FINAL_PROJECT SCORPION ECONOMIC IMPACT REPORT_6-30-20.PDF

Project Scorpion
Fiscal & Economic Impact Report
ESI Corporation June 30, 2020

Project Scorpion
Fiscal and Economic Impact Report
PREPARED FOR THE CITY OF BUCKEYE
BY:
ESI CORPORATION
5635 N. Scottsdale Rd
Suite 170
(602) 265-6120
www.esicorp.net
June 30, 2020
ESI Corporation ADESA, Inc. Economic and Fiscal Impact Study
January 29, 2009 A-i

Project Scorpion Fiscal and Economic Impact Report City of Buckeye
TABLE OF CONTENTS
1. Background ........................................................................................................................................... 2
Introduction ..................................................................................................................................... 2
Study Assumptions ........................................................................................................................... 2
Methodology .................................................................................................................................... 3
2. Study Findings ....................................................................................................................................... 4
Fiscal Impact Analysis ...................................................................................................................... 4
Economic Impact Analysis ................................................................................................................ 5
Development Agreement ................................................................................................................ 6
Appendix A – Exhibits 1 and 2, Fiscal and Economic Impact Analysis by Year .......................................... A-1
LIST OF TABLES
Table 1 – Fiscal and Economic Impact Report Assumptions ......................................................................... 2
Table 2 – Project Scorpion Annual Employment, Internet Sales and Expenditures (2020-2030) ................ 4
Table 3 – Project Scorpion Fiscal Impact Summary by Year (2020-2030) ..................................................... 5
Table 4 – Project Scorpion Economic Impacts .............................................................................................. 6
Table 5 – City of Buckeye Development Agreement Incentive .................................................................... 6
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Project Scorpion Fiscal and Economic Impact Report City of Buckeye
1. BACKGROUND
Introduction
Project Scorpion is a fast growing national retailor who has selected Buckeye, Arizona for their
distribution facility. This facility will service their stores throughout the Southwest and also house
internet sales. They are purchasing approximately 80 acres located at the southwest corner of Miller
Road and Durango Street in Buckeye, and plan to build an 850,000 square foot building as part of their
first phase. The purpose of this report is to provide the City of Buckeye with an understanding of the
public benefits associated with this project, compared to the incentives offered by the City of Buckeye in
the Project Scorpion Development Agreement. The original analysis was completed March 26, 2020, but
due to COVID-19 there was a delay in presenting the results to the City Council. Since March, there have
been no changes to the impact analysis. The results and findings have been verified and remain the
same.
Study Assumptions
It was necessary to make several assumptions in order to provide an analysis of the fiscal and economic
impacts resulting from the siting of this business. Many of the assumptions used in the analysis were
provided by Cushman & Wakefield, who represents Project Scorpion, while some of the information
came from other sources. The primary assumptions utilized in the analysis are summarized in Table 1.
Table 1 – Fiscal and Economic Impact Report Assumptions
Value Data Source
Project Scorpion Operations
Total Construction Cost $50 million Cushman & Wakefield
Total Land and Building $58 million Cushman & Wakefield
Construction Start Date Aug-20 Cushman & Wakefield
Construction End Date Jun-21 Cushman & Wakefield
Operational Start Date Aug-21 Cushman & Wakefield
Total Employment by 2030 (salaried and hourly) 291 Cushman & Wakefield
Total Payroll by 2030 (salaried and hourly) $15.9 million Cushman & Wakefield
Fringe Benefit Rate 27% Cushman & Wakefield
Equipment Acquisition: $30,535,000 Cushman & Wakefield
Computer , Software $500,000 Cushman & Wakefield
Office furniture, fixtures $25,000 Cushman & Wakefield
Material handling $27,000,000 Cushman & Wakefield
Telephone, intercom $10,000 Cushman & Wakefield
Mobile Warehouse Equipment $3,000,000 Cushman & Wakefield
Internet Sales by 2030 $4.6 million Cushman & Wakefield
Tax Rates
State of Arizona - Construction TPT 5.60% Arizona Department of Revenue
Buckeye Construction TPT 3.00% City of Buckeye
Buckeye - Primary Property Tax Rate $1.80 Maricopa County Assessor's Office
City of Buckeye State Shared TPT Revenue (as of Feb 2020) 1.3052% Arizona Department of Revenue
Assessment Ratio 18% Maricopa County Assessor's Office
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Project Scorpion Fiscal and Economic Impact Report City of Buckeye
Methodology
Fiscal and economic impacts are measured over a 10-year time horizon, which is the length of the
Project Scorpion Development Agreement. This timeframe includes 10 months of construction over two
years and 9 years/5 months of operations.
