A PRELIMINARY FINANCIAL AND ECONOMIC REDEVELOPMENT FEASIBILITY STUDY FOR THE CITY OF FERNLEY, NEVADA

TECHNICAL REPORT UCED 2015/16-07 A PRELIMINARY FINANCIAL AND ECONOMIC REDEVELOPMENT FEASIBILITY STUDY FOR THE CITY OF FERNLEY, NEVADA UNIVERSITY OF NEVADA, RENO

A PRELIMINARY FINANCIAL AND ECONOMIC REDEVELOPMENT FEASIBILITY STUDY FOR THE CITY OF FERNLEY, NEVADA Frederick Steinmann Frederick Steinmann is an Assistant Research Professor with the University Center for Economic Development, College of Business at the University of Nevada, Reno. January 2016 A Preliminary Financial and Economic Redevelopment Feasibility Study for the 1/2/2016 ii

This publication, A Preliminary Financial and Economic Redevelopment Feasibility Study for the, was published by the University Center for Economic Development in the College of Business at the University of Nevada, Reno. This publication's statements, findings, conclusions, recommendations, and/or data represent solely the findings and views of the authors and do not necessarily represent the views of the City of Fernley, the University of Nevada, Reno, or any reference sources used or quoted by this study. Reference to research projects, programs, books, magazines, or newspaper articles does not imply an endorsement or recommendation by the authors unless otherwise stated. Correspondence regarding this document should be sent to: Frederick A. Steinmann, DPPD University Center for Economic Development University of Nevada, Reno The College of Business Mail Stop 204 Reno, Nevada 89557 Phone: 775.784.1655 UCED University of Nevada, Reno University Center for Economic Development The College of Business A Preliminary Financial and Economic Redevelopment Feasibility Study for the 1/2/2016 iii

TABLE OF CONTENTS Table of Contents List of Tables iv v Executive Summary 1 1.0 Introduction 3 1.1 Subareas of the Proposed Redevelopment District 3 1.2 Purpose of the Preliminary Financial and Economic Feasibility Study 6 2.0 Results 9 2.1 Assessment of Total Taxable Value and Total Assessed Value 9 2.2 Assessment of Estimated Ad Valorem Revenues 17 2.3 Estimated Financial Performance of a Proposed Redevelopment District 20 Appendix A: Map of All Proposed Redevelopment Area Subareas 25 Appendix B: Map of the Historic Downtown Proposed Subarea 27 Appendix C: Map of the Industrial Area Proposed Subarea 29 Appendix D: Map of the Residential Area Proposed Subarea 31 Appendix E: Map of the West Development Area Proposed Subarea 33 Appendix F: Map of the East Development Area Proposed Subarea 35 A Preliminary Financial and Economic Redevelopment Feasibility Study for the 1/2/2016 iv

LIST OF TABLES Table 1.1: Total Number of Acres and Parcels; City of Fernley, Proposed 5 Redevelopment Project Area, Proposed Redevelopment Project Areas Table 2.1: City of Fernley; Total Taxable Value and Total Assessed Value; 10 FY 2011-12 to FY 2016-17 Table 2.2: Proposed Redevelopment Project Area; Total Taxable Value and 11 Total Assessed Value; FY 2011-12 to FY 2016-17 Table 2.3: Historic Downtown Subarea; Total Taxable Value and Total Assessed 11 Value; FY 2011-12 to FY 2016-17 Table 2.4: Industrial Area Subarea; Total Taxable Value and Total Assessed 12 Value; FY 2011-12 to FY 2016-17 Table 2.5: Residential Area Subarea; Total Taxable Value and Total Assessed 13 Value; FY 2011-12 to FY 2016-17 Table 2.6: West Development Area Subarea; Total Taxable Value and Total 14 Assessed Value; FY 2011-12 to FY 2016-17 Table 2.7: East Development Area Subarea; Total Taxable Value and Total 15 Assessed Value; FY 2011-12 to FY 2016-17 Table 2.8: City of Fernley, Proposed Redevelopment Project Area, and Subareas; 15 Actual, Actual Percentage and Annual Percentage in Total Taxable Value; FY 2011-12 to FY 2016-17 Table 2.9: City of Fernley, Proposed Redevelopment Project Area, and Subareas; 16 Actual, Actual Percentage and Annual Percentage in Total Assessed Value; FY 2011-12 to FY 2016-17 Table 2.10: City of Fernley; Ad Valorem Rates; FY 2011-12 to FY 2015-16 18 Table 2.11: City of Fernley, Lyon County, Special Districts, Lyon County School 19 District, State of Nevada; Average Annual Potential Ad Valorem Estimates; FY 2011-12 to FY 2015-16 Table 2.12: Estimation of Potential Future Gross Tax Increment Revenues; 22 0.50% Annual Growth with 30 Year, 40 Year, and 50 Year Horizons Table 2.13: Estimation of Potential Future Gross Tax Increment Revenues; 23 1.00% Annual Growth with 30 Year, 40 Year, and 50 Year Horizons A Preliminary Financial and Economic Redevelopment Feasibility Study for the 1/2/2016 v

Table 2.14: Estimation of Potential Future Gross Tax Increment Revenues; 24 2.00% Annual Growth with 30 Year, 40 Year, and 50 Year Horizons A Preliminary Financial and Economic Redevelopment Feasibility Study for the 1/2/2016 vi

