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HomeMy WebLinkAboutZMA202100001 Correspondence 2021-07-16PREPARED FOR Breeden Investment Properties 4/16/2021 Economic & Fiscal Impact Proposed Willow Glen Residential Development in Albemarle County, Virginia 1I1I1I 11111CH M U RA Contents 1. BACKGROUND AND SUMMARY ...........................1 2. ECONOMIC IMPACT OF WILLOW GLEN..............2 2.1. ONE-TIME ECONOMIC IMPACT OF CONSTRUCTION SPENDING................................................................ 2 2.2. ONGOING ECONOMIC IMPACT OF OPERATIONS .... 2 3. COUNTY FISCAL IMPACT.....................................4 3.1. ONE-TIME TAX AND FEE REVENUE......................4 3.2. RECURRING TAX REVENUE FROM WILLOW GLEN OPERATIONS............................................................ 5 3.4. COUNTY COSTS ASSOCIATED WITH WILLOW GLEN ........6 APPENDIX: IMPACT ANALYSIS GLOSSARY ............ 8 1. Background and Summary Breeden Investment Properties is in the process of developing the Willow Glen project in Albemarle County, Virginia. This project is being built on a 24-acre site near the Charlottesville Albemarle Airport. The plan for Willow Glen includes multi -family residential units, a parking garage, and storage units.' The site was previously considered for the development of mixed housing types which included a commercial component. In 2018, Chmura prepared an economic and fiscal impact study for the commercial component of the development. Breeden Investment Properties is now involved with the development of Willow Glen and needs to demonstrate to county leaders the economic and fiscal impact of the multi -family housing project in the county.2 Chmura Economics & Analytics (Chmura) was contracted to evaluate the economic and fiscal impacts of this multi -family residential development at Willow Glen? The economic impact of Willow Glen on the local economy occurs in two phases. The first takes place during the development and construction period of the project, which is expected to start in spring 2022 and last for two years. The second phase is the ongoing operations of Willow Glen, such as apartment rental operations, which are expected to commence in 2024. The first full year of operations for the project will be in 2025. For both phases, the direct, indirect, and induced impacts4 in spending and job creation are estimated through Chmura's proprietary JobSEQO economic impact model. In addition, tax revenue and county costs are estimated for Albemarle County. Chmura concludes that the Willow Glen development will generate a positive economic impact in the county. The project will include 308 apartments, plus parking and storage units. The preliminary estimate of the total project cost is $45.7 million in 2021 dollars. From 2022 to 2024, the construction of Willow Glen is expected to inject $10.4 million (direct, indirect, and induced) into the Albemarle County economy and support 67 jobs per year. Post construction, the total economic impact of Willow Glen residential operations is estimated to be $6.7 million that will support 11 jobs in the county per year from 2025 onward. From 2025 onward, the Willow Glen development will generate $992,584 in annual tax revenue for Albemarle County, including real estate, personal property, and other taxes. The estimated annual county cost to provide services to Willow Glen is $908,850 from 2025 onward, with major cost items being education and public safety. The net fiscal impact of the Willow Glen development will be positive for Albemarle County. ' ' There are existing single-family homes in Willow Glen, and those are not included in this study. 2 The study area is defined as Albemarle County. ' Chmura provides economic software, consulting, and data so our clients can make informed decisions that benefit their communities. Our PhD economists, data scientists, and strategic planners guide clients through their local labor market. Over the past 22 years, we have served hundreds of clients nationwide with our thoroughness, accuracy, and objectivity. 4 Direct impact is defined as the economic activity generated by the project under consideration. Indirect impact is secondary economic activity generated by the project due to suppliers to the development, construction, or ongoing operations. Induced impact is economic activity generated when workers and their suppliers spend their income at retail stores, restaurants, and professional offices. I 1 r'r © Chmura Economics & Analytics, 2021 i C H M U RA Richmond, VA - Cleveland, OH - Dallas, TX - ehmuraeeon.0om 2. Economic Impact of Willow Glen 2.1. One -Time Economic Impact of Construction Spending The preliminary plan for the Willow Glen residential component features 308 apartments; this includes one -bedroom, two -bedroom, and three -bedroom units. There will be ten storage units and 579 parking spaces on the premises, with 27 of those parking spaces being private garages. The parking garage and storage units will generate revenue for Willow Glen, in