Fiscal Impact Analysis
Construction and equipment expenditure data and internet sales revenue is used in developing the fiscal
impact analysis to determine the direct tax impact that would be generated to the City of Buckeye. Tax
revenue categories include construction sales tax, internet sales, and real and personal property tax.
Construction and internet sales tax presented in the findings includes both the City of Buckeye and state
shared revenue. Personal property taxes are based on the original value of the new equipment and
applying the depreciation, assessment ratio formulas and the City’s tax rate.
Economic Impact Analysis
The economic impact analysis applies direct expenditures such as construction value, operational payroll
(including fringe benefits), and number of jobs. This information is used to measure the indirect and
inducted impacts (multiplier effect) that would likely accrue to the City of Buckeye and the regional
economy. ESI Corp utilizes the IMPLAN econometric model1 multipliers to estimate the economic
impact. IMPLAN is an input-output trade flow model that allows for the computation of the direct and
multiplier effects of a given change to the economy. The model operates by estimating the direct,
indirect, and induced impacts of specific economic activity, which is summarized below:
• Direct economic impacts are those attributable to the initial economic activity. For example, an
operation with ten full-time employees creates ten direct jobs.
• Indirect economic impacts are those economic activities undertaken by vendors and suppliers
within the supply chain of the direct activity as a result of the initial economic activity. For example,
suppliers of goods, materials, and services used in the direct activities produce indirect economic
impacts.
• Induced economic impacts result from the spending of wages paid to employees in local industries
involved in direct and indirect activities. These wages, which are analogous to household spending,
support additional local activities, such as the purchase of goods and services within the region. In
turn, that portion of spending that accrues to local businesses and employees is once again re-
circulated within the local economy, producing additional activity.
1 IMPLAN stands for Impact Analysis for Planning. The software was created and is distributed by the IMPLAN Group (MIG, Inc.)
out of Huntersville, North Carolina.
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Project Scorpion Fiscal and Economic Impact Report City of Buckeye
STUDY FINDINGS
The expenditures analyzed in this report include construction, equipment acquisition, and payroll.
Annual expenditures, employment and internet sales are all inputs to the economic and fiscal impact
proforma and are detailed in Table 2. The employment figures do not include construction jobs.
Construction of the building will commence August 2020 and be completed by June 2021. It is
anticipated that Project Scorpion will be operational by the 3nd quarter of 2021. Project Scorpion will
begin 12 months of operations in Buckeye by the year 2022. They will employ 16 salaried workers and
165 hourly workers (127 FTE’s) with an annual payroll of $7.8 million and an average fully loaded wage
of $51,894. By 2030 their employment base will expand to 291 people (16 salaried and 275 hourly) with
an annual payroll of $15.9 million, including fringe benefits. During construction and over the nine years
of operations, the combined total of expenditures for payroll, acquisition of new equipment, and
construction amounts to $201.2 million.
Table 2 – Project Scorpion Annual Employment, Internet Sales and Expenditures (2020-2030)
2020 2021 (5 mo.) 2022 2023 2024 2025
Total New Jobs* 0 101 151 187 224 239
Internet Sales $0 $300,000 $900,000 $1,500,000 $2,100,000 $2,250,000
Expenditures
Total Payroll & Benefits $0 $2,334,445 $7,817,549 $9,496,489 $11,335,449 $12,216,829
Building Construction $20,833,333 $29,166,667 $0 $0 $0 $0
Equipment $0 $30,535,000 $0 $0 $0 $0
Total Expenditures $20,833,333 $62,036,112 $7,817,549 $9,496,489 $11,335,449 $12,216,829
2026 2027 2028 2029 2030 Total
Total New Jobs* 297 295 294 293 291 --
Internet Sales $2,940,000 $3,387,000 $3,819,600 $4,272,180 $4,600,000 $26,068,780
Expenditures
Total Payroll & Benefits $15,106,079 $15,301,659 $15,499,779 $15,701,709 $15,906,179 $120,716,162
Building Construction $0 $0 $0 $0 $0 $50,000,000
Equipment $0 $0 $0 $0 $0 $30,535,000
Total Expenditures $15,106,079 $15,301,659 $15,499,779 $15,701,709 $15,906,179 $201,251,162
Notes:
*FTE's provided by client were converted to jobs
Internet sales figures are provided by Cushman Wakefield for 2021, 2025 and 2030. ESI forecasted the intervening
years.
