in july 2009 the city adopted its current general plan and

THE CITY OF 1 5m 1' CITY COUNCIL AGENDA REPORT

LEASANTON0

February 4, 2014

Finance

TITLE: LONG-TERM FISCAL IMPACT ANALYSIS OF THE GENERAL PLANAND HOUSING ELEMENT UPDATE

SUMMARY

Upon the adoption of the General Plan in July 2009 and the Updated Housing Elementin February 2012, the City hired Economic Planning Systems, Inc. to prepare a report

that evaluates the fiscal impacts on the City's General Fund budget of the City's growthpolicies through buildout of the City. The purpose of the fiscal impact analysis is to

estimate the impact of future development on the costs of providing City services to thefuture development as compared to the tax revenues generated by the future

development. The analysis will help the City determine if the City's current fiscalperformance ( revenues versus expenditures) is sustainable through buildout of the City.While the focus is on the fiscal impacts of future growth, the study makes reference tothe important interaction between new and existing development. The analysis is

generally based on the fiscal characteristics of the community— e.g., revenues,

expenditures, building and land values—and the characteristics of the future

development based on land use designations in the General Plan— e.g., type of land

use, distance from existing public facilities.

The conclusion of the fiscal analysis is that the City's current fiscal performance issustainable through buildout of the City based on the Housing Element and GeneralPlan land use projections and designations.

RECOMMENDATION

Staff recommends the City Council receive and review the fiscal impact report as

prepared by Economic & Planning Systems, Inc.

FINANCIAL STATEMENT

There is no financial impact from the preparation and receipt of the study. The

recommendations in the study are designed to support a balanced and integrated

financial approach to future land use planning that would maintain a high quality of lifefor existing and future residents that is fiscally sustainable through buildout of the City.

BACKGROUND

In July 2009 the City adopted its current General Plan and in February 2012 the Cityadopted its Housing Element Update. Land use policies, such as those reflected in

Pleasanton' s General Plan and Housing Element Update, have broad implications for

the City's fiscal well-being and sustainable growth. Going forward, the City wants tomake sure that new growth does not result in any adverse effects on the City. In order

to determine the impacts of growth, the City hired Economic & Planning Systems, Inc.

EPS) to prepare a fiscal impact analysis based on the land use data contained in itsGeneral Plan and Housing Element Update. The East Side of Pleasanton that is

currently under study by the Task Force was excluded from the analysis. The fiscal

analysis of the impacts of development in this area will be considered separately at alater date when the East Side Specific Plan Study comes forward for Council review andapproval.

DISCUSSION

The following are the key findings in the study:

1. Pleasanton' s service population ( employees plus night time population) is

expected to grow by roughly 24 percent through buildout, suggesting that existingdevelopment will continue to account for the majority of General Fund costs andrevenues ( 76 percent). Residential uses are estimated to grow by 15-20 percent whilecommercial space is expected to increase by 35- 40 percent.

2. New growth is likely to have a positive fiscal impact on the City's General Fund atbuildout. The analysis estimates that new growth will result in additional annual revenue

of $15. 1 million and will exceed additional annual expenditures of $11. 1 million;

resulting in an annual net fiscal surplus of$4.0 million to the City. Property tax will

comprise the largest revenue to the City, while public safety and parks will result in themost significant expenditures from new growth.

3. Fiscal impacts of residential uses will vary depending on product orientation anddensity. For-sale housing units provide fiscal advantages for the City, while multifamilyrental housing will likely result in fiscal shortfalls. However, these potentially negative

impacts could be mitigated if new apartments provide housing opportunities that allowexisting empty nesters ( with higher income households) to remain in Pleasanton as they

age and downsize. This is especially true if they sell their existing single-family homes,which likely have depressed assessed values due to Proposition 13, to more affluent

families.

4. Commercial uses result in positive fiscal impacts on the City's General Fund.Retail uses generate the highest fiscal benefits to the City's General Fund due togenerating both sales tax and property tax revenues. This is followed byindustrial/warehouse, R& D, and office use.

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5. The City's projected development growth dynamics suggest that new local-

serving retail would shift a portion of sales from existing retail space. The analysis

assumes that Pleasanton continues capturing growth in regional sales through theaddition ofnew regional retail development. However, local-serving retail is assumed tobe supportedprimarily by household spending and growth in this area ofretail sales willbe highly dependent on the growth in household incomes through the development ofnewhousing unit. Without this new housing development, newly developed local-servingretail will shift a portion of sales from existing local-retail sales and not result in anoverall growth in retail sales.

6. A number of fiscal mitigation measures could enhance the City's long- term fiscaloutlook and remedy fiscal impacts of higher density residential uses. Location, is avery important factor affecting fiscal impacts. Infill development, both residential and

commercial typically provides more advantageous fiscal outcomes due to lower publicservice costs relative to outlying areas. A a result, locations in compact development

settings, such as downtown or close to the BART stations, may reduce potential fiscalshortfalls from higher density residential uses.

7. New growth should be evaluated holistically with fiscal considerations balancedagainst other policy objectives. The City's growth policy should balance a mix ofrelated uses rather than treating them as distinct or independent items. Fiscal benefits ofspecific land uses typically vary by site-specific and locational attributes. Long-term

policy decisions should consider balancing fiscal issues against the City's other

objectives, such as economic development, provision ofadequate affordable housing forthe local workforce, and maintaining a high quality oflife.

8. The City's long- term fiscal health will be more determined by the existing

developed areas than by new growth. New growth will comprise less than 25 percent

of the City's development at buildout. As a result, the City's fiscal health will be moreaffected by the performance of existing development and established areas within theCity.

CONCLUSION

The completion of the fiscal analysis has been a Council priority since the adoption ofthe General Plan in 2009. It was delayed until the adoption of the Housing Element in2012. The analysis provides a true quantitative look at the fiscal impacts on the GeneralFund of growth as designated in the City's General Plan and Housing Element throughbuildout of the City. According to the analysis, the proposed land use mix supports the

City's efforts to sustain and enhance service levels to the community through buildout ofthe City.

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Submitted by: Approved by:

o

Emily E. Wagner Nelson Fialho

Director of Finance City Manager

Attachments:

1. Pleasanton General Plan Fiscal Impact Analysis dated January 2013 prepared byEconomic & Planning System, Inc.

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Attachment 1

Final Report

Pleasanton General Planl,uiiil

Fiscal Impact Analysis

Prepared for:

City of Pleasanton

Prepared by:

Economic & Planning Systems, Inc.

Economic& Planning Systems, Inc.2501 Ninth Street, Suite 200 January 16, 2014Berkeley, CA 94710-2257510 841 9190 tel

510 841 9208 fax

Berkeley EPS # 121062Denver

Los Angeles

Sacramento

www.epsys.com

Table of Contents

1. INTRODUCTION 1

Study Overview 1

Background 1

Key Findings 2

Report Organization 4

2. ECONOMIC AND FISCAL ENVIRONMENT 5

Pleasanton Socioeconomic Overview 5

Recent Economic Trends 6

General Fund Budgetary Trends 7

Role of State Budget 11

3. PROJECTIONS OF FUTURE GROWTH 12

Land Use Forecasting Methodology and Projections 12

Population, and Employment Projections 15

4. FISCAL IMPACT METHODOLOGY AND KEY ASSUMPTIONS 19

Methodological Overview 19

Key Demographic and Market Assumptions 21

5. GENERAL FUND REVENUES 25

Property Tax 25

Property Tax In Lieu of VLF 25

Document Transfer Tax 25

Sales Tax 29

Business Licenses 32

Hotel and Motel Tax 32

Licenses, Permits, and Franchise Fees and Fines and Forfeitures 32

Miscellaneous Revenue 32

6. GENERAL FUND EXPENDITURES 35

General Government 35

Community Development 35

Police 37

Fire 40

Operations Services Department 43

Community Services 48

Table of Contents ( continued)

Library48

Water and Sewer Subsidy 49

7. FISCAL IMPACT RESULTS AND MITIGATION MEASURES 52

Fiscal Impact Allocation by Land Use 52

Fiscal Impact Results 52

Policy Considerations and Mitigation Measures 56

APPENDIX A

List of Tables

Table S- 1 Summary of Fiscal Impacts From New Growth ( rounded) 3

Table 1 Population by Educational Attainment 5

Table 2 Population by Age Distribution 6

Table 3 Pleasanton General Fund Revenue Distribution ( FY2012- 13) 8

Table 4 Pleasanton General Plan Land Use Categories 13

Table 5 Pleasanton Adjusted Projections Through Buildout 16

Table 6 New Population and Employment Growth Projections 17

Table 7 Budget Summary and Estimating Factors 20

Table 8 Citywide General Assumptions and Data ( FY2012- 13) 22

Table 9 Property Value Estimates 23

Table 10 Annual General Fund Revenues at Buildout 26

Table 11 Property Tax and Property Tax In Lieu of VLF Estimate 27

Table 12 Documentary Transfer Tax Estimate 28

Table 13 Local Household Sales Estimate 30

Table 14 Sales Tax Estimate 31

Table 15 Business License Tax Estimate 33

Table 16 Other Revenue Estimates 34

Table 17 Increase in Annual General Fund Expenditures at Buildout 36

Table 18 Community Development Cost Estimate 38

Table 19 Police Department Service and Cost Estimate 41

Table 20 Fire Cost Estimate 44

Table 21 Street Maintenance Division Cost Estimate 46

Table 22 Parks Cost Estimate 47

Table 23 Community Services Cost Estimate 50

Table 24 Library Cost Estimate 51

Table 25 Allocation by Land Use 53

Table 26 Fiscal Impact Allocation Detail 54

List of Figures

Figure 1 Pleasanton Revenue Distribution by Fund ( FY2012- 13) 7

Figure 2 Pleasanton General Fund Revenue and Expenditure Trends

nominal dollars, FY1992/ 93- FY2012/ 13) 8

Figure 3 Pleasanton Composition of Assessed Value by Land Use ( FY2009- 10) 9

Figure 4 Pleasanton Taxable Sales Allocation by Category ( FY2010- 11) 9

Figure 5 Pleasanton Taxable Sales Allocation by Geography ( FY2011- 12) 10

Figure 6 Pleasanton General Fund Expenditures ( FY2012- 13) 10

Figure 7 Pleasanton Police Department - District Boundaries 39

Figure 8 Pleasanton Fire Department - District Boundaries 42

1. INTRODUCTION

Study Overview

This study has been conducted by Economic & Planning Systems, Inc. ( EPS) for the City of

Pleasanton in order to provide a fiscal impact analysis for the City' s recently adopted growth

policies. Specifically, this report evaluates the fiscal implications of the General Plan adopted inJuly 2009 and Housing Element adopted in February 2012 designed to guide new growth in theCity through buildout. The analysis is based on interviews with City staff as well as review of

applicable budget trends both at the City and State level.

