HomeMy WebLinkAboutEconomic Impact Report-Umbaugh
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H.J.UmbaugI1 & Associates
20 East 91st Street. Sll'te 100
P. O. Box 40458
Indianapolis. IN 46240.0458
P!1one: 317.844.7288
Fax: 317.848.3604
Website: wvvw.hju.com
It's all abollt experiencL'.
September 15, 2005
Heritage RDG, LLC
P.O. Box 1627
Grand Rapids, MI 49501-1627
At the request of Heritage RDG, LLC, we have prepared this special purpose report regarding the
economic impact of the proposed Michigan Road retail development. The attached schedules (listed
below) present unaudited and limited financial information for the purpose of discussion and
consideration by Heritage RDG, LLC. and the impacted local governments, namely Hamilton
County and the Town of Zionsville. The use of these schedules should be restricted to this purpose
as the information is subject to future revision and further reports.
Page(s)
2-5 General Comments
6 Estimated Annual Tax Increment Revenue
7 Estimated Number of Employees and Estimated Total Annual Wages
8 Estimated Annual COlT Revenue
9 Estimated Annual Sales Tax and Food and Beverage Tax Revenue
The schedules are based upon information, assumptions and estimates provided to and gathered from
Heritage RDG, LLC, and various sources of data including the Hamilton County and Boone County
Auditor's and Assessor's offices. In the preparation of these schedules, assumptions were made
regarding certain future events. As is the case with such assumptions regarding future events and
transactions, some or all may not occur as expected and the resulting differences could be material.
We have not examined the underlying assumptions nor have we audited or reviewed the historical
data. Consequently, we express no opinion or provide any form of assurance thereon, nor do we
have a responsibility to prepare subsequent reports.
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HERITAGERDG, LLC
GENERAL COMMENTS
This special purpose report has been prepared to illustrate the potential economic impact of the
proposed Michigan Road retail development (the "Development"), based upon assumptions and
estimates provided by representatives of Heritage RDG, LLC (the "Developer") and data for
comparable developments. The following comments and attached schedules have been compiled
to provide an estimate of the state and local benefits from the proposed Development. In
addition to the new jobs and wages, the local tax revenues to be considered in this analysis
include annual real property taxes, Tax Increment (defined herein), state sales tax revenue, food
and beverage tax revenue, and County Option Income Tax ("COlT") revenue. Actual results
achieved will vary from these estimates and these variances may be material.
The Developer envisions that the proposed Development will total approximately 280,000 square
feet located along the west side of Michigan Road north of 106th Street and South of Bennett
Parkway. A portion of the site of the proposed Development is located in the Town of Zionsville
within Boone County, and the other portion is located in Clay Township within Hamilton
County. The City of Carmel has proposed a large annexation in southwest Clay Township which
includes the proposed Development. This report is based on Clay Township's current situation.
The proposed Development includes a 200,000 square foot "big box" store with a high quality
exterior, two strip shopping centers which will house multiple stores, and several out lots for
restaurants and possibly a branch bank or two. The Developer is proposing to construct various
on-site improvements such as parking lots, landscaping, and two interior roads to help with
traffic flow from Bennett Parkway and Michigan Road. The Developer is not requesting any
additional incentive or funding from the local government in connection with the proposed
Development.
Estimated Annual Tax Increment Revenues- page 6
This schedule summarizes the estimated annual. Tax Increment that could be generated from the
Development. The site of the proposed Development happens to lie within two different
economic development areas: a portion of the site is located within the Zionsville Economic
Development Area in Boone County (the "Zionsville Area"), and the other portion appears to be
located within the u.s. 421 and 96th Street Economic Development Area in Hamilton County
(the "Hamilton County Area") (together referred to herein as the "TIP Areas"). Each Economic
Development Area was also designated a tax allocation area in order to capture Tax Increment
for the purpose of financing the cost of expanding public infrastructure.