Fiscal Impact Analysis
Fiscal impacts (tax collections) of the operation are presented in Table 3. Impacts are measured in detail
over a 10-year time horizon, with an aggregate total for the 10 years. Fiscal impacts are broken down by
source of tax revenue: construction, personal property tax (equipment), real property tax (building), and
internet sales taxes.
It is estimated that construction of Project Scorpion’s facility in Buckeye will generate $920,541 in
construction sales tax to the city, including state shared revenue. When examining the ongoing
operations, real property tax on the building will generate $3.8 million, personal property tax on
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Project Scorpion Fiscal and Economic Impact Report City of Buckeye
equipment is estimated to yield $301,929, and internet sales will contribute $783.960 in taxes. Total tax
collections over the time horizon is estimated at $5.8 million. Appendix A, Exhibit 1 provides a detailed
year by year analysis of the fiscal impacts.
Table 3 – Project Scorpion Fiscal Impact Summary by Year (2020-2030)
2020 2021 2022 2023 2024 2025
Construction Sales Tax $383,559 $536,982 $0 $0 $0 $0
Real Property Tax $12 $12 $367,863 $405,541 $413,527 $421,671
Personal Property Tax $0 $0 $21,509 $33,707 $42,273 $47,527
Internet Sales Tax $0 $9,022 $27,065 $45,109 $63,153 $67,664
Total $383,571 $546,016 $416,437 $484,357 $518,953 $536,862
2026 2027 2028 2029 2030 Total
Construction Sales Tax $0 $0 $0 $0 $0 $920,541
Real Property Tax $429,976 $438,443 $447,078 $452,753 $458,500 $3,835,377
Personal Property Tax $47,425 $43,433 $32,726 $22,018 $11,310 $301,929
Internet Sales Tax $88,414 $101,856 $114,866 $128,476 $138,335 $783,960
Total $565,815 $583,733 $594,670 $603,247 $608,145 $5,841,807
Note: Real and Personal Property tax collections lag by one year.
Economic Impact Analysis
To understand the magnitude of the economic impacts that Project Scorpion will have on the regional
economy, ESI created a proforma model of the facility’s construction and operations to measure the
direct, indirect and induced economic effects. The model measures the amount of economic activity in
each round of spending until all of the spending within the local region has been leaked outside the
study area. The categories of impacts which were analyzed in the modeling process include:
Earnings impact – wages paid to personnel associated with the industry. Includes total wage and salary
including benefits of the direct, indirect and induced employees
Employment impact – this represents the full and part time jobs, including self-employed.
Economic Output – this represents the spending or gross receipts for goods or services generated by
construction or the facility’s operations.
During the 10 months of construction, an estimated 364 direct construction jobs will be created
generating total payroll of $21.6 million (Table 4). When taking into account the multiplier effect, the
direct and induced construction jobs created include another 233 jobs, for a total of 597 construction
related jobs. The total Output of the local construction industry would be boosted by an estimated
$89.4 million.
When reviewing the economic impact of the proposed operational spending by Project Scorpion (Table
4) there are notable contributions to the economy. Over the nine years of operations beginning in
2021, the total direct payroll combined with fringe benefits equals $120.7 million. When examining the
combined totals of direct, indirect and induced impacts, 4,145 jobs (in worker years) are estimated to be
supported over the nine years with total economic output of $297.1 million. Appendix A, Exhibit 2,
provides a year by year analysis of the economic impacts.
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Project Scorpion Fiscal and Economic Impact Report City of Buckeye
Table 4 – Project Scorpion Economic Impacts
Construction (2020-2021)
Earnings Jobs1 Output
Direct $21,669,317 364 $50,000,000
Indirect and Induced $13,007,667 233 $39,407,459
Total $34,676,983 597 $89,407,459
Operations (2021-2030)
Earnings Jobs1 Output
Direct $120,716,162 2,209 $136,484,670
Indirect and Induced $99,447,956 1,935 $160,640,205
Total $220,164,118 4,145 $297,124,875
1Cumulative jobs in worker years
Development Agreement
The City of Buckeye has negotiated a development agreement with representatives of Project Scorpion.