addition to the apartment rentals. Construction on the Willow Glen residential units will create jobs in construction and related industries in Albemarle County. The preliminary estimate of the total project cost is $45.7 million in 2021 dollars 5 If the plan is approved, the project will commence in spring 2022 and last for two years. Operations are expected to start in 2024, and the first full year of operations will be in 2025. Not every requirement for construction and operation of Willow Glen is available in Albemarle County; therefore, some products and services will be purchased from firms located outside the county. Chmura used information from JobsEQ to estimate the percentage of project spending that is expected to go to firms within Albemarle County. Table 2.1 presents the estimated one-time economic impact from construction activities associated with the Willow Glen residential development in Albemarle County. From 2022 to 2024, it is estimated that development and construction will generate a cumulative $24.8 million in direct economic impact in the county. During this initial phase, 150 cumulative jobs will be created —mostly in the construction industry.6 The cumulative indirect impact in Albemarle County is estimated to be $3.2 Table 2.1: One -Time Economic Impact of Construction in Albemarle County (2022-2024) Cumulative (2022-24) Annual Average (2022-24) Spending ($Million) Employment Spending ($Million) Employment Note: Numbers may not sum due to rounding. Source: JobsEQ by Chmura $24.8 $3.2 150 23 $8.3 $1.1 50 8 $3.1 $31.1 27 200 $1.0 $10.4 9 67 million and can support 23 cumulative jobs during the development and construction phase. Beneficiaries will be firms providing services such as site preparation and truck transportation. The cumulative induced impact is estimated to produce $3.1 million in spending that can support 27 cumulative jobs in the county during this same period. The induced jobs are concentrated in consumer service -related industries such as restaurants, healthcare, and retail stores. On an annual average basis, the construction of the residential development of Willow Glen is expected to inject $10.4 million (direct, indirect, and induced) into the Albemarle County economy and support 67 jobs per year from 2022 to 2024. 2.2. Ongoing Economic Impact of Operations Sustained economic impact of the Willow Glen residential development will mainly come from apartment rental operations. Revenue will also come from the parking and storage unit rentals. The direct impact from operations is the expected total revenue of those components. Breeden Investment Properties provided information on available space within the development and corresponding monthly rental rates. The development will include 308 Table 2.2: Economic Impact of Willow Glen Residential Operations in Albemarle Count 2025 Direct Spending ($Million) $6.0 $0.6 $0.1 $6.7 Employment Note: Numbers may not sum due to rounding. Source: JobsEQ by Chmura s Source: Breeden Investment Properties. The number of cumulative jobs refers to the number of workers multiplied by the number of years they will be employed. For example, one person employed for two years is equal to two cumulative jobs. Two persons employed for one year is also equal to two cumulative jobs. The jobs estimated in this report include both full-time and part-time jobs. In estimating the direct employment, Chmura used an average annual wage of $41,000 for the construction industry. © Chmura Economics & Analytic$, 2021 ( C H M U RA Richmond, VA - Cleveland, OH - Dallas, TX - ehmuraeeon.eom apartments, 579 parking spaces, and 10 storage units. The monthly rental rate ranges from $1,400 for a one -bedroom apartment to $1,900 for a three -bedroom apartment. For parking spaces, 27 will be private garages which cost $140 per space. The remaining parking spaces are surface parking spaces and are free of charge to residents. The monthly rent for a storage unit will be $60 per unit.? Assuming 99% occupancy for apartments, parking, and storage units, Chmura estimated that the annual revenue of apartment operations will be $6.0 million (in nominal dollars) in 2025. Based on the JobsEQ impact model, it is projected that apartment operations will require six employees, with an average wage estimated at $45,505 in 2025, plus benefits valued at 30% of the average wage. Operations of the Willow Glen residential development will provide benefits throughout Albemarle County. An additional indirect impact of $0.6 million and four jobs will benefit county businesses that support Willow Glen operations. Examples are local contractors in landscaping, repair and maintenance, and possibly marketing 8 The induced impact is estimated to be $0.1 million that can support one job in the county. The total economic impact of Willow Glen residential operations is estimated to be $6.7 million that supports 11 jobs in the county per year. 7 Source: Breeden Investment Properties. a If the apartment complex hires its ovm maintenance