial. Z Interest rates are different in the existing development report for Bennuda Dunes(prepared by MuniFinancial)and other reports(prepared by Terra No�a). 3 Does not include one-time(year i)start-up ambulance costs of$190,000. 24 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas C. Capital Improvement Costs Also included in the scope of this analysis was how to fund the capital improvements necessary in the study area. The analysis centers on the potential costs of either an assessment district or a community facilities district to cover the costs of the improvements. It is important to note that prior to annexation, the City is unable to assess the properties in either Bermuda Dunes or the Northern Sphere Area, because it has no jurisdiction over these properties. Further, LAFCo cannot approve an annexation contingent on the passage of an assessment district to cover capital improvements. Therefore, the City would be required to process an assessment only after annexation was complete, and cannot be assured that an assessment would be approved by the voters. As previously described, the Public Works Department has, in the past, developed estimates of the costs for public improvements in both the Bermuda Dunes area and the Northern Sphere area. In the Bermuda Dunes area, infrastructure improvements include sanitary sewers (the majority of Bermuda Dunes remains on septic tanks); storm drainage systems; street improvements and traffic lights. In 2007, the estimated total costs of these improvements was $42,151,400. Since that time, the County has invested approximately $4 million in roadway improvements. For purposes of this analysis, it was assumed that all these improvements were consistent with the improvement costs developed by the City's Public Works Department, and thus should be deducted from the total costs. A 10% cost for first year start up costs and an annual administration cost have also been added. For purposes of this analysis, it was assumed that either an assessment district or a community facilities district could be implemented for Bermuda Dunes. Although either option requires approval by the affected land owners, if these land owners wish to be annexed, they would be expected to support the formation of a district. Table 14 shows the likely per acre cost of such an assessment, based on a total of 1,579.8 acres. This does not include the golf course or the streets in the Bermuda Dunes area. 25 Terra Nova/City of Palm Desert Land Use and Fiscal lmpacts of the Northern Sphere&Bermuda Dunes Areas Table 14 Bermuda Dunes Infrastructure Im rovements* 20 Year 15 Year Annual Annual Per Assess- Assess- Payment Payment per Aggregated Acre ment/ ment/ per acre/20 per acre/ Cost Cost** Acre Acre Year 15 Year Sanitary Sewers $8,831,900 Storm Drains $22,400,000 New Street Improvements $8,519,500 Traffic Signals $2,4Q0,000 First Year Start Up Fees $4,215,140 Total $46,366,540 Annual Administrative Costs $316,l36 Less 2009 County Street Improvements $4,000,000 Net Cost of Improvements $42,366,540 $26,818 $42,596 $39,300 $3,096 $3,492 *Based on 2007 calculations by the Director of Public Works **Does not include golf course In the Northern Sphere area, the Public Works Department estimated infrastructure improvements to include regional retention; storm drainage systems; and street improvements and traffic signals. The estimated total costs of this infrastructure is $44,000,000. All the improvements are regional in nature, and take into account only arterial roadways and area-wide flood control measures. None of these costs include, for example, the costs of maintenance of streets within Sun City, which would be expected to remain private, and be maintained by the homeowners' association. The land area in the Northern Sphere totals 2,744.6 acres, not including the golf courses or streets in the area. Table 15 shows the likely assessment for the Northern Sphere. A l0% cost for first year start up costs and an annual administration cost have also been added. 26 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas Table 15 Northern Sphere Area Infrastructure Improvements Per 20 Year 15 Year Annual Annual Aggregated Acre Assessment/ Assessment/ Payment/ Payment/ Cost Cost*** Acre Acre 20 Year 15 Year Regional Retention $2,500,040 Storm Drains $12,000,000 New Street Improvements $28,000,000 Traffic Signals $1,500,000 First Year Start Up Fees $4,400,000 Total $48,400,000 Annual Administration Costs $363,000 $17,635 $28,293 $26,125 $2,064 $2,328 In both areas, homes on smaller lots would be assessed the appropriate fraction of the fee, while parcels of greater than one acre would have an assessment equivalent to their total land area. For example, in Bermuda Dunes, a one half acre lot would be charged approximately $1,450 annually far 20 years, while a 7,200 square foot lot would be assessed $512 annually for 20 years; in the Northern Sphere Area, a one half acre lot would be charged approximately $1,032 annually for 20 years, and a 7,200 square faot lot wauld be assessed $341 annually for 20 years. The analysis is very preliminary, and would require further study prior to implementation, but should provide a basis far discussion. 