The fiscal impact analysis is focused on the City' s General Fund budget, comparing the costs of

providing public services and maintaining public facilities with the primary revenue sourcesavailable to cover these expenditures. While the focus is on the fiscal impacts of growth, the

study makes reference to the important interaction between new and existing development.Going forward these relationships will be critical to understanding the City' s overall fiscalperformance because even at buildout of the General Plan existing land uses ( i. e., uses already

in place) will continue to account for the bulk of General Fund costs and revenues.

Location and type of growth can have important fiscal implications for the General Fund.

Consequently, this study is based on land use projections that distinguish density, product type,

and other characteristics of new development. The primary goal of the fiscal impact analysis is

to quantify the impact of each land use on the City' s long- term fiscal health and to inform policyformulation related to growth patterns and appropriate development mix that is fiscallysustainable over the General Plan buildout.

It should be noted that fiscal results ( annual surpluses or deficits) are simply indicators of fiscal

performance; they do not mean that the City will accordingly have surplus revenues or deficitsbecause it must have a balanced budget each year. Persistent shortfalls shown in a fiscal impact

analysis may indicate the need to reduce service levels or obtain additional revenues; persistent

surpluses will provide the City with resources to improve overall service levels or reduceliabilities, or to address deferred maintenance. This analysis is designed to inform growth

policies and should not be used for actual budgeting purposes. Thus, the results should not be

used as a basis for making actual, department level staffing decisions or annual revenueestimates.

Background

The City has recently adopted a new General Plan and Housing Element with the documentsdesigned to provide guiding principles for the City' s land use and growth. The City plans to

accommodate nearly 10, 000 new residents and 22, 800 additional employees through buildout asit is transitioning from a growth- oriented focus to a more stable state.

Pleasanton has enjoyed a balanced economic base with historically strong fiscal performance.

The City has taken steps towards balancing its fiscal and economic development with theinclusion of well- designed fiscal and economic policies in its General Plan. Going forward, the

City staff wants to make sure that new growth does not result in any adverse effects on the City.

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Pleasanton General Plan Fiscal Impact Analysis

Final Report 01/ 16/ 14

In this context, planning for new growth presents a fresh opportunity to evaluate Pleasanton' sfiscal performance relative to existing services and budgetary structure. Recommendations in

this study are designed to support a balanced and integrated approach for future land useplanning that would maintain a high quality of life for existing and future residents.

Key Findings

The fiscal impacts developed as part of this analysis are summarized in Table S- 1 ( all results are

expressed in constant 2013 dollars). The key findings and implications are summarized furtherbelow.

1. Pleasanton' s service population) is expected to grow by roughly 24 percent through

buildout, suggesting that existing development will continue to account for the bulkof General Fund costs and revenues. Residential uses are estimated to grow by 19

percent while commercial space is expected to increase by 35 percent in the City.

Projections for new growth are based on the recently adopted General Plan and HousingElement and are adjusted to reflect the most likely growth outcome below the maximumallowed development capacity. The East Pleasanton Specific Plan, the planning work for

which is c:urrently in progress, is excluded from the forecast. Residential composition of

future residential growth is projected to shift towards higher density uses and away from the

City' s existing lower density pattern. Roughly two- thirds ( 69%) of new residential growth is

expected to be in multifamily compared to the existing share of 26 percent.

2. New growth is likely to have a positive fiscal impact on the City's General Fund atbuildout. This analysis estimates that new growth will result in a benefit on the City with

new annual revenue of$ 15. 1 million exceeds annual expenditures of$ 11. 1 million ( see

Table S- i). These estimates result in an annual net fiscal surplus of $4. 0 million to the City.

Property tax will comprise the largest revenue to the City, while public safety and parks willresult in the most significant costs from new growth.

3. Fiscal impacts of residential uses will vary depending on product orientation and

density. For- sale development provides fiscal advantages for the City, while multifamily

rentals would likely result in fiscal shortfalls. Future impacts of residential growth will depend

on market orientation of higher density product and its ability to attract higher incomehouseholds, which would improve revenues to the City. To the extent that multifamily uses

provide an entry- level product for households otherwise priced out of Pleasanton, their fiscalimpacts are likely to be less favorable. On the other hand, these potentially negative impacts

could be mitigated if new apartments provide housing opportunities that allow existing empty

nesters to remain in Pleasanton as they age and downsize. This is especially true if they sell

their existing single- family homes, which likely have depressed assessed values due toProposition 13, to more affluent families.

1 Estimated by adding total residential population and 68% of total employment. It represents a

measure of public service demand in which employees are given a share of resident weight because ofmore limited service requirements. See Table A- 4 for additional detail.

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Table S- 1: Summary of Fiscal Impacts From New Growth ( rounded)

Total

Item rounded)

General Fund Revenues

Property Tax 9,500,000

Property Tax In Lieu of VLF 1, 087,000

Document Transfer Tax 124,000

Sales and Use Tax 2, 130,000

Business Licenses 529,000

Hotel and Motel Tax 624,000

Licenses and Permits 14, 000

Fines and Forfeits 115, 000

Franchise Fees 485,000

Miscellaneous Revenue 469,000

Total Revenues 15, 077,000

General Fund Expenditures

General Government 285,000

Community Development 307,000

Housing 192, 000

Economic Development 177, 000

Police 3,594,000

Fire( 4) 2, 303,000

Operations Services

Streets 840,000

Parks 2,281, 000

Community Services 513,000

Library Services 567,000

Sr. Water/ Sewer Subsidy 49,000

Total Cost 11, 108,000

General Fund Net 3, 969,000

4. Commercial uses result in positive fiscal impacts on the City's General Fund. Retail

uses generate the highest fiscal benefits to the City' s General Fund, followed byindustrial/ warehouse, R& D, and office uses. However, the fiscal performance of all

commercial development will be driven by strong tenant occupancy and thus tied to broaderregional economic trends. As a result, the policy framework should be linked to localemployment that would support the increase in the City' s commercial space.

5. The City's projected development growth dynamics suggest that new retail wouldshift a portion of sales from existing retail space. An emphasis on creating additional

retail space will not necessarily improve the City' s long- term fiscal health if householdincomes do not support consumer demand growth or if new stores shift sales from existing

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retail. This analysis assumes that Pleasanton continues capturing growth in regional sales

while local- serving retail is assumed to be supported primarily by household spending.

6. A number of fiscal mitigation measures could enhance the City's long- term fiscaloutlook and remedy fiscal impacts of higher density residential uses. Location is an

important factor affecting fiscal impacts; infill development ( residential and commercial)

typically provides more advantageous fiscal outcomes due to lower public service costsrelative to outlying areas. As a result, locations in compact development settings, such as

downtown or close to the BART station, may reduce potential fiscal shortfalls from higherdensity residential uses.

Implementation of special taxes could also offset the impact of new growth. Special taxes

guarantee an ongoing revenue source to pay for public services and infrastructuremaintenance and reduce the burden on the General Fund. The City could also recover a

higher share of its costs through fees, as many of the current fees fall below those incomparable cities. Finally, condo mapping new multifamily projects could encouragepotential conversion to ownership which would result in higher revenues long- term. This

approach will need to be balanced with the City' s affordable housing goals to preserve the

housing stock for the local labor force.

7. New growth should be evaluated holistically with fiscal considerations balancedagainst other policy objectives. The City' s growth policy should balance a mix of relateduses rather than treating them as distinct or independent items. Fiscal benefits of specific

land uses typically vary by site- specific and locational attributes. The estimates in this

analysis are intended to highlight the magnitude for fiscal performance by land use type.

Ultimately, these land uses will not exist in isolation and will depend on synergetic effectswith other existing and new development. Long- term policy decisions should consider

balancing fiscal issues against the City' s other objectives, such as economic development,provision of adequate affordable housing for the local workforce, and maintaining a highquality of life. For example, a site adjacent to the BART station could be best suited for

multifamily development despite the fiscal impacts due to proximity to transit, creation ofdensity around a major activity node, and provision of an affordable housing stock in theCity' s core.

8. The City's long- term fiscal health will be more determined by the existingdeveloped areas than by new growth. New growth will comprise less than 25 percent of

the City's development at buildout. As a result, the City' s fiscal health will be more affected

by performance of existing development and established areas within the City. In this

context, fiscal and economic development policy should focus on the existing core to ensurethat the high quality of life remains in the City. Revitalization and reuse of the exiting urban

fabric will play a key role in this effort.

Report Organization

Following the introduction, economic background and fiscal environment are described inChapter 2 while the future growth forecast is described in Chapter 3. Chapter 4 provides the

analytical framework and key assumptions in this study. General Fund revenues are estimated

in Chapter 5 and expenditure in Chapter 6. Chapter 7 summarizes the findings and mitigation

measures for future growth. Detailed calculations are included in the Appendix.


2. ECONOMIC AND FISCAL ENVIRONMENT

This chapter provides an overview of the City' s local economy and fiscal environment that affectsnew development trends and their impact on the City.