staff, any maintenance employees are counted as direct employment. © Chmura Economics & Analytic$, 2021 i C H M U RA Richmond, VA - Cleveland, OH - Dallas, TX - ehmuraeeon.eom 3. County Fiscal Impact Development of the Willow Glen residential units will also produce revenue for the Albemarle County government. During construction, the county government can receive revenue from business, professional, and occupational license (BPOL) taxes; building permit fees; and the recordation tax. For ongoing operations, major local revenue sources will come from the following: real estate, tangible (personal) property, and BPOL taxes. Additional tax revenue will come from residents spending in the county. In order to be conservative, only revenue from the direct impact was estimated.9 3.1. One -Time Tax and Fee Revenue During the initial phase (2022 through 2024), Albemarle County is expected to benefit from BPOL taxes and building permit fees. In addition, the county will also collect a one-time recordation tax upon the competition of the project10 (Table 3.1). Willow Glen construction spending is subject to the county BPOL tax. In 2020, Albemarle County's BPOL tax rate for contractors is $0.16 per $100 of gross receipts.11 Consequently, the cumulative BPOL tax for the county is estimated to be $39,750 from 2022 through 2024. Table 3.1: County Tax Revenue from Construction Spending Building Permit Fees $182,706 BPOL $39,750 Estimated County Recordation Tax $47,098 Total $269,554 Note: Numbers may not sum due to rounding. The county will also receive a one-time building permit fee based on Source: Chmura the size of the development. The fee is $0.53 per square foot for new residential construction.12 Based on the average apartment size, total square footage of the development is over 340,000 square feet. Consequently, the one-time building permit fee is estimated to be $182,706 for Albemarle County. For real estate transactions, Albemarle County collects a recordation tax based on the total transaction. The current tax rate is 8.3 cents per $100 of the transaction amount.13 The estimated county recordation tax will be $47,098 in 2024. Combined, the one-time tax and fee revenues from the Willow Glen development are estimated to be $269,554 from 2022 through 2024. B This approach is recommended by The Fiscal Impact Handbook. Source: Burchell, R.W. and Listokin, D. 1978. The Fiscal Impact Handbook: Estimating Local Costs and Revenues of Land Development. Center for Urban Policy Research. New Brunswick, NJ: Rutgers, The State University of New Jersey. This fiscal impact analysis does not estimate the incremental county revenue and costs, as information is not available regarding the number of residents in Willow Glen who would be moving from outside the county. 10 Since Willow Glen units are for rental only, there is no ongoing recordation tax. 11 Source: Albemarle County website, https://v w .albemarle.org/governmentffinancetbusiness-license-taxes/existing-businesses. 12 Source: Albemarle County Development Fees, at https://www.albemarle.org/governmenttcommunity-developmenVcommunitydevelopment-fees. 13 State of Virginia has its own recordation tax. Source: Virginia Local Tax Rates, 2018, prepared by Weldon Cooper Center for Public Service, University of Virginia. © Chmura Economics & Analytics, 2021 i C H M U RA Richmond, VA - Cleveland, OH - Dallas, TX - ehmuraeeon.00m 3.2. Recurring Tax Revenue from Willow Glen Operations From Willow Glen apartment operations, recurring revenue for Albemarle County will come from the following sources: BPOL, real estate, and personal property taxes. Additional tax revenue will come from residents spending in the county. Table 3.2 presents the estimated annual tax revenue from Willow Glen residential operations from 2025 onward. Albemarle County's BPOL tax is also applied to rental income for apartments, parking spaces, and storage units. As of 2021, the BPOL tax rate is $0.58 per $100 of gross receipts for financial and real estate businesses.14 As a result, the total BPOL tax is expected to be $34,674 in 2025. The Willow Glen residential development will expand the county's tax base and increase real estate tax for the county. The current real estate tax rate for Albemarle County is $0.854 per $100 of assessed value.15 Albemarle County assesses real estate at 100% of its fair market value. Based on data from Breeden Investment Properties, the construction cost of Willow Glen averages $148,469 per unit in 2021 dollars. However, the current assessed value of similar apartment properties in the county is higher than the construction cost.16 Based on Chmura research of the assessed value of similar apartment Table 3.2: Recurring Tax Revenues from Willow Glen (2025) BPOL $34,674 Real Estate Tax $679,757 Personal Property Tax $119,846 Consumer Utility Tax $14,784 Tax from Willow Glen Resident Spending $143,524 Total $992,584 Note: Numbers may not sum due to rounding Source: Chmura Table 3.3: Estimated Willow Glen Residents' Spending in