27 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas IV. Conclusion Previous analyses prepared far both the Northern Sphere Area and the Bermuda Dunes area demonstrated a fiscal shortfall to the City of Palm Desert if the lands developed according to the land use designations currently assigned to them. Further, the Jack Ivey Ranch is built out, vacant lands adjacent to it are planned for residential development, and build out will also generate a shortfall. This report demonstrates the types and intensity of land uses that would be required to provide the City with a revenue neutral build out scenario. The Hypothetical Scenario allows the City to see a positive cash flow when about 75% of the lands are built out. However, it is important to note that two significant factors are unknown about the Hypothetical Land Use Scenario: • Whether the high intensity of development could be supported in the marketplace. • How long it would take for these areas to build out, particularly at the intensity proposed in the hypothesis. At the very least, the City can anticipate that if it were to annex these lands in the immediate future, it would have to absorb an annual loss of$9.3 million for the foreseeable future. 28 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas APPENDIX A FISCAL IMPACT ANALYSIS METHODOLOGY 29 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas APPENDIX A: STUDY METHODOLOGY POTENTIAL REVENUES Annexation 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. 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 General Fund revenues include property tax, property transfer tax, sales tax, transient occupancy tax and motor vehicle in-lieu fees. Propert.�� The County of Riverside collects property tax annually at a rate of 1% of assessed valuation. Properly 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 General Fund. Should annexation occur, the City would receive 7% of the 1% 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 Pa.lm 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.3 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 245.3 acres (Classic Club golf course, maintenance building, and clubhouse) owned by the Berger Foundation.4 Property tax revenue calculations have been adjusted to account for these cases. 3 Paul Gibson,Director of Finance/City Treasurer,City of Palm Desert,personal communication,October 27,2011. 4 Based on property taa information provided by Mike Rover,Rover Armstrong,Berger Foundation representative, personal communication,November 29,2011. 30 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas 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 values of new residential, commercial and industrial development in Palm Desert. Table 1 Average Value of New Construction in Palm Desert Type of Development Average Value Single-family Residential $249,123/unit' Mu1ti-family Residential $104,425/unit Commercial Lodging $110/sq. ft.' 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 ?01I 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. '`Based on building permit data provided by the Palm Desert Building& Safety Department, Nov.201 L Includes value of structure only. 3 Based on comparable existing high�vay-serving hotel in the annexation area, per Ric, Co. Assessor's records,Oct.?011. 4 Based on a�erage 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 201 I.Includes value of structure only. Property Transfer T� 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.s 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 $364,653.6 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. 5 Assessor's Office,County of Riverside,personal communication,November 9,2011. 6 Riverside County Assessor's parcel data,October 2011. 31 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas 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. 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 2 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 Taa 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 fisca] 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.' 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 � Paul Brady, Sun City Palm Desert Community Association,personal communication,October/November 2011. 32 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas negligible. As a result, business park and industrial development is assumed to generate no taxable sales in this analysis. 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%. Approximately 3 acres are designated for future hotel/motel development in SP-151, and this analysis assumes that two 125-room hotels will be constructed on these parcels in the future, for a total of 250 hotel rooms. An additional 3.1 acres are designated for hotel/motel development in the Mirasera Specific Plan, and this analysis assumes a single hotel/motel will contain 150 rooms. Therefore, future buildout of the annexation areas could result in the development of 400 new hotel 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. 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.8 Given the specific and limited nature of these parameters, this fiscal model does not estimate TOT revenue from RV parks. 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 motarists in-lieu of a local property tax. During FY10/11, the City of Palm Desert received $167,177 in motor vehicle in-lieu fees.� The State uses a City population figure of 52,067, which translates to $3.21 per capita annually. g Paul Gibson,Director of Finance/City Treasurer,City of Palm Desert,personal communication,December 2011. 9 Compilation of Motor Vehicle In-Lieu data from State Controller's Office,July 2010-June 2011. 33 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas 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. Many of Palm Desert's development fees are outdated, and a comprehensive nexus study should be undertaken to update these fees prior to any significant annexations. This is to assure that the General Fund is not called upon to support new development in annexation areas. 