Executive Summary Consisting of five separate subareas, the proposed redevelopment project area evaluated in this University Center for Economic Development Technical Report consists of a total of 3,886 recognized and recorded parcels within the and has a total size of approximately 4,012.7 acres. In order for a proposed study area to be eligible for inclusion into a redevelopment project area, the legislative body, in this case the City Council of the City of Fernley, must, in part, determine that the project area is financially and economically feasible. In short, the City Council must find that, over the lifetime of the project area, the redevelopment district will generate enough incremental assessed value and gross tax incremental revenue to support the operations of the redevelopment agency. Between FY 2011-12 and FY 2016-17, the total assessed value of the entire City of Fernley grew by 35.46 percent, growing at an average annual rate of 6.55 percent. As a whole, the proposed redevelopment project area s total assessed value grew by 24.97 percent, growing at an average annual rate of 4.79 percent between FY 2011-12 and FY 2016-17. Individual proposed subarea total assessed value growth rates between FY 2011-12 and FY 2016-17 were: Historical Downtown Subarea: 14.74 percent total growth; 2.93 percent average annual growth. Industrial Area Subarea: 9.00 percent total growth; 1.88 percent average annual growth. Residential Area Subarea: 51.39 percent total growth; 9.29 percent average annual growth. West Development Subarea: 29.86 percent total growth; 5.99 percent average annual growth. East Development Subarea: 57.12 percent total growth; 10.72 percent average annual growth. While total assessed value levels for most of the proposed redevelopment project area, and for the entire proposed redevelopment project area as a whole, have generally grown at a rate less than the rate of growth in total assessed value for the entire City of Fernley as a whole, total assessed value levels have generally improved and grown significantly in the last three fiscal years from FY 2014-15 to FY 2016-17. While this suggests that a degree of economic maladjustment might exist within the proposed project area, the window to create a new redevelopment district with relatively low levels of total assessed value may be closing. A Preliminary Financial and Economic Redevelopment Study for the Page 1 of 35

Assuming a base year total assessed value level of approximately $209.1 million, a tax rate or levy of 0.5994 per $100 of assessed value, and a 0.50 percent rate of growth, a 1.00 percent rate of growth, and a 2.00 percent rate of growth in total assessed values over a 30 year, 40 year, and 50 year planning horizon, anticipated gross tax increment revenues that could potentially be collected from the proposed redevelopment project area should be sufficient to support the operations of a redevelopment agency and new redevelopment activities within the project area. At 0.50 Percent Growth: o 30 Years: $2.7 million in total revenues; $101,980 in annual revenues. o 40 Years: $5.5 million in total revenues; $137,206 in annual revenues. o 50 Years: $8.7 million in total revenues; $173,643 in annual revenues. At 1.00 Percent Growth: o 30 Years: $5.6 million in total revenues; $214,399 in annual revenues. o 40 Years: $11.8 million in total revenues; $293,708 in annual revenues. o 50 Years: $18.9 million in total revenues; $378,639 in annual revenues. At 2.00 Percent Growth: o 30 Years: $12.3 million in total revenues; $475,329 in annual revenues. o 40 Years: $27.1 million in total revenues; $677,001 in annual revenues. o 50 Years: $45.5 million in total revenues; $909,041 in annual revenues. A Preliminary Financial and Economic Redevelopment Study for the Page 2 of 35

1.0 Introduction In July 2015, the City of Fernley requested that faculty and staff of the University Center for Economic Development in the College of Business at the University of Nevada, Reno conduct and prepare a preliminary financial and economic feasibility study of physical areas within the that could potentially be considered for inclusion into a future redevelopment project area as defined by Nevada Revised Statutes, Chapter 279 Redevelopment of Communities. The financial and economic feasibility study is a basic assessment of the current trends in total assessed value and total ad valorem (property tax) revenues being currently generated within the proposed redevelopment project area and an estimation of potential future ad valorem revenues that could support redevelopment efforts within the proposed project area over the lifetime of the redevelopment district and agency. 1.1 Subareas of the Proposed Redevelopment District In consultation with city staff, a series of five separate geographic areas were selected. Appendix A contains a map outlining each of the five separate geographic areas evaluated in this preliminary financial and economic feasibility study. These are: Historic Downtown (Appendix B) Industrial Area (Appendix C) Residential Area (Appendix D) West Development Area (Appendix E) East Development Area (Appendix F) The City of Fernley, as of Fiscal Year 2015-16, consists of 78,803.4 total acres and contains an estimated 9,461 total recognized and recorded parcels. The City of Fernley is generally comprised of a number of commercial, industrial, residential, open space and agricultural uses. The Historic Downtown proposed subarea consists of approximately 873.5 total acres and 1,075 total recognized and recorded parcels and is generally comprised of older commercial uses, some industrial uses, and some older residential uses. The Historic Downtown proposed subarea generally contains parcels south of U.S. Interstate 80 with parcels both north and south of W Main Street/U.S. Interstate 80 Business Alternate/U.S. Highway 50 running west to east from the A Preliminary Financial and Economic Redevelopment Study for the Page 3 of 35

junction of U.S. Interstate 80 and W Main Street/U.S. Interstate 80 Business Alternate/U.S. Highway 50 along W Main Street/U.S. Interstate 80 Business Alternate/U.S. Highway 50 to the junction of Farm District Road and W Main Street/U.S. Interstate 80 Business Alternate/U.S. Highway 50. U.S. Interstate 80 and the Union Pacific Railroad serves as the northernmost boarder of the Historic Downtown proposed subarea. The subarea s easternmost boarders consists of the demarcation between two industrial parcels and Farm District Road. The subarea s southernmost boarders consist of Westerlund Lane and Truckee Lane. The subarea s westernmost boarders consist of the demarcation between several residential and industrial parcels and Stock Lane. The Industrial Area proposed subarea consists of approximately 1,378.1 total acres and 506 total recognized and recorded parcels and is generally comprised of industrial uses and large open spaces. The Industrial Area proposed subarea generally contains parcels south of U.S. Interstate 80 and north of the Union Pacific Railroad and is generally bifurcated by U.S. Interstate 80 Business Alternate/U.S. Highway 95 Alternate. U.S. Interstate 80 serves as the northernmost boarder of the Industrial Area proposed subarea. The subarea s easternmost boarders consists of the demarcation between several large and generally unused parcels. The subarea s southernmost boarders generally consist of the Union Pacific Railroad with the exception of three parcels and the portion of one large parcel located between the Union Pacific Railroad to the north and U.S. Highway 50 Alternate to the south. The subarea s westernmost boarder consists of the demarcation between two industrial parcels. The Residential Area proposed subarea consists of approximately 548.9 total acres and 1,043 total recognized and recorded parcels and is generally comprised of residential uses with some commercial, small-scale agricultural, and open space uses. The Residential Area proposed subarea generally contains parcels located south of the Union Pacific Railroad, west of the demarcation between several smaller residential and open space parcels, north of Farm District Road (along a general east-to-west stretch of Farm District Road) and east of Farm District Road (along a general north-to-south stretch of Farm District Road). The West Development Area proposed subarea consists of approximately 438.0 total acres and 172 total recognized and recorded parcels and is largely undeveloped but an already planned area and is generally comprised of some residential and some industrial uses with a significant portion of the proposed subarea containing infrastructure already developed but not used to support future residential development. The northernmost boarder of the proposed subarea consists of Sage Street. The easternmost boarder of the proposed subarea consists of U.S. Highway 95 Alternate. The southernmost boarder consists of the demarcation between several large industrial and open space parcels and a partially developed residential subdivision. The westernmost boarder consists of the demarcation between several large open space parcels. Pipeline Road generally bifurcates the West Development Area proposed subarea, running northto-south from the north-western portion of the proposed subarea to the general center of the proposed subarea s southernmost boarder. The East Development Area proposed subarea consists of approximately 743.2 total acres and 1,090 total recognized and recorded parcels and is generally comprised of residential uses, a A Preliminary Financial and Economic Redevelopment Study for the Page 4 of 35

