DRAFT REPORT. Boudreau Developments Ltd. Hole s Site - The Botanica: Fiscal Impact Analysis. December 18, 2012

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2 Boudreau Developments Ltd. Hole s Site - The Botanica: Fiscal Impact Analysis DRAFT REPORT December 18, Sun Life Place St. Edmonton, Alberta T5J 3H1 T F

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4 Contents 1. Introduction Study Area Scope of Analysis Study Limitations Structure of the Report Proposed Development: The Botanica Land Area Development Parameters Property Tax Revenues Municipal Operating Costs Capital Cost Impacts Alternate Development: General Commercial Land Area Development Parameters Property Tax Revenues Municipal Operating Costs Capital Cost Impacts Study Findings Conclusions... 18

5 1. Introduction It is the policy of the City of St. Albert to evaluate the financial impacts of proposed new development on the City s operations. 1 The fiscal impact analysis presented in this report examines the municipal fiscal impacts related to the proposed re-development of the south lot of the original Hole s Site in the City of St. Albert. Applications Management Consulting Ltd. was retained by Boudreau Developments Ltd. to undertake this analysis STUDY AREA The original Hole s Site in St. Albert is situated on the corner of Bellerose Drive and Boudreau Road. Occupying a total area of 4.28 hectares, the site generated $3.9 million of assessment in 2012 of which only $2.6 million was taxable. Of the taxable assessment, 53% or $1.37 million was assessed for commercial use with the remaining $1.23 million assessed as farm. Property tax revenues, for municipal purposes, amounted to $25,756 in The Hole s site is registered as three separate lots for intended re-development. Currently, the lots are all designated as Direct Control land use districts. There is increasing interest from prospective developers to re-develop these lands to include new commercial and multi-residential development. The developer, Boudreau Developments Ltd., is submitting a development application to the City to redevelop the south lot of the Hole s Site as shown in Figure 1. The south lot is the defined Study Area for this fiscal impact analysis. The development application is to request a change in the land use district for this parcel of land from Direct Control to a R4 land use district to allow for medium / high density residential development on this lot. The south lot occupies a gross area of 1.53 hectares. 1 City of St. Albert Municipal Development Plan Bylaw 15/2007, Sections 17.5 and Botanica: Fiscal Impact Analysis (December 2012) - Draft Report 1

6 Figure 1: Study Area: Hole s Site - South Lot 1.2. SCOPE OF ANALYSIS The purpose of the fiscal impact analysis presented in this report is to estimate the impacts of proposed development of the Study Area on the financial operations of the City of St. Albert, once development of the site is complete. This analysis does not consider or address the timing at which development may take place and the associated annual financial impacts over the course of development. Two development scenarios have been evaluated. The first scenario represents the developer s proposal to construct multi-family residential development on the site, under the proposed R4 Land Use District. The second scenario reflects the likely development of the lands for General Commercial use, assuming that the request to change the lands to a R4 Land Use District is rejected by the City. The analysis considers the assessment and tax revenues generated from the proposed re-development, as well as the net operating costs associated with providing municipal services to the new development. While the developers would be responsible for putting in most of the infrastructure required to service the area, the analysis includes anticipated capital and operating costs that would be incurred by the City to provide services to the Study Area. Botanica: Fiscal Impact Analysis (December 2012) - Draft Report 2