This agreement includes a variety of incentives such as fee waivers and sales tax rebates. Arizona state
law requires that the total value of the public benefit from the project generates more revenue than the
total value of the incentive provided. Based on this analysis, the total value of the incentive offered
amounts to $1.1 million (Table 5). The estimated tax revenue that the City of Buckeye will collect over
the 10-year time horizon is $5.8 million, which is $4.6 million more than the incentive provided.
Table 5 – City of Buckeye Development Agreement Incentive
Value
Waiver of Building Permit Fee $600,000
Expedited Fast Track Fees (high estimate) $100,000
Sales Tax Rebate* $451,065
Total Incentive Value $1,151,065
10-Year Estimated Tax Collection $5,841,807
Surplus Collection $4,690,741
*Based on 49% of total construction sales tax collections
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Project Scorpion Fiscal and Economic Impact Report City of Buckeye
APPENDIX A – EXHIBITS 1 AND 2, FISCAL AND ECONOMIC IMPACT
ANALYSIS BY YEAR
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EXHIBIT 1 - PROJECT SCORPION FISCAL IMPACT ANALYSIS
Nominal Total 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
CONSTRUCTION SALES TAX GENERATION
Construction Costs $50,000,000 $20,833,333 $29,166,667 $0 $0 $0 $0 $0 $0 $0 $0 $0
Taxable Amount $30,647,367 $12,769,736 $17,877,631 $0 $0 $0 $0 $0 $0 $0 $0 $0
Buckeye Estimated Share of State Sales Taxes $1,120 $467 $653 $0 $0 $0 $0 $0 $0 $0 $0 $0
Buckeye Sales Tax $919,421 $383,092 $536,329 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Construction Tax Collections $920,541 $383,559 $536,982 $0 $0 $0 $0 $0 $0 $0 $0 $0
REAL PROPERTY TAX GENERATION (LAND & BUILDING) Tax collections lag one year
Estimated Value of Land/Building --- $4,486 $4,486 $58,000,000 $63,940,600 $65,199,828 $66,483,855 $67,793,169 $69,128,268 $70,489,661 $71,384,432 $72,290,561
Assessor's Valuation (85%) --- $49,300,000 $54,349,510 $55,419,854 $56,511,276 $57,624,193 $58,759,028 $59,916,211 $60,676,767 $61,446,977
Assessment Ratio --- 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0% 18.0%
Assessed Value --- $8,874,000 $9,782,912 $9,975,574 $10,172,030 $10,372,355 $10,576,625 $10,784,918 $10,921,818 $11,060,456
City Property Tax Receipt $3,835,377 $12 $12 $367,863 $405,541 $413,527 $421,671 $429,976 $438,443 $447,078 $452,753 $458,500
Total Real Property Tax Collections $ 3,835,377 $ 12 $ 12 $ 367,863 $ 405,541 $ 413,527 $ 421,671 $ 429,976 $ 438,443 $ 447,078 $ 452,753 $ 458,500
PERSONAL PROPERTY TAX GENERATION (EQUIPMENT) Tax collections lag one year
New Equipment (RCNLD) --- $0 $0 $6,634,314 $10,396,851 $13,038,961 $14,659,471 $14,628,086 $13,396,811 $10,094,061 $6,791,310 $3,488,559
Assessment Ratio --- $0 $0 18% 18% 18% 18% 18% 18% 18% 18% 18%
Buckeye Personal Property Tax Rate --- $0 $0 $1.8 $1.8 $1.8 $1.8 $1.8 $1.8 $1.8 $1.8 $1.8
Buckeye Personal Property Tax $192,442 $0 $0 $21,509 $33,707 $42,273 $47,527 $47,425 $43,433 $32,726 $22,018 $11,310
Total Personal Property Tax Collections $ 301,929 $0 $0 $21,509 $33,707 $42,273 $47,527 $47,425 $43,433 $32,726 $22,018 $11,310
RETAIL SALES TAX
Internet Sales $9,990,000 $0 $300,000 $900,000 $1,500,000 $2,100,000 $2,250,000 $2,940,000 $3,387,000 $3,819,600 $4,272,180 $4,600,000
Buckeye Estimated Share of State Sales Taxes $727 $0 $22 $65 $109 $153 $164 $214 $246 $278 $311 $335