Tax Increment Financing" or "TIP" can be used to finance improvements located in, serving, or
benefiting an economic development area. Tax Increment consists of all real property tax
proceeds attributable to the assessed valuation within an allocation area as of the assessment date
in excess of the base assessed value (as defined in IC 36-7-14-39(a), multiplied by the gross
property tax rate (per $100 of assessed value), reduced by the Additional Credit provided for in
IC 36-7-14-39.5(c) (referred to throughout this report as the "Tax Increment".) The Additional
Credit is equal to the State Property Tax Replacement Credit (PTRC). The base assessed value
means the net assessed value of all the property in an allocation area as finally determined for the
March 1 assessment date immediately preceding the effective date of a declaratory resolution
adopted pursuant to IC 36-7-14-39 establishing an allocation area.
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HERITAGE RDG, LLC
GENERAL COMMENTS
Estimated Annual Tax Increment Revenues - page 6 (Cont'd)
Only the real property incremental assessed value generated by the proposed new Development
would be captured as Tax Increment. The property taxes attributable to the base values of the
existing TIF Areas, which were in place prior to the creation of the TIF Areas, would continue to
be distributed to the overlapping taxing units (i.e., the school, town, county, etc.).
Based on the assessed value of comparable developments in Hamilton County, the incremental
assessed value for the portion of the proposed new Development located within the Zionsville
Area is estimated to be approximately $10,910,000. The incremental assessed value is
multiplied by the 2004 payable 2005 Zionsville gross tax rate of$2.6206 per $100 assessed value
less the Additional Credit equal to the PTRC of .157008, to calculate the estimated Tax
Increment. It is estimated that the Zionsville Area would receive approximately $241,000 of
estimated annual Tax Increment from that portion of the proposed Development located within
the Zionsville Area.
Based on the assessed value of comparable developments in Hamilton County, the incremental
assessed value for the portion of the proposed new Development located within the Hamilton
County Area is estimated to be approximately $2,640,000. The incremental assessed value is
multiplied by the 2004 payable 2005 Clay Township gross tax rate of $1.6740 per $100 assessed
value less the Additional Credit equal to the PTRC of .281200, to calculate the estimated Tax
Increment. It is estimated that the Hamilton County Area would receive approximately $31,770
of estimated annual Tax Increment from that portion of the proposed Development located
within the Hamilton County Area.
The tax estimates provided in this report are dependent upon the aforementioned assumptions
and their materialization. Actual occurrences and events are likely to differ from the
assumptions presented, and these differences could cause the actual Tax Increment and other
taxes generated by the new Development to differ significantly from the estimates. These
potential differences include, but are not limited to, the following: (1) the types of businesses
that actually locate in the new Development, and the size and quality of the buildings and tenant
finishes; (2) the length of time over which the Development is developed; (3) the actual property
tax rate growth of the underlying taxing units (this Report assumes constant tax rates based on
the current tax rates); and (4) the Indiana General Assembly, the courts, the Department of Local
Government Finance or other administrative agencies could enact new laws or regulations or
interpret, alter, or modify the laws or regulations governing the calculation, collection, definition
or distribution of Tax Increment and/or property taxes.
Estimated Number of Emplovees and Total Annual Wages - Page 7
- -
In order to convert square footage by development into employees and payroll, the following
assumptions were used. The range of employment density is intended to account for variations
based on the specific retail tenants that will ultimately occupy the space. Average wages per
employee are based on information from County Business patterns for the Indianapolis metro
area.
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HERITAGE RDG, LLC
GENERAL COMMENTS
Estimated Number of Employees and Total Annual Wages - Page 7 (Cont'd)
Based on comparable developments, this Report assumes the following number of employees for
the following retail uses: (1) Neighborhood Retail (grocery stores and drug stores): a minimum
of one employee for every 425 square feet and a maximum of one employee for every 400
square feet; average wage per employee is $17,424; (2) Retail Outlots (restaurants and video
stores): a minimum of one employee for every 100 square feet and a maximum of one employee
for every 80 square feet; average wage per employee is $11,443; (3) Destination Retail (home
centers and department stores): a minimum of one employee for every 700 square feet and a
maximum of one employee for every 550 square feet; average wage per employee is $19,843.