Pleasanton Socioeconomic Overview

Pleasanton is located in the Tri- Valley region of the San Francisco

Bay Area at the crossing of two major freeways, I- 680 and I- 580. It has a population of 73, 000 residents and roughly 53, 000 jobs. t

The City' s evolution into a regional hub for single- family ownershiphousing, office, and retail space has been driven by its strategicP Y 9

location, high quality of life, BART expansion, and effective land

use policies. Pleasanton experienced rapid population growth

during the 1980s and 1990s with much success attributed to a Downtown Pleasanton

Source: Tri- Valley Convention&

variety of desirable community attributes, including good schools, Visitors Bureau

low crime rate, recreational amenities, and an attractive,

pedestrian- friendly downtown.

Pleasanton' s residents are educated and affluent relative to Livermore and Alameda County as a

whole. Over 58 percent of Pleasanton' s residents hold a college degree compared to 41 percent

in Livermore and 42 percent in Alameda County ( see Table 1). Pleasanton' s median household

income reached nearly $ 115, 200 by 2010 with the City registering one of the highest medianhousehold incomes in the Bay Area. This trend suggests that the City has been successful in

attracting educated and relatively affluent households.

Table 1 Population by Educational Attainment

Pleasanton Livermore Alameda County

Education Level Total Share Total Share Total Share

No High School Diploma 2,422 5.0% 6,302 11. 1% 140, 983 13. 3%

High School Graduate 5, 763 11. 9% 8,629 15.2% 193, 984 18. 3%

Some College 9,033 18.7% 13, 114 23. 1% 201, 405 19. 0%

Associates 2, 979 6.2% 5,365 9. 5% 74,732 7. 1%

Bachelors 17, 387 35.9% 15,016 26.5% 268,716 25.4%

Master's/Advanced Degree 10. 849 22.4% 8.345 14.7% 180.204 17. 0%

Total 48,432 100.0% 56,772 100.0% 1, 060,024 100.0%

Population Over 25, 2012

Source: 20012 American Community Survey( ACS), and Economic& Planning Systems, Inc.




Pleasanton' s population is older than other Tri- Valley cities. Its average age of 40. 5 exceeds

Livermore' s 38. 2 and Dublin' s 35. 3, as shown in Table 2. Pleasanton has the highest share of

active" seniors in the 65 to 79 years age cohort as well as children, and the least young

professionals between the ages of 20 and 34. The age distribution suggests Pleasanton' s

desirability among affluent families that seek school performance and other quality of lifeamenities for their children. Many of these parents are also likely to remain in the City afterretirement, resulting in strong demand for senior services.

Table 2 Population by Age Distribution

Pleasanton Livermore Dublin

Age Total Share Total Share Total Share

Under 10 years 9,753 14. 3% 10,679 13.6% 6,057 14. 2%

10 to 19 years 10,299 15. 1% 11, 228 14. 3% 4,692 11. 0%

20 to 34 years 10, 913 16. 0% 13, 270 16.9% 11, 133 26. 1%

35 to 49 years 17, 733 26.0% 20,886 26.6% 11, 944 28.0%

50 to 64 years 12, 686 18. 6% 14, 762 18. 8% 6, 356 14. 9%

65 to 79 years 5, 184 7.6% 5,496 7.0% 2, 048 4. 8%

80 years and over 1. 637 2.4% 2. 199 2.8% 427 1. 0%

Total 68,204 100.0% 78,520 100.0% 42,657 100.0%

Median Age 40.5 38.2 35.3

Note: Factors such as differences in residence rules, universes, and reference periods may affect

comparisons of ACS estimates with decennial census estimates. For example, given the

reference period differences, seasonality may affect comparisons between decennial censusand ACS estimates.

Source: 2006-2010 American Community Survey( ACS), and Economic& Planning Systems, Inc.

Pleasanton has become more ethnically diverse over the last 20 years. The City' s residents are

increasingly diverse, well- educated, and affluent. Asian and multi- race persons have become a

significantly greater share of the population. 2

Recent Economic Trends

At this time, the United States is still recovering from the Great Recession and economicconditions remain uncertain. The Great Recession had a profound effect upon local economies,

growth, and related fiscal conditions in California cities, with widespread home foreclosures,unemployment, reduced consumer confidence and credit, and declining property values. These

conditions have diminished General Fund revenues from property, sales, business license,development fees and other sources in recent years. While home values have started to recover,

the effect on municipal revenues is delayed. At the same time, demand for many of the public

services funded through the General Fund, such as public safety, facility maintenance, and park

and recreation, has remained steady and in some cases increased.

2 2011 Eastern Alameda County Human Services Needs Assessment.

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General Fund Budgetary Trends

Pleasanton has enjoyed a diversified economic base with historically strong fiscal performanceand has adopted measures to balance short- term shortfalls when necessary. While Pleasanton

has not been as strongly affected by the recent economic downturn as many other cities, thebudgetary impact of the Great Recession was evident.

General Fund Revenues

The General Fund is the largest fund in the City and makes up nearly half of the City' s financialoperations, as shown in Figure 1. It experienced revenue declines following 2008 for the first

time during the last 20 years. Although some level of recovery has taken place since 2010,

revenues have still not rebounded to the pre- 2008 level, as shown in Figure 2. Despite effective

cost management that resulted in cost cutting after 2008, the City' s fiscal surplus has been

significantly reduced relative to the historic performance over the last 20 years. Cost reductions

reflect recently implemented measures such as no salary increases and future pension costincreases offset by the pickup by employees of the employer- paid member contributions.

Figure 1 Pleasanton Revenue Distribution by Fund ( FY2012- 13)

16% 1%

46%

21%

18%

I General Fund Enterprise Fund Dinternal Service CI Special Revenue ® Debt Service and Trust


Pleasanton General Plan Fiscal Impact AnalysisFinal Report 01/ 16/ 14

Figure 2 Pleasanton General Fund Revenue and Expenditure Trends ( nominal dollars,

FY1992/ 93- FY2012/ 13)

100,000

75,000

19

50,000a

fx-

25,000

0 1 1 1 1 1 T 1 1 1 I 1 1 1 1 1 1 1 1 1 1

I° ,° S° °°' °° °ti° ti° °

ry °°ti° x°

13dap °

1 °°` °°° °° °.'°. 4,1

Revenues - f-Expenditures

Property taxes and sales taxes comprise the majority of the General Fund revenues. As shown

in Table 3, these two items comprise over 75 percent of the City' s ongoing proceeds.

Development fees, a primary revenue source driven by new development in the City, make up

only 3 percent of total revenues.

Table 3 Pleasanton General Fund Revenue Distribution ( FY2012- 13)

General Fund Revenues Total Distribution

Property Tax 48,681, 990 54. 3%

Sales and Use Tax 19,446,679 21. 7%

Business Licenses 2,900,000 3.2%

Hotel and Motel Tax 3,450,000 3.8%

Developer Fees 2, 886,691 3.2%

Other 12, 328,544 13.7%

Total 89,693,904 100%

The share of property tax has been gradually increasing over the last 15 years, while sales taxshare has been decreasing. Rapid property tax revenue growth has been driven by highproperty values with citywide assessed valuation increasing by an annual average rate of 7. 8percent over the last 15 years. While high, this rate was below the City' s growth in the 1980' s

when assessed value increase averaged 18 percent a year. The majority of the City' s assessed

value comprises residential uses, as shown in Figure 3.

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Figure 3 Pleasanton Composition of Assessed Value by Land Use ( FY2OO9- 10)

4% 6%

22%

68%

Residential • Commercial 13 Industrial • Other

Sales tax remains one of the City' s key revenue sources despite the reduction in recent years.

The City receives substantial sales taxes from residents as well as business to business sales.Pleasanton has a major retail cluster and competes for sales directly with Dublin and Livermore

and indirectly with many other cities along the I- 680 corridor. The majority of the City' s sales

tax proceeds are driven by retail sales, business- to- business sales, and automotive sales, asshown in Figure 4. Within the City, the majority of taxable sales originate in North Pleasanton,Stoneridge Mall, and Hacienda Business Park, as shown in Figure 5.

Figure 4 Pleasanton Taxable Sales Allocation by Category ( FY2O1O- 11)

5% 4%

o, 35%

24%

18% 9%

5%

Retail Restaurant& Hotels 13 Building& Construction • Auto& TransportationSW : HdL

El Business& Industry s Fuel& Service Stations • Food& Drugs




Figure 5 Pleasanton Taxable Sales Allocation by Geography ( FY2011- 12)

3%

16%31%

2%

r

31% 16%

North Pleasanton Hacienda Business Park 13 Stoneridge Mall a South Pleasanton

till Bernal Corporate Center ® Other Citywide Retail • Downtown source: HdL


The majority of the General Fund expenditures consists of personnel costs that comprise morethan three- quarters ( 75%) of the City' s total expenditures. On a department basis, police and

fire comprise the largest share of the cost, combining for 44 percent, followed by operationsservices, general government, and community development ( see Figure 6).

Figure 6 Pleasanton General Fund Expenditures ( FY2012- 13)

Item Total Distribution

General Government( 1) 12, 113,226 13.9%

Community Development( 2) 11, 564,885 13.2%

Police 24,328,013 27.9%

Fire 14,217,879 16. 3%

Operations Services( 3) 14,238,680 16. 3%

Community Services( 4) 6,716, 140 7.7%

Library Services 4, 114,723 4.7%

Total Cost 87,293,546 100.0%

1) Includes City Manager, City Attorney, Human Resources, City Council, Administration, and Finance.2) Includes Building, Engineering, Housing, Economic Deleelopment, and Planning.3) Includes Park and Street maintenance, Facility and Fleet Maintenance, Signs and Street Lights, Water, and Sewer.4) Includes Recreation.




Role of State Budget

Pleasanton' s General Fund is affected by the State budget and how lawmakers in Sacramentoaddress their fiscal challenges. In the past, State lawmakers have targeted cuts in a number of

local ( city and county) programs and revenues as well as a transfer of traditionally State

responsibilities to local bodies ( e. g., " realignment").