Buckeye Sales Tax $299,700 $0 $9,000 $27,000 $45,000 $63,000 $67,500 $88,200 $101,610 $114,588 $128,165 $138,000
Total Sales Tax Collections $ 783,960 $0 $9,022 $27,065 $45,109 $63,153 $67,664 $88,414 $101,856 $114,866 $128,476 $138,335
TOTAL TAX COLLECTIONS $5,841,807 $383,571 $546,016 $416,437 $484,357 $518,953 $536,862 $565,815 $583,733 $594,670 $603,247 $608,145
Project Scorpion Fiscal and Economic Impact Analysis ESI Corp A-2

EXHIBIT 2 - PROJECT SCORPION ECONOMIC IMPACT ANALYSIS
Nominal Total 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
CONSTRUCTION IMPACTS
EARNINGS FROM CONSTRUCTION
Construction Expenditures $50,000,000 $20,833,333 $29,166,667 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Direct Earnings $21,669,317 $9,131,762 $12,537,555 $0 $0 $0 $0 $0 $0 $0 $0 $0
Indirect/Induced Earnings $13,007,667 $5,481,618 $7,526,049 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Direct, Indirect, and Induced Earnings $34,676,983 $14,613,379 $20,063,604 $0 $0 $0 $0 $0 $0 $0 $0 $0
JOBS FROM CONSTRUCTION
Construction Expenditures $50,000,000 $20,833,333 $29,166,667 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Direct Jobs 364 153 211 0 0 0 0 0 0 0 0 0
Indirect/Induced Jobs 233 98 135 0 0 0 0 0 0 0 0 0
Total Direct, Indirect, and Induced Jobs 597 252 346 0 0 0 0 0 0 0 0 0
TOTAL OUTPUT FROM CONSTRUCTION
Construction Expenditures $50,000,000 $20,833,333 $29,166,667 $0 $0 $0 $0 $0 $0 $0 $0 $0
Indirect and Induced Output $39,407,459 $16,606,870 $22,800,589 $0 $0 $0 $0 $0 $0 $0 $0 $0
Total Direct, Indirect, and Induced Output $89,407,459 $37,440,203 $51,967,256 $0 $0 $0 $0 $0 $0 $0 $0 $0
OPERATIONAL IMPACTS
EARNINGS FROM OPERATION (5 months)
Estimated Direct Output $282,572,441 $0 $5,464,470 $18,299,321 $22,229,384 $26,534,022 $28,597,157 $35,360,315 $35,818,128 $36,281,888 $36,754,566 $37,233,189
Total Direct Employee Compensation $120,716,162 $0 $2,334,445 $7,817,549 $9,496,489 $11,335,449 $12,216,829 $15,106,079 $15,301,659 $15,499,779 $15,701,709 $15,906,179
Indirect + Induced Earnings $99,447,956 $0 $2,069,657 $6,836,281 $8,191,191 $9,644,004 $10,252,076 $12,503,734 $12,492,840 $12,481,961 $12,486,081 $12,490,131
Total Direct, Indirect, and Induced Earnings $220,164,118 $0 $4,404,102 $14,653,830 $17,687,679 $20,979,452 $22,468,904 $27,609,813 $27,794,498 $27,981,740 $28,187,790 $28,396,310
JOBS FROM OPERATION
Estimated Direct Output $282,572,441 $0 $5,464,470 $18,299,321 $22,229,384 $26,534,022 $28,597,157 $35,360,315 $35,818,128 $36,281,888 $36,754,566 $37,233,189
Direct Job Creation 2,209 0 85 135 171 208 223 281 279 278 277 275
Indirect + Induced Job Creation 1,935 0 40 133 159 188 199 243 243 243 243 243
Total Job Creation 4,145 0 125 268 330 395 422 524 522 521 520 518
OUTPUT FROM OPERATIONS
Estimated Direct Output $136,484,670 $0 $5,464,470 $18,299,321 $22,229,384 $26,534,022 $28,597,157 $35,360,315 $35,818,128 $36,281,888 $36,754,566 $37,233,189
Indirect and Induced Output $160,640,205 $0 $6,716,983 $22,186,857 $26,584,159 $31,299,201 $33,272,672 $40,580,334 $40,544,976 $40,509,670 $40,523,041 $40,536,186
Total Direct, Indirect, and Induced Output $ 297,124,875 $0 $12,181,453 $40,486,178 $48,813,543 $57,833,223 $61,869,830 $75,940,648 $76,363,105 $76,791,558 $77,277,607 $77,769,375
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