7 The assumptions incorporated into the fiscal impact analysis are based on the best information available at the time of completing the analysis. The assumptions and results of the fiscal impact analysis that has been undertaken serve as a starting point for further discussions and subsequent refinements to the analysis as more detail becomes available. Therefore, the assumptions that have been presented in this report should not be viewed as final or binding on either the City of St. Albert or the developer. The results presented in this report should not be viewed in isolation from other quantifiable or qualitative factors that may affect the desirability and type of future development for this site STUDY LIMITATIONS A number of limitations to the analysis exist, including the following: The results presented in this report are based on the best information available to date with respect to the proposed re-development of the Study Area. Once the proposed development is approved, adjustments to the analysis assumptions will likely be required as the parameters of development are further refined and the commencement date for development approaches. The analysis does not address the timing of development and the impact future development will have on property tax rates over time. For the purposes of conducting this analysis, the fiscal impacts are based on full development and current municipal property tax rates (2012 tax year). The municipal capital cost impacts to service development in the Study Area are based on information provided by affected City departments and assumptions used in previous fiscal impact analyses completed for the City. At this time, the information provided should be considered preliminary. Further work is required to ensure all capital costs that would be incurred by the City are appropriately incorporated into the analysis. The analysis does not include the City s future financial liabilities in maintaining any municipal capital assets (developer contributed and non-contributed) that are identified in this report. The lifecycle costs (e.g. rehabilitation, upgrades, replacement) associated with these capital projects extend beyond the development timeframe anticipated for the Study Area (5 years). The analysis is limited to an evaluation of impacts on municipal property tax rates. Other property tax rates levied by requisitioning authorities (e.g. education) are not anticipated to be impacted by the developments evaluated in this analysis STRUCTURE OF THE REPORT Following this section, the report includes the following sections: Proposed Development - The Botanica: This section documents the development parameters assuming that the Study Area is re-districted to permit Medium / High Residential Density development. Incremental cost impacts for providing municipal services to the proposed Botanica development are also discussed. Alternate Development - General Commercial: This section documents the development parameters of assumed General Commercial development and the municipal cost impacts of this type of development on municipal services. Study Findings: This section provides an overview of the fiscal impacts associated with developing the south lot of the Hole s Site to include multi-family residential development versus general commercial development. The results presented are based on the assumptions discussed in the report. Conclusions: This section provides an overview of the main conclusions of the report. Botanica: Fiscal Impact Analysis (December 2012) - Draft Report 3

8 2. Proposed Development: The Botanica This section provides an overview of the development parameters assumed for the multi-family residential development being proposed by Boudreau Developments Ltd., along with a discussion of the assumptions regarding assessment, net incremental operating costs, and capital costs impacts to the City. The proposed residential development is referred to as the Botanica LAND AREA The Study Area comprises 1.53 hectares. With the proposed Botanica development, the following land allocations have been assumed: Table 1: The Botanica - Land Area Allocations LAND AREA (HECTARES) BOTANICA (PROPOSED) % OF TOTAL LAND Residential % Parking / Driveway % Green Space % Total % Of the total land area, just over one-third (35%) of the land is allocated for residential development. Approximately 23% is allocated for surface parking and the driveway providing access to the South Lot from Bellerose Drive, with the remaining 43% of lands allocated for green space including the lands closest to the river. The fiscal impact analysis is concerned primarily with the development of net lands areas designated for residential use. This land use will have a direct impact on municipal expenditures and revenues DEVELOPMENT PARAMETERS The proposed Botanica development includes medium / high density residential development as permitted under a R4 Land Use District. The parameters of this development, at this stage of the planning process, are summarized below. PROPOSED DEVELOPMENT The developer proposes to construct two medium / high density residential complexes that would include apartment condominiums. For the purposes of this analysis, it has been assumed that a total of Botanica: Fiscal Impact Analysis (December 2012) - Draft Report 4

9 250 units would be developed. While specific target market groups have yet to be identified, the market for the purposes of this analysis is broadly defined to primarily comprise the adult (18+) population. The following figure shows the proposed site plan for the Botanica. Figure 2: The Botanica - Site Plan In addition to the surface parking shown in Figure 2, the Botanica development would include underground resident parking. Although the R4 Land Use District allows for limited commercial use on the lower levels of the residential buildings, this analysis assumes the buildings would only include residential use, and thus no commercial development has been included. ASSESSMENT To calculate the municipal property tax revenues that would be collected from the proposed Botanica development, projections of assessment are required. Total residential assessment is calculated by multiplying the number of projected residential units by the estimated average assessment value (i.e. market value) per unit. In the absence of any specific pricing assumptions for the residential units proposed in the Botanica development, the assessment figures assumed in the analysis have been derived based on the assessments of an existing comparable property in the City of St. Albert. While the City of St. Albert currently has no completed R4 developments upon which to draw some direct comparisons, the City did identify a lower-density residential building that shares some of the characteristics of the proposed Botanica development. The development selected as a comparable in this analysis is a recently constructed concrete and steel residential condominium building similarly Botanica: Fiscal Impact Analysis (December 2012) - Draft Report 5