minimum amount of commercial uses, and some generally small and large-scale agricultural uses. The subarea s northernmost boarder consists of U.S. Highway 50 Alternate. The easternmost boarder of the proposed subarea consists of the demarcation between several residential and small scale agricultural parcels and several large-scale agricultural and open space parcels. The southernmost boarder of the proposed subarea consists of Desert Shadows Lane and the Truckee Canal. The westernmost boarder of the proposed subarea consists of Fort Sutter Boulevard and a line extending generally south from the southernmost point of Fort Sutter Boulevard to the intersection of this line and Desert Shadows Lane. Table 1.1 presents a summary of the total number of acres and the total number of recognized and recorded parcels for the City of Fernley, the entire proposed redevelopment project area, and for each of the proposed subareas. The total number of acres and the total number of parcels for the City of Fernley, the proposed redevelopment project area, and for each of the proposed subareas were provided by the Lyon County Clerk/Treasurer and Lyon County Assessor s Office. Table 1.1 Total Number of Acres and Parcels City of Fernley, Proposed Redevelopment Project Area, Proposed Redevelopment Project Area Subareas Geographic Area Total Number of Acres Percent of City- Wide Total Total Number of Parcels Percent of City- Wide Total City of Fernley 78,803.4 100.0% 9,461 100.0% Proposed Redevelopment 4,012.7 5.1% 3,886 41.1% Project Area Historic Downtown 873.5 1.1% 1,075 11.4% Industrial Area 1,378.1 1.7% 506 5.3% Residential Area 584.9 0.7% 1,043 11.0% West Development Area East Development Area 433.0 0.5% 172 1.8% 743.2 0.9% 1,090 11.5% A Preliminary Financial and Economic Redevelopment Study for the Page 5 of 35

1.2 Purpose of the Preliminary Financial and Economic Feasibility Study The financial and economic feasibility study is designed to determine whether or not a proposed redevelopment project area, including each of its component subareas, is capable of generating enough incremental total assessed value and incremental ad valorem tax revenue to support the activities of a redevelopment agency over the term of the project area s existence. Nevada Revised Statute, Chapter 279 Section 572 Contents of redevelopment plan; General requirements states that every redevelopment plan must contain the following: The amount of open space to be provided and the layout of streets. Limitations on the type, size, height, number and proposed use of buildings. The approximate number of dwelling units. The property to be devoted to public purposes and the nature of those purposes. Other covenants, conditions and restrictions which the legislative body prescribes. The proposed method of financing the redevelopment plan in sufficient detail so that the legislative body may determine the economic feasibility of the plan. The sixth required component of the redevelopment plan, The proposed method of financing the redevelopment plan in sufficient detail so that the legislative body may determine the economic feasibility of the plan, includes an economic feasibility study of the proposed project area. This economic feasibility study, conducted for the in 2015 and reported in this University Center for Economic Development Technical Report, should and does include the following components: An approximation of the base year assessed value including base ad valorem revenues generated from the proposed project area and the assignment of ad valorem revenues to eligible taxing jurisdictions including, but not limited to, the local municipality, county, school district, state, and other eligible taxing entities. Estimated assessed value and incremental property tax revenue growth rates in both the base year and for each year over the lifetime of the proposed project area. An estimate of the property tax levy (or rate). An estimation of any housing fund set-asides and any statutory pass through requirements. A Preliminary Financial and Economic Redevelopment Study for the Page 6 of 35

