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RANGE OF FISCAL IMPACTS AN237 WIGWAM PARCEL ANNEXATION FEBRUARY 2022 11209 N. Tatum Boulevard, Suite 225 * Phoenix, AZ 85028 * 602-765-2400 tel * 602-765-2407 fax 1 Introduction The following summary presents the fiscal impacts of annexation for the Wigwam parcel that will include a total of approximately 4.38 gross acres of light industrial development. This parcel will be combined with surrounding parcels to become part of a larger industrial park, however since the surrounding parcels are already in the city, this annexation impact is limited to the 4.38 acre site. The Wigwam parcel is located southwest of the SWC of Bethany Home Road and Litchfield Road. Based on typical floor area ratios for light industrial development, it is anticipated that this site could ultimately support approximately 66,000 square feet of built space. Detail on the specific users is not yet known; therefore this analysis presents a range of possible impacts based on hypothetical scenarios for the type of industrial project that could develop in this area. The potential types of uses include: 1) an unoccupied shell building; 2) leased warehouse; and 3) leased manufacturing. Various assumptions were developed for each scenario regarding employment density, lease rates and capital investment (construction and FF&E). While these assumptions are based on recent projects, as well as published sources for lease rates and construction costs, they are intended to show a general range of possible economic and fiscal impacts. The point of this exercise is simply to frame what each type of use could bring to the city in terms of the number and quality of jobs, as well as the fiscal impacts, and how that result could be scaled to the Wigwam parcel. Project Assumptions The table below presents the results for 1.0 million square feet of each type of development in terms of capital investment, jobs and wage levels, annual fiscal impacts (revenues less expenditures for city operating funds), one-time fees (construction sales tax, development impact fees, estimated permit fees) and overall ranking. This is followed by the “blended average” for the Wigwam parcel that includes 33,000 square feet of warehousing and 33,000 square feet of manufacturing for a total of 66,000 square feet. The total number of square feet is consistent with the parcel size, typical floor-area ratios and expected building sizes for industrial development in this area. The impacts assume that no new roads would be taken into the city for maintenance since this would be an interior parcel in a larger industrial park. COMPARATIVE IMPACTS OF POTENTIAL INDUSTRIAL USES AND WIGWAM PARCEL BLENDED AVERAGE Building Use Building Square Feet Building Construction (millions) FF&E (millions) Jobs Average Wage One-Time Fees* Annual Revenues less Expenditures Overall Ranking Empty Shell 1,000,000 $77.0 $0.0 0 $0 $2,417,000 $40,000 Low Leased Warehouse 1,000,000 $126.9 $22.0 400 $43,926 $3,794,000 $210,000 Medium Leased Manufacturing 1,000,000 $140.4 $100.0 833 $53,177 $4,167,000 $260,000 High Wigwam Blended Average (50% warehouse, 50% manufacturing) 66,000 $8.8 $4.0 40 $48,600 $263,000 $10,000 Medium *One Time Fees include construction sales tax, estimated planning and permitting fees and development impact fees in West Glendale. 2 • Capital investment is represented by a combination of building costs and FF&E, both of which generate property taxes for the city. Construction activity also results in significant one-time sales taxes. Manufacturing typically requires a larger capital investment than warehousing based on the nature of their operations and the corresponding building and equipment requirements. The empty shell represents the low end with an unfinished building and no equipment, and is a temporary condition. The total construction cost for the Wigwam parcel is estimated at $8.8 million for 66,000 square feet of industrial space. • Jobs and average wages are important not only in terms of the number of jobs created, but also the quality of jobs as represented by average wages. To the extent that workers live in Glendale, higher wages translate into more taxable spending and higher value housing. Typical warehouse operations create a limited number of jobs, and generally at lower average wages than manufacturing. Manufacturing represents a relatively high job density, among industrial uses, with above average wages. However manufacturing wages vary significantly based on the type of product being produced. It is estimated that the industrial development could support about 40 jobs at an average wage of close to $49,000. Fiscal Results • One-time fees are related to construction and are generally proportional to the construction cost because construction sales taxes make up the largest share of one-time fees. Development impact fees (DIF) are the same for all types of industrial uses since they are based on building square footage. One-time fees also include estimated planning and permitting fees that are generally proportional to construction costs. Total one-time fees for the Wigwam parcel are estimated at $263,000. This number does not include any DIF fees for streets, or the value of any infrastructure that may be constructed by the developer. • The annual fiscal impacts represent the net value of these different types of industrial uses to the city in terms of revenues less expenditures. These annual fiscal impacts are intended to be order of magnitude only. For each type of use, there are a variety of factors imbedded in the assumptions that will affect the magnitude of fiscal impacts for individual uses, including the level of capital investment, amount of new street lane miles added, lease rates and the presence of taxable sales. The potential type(s) of industrial users that are anticipated for the Wigwam parcel could result in a net impact to the city of $10,000 per year, excluding one-time revenues. • The overall rankings show low impacts for the shell building, medium impacts for leased warehouse, and high impacts for leased manufacturing. These three scenarios represent the typical possibilities for industrial land in Glendale. The combination of uses proposed for the Wigwam parcel could produce a medium net impact, proportional to its size, given the range of potential impacts for commercial and industrial users. 3 ANNUAL FISCAL IMPACTS OF STANDARD INDUSTRIAL USES WIGWAM PARCEL ANNEXATION Summary These results frame the range of potential impacts that the Wigwam parcel could have on the city budget if this 4.38-acre parcel is annexed. All of the user types shown here generate a positive net fiscal impact, but at varying magnitudes. The long-term net impacts (revenues less expenditures) for the Wigwam parcel are estimated at $10,000 per year, including $20,000 in annual revenues and $10,000 in annual expenditures, excluding one-time taxes and fees. The magnitude of the impacts is proportional to the size of the development, although estimated annual revenues exceed expenditures by 100 percent. The actual fiscal impacts will depend on the specific tenant, as well as other factors such as capital investment, lease rates and other project details. $50,000 $320,000 $410,000 $20,000 $10,000 $110,000 $150,000 $10,000 $40,000 $210,000 $260,000 $10,000 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 1M SF Shell 1M SF Warehouse 1M SF Manufacturing 66,000 SF Wigwam Revenues Expenditures Net Benefit