10 located on the river. 2 Based on this development, the assessment for the residential units averages $325 per square foot. At this time, residential units in the Botanica are anticipated to range from 600 square feet to over 2,000 square feet with an estimated average unit size of 1,100 square feet. 3 Applying the average assessment figure of $325 per square foot, residential units in the Botanica are projected to average $357,500 per unit. In addition to the units, separately titled parking stalls will also generate assessment for the City. It is assumed that a typical unit will have 2 underground parking stalls. Based on information provided by the City, the average assessment is $15,000 per stall, for a total additional assessment of $30,000 per unit. Based on the above, the residential assessment is projected to average $387,500 per unit, A number of factors will affect the actual residential assessment values for the Botanica, including: specific housing types and features, quality of construction / finishing, location (building as well as individual units), and overall market conditions at the time of development. At full build-out, the Botanica is projected to generate a total residential assessment of $96,875,000 (based on 250 units) PROPERTY TAX REVENUES The Botanica development will generate taxable assessment that in turn generates municipal property tax revenues for the City of St. Albert. To calculate the revenues the City would receive once the development is fully built out, the City s 2012 municipal tax rates were used: 4 Residential: mills (General Municipal: Servus Place Capital: ) 2.4. MUNICIPAL OPERATING COSTS Municipal property tax revenues that the City would collect from development will be offset by municipal costs to provide services to the development. Incremental operating costs and revenues associated with the proposed Botanica development have been estimated, based on the City s Municipal Fiscal Impact Model and additional input provided by City Administration. 5 BASE FIGURE The City s Municipal Fiscal Impact Model includes the following factors for projecting operating costs and operating revenues. 2 The development is located at 35 Sturgeon Road. 3 The unit sizes assumed in this analysis are subject to change, depending on the final floor plan designs for the proposed development. 4 See Section 1.3 Study Limitations regarding use of current municipal tax rates. 5 The City of St. Albert Municipal Fiscal Impact Model was developed for the City over ten years ago. Since that time, the model has been regularly used to conduct fiscal impact analyses of various growth and development proposals for the City including: Area Structure Plans; specific development proposals; residential lot mix options; and future growth scenarios (including annexation studies and evaluations of alternative growth patterns). The Base Year in this model was recently updated to and reflects the City s 2012 budgeted figures for operations. Botanica: Fiscal Impact Analysis (December 2012) - Draft Report 6

11 Operating Costs: In the Municipal Fiscal Impact Model, municipal operating costs are projected using a marginal cost approach, 6 whereby a specified percentage of each City department s Base Year operating costs are deemed to be fixed and not affected by growth, with the remaining portion of costs being variable and driven by population growth. 7,8 Based on the projected resident population of the Botanica. the operating costs attributed to the proposed development would reflect the incremental operating costs to the City of providing municipal services to the area. Total marginal operating costs equal $1,311 per capita. 9 Operating Revenues: Departmental operating revenues are projected based on cost recovery rates. 10 The cost recovery rates assumed in this analysis are the same as the cost recovery rates calculated using the Base Year (2012) data seeded into the model. Operating revenues total $529 per capita. 11 Net operating costs are estimated to be $782 per capita. This figure is an estimated average figure for the City overall. It does not necessarily reflect the municipal services the proposed Botanica development will receive, or the actual net operating costs the City will incur to serve the development. 12 ADJUSTMENTS TO BASE FIGURE In attempts to quantify operating costs impacts specific to the proposed Botanica development, City departments were asked to comment on the potential operating costs impacts of providing municipal services to the proposed development. Overall, most departments that responded indicated that the proposed development would have minimal to no impacts on their respective areas. There are several explanations for this conclusion: Given the scope of the proposed Botanica development and that it is an in-fill development within an established part of the City, existing municipal resources will have the capacity to service the proposed development. As the Study Area is a relatively small land area, incremental municipal infrastructure requirements for this area will likely be lower and any infrastructure that is required to service the development would likely reside on private lands for which the developer would be financially responsible. With a more compact development, costs on a per capita basis should be lower. Based on these general observations, it would appear that applying the base net operating cost per capita figure above will overstate the incremental operating cost impacts of the proposed Botanica development. 6 This differs from average costing, which includes both fixed and variable operating costs in calculating an average cost. 7 For most municipal services (e.g. emergency, policing, roads, transit, parks and recreation, arts and culture), the primary driver of municipal operating costs is population. 8 The fixed / variable splits assumed in the model are rounded, based on an analysis undertaken by the City in There have been discussions to revisit these splits. Until then, the fixed / variable splits assumed in this analysis are similar to other fiscal impact analyses completed for other development applications submitted to the City. 9 Based on City s 2012 operating budget figures (November 2012). 10 Capital costs are not included in the calculation of cost recovery rates, with the exception of the utilities (water, wastewater, stormwater, solid waste). 11 Ibid. 12 It is recognized that location, density and type of development will have an impact on municipal operating costs. Botanica: Fiscal Impact Analysis (December 2012) - Draft Report 7