Over the last several years, State budget has been contracting. As a result, a number of cost

cutting measures have been implemented. These measures include cuts to public schools,

community colleges, libraries and certain social programs. In addition, recent run ups in pension

costs have caused substantial increases in local government expenditures.


3. PROJECTIONS OF FUTURE GROWTH

This chapter provides the overview of the City' s growth projections based on the recentlyadopted General Plan and Housing Element.

Land Use Forecasting Methodology and Projections

Categorization

The City' s General Plan update was based on the development forecast through buildout ofvarious land use categories developed for the City' s traffic model that informed the General Planupdate. This forecast was based on the maximum development capacity with relevant land usecategories consisting of residential, hospitality, commercial, and recreation uses, as shown in

Table 4.

A forecast of new development and other economic changes is critical for conducting the fiscalimpact analysis, though not all land use categories are relevant. For the purpose of this analysis,

EPS retained the relevant land use categories based on the following criteria:

a) Projected to experience new growth through buildout

b) Likely to have significant local fiscal and economic implications

Each land use excluded from the fiscal impact analysis is briefly described below:

Mobile Homes: These units comprise 1. 5 percent of the overall housing base. The

projected increase of 1 percent ( by 4 mobile homes) in this category is not likely to have any

substantial fiscal implications for the City' s ongoing operation.

Hospitals: The City currently has one major hospital and other medical offices. Kaiser is the

City' s largest employer3, and Valley Care Medical is the fifth largest, combining for nearly4, 800 jobs. Hospital space is projected to nearly double through buildout. Fiscal impacts of

hospitals vary widely depending on a range of factors, such as location, market orientation,

size, programming, and relationship to the broader community, as well as degree ofintegration into the local economy. Given hospitals' nonprofit status in California, they are

generally exempted from property taxes, with the exception of for-profit subsidiaries.However, they do generate franchise fees, sales and use taxes and possessory interest taxesfor subleasing activity to for-profit operators ( i. e., medical offices).

Hospitals on their own typically fall short of breaking even, but overall programs often

include a for-profit component that generates property taxes and makes the overall impactless conclusive. Another consideration is whether new hospital development replaces an

existing property tax- generating use or is built on a site that was not generating anysubstantial property tax revenues. The precise nature of the hospital impact could vary

3 Kaiser operates its IT division in Pleasanton.


Table 4

Pleasanton General Plan Land Use Categories

Fiscal Impact Analysis of the Pleasanton General Plan; EPS# 121062

Included

Item Units in FIA

Residential

SF Detached dwelling units yes

Multifamily Rental dwelling units yes

Condo/Townhome dwelling units yes

Mobile Homes dwelling units no

Elderly Attached Housing dwelling units yes

Retirement/Convalescent Housing beds yes

HospitalitySuites/Hotel rooms no

Hotel/ Motel rooms yes

Commercial

Office 1, 000 sq. ft. yes

Hospital 1, 000 sq. ft. no

R& D 1, 000 sq. ft. yes

Industrial/Warehouse 1, 000 sq. ft. yes

Neighborhood Retail 1, 000 sq. ft. yes

Regional Retail 1, 000 sq. ft. yes

Auto Dealer 1, 000 sq. ft. yes

Other Retail 1, 000 sq. ft. yes

Auto Care/Service Center 1, 000 sq. ft. no

Fitness/Athletic Club 1, 000 sq. ft. no

Gas Stations fueling positions yes

Gravel Processing acres no

Winery acres no

Movie Theater/Amphitheater seats no

Recreation

Community Park acres yes

Regional Park acres no

Open Space and Trails acres yes

Golf Course Holes no

Other Public/Quasi-Public Uses

Public/ Institutional 1, 000 sq. ft. no

Religious 1, 000 sq. ft. no

Schools students no

Day Care students no

Mortuary/Cemetery acres no

Parking/ Park-and-Ride Lot parking stalls no

Source: City of Pleasanton and Economic& Planning Systems, Inc.

Economic& Planning Systems, Inc. 1/ 15/2014 13P:11210001121062PIeasantonlModel1121062 Fiscal6.xls



based on a number of specific factors. However, for the purpose of this study which is

focused on other land uses, hospitals are assumed to be fiscally neutral.

Auto Care/ Service Center: These uses are projected to increase by 12 percent through

buildout. While these uses generate limited sales taxes, their primary function is service-

oriented. As a result, the fiscal impact of auto care and service functions is not assumed to

be significant for the purpose of this analysis.

Fitness/ Athletic Clubs: The City currently has 184, 000 square feet of fitness clubs andathletic facilities with 4, 000 additional square feet planned through buildout. While these

facilities generate some fiscal impacts ( i. e., property and sales tax revenues and public works

costs), their primary service- oriented focus makes fiscal impacts negligible. In addition, the

local- serving nature of these uses would predominantly service the City' s population growthwith some of its fiscal impacts captured elsewhere. As a result, these uses are excluded from

the fiscal impact analysis.

Gravel Processing: The share of sales tax captured by local jurisdictions from gravelprocessing varies depending on the " point of sale" of end users with most local jurisdictions

capturing a small tax share of the overall sales activity. Gravel processing activities generate

truck traffic, which results in increased road maintenance costs. In some cases, these costs

are mitigated by charging companies user fees that fund excessive road usage. While gravel

processing is projected to increase, most of the facilities are likely to be located in East

Pleasanton outside of the City's limits. This expansion is not expected to result in any

substantial fiscal implications for the City's ongoing operation, such as sales tax revenue. As

a result, this category is not considered in the context of the fiscal impact analysis.

Winery: This use is projected to increase in Pleasanton by 50 percent. Fiscal impacts of

wineries vary widely depending on a range of factors, including the extent of the agricultural

operation on site, restaurant/ catering activities, traffic impacts, and the " point of sale"

location of retail customers ( with local jurisdictions not capturing sales taxes if wine is sold atwholesale to retailers that generate sales taxes at their respective locations). For the

purpose of this analysis, winery operation is assumed to be fiscally neutral on the City' songoing operation.

Movie Theater/ Amphitheater: These uses are projected to increase by 116 percentthrough buildout. While these facilities typically generate sales taxes from concession sales,

they also result in road maintenance and public safety costs. The fiscal impact of movie

theater and amphitheater uses is not likely to be significant for the purpose of this analysis.

Regional Parks: While substantial growth in the regional park acreage is projected, the cost

for regional park maintenance is provided by the East Bay Regional Park District rather thanthe City. Therefore, forecasted growth in regional parks is not envisioned to have any

significant implications for the City' s ongoing operation.

Golf Course: While the City currently has 63 holes among various golf courses, no increase

in this category is projected through buildout.

Economic& Planning Systems, Inc. 14 P:\ 121000\ 121062PleasantonkReport\ 121062Report_FINAL. doc



Other Public/ Quasi- Public Uses: These uses, including institutional space, religious

facilities, schools, day care, and parking spaces, are projected to experience growth throughbuildout with only mortuary/ cemetery acreage remaining fixed. While some of these uses

result in small fiscal revenues and expenditures, their impact on the overall City budget is

negligible. 4 Some of the growth in these uses is projected to support future population and

employment growth, the impacts of which will be captured elsewhere in the fiscal impact

analysis. For example, the increase in the number of students, driving school and day care

projections, will be captured under the household growth based on the residential housingprojections.

Development Capacity

In addition to category exclusions described above, adjustments to the baseline General Planprojections have been made by the City staff and EPS to reflect that growth will likely occur atbelow the maximum allowed development capacity. In addition, some of the projects envisioned

in the General Plan are no longer expected to capitalize. The adjusted projections reflect the

most likely growth outcome, which falls below the maximum capacity estimate.

In addition, this analysis excludes any growth in East Pleasanton, a large undeveloped area in

the City. The East Pleasanton Specific Plan ( EPSP) is currently in the works. However, this

ongoing planning effort has yet to provide a definitive development program.

The approach described above results in adjusted projections, grouped under residential,

hospitality, commercial, recreation, and public/ quasi- public classifications, as summarized in

Table 5. It is based on the most current available data and forms the basis for the EPS fiscalimpact analysis.

Population, and Employment Projections

Population Projections

Pleasanton currently has an average household size of 2. 8. Based on the 2010 Census, this

analysis assumes that new housing units will accommodate a range of household sizes rangingfrom 2. 0 in multifamily rental units to 3. 0 in single- family detached units. Additionally, an

average household size of 1. 5 in elderly housing and 1 person per bed in retirement/convalescent housing is assumed. These assumptions yield a total population increase of

approximately 10, 800 through buildout, as shown in Table 6.

4 Some of these uses, including institutional space, religious facilities, and schools are likely to beexempt from the property tax roll while some of the other quasi- public uses may also be exemptedfrom property taxes depending on their ownership structure.


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Employment Projections

Pleasanton is projected to add approximately 21, 700 new jobs through buildout, as shown inTable 6. Employment estimates are based on average employee densities of 440 square feet

for retail, 260 square feet for office, 425 square feet for R& D/ flex, and 590 square feet for

industrial uses based on the City' s 1998 Development Impact Fee Report. These densities will

range in specific orientation and location of commercial space.

Service Population Projections

Service population is a measure commonly used to incorporate job as well as resident growth

into allocations of service demand and associated costs. Service population for the City of

Pleasanton was derived based on a weighting of residents relative to nonresident employees.These calculations compare Pleasanton' s residents and employees based on commute patterns

and the estimated proportion of time spent at work, as shown in the Appendix. For example,

residents who work outside the City are estimated to spend an average of about 50 percent oftheir time in the City relative to those who don' t work or who both live and work in the City.After accounting for regional commute patterns, the typical worker is estimated to have a serviceburden of about 68 percent of the typical resident. As shown in Table 6, service population

increase of about 25, 500 is projected through buildout.