Albemarle Count (Annual, 2025 Onward) Spending Items Amount Utility $0.7 Construction/Skilled Trade Retail Sales $0.4 $5.5 properties, and information from Breeden Investment Transportation $0.2 Properties, the assessed value of Willow Glen is assumed to Finance, Insurance, Real Estate be $237,880 per unit in 2021?' Further, the assessed value is $3.4 assumed to appreciate 1.7% per year from 2021 to 2025.11 As Education and Health $1.8 a result, the annual real estate tax is estimated to be $679,757 Leisure $1.4 in 2025 for the county. Other Services $2.2 Albemarle County can collect personal property tax from Total Spending in County $15.7 households in Willow Glen. The county's tangible personal property tax rate is $4.28 per $100 of assessed value.19 The Source: Chmura Economics & Analytics latest American Community Survey indicates that each household in Albemarle County had 1.9 vehicles.20 The household size in Willow Glen will be much smaller than the county average, and it is estimated that each household will have 1.2 vehicles. According to the latest county budget, the average assessed value is $7,538 per vehicle in Fiscal Year 2021.21 Based on that information, the annual personal property tax is valued at $119,846 in 2025. 10 Source: Albemarle County website, https://v w .albemarle.org/governmentffnancetbusiness-license-taxes/existing-businesses. 15 Source: Albemarle County Fiscal Year 2021 Adopted Budget, available at https://w .albemarle.orgtgovernment/budgevcurrent-budget. 18 The comparable properties Chmura researched are Archer at Brookhill Apartment, Stonefeld Commons, and Arden Place in Albemarle County. Those communities include 200-350 units of 1-3 bedroom apartments, are located in a similar geographical area, and were completed in recent years with similar amenities to the proposed Willow Glen development. 11 Source: Albemarle County GIS Web, at: https://gisweb.albemarle.org/gpv_51/Vewer.aspx# 18 This is the average annual growth rate of the consumer price index (CPI) from 2010 to 2020. 18 Source: Albemarle County Fiscal Year 2021 Adopted Budget, available at https://w .albemarle.org/government/budgettcurrent-budget. 30 Source: Census American Community Survey, available at https:/Aw .census.gov/acsAw idata/data-tables-and-tools/data-profiles/. 31 Source: Albemarle County Fiscal Year 2021 Adopted Budget, available at https://w .albemarle.org/government/budgettcurrent-budget. (I 1 r E l © Chmura Economics & Analytics, 2021 1 1 1 � � i C H M U RA Richmond, VA - Cleveland, OH - Dallas, TX - ehmuraeeon.00m Albemarle County collects a consumer utility tax on the electricity usage by all utility customers in the county. The monthly tax rate for residential customers is 0.031284 per kilowatt hour (kwh), but the tax is capped at $4.00 per month.22 The annual consumer utility tax is estimated to be $14,784 in 2025. Finally, the residents of Willow Glen will spend a large percentage of their household incomes in Albemarle County, benefiting county businesses such as retail shops, restaurants, and other services establishments. Data from Breeden Investment Company indicate that average household income in Willow Glen is expected to range from $80,000 to $100,000. From this amount, Chmura first excludes part of income that will be used for savings, investment, and tax payments. Second, Chmura excludes household expenditure that will be spent outside the county. The estimated annual residents spending in Albemarle County is estimated to be $15.7 million in 2025 (Table 3.3). The annual county tax revenue from residents' spending, including as sales, meals, and BPOL taxes, can reach $143,524 in 2025. Overall, annual county taxes derived from Willow Glen apartment are estimated to be $992,584 in 2025 when the project is completed. The tax revenue for future years may be different due to changes in tax rates and assessment methods. 3.4. County Costs Associated with Willow Glen While benefiting from revenue collected from Willow Glen multi -family development, Albemarle County will also incur costs to provide services to workers and residents located at the development. The cost estimated in this section is only related to the 308-unit apartment complex, and does not include existing single-family homes 23 Excluding educational costs, Chmura utilizes a per -capita approach to estimate the county costs related to providing services to Willow Glen. Only county costs paid by local revenue sources are estimated and the analysis excludes expenditures paid by state or federal revenue sources.24 Some types of county expenditures —such as health and social services, and parks and recreation —are related to providing services to residents. Chmura allocates 100% of those costs to county residents For county cost categories related to general administration Table 3.4: Estimated County Cost for Willow Glen (Annual, 2025 Onward) Cost Items Amount General Administration Public Safety Public Works $69,427 $149,381 $20,035 public safety, public works, and debt