12 For the purposes of this analysis, several adjustments to the base net operating cost per capita figure identified above were considered and incorporated into the analysis with the intent of providing an estimate of the upper range of operating cost impacts. These adjustments are based on input provided by City Administration, service ratios developed by the City for use in fiscal impact evaluations of other development scenarios, and consideration of the scope of services required to service Botanica vis-a-vis other developments in newly growing areas: Fire: No incremental cost impacts were identified for the Botanica. It is assumed that the Botanica development, as an in-fill development, could be served by the existing fire stations and firefighting resources in the City. RCMP: Incremental policing costs to service the Botanica have been estimated based on RCMP officer to population ratios previously used by the City. 13 With the projected build-out population, it is estimated that another 0.5 police officer and 0.1 of a new support position would be required to address the anticipated increase in call volumes. Total estimated municipal operating costs are $67,500 per year at build-out. On a per capita basis, the costs identified exceed those projected in the Fiscal Impact Model for RCMP. As a result, net operating costs per capita for RCMP were increased by $42 (from $39 to $81). Municipal Enforcement: As with RCMP, an officer to population ratio has been developed for municipal enforcement. 14 With the projected build-out population, it has been assumed that 0.1 of a new bylaw officer position would be allocated to the Botanica development for a total annual cost of $8,500 at build-out. On a per capita basis, the operating costs above slightly exceeded those projected in the Fiscal Impact Model for Municipal Enforcement. As a result, net operating costs per capita for Municipal Enforcement were increased by $1 (from $3 to $4). Transportation: All maintenance of roads, paved surfaces and sidewalks located within the Study Area would be the responsibility of the developer as these assets would be situated on private land. The City has indicated that there could be some operating costs associated with traffic control as preliminary transportation servicing requirements identify a need for some roadway upgrades and traffic lights to improve access to the development. To capture the incremental cost impacts of maintaining road upgrades leading to the development and signal timing, a theoretical adjustment was made to the base net operating cost per capita factor (25% of base figure) for Transportation to reflect Botanica s more compact development form and the more limited scope of services Transportation would need to provide (less inherited infrastructure) to service the Botanica development compared to more typical residential development located in new growth areas. It was assumed that net operating Transportation costs would decrease from $91 to $23 per capita. Transit: City Administration has reported that the Study Area is within 400 m of an existing transit stop and that the existing local transit service could accommodate the ridership associated with the projected build-out population of the Botanica development. However, there is an anticipated need for an additional bus to service projected peak commuter ridership. Estimated operating costs are $150,000 per year at full operation. On a per capita basis, these costs exceed those projected in the Fiscal Impact Model for Transit. As a result, net operating costs per capita for Transit were increased from $38 to $195. Utilities: Minor operating cost impacts were noted for utility services. Potential costs impacts included maintenance of hydrants, site boundary valves and Pressure Reducing Valves, along with maintenance of 13 Based on one officer per 1,000 population ($120,000 per officer), and one support position per 5.7 officers ($75,000 per support position). These same cost factors were assumed in a future growth study completed for the City in December Based on 1 officer per 5,000 population ($85,000 per officer). These same cost factors were assumed in a future growth study completed for the City in December Botanica: Fiscal Impact Analysis (December 2012) - Draft Report 8