Based on the assumptions above the Development is anticipated to create approximately 560 to
610 new jobs and wages of $9,952,000 to $10,870,000 in the Zionsville Area and 220 to 270
new jobs and wages of $2,517,000 to $3,091,000 in the Hamilton County Area.
The accuracy of the number of employees and annual wages estimates is dependent upon the
aforementioned assumptions and their materialization. Factors that may alter the assumptions
include, but are not limited to, the following: (1) the actual number of jobs created differs from
the estimated number of jobs; and (2) the type of jobs created and wage levels differ from those
assumed.
Estimated Annual COlT Revenue - Page 8
This schedule illustrates the potential income tax revenues that could be collected based upon the
total wages calculated on page 7. Both Boone County and Hamilton County currently impose
the County Option Income Tax (COlT) at 1 %.
Assuming 82% of the new employees located in Boone County reside in Boone County (based
on 2003 commuting patterns), the estimated income tax revenue generated in Boone County
could range from $81,610 to $89,130.
Assuming 77% of the new employees located in Hamilton County reside in Hamilton County
(based on 2003 commuting patterns), the estimated income tax revenue generated in Hamilton
County could range from $19,380 to $23,800.
The accuracy of the income tax estimates is dependent upon the aforementioned assumptions and
their materialization. Factors that may alter the assumptions include, but are not limited to, the
following: (1) the actual number of jobs created differs from the estimated number of jobs; (2)
the type of jobs created and wage levels differ from those assumed; and (3) the number of
County residents employed in the Development differs from the assumed resident employees.
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HERITAGE RDG, LLC
GENERAL COMMENTS
Estimated Annual Sales Tax and Food and Beverage Tax Revenue - Page 9
Sales taxes from direct retail sales are based on estimates of sales per square foot for
representative tenants in each of the retail components from Dollars and Cents of Shopping
Centers, published by the Urban Land Institute. This Report assumes that Neighborhood Retail
has sales of $213 per square foot, Retail Outlots has sales of $368 per square foot and
Destination Retail has sales of $206 per square foot.
Based on the above assumptions, the Development could generate approximately $54,782,000 in
sales in the Zionsville Area and $8,096,000 in the Hamilton County Area. Based on the 6%
State sales tax rate, the State could generate approximately $3,287,000 of sales tax from the
Development in the Zionsville Area and $484,000 of sales tax from the Development in the
Hamilton County Area.
Both Boone County and Hamilton County have also imposed the Food & Beverage Tax at 1 %.
However, the Counties only retain 50% of the money collected while the remaining 50% is used
for the stadium/convention center financing. The Town of Zionsville has also recently adopted
the Food & Beverage Tax at 1 %. Zionsville will retain 100% of the money it collects. For the
purpose of this Report, it is assumed that the Food & Beverage Tax collected in the Zionsville
Area will be insignificant and the Food & Beverage Tax collected in the Hamilton County Area
could be approximately $40,000 annually.
As with the other illustrative tax revenue estimates, the accuracy of the annual sales tax and food
and beverage tax estimates is dependent upon the aforementioned assumptions and their
materialization. Factors that may alter the assumptions include, but are not limited to, the
following: (1) the types of business tenants that locate into the area and (2) success and related
sales revenues of those businesses.
Other Considerations
This study only addresses the potential direct effect upon local property taxes and income taxes
of the proposed Development. In many instances, each new job that is directly created leads to
the creation of other jobs and investment to support the new employer and new employees. This
is referred to as "spin-off' effect. The "spin-off' that results from the Development will be
dependent on the number and type of tenants that are attracted to locate there. This "spin-off'
could increase the actual tax revenues and impact beyond the levels shown in this report.
