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RANGE OF FISCAL IMPACTS FOR
ANNEXATION
MAY 2022
11209 N. Tatum Boulevard, Suite 225 * Phoenix, AZ 85028 * 602-765-2400 tel * 602-765-2407 fax
NEC 173RD AVENUE AND OLIVE AVENUE
1
Introduction
The following summary presents the fiscal impacts of annexation for the
which includes approximately 67 gross acres and is anticipated to develop as a combination of
manufacturing, assembly, warehousing and logistics uses. The
property is located just west of the Loop 303. Detail on specific users is not yet known; therefore this
analysis presents a range of possible impacts based on hypothetical scenarios for the types of light
industrial uses 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 simply intended to
show a general range of possible economic and fiscal impacts.
Another potential use for light industrial space is e-commerce, specifically fulfillment centers that
represent point of sale for shipments. These types of projects are highly competitive and they can yield a
significant amount of sales tax revenue. However, since there are a limited number of these projects
looking at the Phoenix metro area, this type of potential use was not explicitly considered in the analysis.
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
Project Assumptions
The table below presents the results for 1 million square feet of each user type 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.
includes 515,000 square feet of warehousing and 515,000 square feet of manufacturing for a total of 1.03
million square feet in two buildings. The total number of square feet is consistent with the parcel size and
the proposed site plan. It is assumed that all of the space would be leased. The impact results do not
assume any new lane miles of streets would be added to the city for on-going maintenance.
Ave.,
NEC 173rd Avenue and Olive Avenue
NEC 173rd Avenue and Olive
173rd Avenue and Olive Avenue property.
NEC
This is followed by the "blended average" for NEC 173rd Avenue and Olive Avenue that
2
AND NEC 173RD AVENUE AND OLIVE AVENUE BLENDED AVERAGE
•
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 operations typically have higher capital investment than other uses based on
the nature of their process and the corresponding equipment requirements, however given recent
changes in Arizona’s depreciation rates for business personal property, large capital investments in
equipment no longer have a significant impact on property tax revenues. The leased warehouse in
this analysis has a slightly lower projected construction cost than manufacturing and less equipment.
The empty shell represents the low end with an unfinished building and no equipment, and is a
temporary condition.
at $141.0 million for 1.03 million square feet of light 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 with generally lower average wages than manufacturing.
Manufacturing represents a relatively higher job density, among light industrial uses, with above
average wages. However manufacturing wages vary significantly based on the type of product being
produced. It is estimated that the light industrial development in
could support about 635 jobs at an average wage of $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 light 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 NEC 173rd Avenue and Olive Avenue are
estimated at $4.2 million. This number does not include any streets DIF fees or the value of any
infrastructure that may be constructed by the developer.
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
$78.8
$0.0
0
$0
$2,467,000
$40,000
Low
Leased Warehouse
1,000,000
$133.9
$22.0
400
$43,929
$3,988,000
$200,000
Medium
Leased Manufacturing
1,000,000
$139.5
$100.0
833
$53,177
$4,143,000
$260,000
Medium
NEC 173rd Ave and Olive Ave
Blended Average (50%
warehouse, 50% manufacturing)
1,030,880
$141.0
$62.9
635
$48,553
$4,191,000
$240,000
Medium
*One Time Fees include construction sales tax, estimated planning and permitting fees and development impact fees in West Glendale.
COMPARATIVE IMPACTS OF POTENTIAL LIGHT INDUSTRIAL USERS
The total construction cost for NEC173rd Avenue and Olive Avenue is estimated
NEC 173rd Avenue and Olive Ave
3
•
The annual fiscal impacts represent the net value of these different types of light industrial users 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 embedded in the assumptions
that will affect the magnitude of fiscal impacts for individual users, including the level of capital
investment, amount of new street lane miles added, lease rates and the presence of taxable sales.
The combination of light industrial users that are anticipated for NEC 173rd Avenue and Olive
Ave could result in an annual net impact to the city of $240,000 per year, excluding one-time
revenues.
•
The overall rankings show low impacts for the shell building, medium impacts for leased warehouse,
and medium impacts for leased manufacturing, given the reduced importance of equipment
investment relative to property taxes. These three scenarios represent the typical possibilities for
light industrial land in Glendale. The combination of uses proposed for NEC 173rd Avenue and Olive
Ave could produce a medium net impact, given the range of possibilities for light industrial uses and
the size of the project.
ANNUAL FISCAL IMPACTS OF STANDARD LIGHT INDUSTRIAL USERS
AND NEC 173RD AVENUE AND OLIVE AVENUE ANNEXATION
Summary
These results frame the range of potential impacts that the NEC 173rd Avenue and Olive Avenue
annexation could have on the city budget. 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 NEC 173rd
Avenue and Olive Avenue are estimated at $240,000 per year including $370,000 in annual revenues and
$130,000 in annual expenditures, excluding one-time taxes and fees. The magnitude of the impacts is
$50,000
$310,000
$410,000
$370,000
$10,000
$110,000
$150,000
$130,000
$40,000
$200,000
$260,000
$240,000
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
$1,000,000
1M SF Shell
1M SF Warehouse
1M SF Manufacturing
1.03M SF NEC 173rd
and Olive Aves.
Revenues
Expenditures
Net Benefit
NEC 173rd and Olive
Blended Avg
4
proportional to the size of the development and relatively modest, although estimated annual revenues
exceed expenditures by 185 percent.
This analysis is intended to illustrate the range of possible impacts for development in the NEC 173rd
Avenue and Olive Avenue annexation.The actual fiscal impacts will depend on the mix of final users as
well as other factors such as construction cost and building value, lease rates and other project details.