An estimation of the impact the existence of the redevelopment agency and redevelopment project area may have on special districts that would share jurisdiction over parcels within the proposed project area. While the preliminary financial and economic feasibility study for the City of Fernley presented within this University Center for Economic Development Technical Report should not be used as a substitute for a properly and comprehensively developed redevelopment plan, the City of Fernley may utilize the results of this preliminary financial and economic feasibility study in any future draft and/or final redevelopment plan. Results of this preliminary financial and economic feasibility study may have to be updated and revised based upon any future timeline for consideration of adoption of a new redevelopment project area and redevelopment agency within the City of Fernley. As the preliminary financial and economic feasibility study contains an assessment of the current trends in total assessed value and ad valorem revenues for the entire proposed project area and each of the proposed subareas, the preliminary financial and economic feasibility study may also be used to assess the presence of blight, as defined by Nevada Revised Statute Chapter 279 Section 388, within the proposed project area. Nevada Revised Statute Chapter 279 Section 388 defines blight as: 1. Except as otherwise provided in subsection 2, blighted area means an area which characterized by at least four of the following factors: a) The existence of buildings and structures, used or intended to be used for residential, commercial, industrial or other purposes, or any combination thereof, which are unfit or unsafe for those purposes and are conducive to ill health, transmission of disease, infant mortality, juvenile delinquency or crime because of one or more of the following factors: (1) defective design and character of physical construction, (2) faculty arrangement of the interior and spacing of buildings, (3) inadequate provision for ventilation, light, sanitation, open spaces and recreational facilities, (4) age, obsolescence, deterioration, dilapidation, mixed character or shifting of uses. b) An economic dislocation, deterioration or disuse. c) The subdividing and sale of lots of irregular form and shape and inadequate size for proper usefulness and development. d) The laying out of lots in disregard of the contours and other physical characteristics of the ground and surrounding conditions. e) The existence of inadequate streets, open spaces and utilities. f) The existence of lots or other areas which may be submerged. g) Prevalence of depreciated values, impaired investments and social and economic maladjustment to such an extent that the capacity to pay taxes is substantially reduced and tax receipts are inadequate for the cost of public services rendered. h) A growing or total lack of proper utilization of some parts of the area, resulting in a stagnant and unproductive condition of land which is potentially useful and valuable for contributing to the public health, safety and welfare. A Preliminary Financial and Economic Redevelopment Study for the Page 7 of 35

i) A loss of population and a reduction of proper use of some parts of the area, resulting in further deterioration and added costs to the taxpayer for the creation of new public facilities and services elsewhere. j) The environmental contamination of buildings or property. k) The existence of an abandoned mine. 2. If the subject of the redevelopment is an eligible railroad or facilities related to an eligible railroad, blighted area means an area which is characterized by at four of the factors set forth in subsection 1 or characterized by one or more of the following factors: a) The existence of railroad facilities, used or intended to be used, for commercial, industrial or other purposes, or any combination thereof, which are unfit or unsafe for those purposes because of age, obsolescence, deterioration or dilapidation. b) A growing or total lack of proper utilization of the railroad facilities resulting in a stagnant and unproductive condition of land which is potentially useful and valuable for contributing to the public health, safety and welfare. c) The lack of adequate rail facilities that has resulted or will result in an economic hardship to the community. Subsection 1, subsection 1h of Nevada Revised Statute Chapter 279 Section 388 states that an area being considered for inclusion into a redevelopment project area may be considered blighted if the degree of depreciated values, impaired investments and general social and economic maladjustment is significant enough to cause a jurisdiction to spend more on the provision of various public services to the redevelopment district than it receives in combined tax revenues. Ad valorem revenues, based upon total assessed value levels, is a significant revenue source for municipalities and counties in Nevada. Fully depreciated and/or declining total assessed value levels within a defined geographic area may result in a jurisdiction having to expend more on public services than it can collect in public revenues from within the defined geographic area. While the preliminary financial and economic feasibility study is not to be confused with a proper blight study of a proposed project area, the total assessed value level and ad valorem revenue level trends reported in the preliminary financial and economic feasibility study can be used to determine whether or not blight may exist within the study area. In future deliberations regarding the potential creation of a new redevelopment project area and redevelopment agency, the City of Fernley may utilize the results of this preliminary financial and economic feasibility study to determine whether or not blight exists within the proposed redevelopment project area. A Preliminary Financial and Economic Redevelopment Study for the Page 8 of 35

2.0 Results This section presents historical trends in the estimated levels of total taxable value and total assessed value for the City of Fernley, for the proposed redevelopment project area, and for each of the five proposed subareas of the proposed redevelopment project area including the Historic Downtown proposed subarea, the Industrial Area proposed subarea, the Residential Area proposed subarea, the West Development Area proposed subarea, and the East Development Area proposed subarea. This section also contains an estimation of historical ad valorem revenues generated city-wide, proposed redevelopment project area-wide, and for each of the five proposed subareas. This section concludes with an estimation of potential revenues for a proposed redevelopment project area and redevelopment agency based upon the inclusion of each of the five proposed subareas over a 30-year, 40-year, and 50-year projected planning horizon. 2.1 Assessment of Total Taxable Value and Total Assessed Value In Nevada, total assessed value is generally estimated by multiplying the total taxable value, determined by a County Assessor, by 35 percent. In Nevada, the total taxable value of property is a combination of the total value of the land and the total value of improvements made to the property within the parcel boundaries. The total taxable value of any property within the State of Nevada at a parcel level is a mix of both market value and the depreciated, or discounted, value of improvements made to the property as determined by the appropriate County Assessor. For the City of Fernley, the entire proposed redevelopment project area, and for each of the subareas included in the proposed redevelopment project area, total taxable value and total assessed value was provided to the University Center for Economic Development by the Lyon County Clerk/Treasurer and the Lyon County Assessor s Office. The Lyon County Clerk/Treasure and the Lyon County Assessor s Office were able to provide total taxable value and total assessed value for each parcel within the City of Fernley, the proposed redevelopment project area, and for each of the proposed subareas for each fiscal year between Fiscal Year 2011-12 and Fiscal Year 2016-17 (for Fiscal Year 2016-17, total taxable value levels and total assessed value levels are preliminary estimates provided by the Clerk/Treasurer and County Assessor s Office). Table 2.1 presents the change in total taxable value and total assessed value for the City of Fernley between FY 2011-12 and FY 2016-17. A Preliminary Financial and Economic Redevelopment Study for the Page 9 of 35