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HERITAGE RDG, LLC
Proposed Development
ESTIMATED ANNUAL TAX INCREMENT REVENUES
Building
Estimated
Sq.Ft.
Estimated
Assessed Value (1)
Zionsville Hamilton County
Large Retail 204,000 $8,160,000
Retail Center I 28,000 1,400,000
Retail Center II 27,000 1,350,000
Outlot 6,000 $630,000
Outlot 5,000 525,000
Outlot 5,000 525,000
Outlot 3,000 480,000
Outlot 3,000 480,000
Incremental Assessed Value $10,910,000 $2,640,000
Net Tax Rate $2.2091 (2) $1.2033 (3)
Estimated Tax Increment $241,020 $31,770
(1) Based on comparable developments within the area.
(2) Based on the 2005 gross tax rate of2.6206 less the Additional Credit equal
to the State PTRC of .157008 for the Town of Zionsville.
(3) Based on the 2005 gross tax rate of 1.6740 less the Additional Credit equal
to the State PTRC of .281200 for Clay Township.
(Subject to the comments in the attached letter
dated September 15, 2005 of Umbaugh.)
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HERITAGE RDG, LLC
Proposed Development
ESTIMATED NUMBER OF EMPLOYEES AND ANNUAL TOTAL WAGES
Zionsville Hamilton County
Minimum Maximum Minimum Maximum
Building Employees Total Wages Employees Total Wages Employees Total Wages Employees Total Wages
Large Retail 480 $8,364,000 510 $8,886,000
Retail Center I 40 794,000 50 992,000
Retail Center II 40 794,000 50 992,000
Outlot 60 $687,000 70 $801,000
Outlot 50 572,000 60 687,000
Outlot 50 572,000 60 687,000
Outlot 30 343,000 40 458,000
Outlot 30 343,000 40 458,000
Total 560 $9,952,000 610 $10,870,000 220 $2,517,000 270 $3,091,000
(Subject to the comments in the attached letter
dated September 15,2005 of Umbaugh.)
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HERITAGE RDG, LLC
Proposed Development
ESTIMATED ANNUAL COlT REVENUE
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Minimum
Total Wages
Estimated Total Wages (1)
$9,952,000
Percent of Employees
County Residents (2)
82%
Estimated Total Wages
$8,160,640
Times COlT Rate
1%
Estimated COlT Revenues
$81,610
Boone
County
Maximum
Total Wages
$10,870,000
82%
$8,913,400
1%
$89,130
(1) See page 7.
(2) Based on 2003 commuting patterns, information provided by the Indiana
Department of Revenue.
(Subject to the comments in the attached letter
dated September 15,2005 of Umbaugh.)
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Hamilton
County
Minimum Maximum
Total Wages Total Wages
$2,517,000
$3,091,000
77%
77%
$1,938,090
$2,380,070
1%
1%
$19,380
$23,800
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HERITAGE RDG, LLC
Proposed Development
ESTIMATED ANNUAL SALES AND FOOD AND BEVERAGE TAX REVENUE
Zionsville
Hamilton County
Building
Sales
per Square
Foot
Sales Tax
Revenue
Sales
per Square
Foot
Sales Tax
Revenue
Food &
Beverage Tax
Large Retail $43,452,000 $2,607,000
Retail Center I 5,768,000 346,000
Retail Center II 5,562,000 334,000
Outlot $2,208,000 $132,000 $22,000
Outlot 1,840,000 110,000 18,000
Outlot 1,840,000 110,000 18,000
Outlot 1,104,000 66,000 11,000
Outlot 1,104,000 66,000 11,000
Total $54,782,000 $3,287,000 $8,096,000 $484,000 $80,000
Hamilton County's portion $40,000
(Subject to the comments in the attached letter
dated September 15,2005 of Umbaugh.)
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