13 any new pipes and manholes situated on public lands. Because utilities operate on a 100% cost recovery basis, any changes to the operating cost impacts will have a corresponding impact on operating revenues, resulting in a net cost impact of zero. Parks: Preliminary plans for the Study Area include a trail alongside the river. While the developer would be responsible for constructing the trail, the City would be responsible for maintaining it. Other than the trail, it was assumed that there would be no other park assets the City would need to maintain in the Study Area. As a result, a theoretical adjustment (25% of base) was made to the base net operating cost per capita factor for Parks to reflect the limited scope of services Parks would need to provide (fewer park amenities) to service the Botanica development compared to more typical development located in new growth areas (e.g. playground, recreation amenities, municipal reserve). It was assumed that net operating Park costs would decrease from $36 to $9 per capita. Recreation and Culture: It has been assumed that the Base net operating cost per capita figures for Arts & Culture and Recreation are reasonable for the Botanica development. The scope of these services is more city-wide based, rather than neighbourhood based. Thus, any additional population growth in the City, regardless of location or development form, could equally impact the incremental costs of providing recreation and cultural services. Library: Library operates on a full cost recovery basis. Thus, any potential impacts on the operating costs would be offset by corresponding revenues, for a net impact of zero. Family and Community Support Services (FCSS): It is recognized that the increase in population would likely result in an increased need for social service supports. However, the scope of services to be provided is unknown at this time, as it will largely depend on the demographics of the Study Area. It has been assumed that the Base net operating cost per capita for Preventative Social Services is reasonable for the Botanica development. For the purposes of this analysis, it has been assumed that the net operating costs per capita figures for the other departments remain unchanged from those projected in the Municipal Fiscal Impact Model. Although it is conceivable that some of these net cost figures could be lower given that the proposed Botanica development occupies a small land area and is a high density residential in-fill development, insufficient information is available as this time to determine appropriate adjustment factors for these service areas. Overall, net operating costs were rounded to $715 per capita, as shown in Table 2 below. Based on the assumptions discussed above,this figure likely reflects the upper range of operating cost impacts that could be attributed to the proposed Botanica development. Botanica: Fiscal Impact Analysis (December 2012) - Draft Report 9

14 Table 2: The Botanica - Net Operating Costs Per Capita MARGINAL OPERATING EXPS / CAPITA OPERATING REVS / CAPITA NET OPERATING EXP / CAPITA SERVICE AREA FIXED % CITY (2012 BUD) STUDY AREA CITY (2012 BUD) COST RECOVERY RATE STUDY AREA CITY (2012 BUD) STUDY AREA Fire and Ambulance 15% $214 $- $42 20% $- $172 $- Police 62% $66 $135 $26 40% $54 $39 $81 Bylaw and Reg. Enforcement 19% $13 $17 $10 78% $13 $3 $4 Transportation 46% $131 $33 $40 31% $10 $91 $23 Public Transit 66% $59 $300 $21 35% $105 $38 $195 Water 64% $46 $46 $46 100% $46 $- $- Sanitary Sewer 63% $50 $50 $50 100% $50 $- $- Waste 57% $35 $35 $35 100% $35 $- $- Storm Sewer 23% $15 $15 $15 100% $15 $- $- Parks 35% $36 $9 $0 0% $0 $36 $9 Governance 23% $25 $25 $0 0% $0 $25 $25 Administration 22% $162 $162 $9 5% $9 $154 $154 Fiscal Services 22% $152 $152 $54 35% $54 $98 $98 Arts and Culture 47% $33 $33 $14 42% $14 $19 $19 Recreation 35% $72 $72 $21 29% $21 $51 $51 Library 50% $36 $36 $36 100% $36 $0 $0 Preventative Social Services 45% $29 $29 $4 13% $4 $25 $25 Economic Development 38% $14 $14 $7 50% $7 $7 $7 Land Use Planning 28% $31 $31 $20 66% $20 $11 $11 MPLC 35% $93 $93 $80 86% $80 $13 $13 Total $1,312 $1,287 $530 $573 $782 $ CAPITAL COST IMPACTS City departments were also contacted to identify potential capital cost impacts associated with the proposed Botanica development. Given the stage of planning of the development proposal, the figures provided or reviewed by the respective departments are considered preliminary. In most cases, the capital cost impacts are based on conservative assumptions (limited external funding), resulting in higher net capital cost estimates. Any cost figures reported represent those costs that would be borne by the City. RCMP: The existing St. Albert RCMP detachment facility is operating at or over capacity. Thus, any further development in the City will require additional resources. To identify the impact the Study Area will have on space requirements, it has been indicated that for every officer, the average space requirement is 25 square meters. Based on the estimated need for 0.5 additional officers to service Botanica: Fiscal Impact Analysis (December 2012) - Draft Report 10

