Economics Research Associates (ERA) was retained by Mountain Springs Community, L.P. to provide an analysis of the fiscal benefit and impact of the master-planned community at Mountain Springs. The Mountain Springs community plan includes a centralized Village Center with a 154-room lodging facility and up to 35,000 square feet of neighborhood commercial, a range of lot and housing types (897 homes and 39 secondary units), land for County public services, leaving nearly 50% in open space and recreation surrounding the Community and protecting the sensitive wildlife habitat corridors. The significant open space and recreation components will include five community parks, several miles of community trails and the existing Mountain Springs golf facility. The Community also provides for recycled water by incorporating an on-site tertiary waste water treatment facility. This report evaluates how the Mountain Springs Community will likely benefit/ impact County costs and revenues, evaluates the benefit and the impact of including affordable housing in the plan, and describes other ways the County will benefit from the Mountain Springs Community. Following the introduction, the remainder of the report is organized as follows:
The community is planned to include a wide variety of housing types, ranging from single-family homes on two-acre lots, to medium-density clustered patio homes, to condominiums in a mixed-use Village Center. Most of the homes (83 percent) are categorized as Low Density Residential (LDR) with 15 percent of the housing units (117 homes) planned to be affordable to moderate-income households.
The majority of the higher-density residential and the commercial uses will be located in a centralized Village Center. Commercial development at the Village Center will include a lodging facility, a commercial component that is proposed to include some retail, and a range of services and professional offices. These businesses are intended to provide some basic services and convenient neighborhood retail, which will reduce traffic on County roads outside the community but are not expected to adversely affect existing county businesses. In that homes at Mountain Springs will support community development not only at Mountain Springs but in other parts of Tuolumne County, the Community will create additional business opportunities and jobs.
ERA estimated the benefit/impact of development at Mountain Springs on the County General Fund between 2009 and 2023. The key ERA findings are as follows:
The Mountain Springs Community development will result in a cumulative benefit of over $74 million in total new property taxes, one-time fees, and transient occupancy taxes through the year 2023. This not does include the positive impact of providing the additional benefits outlined below, which include an additional 600 ongoing jobs as well as the significant benefits from hundreds of millions of dollars in contracts and services that will be awarded during the construction of the Mountain Springs Community to the benefit of Tuolumne County’s economy.
The total assessed value of residential units at Mountain Springs is projected to grow to about $563 million by 2023. Property taxes are calculated as 1 percent of assessed value. At time of estimated build out in 2018, Mountain Springs is projected to generate annual property tax revenue of approximately $5.1 million, rising to more than $5.6 million in 2023. The total property tax receipts from the Mountain Springs community will exceed $56.7 million through 2023. This also does not take into consideration the additional dollars to the County through job creation and local contracting that will result from the Mountain Springs Community development period.
After 2023 the ongoing yearly tax receipts revenue is estimated to be in excess of $5.6 million per year. The property tax revenue estimates are conservative because they do not take into account higher property taxes paid by the developer once the community receives approvals, but prior to residential sales.
The County General Fund receives 35.9 percent of property tax revenues generated in unincorporated parts of Tuolumne County. Property tax revenue is also allocated to Rural Fire, Water District, Schools and Junior College. The annual County share grows from about $235,000 in 2009 to $2.02 million in 2023.
Other General Fund revenues from Mountain Springs include property taxes from new commercial development stimulated by increased demand from new residents (including commercial development outside the Mountain Springs community), sales tax revenues from new residents and County employees, subventions and other revenues. Combined with the residential property tax, these ongoing revenues grow from over $370,000 in 2009 to about $3.15 million annually by 2023. It is important to note that with the GIGER fees factored into the analysis, the positive impact of the community is significant and immediate, and the total impact/benefit to the County will be positive in all years, rising from about $216,000 in 2009 to about $1.36 million in 2023. The total positive fiscal benefit/impact including the GIGER fees and related costs to the County General Fund is more than $13.65 million between 2009 and 2023.
In addition to the positive fiscal benefit to the County General Fund of over $13.65 million, an additional source of revenue to the County is the transient occupancy tax (TOT). The lodging facility in the Village Center at Mountain Springs is projected to generate over $5.6 million in TOT revenues between 2009 and 2023. Specifically, the tax revenue and the TOT revenue from this community will result in a cumulative positive benefit to the County General Fund of over $19.2 million by 2023. This analysis reporting a net positive fiscal benefit of $19.2 million by 2023 does not take into account the full benefit of revenues from development and related impact fees. Additionally Mountain Springs is projected to generate over $11.7 million in one time permit and impact fees for the County, which are used for County services and improvements, roads and schools.
Not only will there be benefits to the County General Fund but also direct benefits to local businesses, such as wineries, restaurants, recreation, entertainment venues and other businesses involved in retail sales, and indirect benefits to those businesses providing goods and services to local retailers.
In addition to these revenue sources, oak and agricultural mitigation fees are also being proposed with the approval of the Mountain Springs Community to provide mitigation for impacts to agricultural land and oak woodlands.
Mountain Springs will also provide a variety of other benefits to the County, described in detail in the report, that include but are not limited to:
A range of housing opportunities for local builders and residents including affordable housing
Summary of ERA Methodology
ERA estimated the benefit/impact of development at Mountain Springs on the County General Fund between 2009 and 2023. The methodology used was based on the one developed by the California Institute for County Government to calculate the net cost of new residential development to the Tuolumne County General Fund for the GIGER fee.
The County derives its General Fund revenues from property tax, sales tax, subvention revenues (transfers from other levels of government such as the state), and other miscellaneous revenues.