This analysis also considers attraction of visitors to the City. While visitors are not directly used

for revenue and cost estimating purposes, their secondary impact is considered for costallocation between land uses, as further described in Chapter 7. Visitors are assumed to be

attracted to the City and accommodated by new retail and motel uses. This analysis assumes

that a visitor day results in 0. 5 of a resident for service demand estimating purposes, as shownin Table 6.

Economic& Planning Systems, Inc. 18 P. 11210001121062PIeasanton\ Report1121062Report FINAL. doc

4. FISCAL IMPACT METHODOLOGY AND KEY ASSUMPTIONS

This chapter describes the fiscal impact analysis methodology and highlights key assumptionsutilized in the analysis.

Methodological Overview

EPS developed a fiscal impact model designed to test how new growth affects General Fund costs

and revenues at buildout. While State and Federal funding sources are considered indirectly, theanalysis is focused primarily on the City' s General Fund expenditure and revenue items that ( 1)

represent a substantive component of the overall budget and ( 2) are likely to be affected by theGeneral Plan policies and growth trends. Thus, General Fund costs and revenues that are

relatively small or are operated on a cost- recovery basis are excluded from the analysis.

This analysis is based on the mid- term FY2012- 13 budget and assumed as the existing service

level " baseline" for the purpose of projecting General Fund revenues and costs. However, it is

recognized that budget cuts during the Great Recession, in many cases, reduced City servicelevels below historic and/ or optimal service levels. While economic conditions have gradually

started to improve after the end of the recession, long- term structural outcomes are uncertain.

As a starting point, this report documents actual service standards based on the existing level ofservice either provided by applicable City departments ( e. g., number of fire fighters, park acres,

road miles, etc.) or reflected in the most recent budget. In some cases, a current service is

below the preferred standard; given the current fiscal situation, it is recognized that the City' s

current service provision may not be optimal. To the extent that service standards improve

above those estimated in this analysis, the City' s General Fund expenditures will increase.

This analysis utilizes several forecasting approaches to evaluate the General Fund costs andrevenues associated with new growth. The primary methodology and factors for each GeneralFund item are summarized in Table 7 and highlighted below.

Service population. The service population for any given budget item is defined as theuniverse of individuals that generate impacts and is based on a review of the various

population groups—including residents and employees—relative to each of the City' s service

providers. For each department, the relative impacts of employment and population are

compared and used to estimate a total service population. For instance, for general

government, an employee is estimated to have a service demand profile equal to about half

the service demanded by a typical resident. Other types of City services, such as parks and

library, are provided to the extent that they are accessed by the population. For these

departments, an employee is only likely to access services during non- work hours andtherefore has a significantly lower impact than the residential population.

Case study. A case study approach was used to calculate fiscal impacts for budget itemsthat may not vary directly with service population or for which detailed data is available tomake a more precise estimate. For example, the case study approach is used to estimate

property and sales tax revenues.

Economic& Planning Systems, Inc. 19 P:\ 121000\ 121062Pleasanton\ Report1121062Report_FINAL. doc

Table 7

Budget Summary and Estimating FactorsFiscal Impact Analysis of the Pleasanton General Plan; EPS# 121062

FY2012-13 % Variable

Item Mid-Total 1) Allocation Factor

General Revenues

Property Tax 43,910,000 24.6% of 1% of new assessed value

Property Tax In Lieu of VLF 4,771, 990 22.78% of citywide AV growth

Documentary Transfer Tax 608, 864 0.55 per$ 1, 000 in sold value

Sales and Use Tax 19,446,679 0. 95% of estimated taxable sales

Business Licenses 2,900,000 23.28 per non- retail employee( 3)

Hotel and Motel Tax 3,450,000 2,600 per hotel/ motel room

Licenses and Permits 58,429 0. 54 per service popFines and Forfeits 488,426 4. 52 per service pop

Franchise Fees 2,058,666 19.05 per service popMiscellaneous Revenue 1, 989,616 18.41 per service pop

Recreation Revenues 3,237,957 not estimated( 4)

Public Safety Sales Tax 347,218 not estimated

Building Permits 1, 611, 990 not estimated( 4)

Interest Income and Rents 313,850 not estimated

Planning and Zoning Fees 94,535 not estimated( 4)

Plan Check Fees 1, 071, 147 not estimated( 4)

Public Works Fees 109,019 not estimated( 4)

Library Fee Revenue 85,855 not estimated( 4)

Vehicle License Fee 0 not estimated

Intergovernmental 530, 500 not estimated

Interfund Charges 2,609, 163 not estimated

Total Revenues 89,693,904


General Government( 2) 12, 113,226 10% $ 11. 21 per service pop

Community DevelopmentAdministration 632, 563 case study

Traffic Engineering 1, 767, 166 case study

Engineering Services 3,226,944 case study

Building& Safety 2,401, 481 case study

Planning 2, 185,359 case study

Housing 319,876 case study

Economic Development 1, 031, 496 case study

Police 24,328,013 case study

Fire 14,217,879 case study

Operations Services

Administration 685,483 case study

Streets 3,043, 381 case study

Support Services 3,944, 122 case study

Parks 6,435,915 case study

Landscape Architecture 129,779 case study

Community Services 6, 716, 140 case study

Library Services 4, 114,723 case study

Senior Housing Water and Sewer Subsidy 330,000 4.52 per capita

Net Transfers and Improvements( 5) 2, 070.358 not estimated

Total Expenditures 89,693,904

Note: excludes operating and capital transfers.

1) Percentage of costs that are population- dependent, as opposed to fixed costs.

2) Includes City Council, City Manager, City Attorney, Finance, Administrative Services, and General Government.3) Nets out a portion of revenue paid by retail uses based on gross receipts. Actual business license in the City is based on gross receiptswith the per employee approach used as a proxy.

4) Considered as part of the cost net out.

5) Include capital and operating improvements, including debt service for capital improvements( golf course and fire station), stormdrain( levyshortfall), paratransit subsidy, and cemetary fund subsidy.

Sources: City of Pleasanton and Economic& Planning Systems, Inc.

Economic& Planning Systems, Inc. 1/ 15/2014 20 P:11210001121062PleasantonlMode11121062 Fiscal6.xls



Not estimated. Some budget items were not estimated because certain City revenues and

expenditures are either not directly related to growth and development and/ or generated on

a cost- recovery basis.

This analysis also determines how fiscal impacts vary by land use type with land usesdesignations described in Chapter 3. It is understood that some new growth will combine these

uses in a mixed- use development format ( i. e., residential multifamily over ground story retail).

Key Demographic and Market Assumptions

As described above, population and employment are key factors that are expected to drivechanges in the City's General Fund costs and revenues. As shown in Table 8, Pleasanton has a

population of 73, 000 residents and roughly 53, 000 jobs with a service population of 108, 000.Pleasanton has 26, 200 housing units with an average household size of 2. 8.

Market assumptions in this analysis are based on Economic and Fiscal Impact Analysis for East

Pleasanton Specific Plan prepared by EPS in November 2012 as well as other supplementalresearch presented in the Appendix. Key market assumptions are summarized in Table 9 anddescribed below:

This analysis assumes that a 10 percent premium will be applied to existing values or rents

to reflect a level of new construction going forward for most uses. For multifamily, the

premium is assumed at 20 percent, reflecting a likely difference between transit- orientednew uses relative to existing garden apartments. While neighborhoods within the City vary

in character, generally, location does not play a critical role in home prices and property

values are relatively even within the City.

Market- rate residential unit value assumptions range from $ 345, 000 per unit for multifamily

based on capitalized rent to $ 880, 000 per unit for single- family uses. Housing prices will

vary over time. Affordable housing values and supporting estimates are provided in theAppendix.

The City' s affordable housing fee has been considered for an update and may change someof the existing policies. Currently, the City has a 15 percent inclusionary requirement forrental uses and a 20 percent requirement for for-sale uses on residential projects with more

than 15 units. Historically, the market has delivered limited inclusionary housing supply asdevelopment feasibility for many product types, especially at the lower end of affordabilitylevels, has been challenged. As a result, many developers chose to pay inclusionary housingdevelopment impact fees. This analysis assumes that a limited share of inclusionary housing

will be provided on- site. In aggregate, 5 percent of single- family and 15 percent of condo

townhomes are assumed to deliver an affordable housing component. For multifamily, the

15 percent threshold is assumed to be met with affordable housing likely provided off-site. 5

The 15 percent affordable housing component for multifamily and 10 percent of elderlyattached units are assumed to be not- for-profit and exempt from the tax roll.

5 The City' s current inclusionary housing policy for rentals is currently inconsistent with the Palmercase that states that affordable requirement may not be enforced on rental projects; future legislationmay change these findings.


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EPS assumes commercial building values range from $ 180 for warehouse/ industrial to $ 416

per square foot for retail based on the rent capitalization approach.

Property turnover rates are assumed to range between 5 and 15 percent a year. Residential

for-sale detached turnover rates are assumed to be 7 percent per annum and for-sale

attached rates are assumed to be 15 percent per annum, as higher density residential

property typically turns over more frequently. Elderly housing is assumed to fall within thisrange with an annual turnover rate of 10 percent. Residential rental, retirement/

convalescent, and commercial uses turnover is assumed at 5 percent per annum as

investment product typically turns over less frequently.

This analysis assumes growth occurs within the existing City limits that does not requireannexation. To the extent that annexation may be required, revenue and cost allocations

may vary.

All dollar amounts in this report are in constant 2013 dollars.


5. GENERAL FUND REVENUES

This chapter describes the methodology and assumptions used for revenue projections in thisanalysis. Table 10 summarizes annual General Fund revenues at buildout. Several General

Fund revenue items are not forecasted because they are not expected to be affected by newgrowth or are cost recovery and are therefore reflected in offsetting cost reductions, as furtherdescribed below.

Property Tax

Property tax in California is based on 1. 0 percent of assessed value and will be collected fromnew development in Pleasanton. The property tax revenue portion accruing to the City' s GeneralFund is 24. 6 percent of the 1. 0 percent based on the City' s property tax capture. 6 Theremaining property tax goes to other taxing entities, including the State, schools, BART, and

Alameda County. The property tax proceeds are shown in Table 11.