15 the proposed development (see previous section) and an estimated construction cost of $6,000 per square meter, the total capital cost is projected to be $75,000. It has been assumed that the City would be responsible for funding the full cost of additional space. This equates to an annual cost of $19,030 over a four-year period. Bylaw Enforcement: In the City, there is an average of 1 vehicle for every two bylaw enforcement officers. Based on the allocated cost of 0.1 of a new officer to the Study Area, $2,000 of the cost of a new vehicle has been attributed to the Study Area. It has been assumed that the allocated vehicle costs would be the City s responsibility. This equates to an annual cost of approximately $510 over a four-year period. Transit: It is projected that one commuter bus would be required to serve the Study Area at build-out during peak periods, for a total cost of $460,000. While the City historically relies on grant funding for the purchase of new buses it was assumed that the City would only receive grant funding to offset half of its proposed capital costs. Based on this assumptions, the City would be responsible for approximately $230,000 in Transit capital costs. This equates to annual cost of $58,360 over a four-year period. Parks: There are a number of park and recreation amenities the City considers for new neighbourhoods (e.g. trail development, rinks, playgrounds, sports fields, etc.). However, due to the small amount of green space in the Study Area (0.65 hectares), the City would be limited as to what amenities would be developed on the site. It has been assumed that the developer would be responsible for any recreation and park amenities on its site and undertake all landscaping. The residential population associated with the Botanica development is expected to impact the demand for city-wide recreation facilities. For the purposes of this analysis, a portion of capital costs related to a new arena, pool, athletic fields and specialty facilities (e.g. Water Park) has been attributed to the Botanica development based on population. It is estimated that a total of $575,000 in City- Wide recreation facilities would be attributed to the Study Area. While the City was able collect levies, historically, from developers to help fund capital recreation, this revenue source is no longer available. 15 Thus, it has been assumed the the City would be responsible for the entire cost amounting to $145,900 per year over a four-year period. Roads & Utilities: It is assumed that most of the necessary road and utility infrastructure required for the proposed Botanica development will be the financial responsibility of the developer. Based on preliminary servicing requirements, the following capital needs were identified: Transportation: To improve access into the Study Area, roadway upgrades and traffic signals are required. All road upgrades and signalization installation will be the responsibility of the developer. Utilities: Developer would be responsible for extending all utility infrastructure to the site. With sanitary sewer, the existing Boudreau Road Sub-Trunk line is presently at capacity and cannot accept additional sanitary flows. The capacity of the existing sub-trunk would either need to be upgraded or a second main installed to the sanitary trunk line. There is a possibility that the City would costshare on this project; however, this is not a firm commitment and the timing and amount of funding is uncertain. As a result, it has been assumed that no City funding would be available. In the event that City funding is available, the cost impacts would be offset by the utility rates. Library: Based on the 2009 fiscal impact analysis conducted of future growth on the City of St. Albert, it is estimated that a library is required for every 50,000 population at a capital cost of $20 million. 15 Historically, funding for both Neighbourhood and City-Wide recreation projects came from developers, in part, through the Capital Recreation Levy contributions made by developers to the City. However in May 2012, City Council set the levy to zero given recent court rulings (Town of Okotoks) that ruled municipalities did not have the authority to impose these recreation levies under the Municipal Government Act. Botanica: Fiscal Impact Analysis (December 2012) - Draft Report 11

16 Based on the projected build-out population of the Botanica development, 1% of the total capital cost has been attributed to the Study Area ($200,000). For the purposes of this analysis, it has been assumed that the capital cost of a new library would be entirely funded from municipal operations. This equates to an annual cost of $50,750 over a four-year period. Culture: According to the 2009 fiscal impact analysis of future growth on the City of St. Albert, the projected incremental space requirement for cultural facilities is one square foot per 15 population. At a unit cost of $500 per square foot, the capital cost of cultural facilities that can be attributed to development in the Botanica development is projected to be $16,670. It has been assumed that the City would be responsible for funding the full cost of additional space. This equates to an annual cost of $4,230 over a four-year period. It has been assumed that there are no capital cost impacts for the other City departments. Based on the assumptions noted above, municipal capital costs attributed to the Botanica development are estimated to total $1.1 million. ANNUAL CAPITAL COSTS In order to measure capital cost impacts on an annual basis, the following approach was taken: The developer projects that the Botanica development would be developed over a four-year period. Municipal capital costs attributed to the Botanica development are projected to total $1.1 million. It has been assumed that all municipal capital costs would be financed, with the term being consistent with the development timeframe (i.e. 4 years). Debenture rates were obtained from the Alberta Capital Finance Authority (ACFA). As of December 1, 2012, the nominal interest rate was 1.596% for a 5-year term. Based on a targeted inflation rate of 1% (Bank of Canada targets 1% to 3%), the corresponding real rate of interest is estimated to be 0.596%. The real rate of interest is used to be consistent with the other assumptions in the analysis (costs based on today s dollars). Based on the above, a total annualized capital cost of $278,770 has been attributed to the Botanica development. While these costs would not be directly recovered from the proposed development, they do represent the incremental capital cost impacts to the City of proceeding with the proposed development. Botanica: Fiscal Impact Analysis (December 2012) - Draft Report 12