Table 2.1 City of Fernley Total Taxable Value and Total Assessed Value FY 2011-12 to FY 2016-17 Fiscal Year Total Taxable Value Percent Total Assessed Value Percent 2011-2012 $1,097,203,013.98 $384,021,068.00 2012-2013 $1,054,083,965.98-3.93% $368,929,401.00-3.93% 2013-2014 $1,038,399,103.79-1.49% $363,439,699.00-1.49% 2014-2015 $1,148,610,017.72 10.61% $402,013,519.00 10.61% 2015-2016 $1,336,688,977.20 16.37% $467,841,155.00 16.37% 2016-2017 $1,486,247,840.60 11.19% $520,186,756.00 11.19% Annual Average Actual Percent $1,193,538,819.88 6.55% $417,738,599.67 6.55% $389,044,826.62 - $136,165,688.00-35.46% - 35.46% - Between FY 2011-12 and FY 2016-17, the total taxable value and total assessed value for the City of Fernley increased at an annual average rate of 6.55 percent. The total taxable value of the City of Fernley increased from an estimated $1.097 billion in FY 2011-12 to an estimated $1.486 billion in FY 2016-17. The total assessed value for the City of Fernley increased from an estimated $348.0 million in FY 2011-12 to an estimated $520.2 million in FY 2016-17. The total taxable value and the total assessed value for the entire City of Fernley grew by an estimated 35.46 percent over the entire six year period. Between FY 2011-12 and FY 2016-17, the total taxable value and the total assessed value for the entire proposed redevelopment project area in the City of Fernley increased at an annual average rate of 4.79 percent; a rate significantly less than the estimated annual average rate of 6.55 percent growth as reported above in Table 2.1. The total taxable value of the proposed redevelopment project area increased from an estimated $567.8 million in FY 2011-12 to an estimated $708.6 million in FY 2016-17. The total assessed value for the proposed redevelopment project area increase from an estimated $198.7 million in FY 2011-12 to an estimated $248.4 million in FY 2016-17. Both the total taxable value and the total assessed value for the entire proposed redevelopment project area grew by an estimated 24.97 percent over the six year FY 2011-12 to FY 2016-17 period; a rate significantly less than the estimated 35.46 percent growth in total taxable value and total assessed value for the entire City of Fernley as presented above in Table 2.1 Table 2.2 presents the change in total taxable value and total assessed value for the entire proposed redevelopment project area in the City of Fernley between FY 2011-12 and FY 2016-17. A Preliminary Financial and Economic Redevelopment Study for the Page 10 of 35

Table 2.2 Proposed Redevelopment Project Area Total Taxable Value and Total Assessed Value FY 2011-12 to FY 2016-17 Fiscal Year Total Taxable Value Percent Total Assessed Value Percent 2011-2012 $567,828,612.75 $198,740,020.00 2012-2013 $530,031,467.43-6.66% $185,511,019.00-6.66% 2013-2014 $532,868,324.74 0.54% $186,503,919.00 0.54% 2014-2015 $587,227,201.79 10.20% $205,529,526.00 10.20% 2015-2016 $656,372,870.08 11.77% $229,730,510.00 11.77% 2016-2017 $709,611,119.87 8.11% $248,363,897.00 8.11% Annual Average Actual Percent $597,323,266.11 4.79% $209,063,148.50 4.79% $141,782,507.12 - $49,623,877.00-24.97% - 24.97% - Table 2.3 presents the change in total taxable value and total assessed value for the Historic Downtown proposed subarea between FY 2011-12 and FY 2016-17. Table 2.3 Historic Downtown Subarea Total Taxable Value and Total Assessed Value FY 2011-12 to FY 2016-17 Fiscal Year Total Taxable Value Percent Total Assessed Value Percent 2011-2012 $142,413,706.96 $49,844,799.00 2012-2013 $134,352,501.42-5.66% $47,023,377.00-5.66% 2013-2014 $135,848,021.17 1.11% $47,546,809.00 1.11% 2014-2015 $140,864,095.41 3.69% $49,302,435.00 3.69% 2015-2016 $156,737,212.45 11.27% $54,858,026.00 11.27% 2016-2017 $163,410,147.09 4.26% $57,193,553.00 4.26% Annual Average Actual Percent $145,604,280.75 2.93% $50,961,499.83 2.93% $20,996,440.13 - $7,348,754.00-14.74% - 14.74% - Between FY 2011-12 and FY 2016-17, the total taxable value and the total assessed value for the Historic Downtown proposed subarea increased at an average annual rate of 2.93 percent. The A Preliminary Financial and Economic Redevelopment Study for the Page 11 of 35

total taxable value of the Historic Downtown subarea increased from an estimated $142.4 million in FY 2011-12 to an estimated $163.4 million in FY 2016-17, a total change of approximately $21.0 million or 14.74 percent. The total assessed value of the Industrial Area subarea increased from an estimated $49.8 million in FY 2011-12 to an estimated $57.2 million in FY 2016-17, a total change of approximately $7.4 million or 14.74 percent. The 14.74 percent total growth in total taxable value and total assessed value was significantly less than the total growth in total taxable value and total assessed value for the entire City of Fernley, 35.46 percent as reported in Table 2.1, and significantly less than the total growth in total taxable value and total assessed value for the entire proposed redevelopment project area, 24.97 percent as reported in Table 2.2, over the entire six year period. Table 2.4 presents the change in total taxable value and total assessed value for the Industrial Area proposed subarea between FY 2011-12 and FY 2016-17. Table 2.4 Industrial Area Subarea Total Taxable Value and Total Assessed Value FY 2011-12 to FY 2016-17 Fiscal Year Total Taxable Value Percent Total Assessed Value Percent 2011-2012 $238,589,203.47 $83,506,222.00 2012-2013 $219,072,735.07-8.18% $76,675,458.00-8.18% 2013-2014 $231,615,580.82 5.73% $81,065,454.00 5.73% 2014-2015 $243,834,517.93 5.28% $85,342,082.00 5.28% 2015-2016 $254,241,835.07 4.27% $88,984,643.00 4.27% 2016-2017 $260,073,552.18 2.29% $91,025,744.00 2.29% Annual Average Actual Percent $241,237,904.09 1.88% $84,433,267.17 1.88% $21,484,348.71 - $7,519,522.00-9.00% - 9.00% - Between FY 2011-12 and FY 2016-17, the total taxable value and the total assessed value for the Industrial Area proposed subarea increased at an average annual rate of 1.88 percent. The total taxable value of the Industrial Area subarea increased from an estimated $238.6 million in FY 2011-12 to an estimated $260.1 million in FY 2016-17, a total change of approximately $21.5 million or 9.00 percent. The total assessed value for the Industrial Area subarea increased from an estimated $83.5 million in FY 2011-12 to an estimated $91.0 million in FY 2016-17, a total change of approximately $7.5 million or 9.00 percent. The 9.00 percent total growth in total taxable value and total assessed value was significantly less than the total growth in total taxable value and total assessed value for the entire City of Fernley, 35.46 percent as reported in Table 2.1, and significantly less than the total growth in total taxable value and total assessed value for A Preliminary Financial and Economic Redevelopment Study for the Page 12 of 35