Residential lot sales are assumed to begin in 2008/2009 timeframe. Based on conversations with the developer and ERA’s market experience, absorption of residential units at Mountain Springs is projected to occur at the rate of approximately 150 per year in the first year, and 100 units per year thereafter.
The property tax revenues received by the County will be determined by the values of the homes at Mountain Springs. In order to estimate property tax revenues, ERA assigned average property values (prices) to the completed homes that will be built in Mountain Springs. Prices for the affordable units are also factored in and calculated according to County requirements. Within the Mountain Springs Community the priority will be to make affordable housing available as one of the options to employees who want to work and live in the Community as well as to County service employees.
ERA estimated the benefit/impact of development at Mountain Springs using a methodology based on the one used in “Tuolumne County Government Cost and Revenue Study: An Update,” prepared by The California Institute for County Government (CICG) in April 2003.
The average annual cost of a new resident was calculated by subtracting dedicated revenues from total expenditures for all relevant County departments, and dividing by the applicable number of County residents (in this case, residents of the unincorporated part of the county). The average cost is about $608 per resident in unincorporated parts of the County. Costs per household were estimated by multiplying the per-resident cost by the average household size for Tuolumne County, 2.36 persons. The estimated annual cost to the County of a new household at Mountain Springs is, therefore, $1,435.
The analysis also incorporates the one-time cost of acquiring additional facilities and equipment needed to provide government services such as fire service, parks and libraries. Based on the GIGER study, the estimated total cost of new capital facilities for a new household is $2,314 per household.
While Mountain Springs supports affordable housing and has included 15 percent of the homes as affordable units within the community plan, it is also important to note that there is a corresponding negative impact of affordable housing on County revenues associated with permitting and development. ERA found that while inclusion of the 117 units of affordable housing is a benefit for the County, it also results in reduced County revenues due to lower property taxes and development fee exemptions. Affordable housing is exempt from both residential permit fees and GIGER fees. In addition, due to their smaller average size (square feet), the affordable units result in reduced school mitigation fees, which are collected on a per square foot basis. ERA also assumed a loss in property tax receipts, as the sales price and resulting assessed value for affordable units would be lower than for the market-rate units. The construction, administration and other direct and indirect costs of affordable housing for Mountain Springs and associated builders will also need to be offset by other home sales within the community.
The positive benefit of the range of homes at Mountain Springs is that the higher-priced homes and larger parcels located along the open space perimeters will produce higher tax, permitting and mitigation fees that will offset and increase the overall fiscal benefits of the Community to the County General Fund.
According to the GIGER report, there are approximately 0.28 jobs per resident in Tuolumne County. Applying this ratio, development at Mountain Springs should generate approximately 600 new jobs in the County. Some of these jobs will be located in the town center at Mountain Springs.
ECONOMICS RESEARCH ASSOCIATES - 2007
Economics Research Associates (ERA) was founded in Los Angeles in 1958. Since 1981, the firm has been owned as a California Corporation by its principal consultants. Headquarters are in Los Angeles, California, with offices in Chicago, San Francisco, San Diego, London, Washington, D.C. and New York. There are 125 members of the staff; professional consultant tenure with the firm averages ten years. ERA has completed more than 17,000 research and consulting assignments for both public and private clients. Fusing talents of a multidisciplined staff, the firm's experience has concentrated in five interrelated fields: (1) economic development and planning; (2) real estate and land use; (3) recreation, tourism, and leisure time; (4) transportation systems; and (5) management and marketing services.
In urban and regional economics, ERA has conducted major studies for public and private clients in most major metropolitan areas. These have included economic base studies, urban redevelopment feasibility assessments, long-range master plans, and analysis of interactions of urban transport with metropolitan development. The firm is frequently called upon to assess fiscal impacts of development policies and projects and to recommend revenue diversification programs. ERA often performs negotiating services and analyses for public clients seeking private ventures. The firm has been involved in all four rounds of contemporary military base reuse planning, defense industry conversion, and community economic diversification since 1988.
Real estate and land use studies constitute a primary area of ERA project experience. ERA has studied the marketability, feasibility, and appropriate project densities for all types of real estate uses. A specialization of the firm involves adaptive use and commercial property revitalization. ERA also conducts project valuation analyses, portfolio reviews, and prepares independent review valuations during sales transactions. Specialties of the firm, in addition to the full range of urban real estate product types, include destination resorts and hotels, high-technology parks, and university-related land uses.
ERA's work in the field of recreation, tourism, and leisure time incorporates experience in formulating tourist development plans for major geographic regions and subregions, evaluation of specific public and commercial recreational facilities, and analysis of special mass attraction events. Long known for its work with major theme parks in the United States, and now internationally as well, ERA has also led in the definition of responsible revenue generation and cost coverage programs for public park systems. The firm is presently a leading authority on the development and programming of urban entertainment centers.
In management and marketing consultation, ERA has provided both public and private clients with guidance in program design, organization, public finance, governmental relations, long-term planning, marketing, and acquisition programs. A growing number of projects involve city and agency marketing strategies.
ERA has established one of the finest research libraries in the country during its 48-year history. This library contains 200 active periodical subscriptions, more than 2,000 books, data series, and focused geographic files. All ERA offices are networked and electronically convey data and documents between offices as well as with clients. The consulting staff profile of the firm emphasizes both breadth and specialization. ERA’s staff includes economists, financial analysts, real estate analysts, urban and regional and planners. The firm is unique in its distribution of responsibility and ownership. Twenty-four of the senior professionals, in all offices of the firm, are shareholders.