17 3. Alternate Development: General Commercial This section provides an overview of the development parameters assumed for the likely type of the development to occur in the Study Area - General Commercial - under the existing Land Use District, along with a discussion of the assumptions regarding associated assessment and municipal cost impacts LAND AREA The land area in this scenario is the same as that reported for the proposed Botanica development (1.53 hectares) DEVELOPMENT PARAMETERS In this scenario, the south lot of the Hole s Site is assumed to include General Commercial (C2) development. The parameters of this development, for the purposes of this analysis, are summarized below. PROPOSED DEVELOPMENT It has been assumed that the commercial development that would take place in the Study Area would be similar to preliminary conceptual plans of a commercial development (Bellerose Village Site Plan) proposed for the west lot of the Hole s Site. 16 ASSESSMENT Based on assessment projections made for the Bellerose Village Site Plan, the City estimates an average commercial assessment of $8.5 million per gross hectare. 17 Applying this figure to the 1.53 gross hectares in the Study Area, the total estimated commercial assessment generated from General Commercial development in this scenario is $13 million at build-out PROPERTY TAX REVENUES To calculate the revenues the City would receive from full build-out of the Study Area for General Commercial use, the City s 2012 municipal tax rates were used: 18 Non-Residential: mills (General Municipal: Servus Place Capital: ) 16 At the time of this analysis, no development application has been made to the City for this proposed development. 17 The estimated rents and cap rates the City applied to the proposed Bellerose Village development are similar to the newer commercial projects located on St. Albert Trail. 18 See Section 1.3 Study Limitations regarding use of current municipal tax rates. Botanica: Fiscal Impact Analysis (December 2012) - Draft Report 13

18 3.4. MUNICIPAL OPERATING COSTS Municipal property tax revenues that the City would collect from development will be offset by municipal costs to provide services to the development. Unlike residential development, whereby most of the municipal services are people-based and incremental operating costs can be projected on the basis of population growth, there is no established factors for projecting the incremental operating costs and revenues associated with potential commercial development. As a result, net operating cost impacts related to the potential development of the Study Area for commercial use is limited, at this time, to input provided by City Administration. As with the proposed Botanica development, most departments that responded indicated that commercial development in the Study Area would have minimal to no impacts on their respective areas. Fire: No incremental cost impacts were identified for the Study Area assuming commercial development. It is assumed that the Study Area, as an in-fill development, could be served by the existing fire stations and firefighting resources in the City. RCMP: No incremental cost impacts identified for policing in this scenario. Municipal Enforcement: No incremental cost impacts identified for municipal enforcement in this scenario. Transportation: For the purposes of this analysis, it has been assumed the need for road upgrades and signal controls to improve access to the Study Area is the same as the Botanica scenario. Although the different traffic volumes and patterns that would be generated by the two land uses could affect the level of service required for each scenario, it has been assumed that the net operating costs projected for Transportation for the proposed Botanica development is the same for this scenario. Thus, incremental net operating Transportation costs are projected to total $11,500 per year at build-out (500 * $23 per capita). Transit: In the absence of any employment projections, it is difficult for the City to project ridership demand in this scenario. However, based on the general assumption that ridership to the Study Area would likely take place at off-peak times and directions, it is expected that current transit services in the area will be able to serve projected transit demands. Utilities: Similar utility operating cost impacts were noted in this scenario as discussed for the Botanica development. Because utilities operate on a 100% cost recovery basis, any changes to the operating cost impacts will have a corresponding impact on operating revenues, resulting in a net cost impact of zero. Parks: In this scenario, it has been assumed that there would be no Parks assets to maintain. For the purposes of this analysis, it has been assumed that there would be no other net operating cost impacts for the other City departments. Botanica: Fiscal Impact Analysis (December 2012) - Draft Report 14