service, both residents and workers Health & Welfare $105,202 will utilize those services. Chmura allocates total county expenses in Education $381,471 those categories based on the current number of employees and residents in the county. Using this approach, based on the Fiscal Year Parks, Recreation & Culture $40,565 (FY) 2021 adopted budget for Albemarle County 25 annual county costs Community Development $49,106 are estimated to be $575 per worker, and $921 per resident in FY2021, excluding education26 Debt Service $93,663 Total County Cost $908,850 Since educational costs are sensitive to the number of school aged children in Willow Glen, they are estimated separately. The county Source: Chmura Economics & Anaiytics budget indicates that the total county cost for education is $134.1 million in FY2021, serving 19,109 estimated school -aged children.27 The average county educational cost is $7,019 per child in FY2021. 22 Source: Virginia Local Tax Rates, 2018, prepared by Weldon Cooper Center for Public Service, University of Virginia. 33 There are existing single-family homes in Willow Glen, and those are not included in this study. 34 Chmura's analysis of the FY2021 budget shows that local source revenues account for 89.3% of general fund revenues for Albemarle County. u Source: Albemarle County Fiscal Year 2021 Adopted Budget, available at hftps:/Ae.albemarle.org/governmenttbudget/current-budget. 38 Fiscal Year 2021 lasts from July 1, 2020 through June 30, 2021. 37 Source: Chmura estimate based on data from the U.S. Census Bureau's American Community Survey. 11.11 © Chmura Economics & Analytic$, 2021 i C H M U RA Richmond, VA - Cleveland, OH - Dallas, TX - ehmuraeeon.eom When completed, Willow Glen will have six workers and 521 residents. The number of school -aged children in the development is estimated to be 50, averaging 0.17 per household. Allowing a cost appreciation of 1.7% per year,28 the total county cost to provide services to Willow Glen is estimated to be $908,850 in 2025.E Education is the largest component of county costs, estimated at $381.471 in 2025. Public safety, including fire, rescue, and police protection, is the second largest county cost, estimated to be $149,381 in 2025.30 There will also be county costs in the areas of health and welfare; debt service; parks, recreation and culture; public works; and general administration. Comparing the total county costs of $908,850 with county revenue of $992,584 in 2025, the net fiscal impact of the Willow Glen development will be positive for Albemarle County. 28 This is the average growth rate of the consumer price index (CPI) from 2010 to 2020. 2' The estimate of tax revenue and costs are those associated with Willow Glen, and they are not the incremental revenue and cost for the county. While it can be argued that some of the Willow Glen residents may come from within Albemarle County, and they do not incur additional costs, Chmura does not have data to estimate that figure. In addition, if such an approach is taken, the tax revenue estimated in Section 3.2 needs to be adjusted as well. 30 Similar to the county revenue estimate, only costs related to direct employment are estimated here. As a result, Chmura's approach is to only estimate tax revenue and cost related to Willow Glen, not the incremental revenue and cost. © Chmura Economics & Analytics, 2021 i C H M U RA Richmond, VA - Cleveland, OH - Dallas, TX - ehmuraeeon.eom Appendix: Impact Analysis Glossary IMPLAN Professional —an economic impact assessment modeling system. It allows the user to build economic models to estimate the impacts of economic changes in states, counties, or communities. It was created in the 1970s by the Forestry Service and is widely used by economists to estimate the impact of specific events on the overall economy. Input -Output Analysis —an examination of business -business and business -consumer economic relationships capturing all monetary transactions in a given period, allowing one to calculate the effects of a change in an economic activity on the entire economy (impact analysis). Direct Impact —economic activity generated by a project or operation. For construction, this represents activity of the contractor; for operations, this represents activity by tenants of the property. Overhead —construction inputs not provided by the contractor. Indirect Impact —secondary economic activity that is generated by a project or operation. An example might be a new office building generating demand for parking garages. Induced (Household) Impact —economic activity generated by household income resulting from direct and indirect impacts. Ripple Effect —the sum of induced and indirect impacts. In some projects, it is more appropriate to report ripple effects than indirect and induced impacts separately. Multiplier —the cumulative impacts of a unit change in economic activity on the entire economy. © Chmura Economics & Analytics, 2021 11 1 � � i C H M U RA Richmond, VA - Cleveland, OH - Dallas, TX - ehmuraeeon.eom