Similarities, differences found in review of economic reports

Similarities, differences found in review of economic reports
The economic analysis from the independent 9212 report states the city would experience an increase in tax revenue. Photo by Steve Puterski

This is the first of a three part series on Measure A.

CARLSBAD — In less than three weeks, the polls will close on one of the more recent hot topics in the city’s storied history.

Voters, who began receiving mail-in ballots in January, can also hit the polls to decide the fate of Measure A, otherwise known as the 85/15 plan.

The proposal calls for Caruso Affiliated to develop 26 acres for a luxury mall, entertainment and restaurants, while the remaining 177 acres will be dedicated to open space featuring three miles of hiking trails.

This three-part series covers several topics of the plan after reviewing the 9212 report, which was compiled from independent consulting firms and filed July 17, 2015, and was used to review Caruso Affiliated’s more than 4,000-page report.

The first part summarizes the findings of the economic impacts of the 9212 report. The data was compiled from 16 sources, including city budgets and general plans, Bureau of Labor Statistics and the county, to name a few.

The economic report was compiled by the Rosenow Spevacek Group (RSG), who was hired by the city to review and compare data compiled by the Kosmont Group, who was hired by Caruso Affiliated.

However, the firms contracted by the city to review the Caruso report were not made available for interviews. Instead, the city’s economic development team of Christina Vincent and Kevin Branca responded to questions about the findings.

“In summary, the net annual fiscal impact to the city as projected by the Agua Hedionda South Shore Specific Plan was determined to be 4 percent higher than the net annual fiscal impact projected by (city) staff,” Vincent said.

Findings in some cases were drastically different, while other times were nearly identical.

Taxes are just one of the many points supporters and opponents disagree on. According to RSG, their findings conclude an open space public benefit for $10 million to $16.5 million plus increased property and sales taxes and business license fees.

The sales tax increase, though, was about 19 percent lower than Kosmont’s projections. RSG found the increase would be at $2,131,500, while the property tax to the General Fund was estimated at $843,400, or 15 percent lower, than projections by proponents due to a requirement to repay obligations of the former redevelopment agency.

However, after payments end in Fiscal Year 2021-22, the property tax will “be more in line” with projections.

Overall, the city may see a short-term dip (12 to 18 months) with a 10 to 15 percent decline with “existing establishments” once the mall opens. The report found there would be no long-term or ongoing adverse economic impact.

“This relates to the comparable high-end retailers that would be in the marketplace and potentially competitors to the project,” Vincent added. “Staff discovered through analysis that it would be a modest impact (no more than 10 to 15 percent projected) and short term (no more than 12 to 18 months) based on many new-to-market retailers and tenants listed in comparable development properties.”

The Primary Fiscal Revenues between Kosmont Companies and RSG differ by 15 percent. RSG’s report in the 9212 document estimates $843,400 versus $989,100 by Kosmont.

RSG also estimates an overall 22 percent reduction in total fiscal revenues plus an added 4 percent decrease in primary fiscal expenditures such as police, fire, public works and other services.

A “major finding” by RSG regarding tourism “appear significantly overstated and should not be used for budgeting purposes.” RSG states the tourism related fiscal revenues are not based on valid data sources, which are not provided or explained in the Specific Plan.

Over three phone calls with Kosmont, RSG could not discover data to support the $3 million to $5.2 million in annual tourism-related tax revenue Kosmont reported the city “could,” claim, according to the report.

“Staff could not validate the magnitude of the Transient Occupancy Tax (TOT) revenues projected by Kosmont, so these revenues were not included in the Summary of Fiscal Impacts, but were identified as a potential additional benefit to the city from the project,” Vincent explained.

Another “major finding” by RSG concerns open space. RSG’s report states the estimates of open space public benefit appear reasonable and Caruso Affiliated’s offering to fund construction and maintenance of public space — estimated between $10 million to $16.5 million — with no cost to the public for 50 years is valid.

In addition, RSG urges the city to enter into a formal agreement with Caruso to “memorialize” the obligation.

However, the exact figures for the proposed park and open space improvements were not confirmed in RSG’s analysis, as those numbers were not available for review.

Yet another “major finding” finds the surplus retail demand in the Specific Plan is overstated but still positive. RSG’s report states demand is between 46 to 89 percent less than the stated demand, depending on the year and retail category. However, based on a revised retail demand analysis, RSG agrees the Specific Plan will not negatively impact the city’s ability to attract and retain businesses.

As for the regional economic output, RSG’s report states it’s “generally reasonable” to align with Kosmont’s projections of $319.9 million to $624.3 million, while RSG’s figure for fiscal revenues to the city were 9 percent lower — $44,690,000 to Kosmont’s estimate of $49,343,700 — for a 30-year present value.

“In the Fiscal and Economic Impacts Report prepared by Kosmont, it not only calculated the annual net fiscal impact of the proposed Specific Plan but also projected future revenues and expenses for 30 years, escalating the increase in revenues and expenses every year by either a 2 percent or 3 percent factor, dependent on the line item,” Vincent said. “Kosmont then discounted these annual revenues and expenses back to today’s dollars over the time period of 30 years. Staff focused on the net estimated annual fiscal impact to the city of $2.7 million. Staff did not include this information in the analysis as the main focus was determining the annual net fiscal impact.”

1 Comment
  1. Carl Pope 9 months ago

    “Three kinds of lies: Lies, Damn lies, and statistics” …Disraili

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