The City' s total assessed value growth will also be subject to much more complex range ofinternal and external variables. For example, future values could be driven by the quality of life

factors, such as the level of service provided by the City as well as broader socioeconomic factorsthat affect property value growth. In addition, the relative fiscal benefit from nonresidential

development will depend on market demand and the degree to which tenants seek new

developed space in the City.

Property Tax In Lieu of VLF

In 2004, the State of California adjusted the method for sharing VLF with local jurisdictions.While the actual amount of VLF decreased for each jurisdiction, the State backfilled those losses

by sharing more of the property taxes than previously. The property tax backfill was based on

the lost revenues in the initial year and since then has been adjusted based on the proportionateincrease in assessed values each year. The Project will add an additional 22 percent to the

current assessed value in Pleasanton ( assuming no other assessed value growth) and will

generate the same increased percentage in in- lieu VLF revenues ( see Table 11).

Document Transfer Tax

Document transfer tax ( also known as property transfer tax) is collected by the City when the

ownership of residential and commercial property changes. The City' s General Fund receives

0. 55 of every $ 1, 000 in value sold. This analysis assumes that for-sale residential uses change

ownership more frequently than residential rental and commercial uses. This approach results in

the property transfer tax estimate of $124, 000 a year, as shown in Table 12. Property transfer

tax proceeds vary year-to- year based on the sales volume.

6 The City collects special taxes in addition to the 1. 0 percent of value; these taxes are excluded fromthis analysis as they typically apply to specific uses and do not impact the General Fund.

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Sales Tax

Pleasanton has established a strong regional retail position due to its central location andStoneridge Mall retail cluster. Pleasanton expects addition of nearly 700, 000 square feet of retail

through buildout, including regional and local retail, as well as auto sales and gasoline stations.

Tri- Valley is a highly competitive retail market area and other cities in the region are graduallydeveloping their own retail space to compete for sales, such as the recently opened premiumoutlets in Livermore. This analysis assumes that Pleasanton' s regional and auto sales retail will

continue serving a regional focus, while local- serving retail will be primarily driven by householdspending from new residential growth. This approach ensures that the City' s General Plan fiscal

planning is based on internal growth dynamics rather than an assumption that supply createsdemand.

EPS estimated retail spending capacity of future residents based on their household incomes as ashare of home values or rents ( see Table 13). Incomes for retirement/ convalescent home

occupants are excluded from the analysis while incomes of elderly housing occupants are basedon the citywide retiree income average. It is assumed that resident growth will support a share

of non- local retail categories ranging between 30 percent for regional retail and 70 percent forgas station sales, while resident growth is also assumed to support 95 percent of neighborhoodretail. Sales are assumed to be shifted from other existing retailers in Pleasanton when sales

capacity of new retail exceeds that supportable by new residents. This approach suggests that

creating additional capacity for neighborhood retail will not necessarily improve the City' s long-term fiscal health without household income growth.

In addition to resident expenditures, the analysis assumes that Pleasanton continues to be aregional retail leader with a net capture of sales across various categories. Nearly half of the

City' s future regional sales are estimated to be supported by regional shoppers and employeesthat live outside of Pleasanton. As shown in Table 14, future resident spending and regional

capture combine for $339 million in taxable sales. However, some of these sales would likely

shift from existing retailers in the City. Specifically, one- third of new sales are assumed to beshifted from existing retail attributed to both, regional and local- serving sales categories.

beyond those supportable by new resident growth would also shift sales from existing retailers.This shift falls within a 5 to 10 percent range of where performance of existing retailers could beadversely affected by sales loss. In other words, growth in new household incomes is likely to

support only a portion of the new retail space capacity, suggesting that the remainder of newretail space will either require higher regional sales capture or will shift sales from existing retailtenants.

The total sales tax rate is 9 percent ( 9%) levied on taxable sales generated in the City. Out of

the 1. 0 percent ( 1. 0%) of sales tax generated to local jurisdictions, the City' s General Fund

receives 0. 95 percent ( 0. 95%) of taxable sales under the Bradley Burns Act with the County

receiving the remaining 0. 05 percent ( 0. 05%). This rate results in $ 2. 1 million a year in new

sales tax revenue to the City' s General Fund.

Economic& Planning Systems, Inc. 29 P:\ 121000\ 121062PleasantonkReport1121062Report_FINAL. doc

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Business Licenses

Business license tax is a general tax on businesses within a local jurisdiction paid at the rate of

0. 30 per $ 1, 000 of sales by businesses with gross receipts above $ 250, 000 a year. Assuming

that 90 percent of the new retail businesses within the City would generate receipts above

250, 000, the rate of$ 0. 30 per $ 1, 000 of sales is applied to estimate the increase in business

license tax revenue. The per-employee approach is used as a proxy to calculate the business

license taxes for the non- retail component using approximately $ 23 per employee based on the

City' s current budget. This estimate excludes retail employment to avoid double- counting.? This

amount is multiplied by the projected non- retail employees from new development. The

business license tax calculation is shown in Table 15.

Hotel and Motel Tax

Pleasanton currently has 1, 330 hotel or motel rooms with an additional 240 rooms envisionedthrough buildout. Hotel and Motel Tax ( also known as Transient Occupancy Tax) will be

generated by the envisioned hotels or motels in the Project. Pleasanton General Fund currently

receives an annual average of$ 2, 600 per room. The actual revenues from new motels will vary

depending on their market orientation and performance of new motels relative to the citywideaverage. Hotel and motel tax is estimated in Table 16.

Licenses, Permits, and Franchise Fees and Fines and

Forfeitures

New development will result in additional revenue to the City through license, permits, and

franchise fees, fines and forfeitures. These include a range of user revenues, including

franchises collected from utility providers. A per-service population approach is used to estimate

these revenues, as shown in Table 16.

Miscellaneous Revenue

This revenue item includes donations grants and other various revenues. This revenue is likely

to increase with new growth and is forecasted based on a per service population approach.

Miscellaneous revenue projections are summarized in Table 16.

7 Based on the data from the EPS November 2012 EPSP Market Study, Table 11.


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6. GENERAL FUND EXPENDITURES

This chapter describes the City' s key departments, existing operational trends, and costestimates associated with new growth through buildout. These cost estimates, summarized in

Table 17, are based on interviews with the City staff and reflect the most up to date informationavailable. Generally, the cost estimates in this analysis fall below the average cost approach,reflecting the City' s established nature and ability to accommodate new growth in an efficientmatter.

General Government

Pleasanton' s general government includes City Council, City Manager, City Attorney, Finance,

Administrative Services, and other general functions. New development typically has a minimal

impact on administrative and legislative government costs in mature cities like Pleasanton. As a

result, this analysis assumes that 10 percent of the General Government service cost will beaffected by new development; the remaining 90 percent represents fixed cost and services thatwill not be affected by new growth. The portion of General Government cost assumed to be

affected by new development is estimated at an average of$ 11 per service population.

Community Development

Community Development department provides a wide range of services, including trafficengineering, engineering services, building and safety, planning, and administration. Some of

the services, such as building and safety and planning are more tied to new growth in the City.Different divisions realize various revenue recovery rates with the City planning to update its feestructure to improve existing cost recovery share. For example, plan check and building

inspection are currently cost neutral to the General Fund as the cost is fully covered throughfees, while planning is mostly funded by the General Fund.

Some of the services, such as engineering, are utilized for various services, including those

covered by the General Fund as well as the Enterprise Fund. The General Fund- related services

provided by the Engineering division include project in- house design for infrastructureimprovements, such as roads, curbs, and gutters. The division has four engineers who oversee

major periodic road improvements, such as resurfacing and maintenance, to supplement minor

road repair provided through the roads division. While most of the division' s cost is funded

through gas taxes, Measure B, and other non- General Fund sources, a share of staff cost is

covered by the City' s General Fund. In addition to the staff increase reflected in this analysis,

the division indicates that additional General Fund funding, estimated at $ 2 million to $ 3 million

a year, would be necessary to maintain the preferred level of road maintenance services in theCity. Historically, this funding has been provided by the General Fund but has been cut due to


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the recession. The Division indicates that residential street maintenance is typically more cost-

effective relative to arterials and collectors due to differences in traffic loads. 8

New growth and development in the City will result in new operating costs to the CommunityDevelopment Department. The Department estimates that three full- time positions would be

necessary to provide the same level of service to the existing level. These positions could be

either limited- term or contract rather than full- time status. The City will be moving in this

direction for certain functions, such as Community Development, where the need for additional

staffing varies and would likely to slow as the City reaches build out. The timing of staff

additions will depend on the rate of growth in the City, especially as it relates to development ofStaples Ranch and other major projects that are expected to drive much of the staffing need.

These estimates are conservative as some of the staffing needs would be driven by developmentof the East Pleasanton Specific Plan, which is excluded from this analysis. The estimated

increase in the General Fund operating cost is summarized in Table 18. The City is moving

towards shifting the Community Development Department cost to an Enterprise Fund to betteraccount for the amount of the subsidy by the General Fund. This shift is designed to ensure a

long- term support by new development and reduce the general taxpayer subsidy. As discussed

above, additional Engineering division cost may also be required to bring the City up to thepreferred service standard, though this cost is not considered in this analysis. 9

Police

Pleasanton' s Police Department has one station in the City and breaks the City up into threedistinct districts, as shown in Figure 7. It consists of operations/ patrol, investigations, traffic

unit, animal services, support services, and administration divisions. The department has

experienced between 70, 000 and 80, 000 annual calls for service over the last 3 years. The

average response time for emergency calls was 4 minutes flat in 2011 compared to 3 minutes 58seconds in 2010. The operations division makes up half of the Department' s budget and is likelyto experience the largest impact from new growth. The Police Department has 87 authorized

sworn officers with 65 sworn officers in the operations division ( consisting of patrol, special

enforcement, and special operations units). In addition, the Department employs 32. 5 non-

sworn staff (e. g., dispatchers) and 29 to 30 volunteers. About 95 percent of the Department' s

cost is funded through the City' s General Fund.