the entire proposed redevelopment project area, 24.97 percent as reported in Table 2.2, over the entire six year period. Table 2.5 presents the change in total taxable value and total assessed value for the Residential Area proposed subarea between FY 2011-12 and FY 2016-17. Table 2.5 Residential Area Subarea Total Taxable Value and Total Assessed Value FY 2011-12 to FY 2016-17 Fiscal Year Total Taxable Value Percent Total Assessed Value Percent 2011-2012 $99,199,970.18 $34,719,991.00 2012-2013 $98,069,718.88-1.14% $34,324,403.00-1.14% 2013-2014 $91,121,484.58-7.08% $31,892,521.00-7.08% 2014-2015 $106,459,621.72 16.83% $37,260,869.00 16.83% 2015-2016 $132,903,984.40 24.84% $46,516,396.00 24.84% 2016-2017 $150,178,636.16 13.00% $52,562,524.00 13.00% Annual Average Actual Percent $112,988,902.65 9.29% $39,546,117.33 9.29% $50,978,665.98 - $17,842,533.00-51.39% - 51.39% - Between FY 2011-12 and FY 2016-17, the total taxable value and the total assessed value for the Residential Area proposed subarea increased at an average annual rate of 9.29 percent. The total taxable value of the Residential Area subarea increased from an estimated $99.2 million in FY 2011-12 to an estimated $150.2 million in FY 2016-17, a total change of approximately $51.0 million or 51.39 percent. The total assessed value for the Residential Area subarea increased from an estimated $34.7 million in FY 2011-12 to an estimated $52.6 million in FY 2016-17, a total change of approximately $17.8 million or 51.39 percent. The 51.39 percent total growth in total taxable value and total assessed value was significantly greater than the total growth in total taxable value and total assessed value for the entire City of Fernley, 35.46 percent as reported in Table 2.1, and significantly greater than the total growth in total taxable value and total assessed value for the entire proposed redevelopment project area, 24.97 percent as reported in Table 2.2, over the entire six year period. Between FY 2011-12 and FY 2016-17, the total taxable value and the total assessed value for the West Development Area proposed subarea increased at an average annual rate of 5.99 percent. The total taxable value of the West Development Area subarea increased from an estimated $6.3 million in FY 2011-12 to an estimated $8.2 million in FY 2016-17, a total change of approximately $1.9 million or 29.86 percent. The total assessed value for the West Development Area subarea increased from an estimated $2.2 million in FY 2011-12 to an estimated $2.9 A Preliminary Financial and Economic Redevelopment Study for the Page 13 of 35

million in FY 2016-17, a total change of approximately $662,497 or 29.86 percent. The 29.86 percent total growth in total taxable value and total assessed value was less than the total growth in total taxable value and total assessed value for the entire City of Fernley, 35.46 percent as reported in Table 2.1, but greater than the total growth in total taxable value and total assessed value for the entire proposed redevelopment project area, 24.97 percent as reported in Table 2.2, over the entire six year period. Table 2.6 presents the change in total taxable value and total assessed value for the West Development Area proposed subarea between FY 2011-12 and FY 2016-17. Table 2.6 West Development Subarea Total Taxable Value and Total Assessed Value FY 2011-12 to FY 2016-17 Fiscal Year Total Taxable Value Percent Total Assessed Value Percent 2011-2012 $6,338,456.37 $2,218,460.00 2012-2013 $6,040,567.81-4.70% $2,114,199.00-4.70% 2013-2014 $6,380,896.36 5.63% $2,233,314.00 5.63% 2014-2015 $6,406,747.80 0.41% $2,242,362.00 0.41% 2015-2016 $6,373,642.09-0.52% $2,230,775.00-0.52% 2016-2017 $8,231,305.62 29.15% $2,880,957.00 29.15% Annual Average Actual Percent $6,628,602.68 5.99% $2,320,011.17 5.99% $1,892,849.25 - $662,497.00-29.86% - 29.86% - Between FY 2011-12 and FY 2016-17, the total taxable value and the total assessed value for the East Development Area proposed subarea increased at an average annual rate of 10.72 percent. The total taxable value of the East Development Area subarea increased from an estimated $81.3 million in FY 2011-12 to an estimated $127.7 million in FY 2016-17, a total change of approximately $46.4 million or 57.12 percent. The total assessed value for the East Development Area subarea increased from an estimated $28.5 million in FY 2011-12 to an estimated $44.7 million in FY 2016-17, a total change of approximately $16.3 million or 57.12 percent. The 57.12 percent total growth in total taxable value and total assessed value was significantly greater than the total growth in total taxable value and total assessed value for the entire City of Fernley, 35.46 percent as reported in Table 2.1, and significantly greater than the total growth in total taxable value and total assessed value for the entire proposed redevelopment project area, 24.97 percent as reported in Table 2.2, over the entire six year period. Table 2.7 presents the change in total taxable value and total assessed value for the East Development Area proposed subarea between FY 2011-12 and FY 2016-17. A Preliminary Financial and Economic Redevelopment Study for the Page 14 of 35