19 3.5. CAPITAL COST IMPACTS It has been assumed that the financial responsibility for all infrastructure requirements to service the commercial development would rest with the developer. The scope of the capital cost impacts will be less in this scenario, as the resident population is viewed as the key driver for determining many of the soft municipal services provided, including community and protective services. In addition, the amount of commercial development that would be constructed on the relatively small Study Area is unlikely to result in any net increase in demand for additional infrastructure. Botanica: Fiscal Impact Analysis (December 2012) - Draft Report 15

20 4. Study Findings Based on the analysis, both development scenarios are projected to generate net revenues to the City of St. Albert, ranging in the order of $105,433 (Proposed Botanica) to $143,003 (General Commercial) annually. Table 3 provides a summary of the fiscal impacts at full build-out of both scenarios. At full-build-out of the south lot of the Hole s Site: The proposed Botanica development would include 250 apartment condominiums resulting in a projected population of 500 people. Total taxable assessment associated with the proposed Botanica development is projected to be $96.8 million compared to $13.0 million for General Commercial development. The Botanica development generates an assessment that is 7.5 times higher than the General Commercial scenario. Based on the 2012 municipal property tax rates for the City (General Municipal + Servus Place Capital), property tax revenues total $739,205 with the Botanica development compared to $154,503 with the General Commercial scenario. The Botanica development generates municipal property tax revenues that are 4.8 times higher than the General Commercial Scenario. The City s municipal tax rate for non-residential properties is approximately 1.5 times greater than the residential rate, resulting in greater tax revenues being generated off non-residential properties. Based on input received from City Administration, both development scenarios are projected to have minimal to no incremental cost impacts on the City s operations. This is due to the small land area available for development and the location of the site within an established part of the City enabling future development to take advantage of the current municipal services being provided to the surrounding areas. Assuming that there are no incremental cost impacts, the net gain as measured by the municipal tax revenues generated from each scenario would represent the upper range of positive impacts. With residential development, the upper range of net municipal operating costs for the Botanica development are estimated to total $355,000 per year, based on an estimated net operating cost of $710 per capita. With the General Commercial scenario, only $11,500 in net operating costs were included in the analysis. The proposed Botanica development is projected to contribute to the need for approximately $1.1 million in municipal capital costs. Based on a four-year term (consistent with development timeframe) and a real interest rate of 0.596%, capital costs equate to $278,770 per year for four years. No capital cost impacts have been identified for the General Commercial scenario. Including net operating costs and capital costs, the net (positive) impact to the City at build-out of the south lot of the Hole s Site is estimated to be $105,433 annually with the proposed Botanica development compared a higher net benefit of $143,003 annually for General Commercial development. Botanica: Fiscal Impact Analysis (December 2012) - Draft Report 16

21 Table 3: Hole s Site South Lot - Fiscal Impacts Botanica: Fiscal Impact Analysis (December 2012) - Draft Report 17

22 5. Conclusions The intent of this analysis has been to evaluate the financial impacts of future re-development of the south lot of the old Hole s Site located at the corner of Bellerose Drive and Boudreau Road, on the City of St. Albert s municipal operations. Two development scenarios have been evaluated. The first scenario represents the developer s proposal to construct multi-family residential development on the site, under the proposed R4 Land Use District. The second scenario reflects the likely alternate development of the lands for General Commercial use. Based on the 2012 municipal property tax rates, property tax revenues total $739,205 with the Botanica development compared to $154,503 with the General Commercial scenario, at full build-out. The Botanica development generates municipal property tax revenues that are 4.8 times higher than the General Commercial Scenario. When the estimated upper range of cost impacts are factored into the analysis, both development scenarios are still projected to generate net revenues to the City of St. Albert at build-out, ranging in the order of $105,433 (Proposed Botanica) to $143,003 (General Commercial) annually. Botanica: Fiscal Impact Analysis (December 2012) - Draft Report 18