The Department' s service is based on a mix of factors including deployment base, response time,

and geographic coverage that are not directly linked to specific land uses. Generally, the

Department indicates that lower density is easier to patrol relative to higher density development

8 Based on the existing ratio, the City is projected to increase its road capacity by 50 to 70 milesthrough buildout, with most of the increase likely in the residential road category. This category,combined with the fact that added streets are new, will likely require lower per mile maintenance

relative to the existing average citywide.

9 According to the City of Pleasanton 2012 Pavement Management Program Update, the majority ofthe City' s streets are in very good to excellent shape, while 11 percent falls in the poor category orbelow. The staff indicates that if roads in poor shape are left untreated, continued deterioration andassociated cost of the maintenance, as well as eventual rehabilitation, will increase significantly overtime.


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and is easier to access in case of a call for service. For example, according to the Department

interview, single- family detached housing provides easier visibility relative to multifamily.However, property crime, the most common type of crime in the City, is not linked to a specific

land use. Calls for service from Hacienda Business Park and Stoneridge Mall are below their fair

share of building space as both have private security on site. However, as the City continues to

grow, patrol needs and volume of calls increase due to more activity, densification, and

geographic expansion.

The majority of new development is planned in District 2. The Department' s cost is projected

based on the staffing increase associated with new growth. This forecast reflects existing per

capita service ratios for sworn and non- sworn officers in the operations as well as other divisions.

The resulting police cost increase to the General Fund through buildout is estimated in Table 19based on the number of needed positions estimated by the Police Department.

Fire

Pleasanton provides fire protection through a consolidated Livermore- Pleasanton Fire

Department service. The partnership began in 1996 with the consolidated Joint PowersAgreement. The department' s fire service covers a 47- square mile area with cities of Pleasanton

and Livermore, as well as Veteran' s Administration Hospital Livermore, Pleasanton Ridge, and

some unincorporated areas in Alameda County. The Department' s service goal is based on

response time for the first unit of seven minutes or below at least 90 percent of the time. 10 Thisgoal is currently being met on a citywide basis, though some outlying areas like Ruby Hill orCastlewood require longer response due to location constraints and rural landscape. The

Department is developing a better regional coordination with cities of Livermore and AlamedaCounty. As this coordination continues, response time to unincorporated areas between

Pleasanton and Livermore is likely to improve.

The Department has 10 fire stations, including 5 located in Pleasanton, as shown in Figure 8.The Department' s budget includes operations and suppression, emergency medical services, fireprevention, and inspection, administration, and asset management. The Department also

provides services related to paramedicine, hazardous materials, and technical rescue. Calls for

service vary widely by fire station based on population needs and age of building inventoryconstruction with stations 2 and 3 more utilized relative to the remaining 3 stations. Response

to emergency medical calls and traffic accidents comprise the majority of requests for service.Staffing levels in Pleasanton currently range between 3 firefighters per engine and 4 firefightersper truck. Fire Department indicates that additional capacity for an increased call volume may

be present in less utilized stations.

Livermore- Pleasanton Fire Department budget is allocated between the cities based on a number

of full- time firefighter equivalents ( FTEs). Currently, there are 51 FTEs in Pleasanton and 48FTEs in Livermore with administration and other costs based on the 50/ 50 split. Under this

10 And 10 minutes or less 90 percent of the time for subsequent units.

Economic& Planning Systems, Inc. 40 P:\ 121000\ 121062Pleasanton\ Report1121062Report_FINAL. doc

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approach, Pleasanton' s General Fund incurs 51. 6 percent of the total cost. In addition, the City

incurs fire apparatus and facility costs of approximately $ 700, 000 a year. The Department

receives reimbursements from the County and the Federal Government for service tounincorporated areas.

Given the level of growth reflected in the City' s General Plan, additional fire staff will be needed.

According to the Department, demand for service from new growth will be driven by geographicexpansion ( e. g., annexation and development of new land) as well as densification. Geographic

expansion would increase distance traveled and result in additional burden on the Department' stime- based service goal; infill growth would require additional staffing to accommodate an

increase in calls for service, especially in areas where capacity is the lowest. However, given the

level of existing station locations and citywide capacity for call volume, significant portion of new

growth could be accommodated by existing resources.

The Department estimates that an additional engine company will be needed at City buildoutwith addition of 9 full- time firefighters. 11 The associated cost estimate at buildout is based onthe average staffing cost provided by the City and is shown in Table 20. This estimate is

conservative as some of the staffing needs would be driven by development of the EastPleasanton Specific Plan, which is excluded from this analysis. The timing of the fire cost will

depend on the pace of new development.

Operations Services Department

Operations Services Department makes up the third largest cost in the City. This department

provides a wide range of services, including facility and fleet maintenance, park maintenance,

street maintenance, and signs and street lights repair. The Department' s key service divisions

related to new growth are streets and park maintenance with each described below.

Street Division

Pleasanton Street Division ensures that the City' s streets and sidewalks are maintained toprovide safe and accessible public passage. Its major street maintenance functions include

urgent repairs of" light" nature, such as pothole maintenance and crack sealing, while heavier

repairs, such as slurry seal, are handled through engineering division of the CommunityDevelopment Department. The Street Division also provides parking lot maintenance, trail

maintenance, and ADA compliance and visual improvements, with most of the service cost

covered through the General Fund.

The majority of the City' s streets are ranked in the very good to excellent condition byMetropolitan Transportation Commission. Street division' s cost is $ 3. 3 million a year with over

90 percent funded by the City' s General Fund. It employs 14. 3 positions net of overtime and

maintains 216 center miles of streets ranging from small residential to major thoroughfares.

Based on the existing ratio, the City is projected to increase its road capacity by roughly 40 milesthrough buildout, with most of the increase in the residential road category.

11 A new engine company is likely to be added to Station 3 with an existing company moved toStation 1.

Economic& Planning Systems, Inc. 43 P:\ 121000\ 121062P/easanton\ Report\ 121062Report FINAL. doc

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Pleasanton General Plan Fiscal Impact AnalysisFinal Report 01/ 16/ 14

As shown in Table 21, this analysis applies a cost of$ 20, 000 per mile reported in the MTP2035

Road Maintenance Report for Sacramento Area Council of Governments. This approach is

conservative as the majority of future road growth is envisioned in the residential category,which is more cost effective to maintain relative to other road types.

Park Maintenance Division

The City of Pleasanton has 400 acres of parks and trails with 42 community and neighborhoodparks as well 810 acres of passive open space. The Park Maintenance division provides

landscape maintenance services to these areas, as well as maintaining street trees, medians andother landscaped areas, park parking lots, and government buildings. It also includes the

oversight of the Callippe Golf Course and its management company CourseCO.

Park maintenance cost is currently $6. 4 million a year, nearly half of the Department's overall

spending. It is almost fully funded by the City' s General Fund and includes 28 positions. 12 Inaddition, it oversees some contracts for facility cleaning and parking lot maintenance.

Landscaping maintenance has historically comprised the bulk of the division' s cost ( e. g.,

watering, mowing). The division has been moving towards a higher share of artificial turf usethat will result in reduced long- term water usage to meet the State' s requirement. As this shift

continues, the overall water usage by the division on a per acre basis is likely to decrease,resulting in long- term cost savings. However, labor costs have been increasing and could offset

much of the water savings. These costs have been growing due to a sparse distribution of theDepartment' s staff at various facilities throughout the City. As the City continues to grow,

geographic distances between various parks and facilities will increase, requiring longer travel

times. For example, the City maintains 42 bathrooms dispersed between various parks, and asnew acreage and facilities come online, further travel time and service needs will be required.

The City forecasts new growth in community parks and open space through buildout13. The

Department indicates that demand for park space and utilization is primarily driven by populationgrowth, though larger regional facilities also attract nonresidents to the City. Existing service

cost for community parks varies by a level of amenities and improvements and ranges between14, 000 and $ 28, 000 per acre with the higher estimate reflecting maintenance of ball fields,

children' s play grounds, and other facilities. Passive open space maintenance cost is based on

the City of Pleasanton Bernal Property Specific Plan Financing Plan. Park and open space costs

are estimated in Table 22 and include landscaping maintenance, facility maintenance, and waterusage. According to the Department, these costs vary with specific facilities and other parkconfigurations and are not significantly impacted by location within the City. In addition, the

12 With the exception of the golf course activity that have a cost recovery of about 90 percent.

13 Community parks typically have more amenities than neighborhood parks with sports activity,playgrounds, and water usage. The City does not forecast any growth in neighborhood parks.

Economic& Planning Systems, Inc. 45 P: 11210001 121062Pleasan[ on\ Report1121062Report FINAL. doc

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Department incurs periodic parking lot pavement maintenance costs that vary widely based on

parking lot size and life cycle. l4

Community Services

Community Services Department provides a range of services to Pleasanton' s population,including operation of the Aquatic Center, Sports and Youth programs, a theater, seniorprograms, and programs for special needs population. The Department indicates that most of

the services are provided for Pleasanton' s population, although some exceptions associated with

golf courses, museums, and baseball fields result in a draw of nonresidents to the City. Within

residential land uses, different types of housing will result in demand for different services.

Single- family households require more programs, sport fields, and team activities whilemultifamily housing is more facility- driven. Senior housing requires senior-oriented services and

the Department is currently evaluating how to better meet these needs as it anticipatessubstantial growth in the senior age cohort in the City.

Community Services Department realizes approximately a 50 percent cost recovery rate net ofrevenues and interfund charges. The net increase in cost is likely to be proportional to

population growth in the City and is estimated in Table 23. The cost increase will depend on

specific service needs and cost recovery rates associated with future growth. While changing

demographic may result in net increases in the Departmental cost, some of the costs could beoffset by improvements in cost recovery rates.