Table 2.7 East Development Subarea Total Taxable Value and Total Assessed Value FY 2011-12 to FY 2016-17 Fiscal Year Total Assessed Value Percent Total Taxable Value Percent 2011-2012 $28,450,548.00 $81,287,275.77 2012-2013 $25,373,582.00-10.82% $72,495,944.25-10.82% 2013-2014 $23,765,821.00-6.34% $67,902,341.81-6.34% 2014-2015 $31,381,778.00 32.05% $89,662,218.93 32.05% 2015-2016 $37,140,670.00 18.35% $106,116,196.07 18.35% 2016-2017 $44,701,119.00 20.36% $127,717,478.82 20.36% Annual Average Actual Percent $31,802,253.00 10.72% $90,863,575.94 10.72% $16,250,571.00 - $46,430,203.05-57.12% - 57.12% - Table 2.8 presents a comparison of the actual change in total taxable value, the actual percentage change in total taxable value, and the annual average percentage change in total taxable value for the City of Fernley, the entire proposed redevelopment project area, and for each of the proposed subareas. Those areas that underperformed relative to the entire City are highlighted in yellow. Table 2.8 City of Fernley, Propose Redevelopment Project Area, and Subareas Actual, Actual Percentage and Annual Average Percentage in Total Taxable Value FY 2011-12 to FY 2016-17 Geographic Area Actual Actual Percentage Annual Average Percentage City of Fernley $389,044,826.62 35.46% 6.55% Proposed Redevelopment Project Area $141,782,507.12 24.97% 4.79% Historic Downtown $20,996,440.13 14.74% 2.93% Industrial Area $21,484,348.71 9.00% 1.88% Residential Area $50,978,665.98 51.39% 9.29% West Development $1,892,849.25 29.86% 5.99% East Development $46,430,203.05 57.12% 10.72% A Preliminary Financial and Economic Redevelopment Study for the Page 15 of 35

In general, the proposed redevelopment project area, the Historic Downtown proposed subarea, the Industrial Area proposed subarea, and West Development Area proposed subarea each underperformed in-terms of actual percentage change and growth and annual average percentage change and growth in total taxable value relative to the City of Fernley as a whole between FY 2011-12 and FY 2016-17. Only the Residential Area proposed subarea and the East Development proposed subarea had an actual percentage change and annual average percentage change in total taxable value greater than that of the entire City of Fernley between FY 2011-12 and FY 2016-17. Table 2.9 presents a comparison of the actual change in total assessed value, the actual percentage change in total assessed value, and the annual average percentage change in total assessed value for the City of Fernley, the entire proposed redevelopment project area, and for each of the proposed subareas. Those areas that underperformed relative to the entire City are highlighted in yellow. Table 2.9 City of Fernley, Propose Redevelopment Project Area, and Subareas Actual, Actual Percentage and Annual Average Percentage in Total Assessed Value FY 2011-12 to FY 2016-17 Geographic Area Actual Actual Percentage Annual Average Percentage City of Fernley $136,165,688.00 35.46% 6.55% Proposed Redevelopment Project Area $49,623,877.00 24.97% 4.79% Historic Downtown $7,348,754.00 14.74% 2.93% Industrial Area $7,519,522.00 9.00% 1.88% Residential Area $17,842,533.00 51.39% 9.29% West Development $662,497.00 29.86% 5.99% East Development $16,250,571.00 57.12% 10.72% In general, the proposed redevelopment project area, the Historic Downtown proposed subarea, the Industrial Area proposed subarea, and West Development Area proposed subarea each underperformed in-terms of actual percentage change and growth and annual average percentage change and growth in total assessed value relative to the City of Fernley as a whole between FY 2011-12 and FY 2016-17. Only the Residential Area proposed subarea and the East Development proposed subarea had an actual percentage change and annual average percentage change in total assessed value greater than that of the entire City of Fernley between FY 2011-12 and FY 2016-17. A Preliminary Financial and Economic Redevelopment Study for the Page 16 of 35

2.2 Assessment of Estimated Ad Valorem Revenues In Nevada, the estimation of ad valorem revenues is complicated due to the presence of properties that are exempt from paying property taxes, the existence of property tax caps or abatements as established by the 2005 Nevada State Legislature, and the application of different rates or levies. These rates, or levies, can fluctuate over time and the existence of property tax caps, which differ between residential and commercial or industrial properties, can further distort historical assessments as well as future estimations of potential ad valorem property revenues. This process is further complicated by the application of a continuous depreciation schedule that, when applied to an individual property owners ad valorem tax bill, will reduce the assessed value of the property owner s property down to one-quarter of the starting assessed value. Further complication is encountered as certain types of property my use an income based approach to the estimation of the amount of depreciation applied to a property. For these reasons, a standard method to estimate ad valorem revenues for the City of Fernley, the proposed redevelopment project area, and for each of the proposed subareas had to be developed. As this preliminary financial and economic feasibility study is less concerned about the true amount of ad valorem revenues generated city-wide, proposed redevelopment project area-wide, or for each of the five proposed subareas and more concerned about the general trend, it was decided to ignore the potential impacts the above listed concerns may have on ad valorem levels. A comprehensive and final financial and economic feasibility study, however, would have to evaluate actual changes in ad valorem revenues. To do so, a parcel-by-parcel estimation of ad valorem revenues, for the entire city, the entire proposed redevelopment project area, and for each subarea would have to be conducted. Ad valorem revenue data at the parcel level is available from the Lyon County Clerk/Treasure but a significant amount of lead time would be needed in order to acquire and analyze this data. Ad valorem rates for FY 2011-12 through FY 2015-16 were provided by the State of Nevada Department of Taxation. The Department publishes these rates each year in the Local Government Finance Redbook for every fiscal year. The Combined Tax Rate, the County Tax Rate, the Combined Special District Tax Rate, the School Tax Rate, the State Tax Rate #, and the Total Property Tax Rate is reported for each local government taxing unit located within each county in Nevada. The Total Property Tax Rate is estimated by simply adding the Combined Tax Rate, the County Tax Rate, the Combined Special District Tax Rate, the School Tax Rate, and the State Rate #. Table 2.10 presents the Combined Tax Rate, the County tax Rate, the Combined Special District Tax Rate, the School Tax Rate, the State Tax Rate #, and the Total Property Tax Rate for the City of Fernley for each year between FY 2011-12 and FY 2015-16. These rates were not currently available for FY 2016-17 at the time of this publication. Note that these rates were taken directly from the Local Government Finance Redbook as published by the State of Nevada Department of Taxation for each fiscal year. The Combined Tax Rate, the rate at which the City of Fernley will most directly receive ad valorem revenues from, is highlighted. A Preliminary Financial and Economic Redevelopment Study for the Page 17 of 35

