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FISCAL IMPACTS OF COTTON AND PEORIA RETAIL CENTER ANNEXATION INTO THE CITY OF GLENDALE 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 Cotton and Peoria Retail Center, which includes 9.1 gross acres with a planned 36,778 square foot retail center. The proposed annexation is located between Cotton Lane and 171st Drive, south of Peoria Avenue. The center is anticipated to include three restaurant PADs, a convenience store and gas station, shops and a major retail site. The assumptions regarding construction costs, taxable sales per square foot, and average wages are based on published sources and are intended as a general estimate of the possible fiscal impacts of this project. The point of this exercise is to frame what this type of user could bring to the city in terms of the number and quality of jobs as well as the fiscal impacts. Note that there are often tradeoffs between high quality jobs and revenue generation at the city level. Project Assumptions Figure 1 below shows the square feet by type of use and the assumptions regarding taxable sales and leases. The total number of square feet, and the breakdown by type of use, is consistent with the site plan submitted by the developer. Figure 2 presents the results for 36,778 square feet of retail and restaurant space 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 fiscal impact does not include any additional street lane miles taken into the city for maintenance since Cotton Lane is a county road and Peoria Avenue is in the City of Surprise. FIGURE 1 DEVELOPMENT ASSUMPTIONS FIGURE 2 Square Percent Annual Percent Building Type Feet/Units Taxable Retail Lease Leased Total 36,778 Restaurant 7,378 100% na 0% Convenience Store 5,000 100% na 0% Gas Station na 0% na 0% Major Retail 22,000 100% $15.81 100% Retail/Services (Shops A) 2,400 50% $15.81 100% Sources: Lease rates - Colliers Q3 2021 Retail Market Reports; Construction cost - Gordian Square Foot Costs, 2022. 2 IMPACTS OF POTENTIAL COTTON AND PEORIA RETAIL CENTER • Capital investment is represented by building construction costs estimated at $5.6 million, although given the rapid increases in construction material and labor costs, this should be viewed as an order of magnitude estimate. Construction activity results in one-time sales taxes for the city as well as on- going property taxes. • 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, these jobs can translate into taxable spending and property ownership. Typical retail and restaurant operations create a sizeable number of jobs, but at lower wage levels. It is estimated that the proposed retail center could support about 105 jobs at an average wage of $32,700. 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) reflect rates for commercial development in West Glendale. One-time fees also include estimated planning and permitting fees that are generally proportional to construction costs. Total one-time fees for Cotton and Peoria Retail Center are estimated at $260,000 (Figure 3). • The annual fiscal impacts represent the net value of these different types of uses to the city in terms of revenues less expenditures. These annual fiscal impacts are intended to be order of magnitude only. There are a variety of factors imbedded in the assumptions that will affect the magnitude of fiscal impacts for different types of uses including the level of capital investment and taxable sales. The proposed 36,778 square foot retail center that is anticipated for this site could result in an average net impact to the city of $230,000 per year, excluding one-time revenues. • The overall ranking compares the level of revenues versus expenditures for the proposed retail center to other land uses such as light industrial, warehouse and residential development that have been included in other recent annexation impact studies. The Cotton and Peoria Retail Center annexation could produce a relatively strong net impact in terms of the ratio of revenues to expenditures, given the anticipated level of taxable sales, however the magnitude of the impact is moderate given the overall size of the proposed development. Project Square Feet Building Construction (millions) Jobs Average Wage One-Time Fees* Annual Revenues less Expenditures Overall Ranking Cotton & Peoria Retail Center 36,778 $5.6 105 $32,630 $260,000 $230,000 High *One Time Fees include construction sales tax, estimated planning and permitting fees and development impact fees in West Glendale. 3 FIGURE 3 ANNUAL FISCAL IMPACTS FOR COTTON AND PEORIA RETAIL CENTER Summary These results frame the possibilities for how the Cotton and Peoria Retail Center annexation could impact the city from a fiscal perspective, based on the types of uses described in the site plan. This project is generally smaller in scale than some of the recent projects in this area, but the level of potential taxable sales results in revenues significantly exceeding expenditures. The annual net impacts (revenues less expenditures) are estimated at $230,000 per year, including $310,000 in annual revenues and $80,000 in annual expenditures. Estimated annual revenues exceed expenditures by 290 percent. The actual fiscal impacts may vary depending on the assessed value, taxable sales and leases, and other project details. $310,000 $80,000 $230,000 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 Revenues Expenditures Net Benefit