Library

The City operates a 30, 000- square foot public library located in downtown. The library is highly

utilized by various segments of local population with 2, 000 daily visitors. The largest user

segment is parents with young children, followed by seniors and students. Given increasing

demand, the current space falls short of the preferred standard of 1 square foot of space per

resident. This standard implies the deficiency of 43, 000 square feet currently in place with theprojected growth likely to increase the space demand by 20, 000 square feet through buildout.The current facility operates 62 hours a week, exceeding the standard for a facility of this typeand scale.

New growth in the City will result in library needs associated with new staff, services andsupplies, books and other ongoing capital, technology, maintenance, and overhead costs. This

analysis reflects a cost increase associated with service population growth through buildoutestimated by the Department, as shown in Table 24. This cost estimate reflects the retention of

the existing 30, 000 square foot building, which would decrease existing level of service given thelevel of new growth projected through buildout. The department indicates that addition of a new

building would be preferred to meet the Library Department' s desired standard and enhance thelevel of service above the current level provided in the City. An addition to the existing library or

a larger replacement is being contemplated in East Pleasanton, although potential deal structure

is not known and is not included in this analysis.

14 Parking lot pavement costs are not included in the analysis; the Department estimates an averagecost of$ 0. 80 per square foot of one inch of AC given a life expectancy of 25 years.




Water and Sewer Subsidy

The General Fund subsidizes water and sewer service fees for elderly and low incomeresidents15. Future expenditure is forecasted based on the existing per capita cost of subsidy.

15 Applies to residential units with a separate water meter with water consumption below a cappedmonthly amount.


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7. FISCAL IMPACT RESULTS AND MITIGATION MEASURES

This chapter describes the allocation methodology used in the fiscal impact analysis and provides

policy considerations and mitigation measures for future growth in the City.

Fiscal Impact Allocation by Land Use

EPS allocated overall fiscal performance estimates from new growth between land uses based oncategories utilized in the General Plan. This allocation is designed to provide a " sense of

magnitude" for fiscal performance rather than a detailed estimate. Ultimately, these land uses

will not exist in isolation and will depend on synergetic effects with other existing and new

development, as further described in the next section.

This analysis utilizes several allocation methodologies to distinguish revenues and costs betweenland uses. These allocation measures are summarized in Table 25 and are described below:

Assessed value: based on the assessed value for new growth in each land use

Population: based on the increase in residents from new growth in each residential land use

Employment: based on the increase in employees from new growth in each commercial landuse

Service population: based on the increase in residents and employees from new growth in

each land use

Service population and visitors: based on the increase in residents and employees as well

as visitors attracted to the City by new growth

Fiscal Impact Results

New growth is expected to result in a fiscal benefit to the City' s General Fund at buildout. This

impact is attributed to various uses and is allocated based on the unique drivers most suitablefor each item. For example, property tax revenue allocation is based on the assessed value ofeach land use, while sales tax revenue allocation is based on sales generation methodology.

16

On the expenditure side, police cost is allocated based on population, employment, and visitor

generation, while park cost is allocated based on resident generation alone.

Fiscal impacts by land use are shown in Table 26. These impacts suggest that new commercial

uses in the City would likely generate fiscal benefits to the General Fund, while impacts of

residential growth vary.

16 This analysis assumes that new regional sales are attributable to retail uses whereas new local-serving sales are predominantly attributable to residential uses based on disposable household incomegrowth.

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54



Residential Uses

Single- family detached and condos/ townhomes, and elderly attached development is estimatedto provide fiscal advantages for the City, while multifamily rental and convalescent housing are

likely to result in fiscal shortfalls. The single- family detached product type is similar to the

prevailing housing form in the City and generates the highest values. This land use would likely

continue attracting higher income households, attracted to Pleasanton by the quality of life andfamily- friendly environment, and would generate substantial property and sales taxes to theCity. Other residential uses are likely to result in lower values and would generate lower GeneralFund revenues due to lower supportable household income spending and property assessments.

Multifamily housing results in fiscal shortfalls due to its likely role as an entry- level housing in theCity. As a result, it would likely have lower property values and would accommodate householdswith lower incomes relative to for-sale residential product types. To the extent that more of a

luxury brand orientation and high amenity features could be delivered in rental products in theCity, it could attract different types of buyers than those primarily driven by affordability, in turn,

reducing potential fiscal shortfalls. For example, household income and associated retail

expenditure of a two- worker household located near BART with both members commuting to

work in San Francisco is typically much higher than a single worker household with children.Potential impacts of higher density residential housing could also allow existing empty nesters toremain in Pleasanton as they age and downsize. This is especially true if they sell their existing

single- family homes, which likely have depressed assessed values due to Proposition 13, to moreaffluent families.

Market orientation and associated impact of multifamily housing will be particularly important as

the City is making a shift away from its traditional single- family detached housing base towardshigher density product types. This analysis assumes that higher density residential uses will

meet a 15 percent affordable housing requirement that increases the fiscal shortfall. However,

market- rate multifamily would still result in negative fiscal impacts to the City, though theseshortfalls would be negligible.

Nonresidential Uses

Retail land use generates the highest fiscal benefits to the City's General Fund. This analysis

assumes that Pleasanton continues to capture regional retail sales across various categories

despite Tri- Valley being a highly competitive retail market area with other cities gradually

developing their own retail space to compete for sales. For local- serving retail, EPS utilizes a

conservative approach of linking retail growth to future household spending and associatedresidential uses. This ensures that the City' s General Plan fiscal planning is based on internalgrowth dynamics rather than an assumption that" supply creates demand". An over-emphasis

on creating additional retail capacity will not necessarily improve the City' s long- term fiscalhealth if household incomes do not support growth in consumer demand or if new store sales

cannibalize" existing retail areas. To the extent that Pleasanton' s retail capture will reduce over

time, the revenues generated by its retail space will decrease or new space may be less feasibleto build.

Economic& Planning Systems, Inc. 55 P:\ 121000\ 121062Pleasanton\ Report\ 121062Report_FINALdoc



Other commercial uses, including industrial/ warehouse, office, R& D, hospitality, and gas stations,

also generate fiscal benefits to the City. However, performance of these uses is dependent on

strong tenant occupancy and is tied to the broader regional economy. In other words, it is not

development of office space that will create fiscal benefits, but rather investment in job growth

that will drive office space demand that supports new tenancy. Consequently, policy guiding new

commercial uses should be grounded in market realities of what could be supported without

adversely affecting existing building supply. Similarly, overly permissive land use ordevelopment standards will not encourage net new growth if an urban landscape becomes

unappealing, one- dimensional, discontinuous, or is neglectful of existing neighborhoods over the

long- run.

Policy Considerations and Mitigation Measures

Land use growth policies have broad implications for the City' s fiscal well- being and

sustainability. Well- designed growth policies balance a mix of uses that improves the City' s fiscal

health and enhances the quality of life through improvement of municipal services, schools, andtransportation, while diversifying recreational and shopping opportunities. These improvements

attract and retain residents and employers who might otherwise choose other locations in theTri- Valley or the broader Bay Area. Increased desirability creates a positive feedback loop by

boosting property values and household incomes, improving economic and social conditions.Maintaining these quality of life factors will also retain the City' s tax base and enable furtherinvestment in the type of public services and infrastructure needed to sustain economic health

and high quality of life.

Pleasanton should promote economic and fiscal well- being through an integrated approach to

planning. The City should lay the foundation for a balanced mix of land uses that optimize itskey policy objectives. While this study disaggregates fiscal performance of each particular landuse in order to compare the relative impact on the General Fund and inform mitigation strategies

for less fiscally advantageous uses, the City should approach and evaluate growth strategyholistically. Long- term policy decisions should be considered in the context of balancing theCity' s other objectives, such as economic development, investment in municipal service andfacilities, provision of diversified housing options, and maintaining a high quality of life. The City

must treat its economic and fiscal performance as fundamental and integrally linked componentsthat over the long run will rise and fall together. For example, while higher density residential

uses are shown to be less fiscally advantageous than single- family, their broader benefits shouldbe considered, including creation of infill opportunities, diversification of housing options, andaccommodation of the lower income segment of the local economic base.

As the City approaches buildout and greenfield is becoming scarcer, attention should be shiftedto underutilized infill sites that become strategic catalysts for development opportunities.Renewal and revitalization strategies will have a critical role in the City' s efforts for reaching

maturity without compromising the existing fiscal integrity and urban texture. In this context,

new growth makes up a small share of the overall citywide development. Future fiscal and

economic development policy should focus on the existing areas in the City to ensure that thehigh quality of life remains as the City approaches buildout.




Location of growth within the City will also play a significant role. In many cases, infill

development that leverages existing infrastructure improves fiscal performance due to reduced

operating costs. As a result, locations in compact development setting, such as downtown or

close to the BART station, may offset potential fiscal shortfalls of higher density residential uses.But the fiscal benefits are not always obvious and typically vary by site- specific attributes aswell. While proximity to existing services reduces operating costs due to economies of scale,greenfield growth on the City' s fringe, that tends to result in higher costs, could also achievefiscal neutrality. For greenfield development, mitigation measures such as CFD taxes are

typically used to supplement General Fund expenditures. These special taxes guarantee an

ongoing revenue source to pay for public services and infrastructure maintenance and reduce theburden on the General Fund. New infrastructure is often cheaper to maintain because it is

designed and built using modern technology and utilities ( e. g., underground).

The City' s economic and fiscal health is also affected by a variety of factors outside of its control,including the national business cycle, state and federal budget decisions, international trade, and

performance of key local industries such as services and retail. Thus, a key challenge for an

established city like Pleasanton is to guard against a negative economic and fiscal spiral triggeredby declining tax revenues and further exacerbated by disinvestment in critical public services andinfrastructure that in turn reduces the City' s quality of life and ultimately the loss of valuable jobsand employed residents.

Economic& Planning Systems, Inc. 57 P:\ 121000\ 121062P/easanton\ Report\121062Report FINAL. doc

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