Fiscal Year Combined Tax Rate Table 2.10 City of Fernley Various Ad Valorem Rates FY 2011-12 to FY 2015-16 County Tax Rate Combined Special District Tax Rate School Tax Rate State Tax Rate # Total Property Tax Rate 2011-12 0.5469 0.8644 0.4567 1.3367 0.1700 3.3747 2012-13 0.5469 0.8644 0.4803 1.3367 0.1700 3.3983 2013-14 0.6169 0.9287 0.4974 1.3367 0.1700 3.5497 2014-15 0.6169 0.9287 0.4994 1.3367 0.1700 3.5517 2015-16 0.6695 0.9827 0.5001 1.3367 0.1700 3.6050 Average Rate 0.5994 0.9138 0.4868 1.3367 0.1700 3.4959 Between FY 2011-12 and FY 2015-16, the City of Fernley, in general, received an average $0.5994 in ad valorem revenues for every $100.00 of total assessed value from all taxable properties located within the City of Fernley. Between FY 2011-12 and FY 2015-16, Lyon County, in general, received an average $0.9138 in ad valorem revenues for every $100.00 of total assessed value from all taxable properties located within the City of Fernley. Between FY 2011-12 and FY 2015-16, various special districts (for example, existing special assessment districts, general improvement districts, or other special taxing districts with the authority to levy and collect an ad valorem tax from taxable properties located within the City of Fernley), in general, received an average $0.4868 in ad valorem revenues for every $100.00 of total assessed value from all taxable properties located within the City of Fernley. Between FY 2011-12 and FY 2015-16, the Lyon County School District, in general, received an average $1.3367 in ad valorem revenues for every $100.00 of total assessed value from all taxable properties located within the City of Fernley. Between FY 2011-12 and FY 2015-16, the State of Nevada, in general, received an average $0.1700 in ad valorem revenues for every $100.00 of total assessed value from all taxable properties located within the City of Fernley. Note that these estimations do not take into account depreciation, the property tax caps or abatements established by the 2005 Nevada State Legislature, or any of the other impacts on property tax revenues listed above. Again, the only accurate measurement of ad valorem revenues collected by the City of Fernley, Lyon County, various special districts, the Lyon County School District, or the State of Nevada between the FY 2011-12 to FY 2015-16 period would be to estimate ad valorem revenues on a parcel-by-parcel level for every single parcel located within the City, the proposed redevelopment project area, and within each individual proposed subarea. Table 2.11 compares the amount of ad valorem revenues estimated for each taxing jurisdiction and entity (the City of Fernley, Lyon County, special districts, the Lyon County School District, and the State of Nevada) for the City of Fernley as a whole, the entire proposed redevelopment A Preliminary Financial and Economic Redevelopment Study for the Page 18 of 35

project area, and for each individual proposed redevelopment subarea using the average rates estimated and presented in Table 2.10 for FY 2015-16. The annual average total assessed value for the City of Fernley, the entire proposed redevelopment project area, and for each individual subarea presented in Table 2.1 (City of Fernley), Table 2.2 (Proposed Redevelopment Project Area), Table 2.3 (Historic Downtown Subarea), Table 2.4 (Industrial Area Subarea), Table 2.5 (Residential Area Subarea), Table 2.6 (West Development Area Subarea), and Table 2.7 (East Development Area Subarea) are used. Table 2.11 City of Fernley, Lyon County, Special Districts, Lyon County School District, State of Nevada Average Annual Potential Ad Valorem Estimates FY 2011-12 to FY 2015-16 Geographic Area Annual Average Total Assessed Value City of Fernley (0.5994) Lyon County (0.9138) Special Districts (0.4868) Lyon County School District (1.3367) State of Nevada (0.1700) City of Fernley $417,738,599.67 $2,504,008.71 $3,817,211.78 $2,033,467.96 $5,583,911.86 $710,155.62 Proposed Redevelopment $209,063,148.50 $1,253,166.32 $1,910,377.24 $1,017,677.59 $2,794,547.11 $355,407.35 Project Area Historic Downtown $50,961,499.83 $305,473.42 $465,675.99 $248,070.39 $681,202.37 $86,634.55 Industrial Area $84,433,267.17 $506,109.89 $771,534.31 $411,004.26 $1,128,619.48 $143,536.55 Residential Area $39,546,117.33 $237,047.34 $361,364.51 $192,502.59 $528,612.95 $67,228.40 West Development Area East Development Area $2,320,011.17 $13,906.61 $21,199.80 $11,293.35 $31,011.59 $3,944.02 $31,802,253.00 $190,629.06 $290,602.63 $154,807.01 $425,100.72 $54,063.83 Depending upon if and when a new redevelopment project area is created, and assuming that the total assessed value of the new redevelopment project area remains at or above a hypothetical base total assessed value of $209,063,148.50 over the lifetime of the project area, the highlighted row in Table 2.11 represents the total amount of ad valorem revenue each taxing jurisdiction and entity (the City of Fernley, Lyon County, special districts, the Lyon County School District, and the State of Nevada) would receive over the lifetime of the redevelopment project area. Regardless of redevelopment activities in the project area, the City of Fernley would receive an estimated $1.3 million in ad valorem revenues; Lyon County would receive an estimated $1.9 million in ad valorem revenues; the various special districts entitled to ad valorem revenues would receive up to an estimated $1.0 million in ad valorem revenues; the Lyon County School A Preliminary Financial and Economic Redevelopment Study for the Page 19 of 35