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 FY10/11, the City of Palm Desert received $1,216,771 in Gas Tax revenue, or$23.37 per capita annually.10 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. Measure A funds are distributed by region; approximately 24% is distributed to the Coachella Valley region. Coachella Valley fimds are further allocated far specific purposes: 50% for State highways and regional road improvements, 35% for local streets and roads, and 15% far 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. The trickle-down effect is illustrated below. lo Compilation of Highway Users Tax data from State Controller's Office,luly 2010-June 2011. 1� Andrea Zureick,Riverside County Transportation Commission,personal communication,November l,2011. 34 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas 8.75% sales tax 1 0.50%of sales tax goes to county-wide Measure A Fund � 24% of county-wide Measure A Fund goes to Coachella Valley region � 35% of Coachella Valley portion goes to local streets and roads � 20%of Coachella Valley streets and roads fund goes to the City of Palm Desert 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. 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.13 With the implementation of ERAF by the State, the City receives 50% less in Structural Fire Tax than it did pre-ERAF. This reduction is made in the analysis and shown in the tables in Appendix B. They are remitted to the City's Fire Fund and restricted for the purpose of providing fire protection and prevention services. 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 l?Rates provided by Mark Dana,Willdan Financial,November 3,2011. 13 `Comprehensive Annual Financial Report,"City of Palm Desert Finance Department,June 30,2010,page 186. 35 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas interest earned on the 90-Day Treasury Bi11 was 4.39%.14 The fiscal model calculates investment income for all annual revenues calculated in this report. POTENTIAL COSTS 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 allacates $13,853,6b4 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, and does not include other general government services that are provided by the City but will not be directly impacted by annexation. 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 $282 per capita. This factor is applied to the projected build out population of the annexation areas. The result is the 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 factars 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 14 Average historical interest rate determined using data from Table B3,"Riverside County Guide to Preparing Fiscal Impacts Reports,"Janua�y 1995;and"3-Month Treasury Constant Maturiry Rates,"from the Federal Reserve Board of Governors,as provided by The Financial Forecast Center. 36 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas 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. It should be noted that historically the cost of police protection has increased more rapidly — especially after an annexation -- than all other costs of providing services. This study assumes that all costs stay the same relative to one another. In the event that annexation is considered further, the escalation of the cost of police protection should be analyzed in greater depth, using information obtained from previous annexations. 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. Costs associated with roadway maintenance include repairs and Americans with Disabilities Act retrofitting of sidewalks, resurfacing and restriping of roadways, and similar activities. These costs also include road improvement projects and the widening of roadways, which have averaged $6.1 million annually over the last ten years, as shown in the Table below15. These costs are paid through the General Fund, and include funds from a reserve fund maintained by the Public Works Department for such projects. Table 3 Annual Road Maintenance Costs, 2002-2011 Year Costs 2002 $1,610,521 2003 $9,026,890 2004 $3,587,830 2005 $10,216,200 2006 $4,220,000 2007 $6,236,627 2008 $10,437,052 2009 $7,558,700 2010 $5,257,500 2001 $2,764,936 10 Year Avera e $6,091,626 With 159 paved public road miles in Palm Desert, this translates to $38,312 per road mile. ls City of Palm Desert Budget calculations f7r roadway construction and maintenance calculations,January,2012. 37 Terra Nova/Ciry of Palm Desert Land Use and Fiscal lmpacts of the Northern Sphere&Bermuda Dunes Areas 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 far 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—Northern Sphere Area The eastern portion of Northern Sphere Area is served by Fire Station 81, as described above. Upon annexation, the City would assume annual costs of approximately $1.5 million annually 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 DesertlCollege Park area, which is expected to directly serve this portion of the annexation area and other areas in northern Palm Desert.16 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 build out population of all land. 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."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.'g 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 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 $190,000.19 l6 Ibid. �� Data provided by Dorian Cooley,Division Chief,CALFIRE/Riverside County Fire,communication,October 12, 201 l. 18 Dorian Cooley,Division Chief,CALFIRE/Riverside County Fire,communication,October 25,2011. �9 Dorian Cooley,Division Chief,CALFIRE/Riverside County Fire,communication,October 13,201 l. 38 Terra Nova/City of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas 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. 39 Terra Nova/Ciry of Palm Desert Land Use and Fiscal Impacts of the Northern Sphere&Bermuda Dunes Areas APPENDIX B C�ST AND REVENUE TABLES BERMUDA DUNES JACK IVERY RANCH NORTHERN SPHERE AREA (Available from Planning Department) 40