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Item F3 BOARD OF COUNTY COMMISSIONERS AGENDA ITEM SUMMARY Meeting Date: December 14, 2000 Bulk Item: Yes No X Division: Growth Management Department: N/ A AGENDA ITEM WORDING: Discussion of draft report on the ultimate fiscal cost and funding of the implementation of the Monroe County Year 2010 Comprehensive Plan. ITEM BACKGROUND: Policy 4 of the Monroe County Year 2010 Comprehensive Plan requires the County with assistance from the State [Department of Community Affairs] to prepare a report that determines the ultimate fiscal cost of implementing the plan and the federal, state and local fair share of its funding. The subject report, including recommendations on funding initiatives and alternatives for plan implementation, must be submitted to the Florida Legislature and Administrative Commission (Governor and Cabinet). As an element of the report, Policy 4 also requires a full cost analysis "relative to the cost of providing facilities and ~rvices to development in the county compared to the cost of acquiring remaining undeveloped land." This element has been completed by the economic consulting firm, of Industrial Economics, Inc. under contract to the U.S. Environmental Protection Agency. A copy of the report was sent previously under separate cover to the County Commission. Included in this agenda is the Executive Summary of that report. The Growth Management Division staff with the assistance of the DCA staff is preparing a draft of the full report to be sent to the State later in December. A copy of the proposed outline of the report is attached. This tight schedule is necessary, since the Florida Administration Commission is anticipated to meet in January 2001 to formally evaluate the County's progress in achieving objectives established in the Third Year of the Comprehensive Plan Work Program. At the Commission's December 14 meeting, the Growth Management Division staff will brief Commissioners on the results of the Industrial Economics, Inc.'s report and discuss the contents of the full report being prepared for submittal to the State. Although, the staff will not have the full draft report completed by that date, the Commission will be asked for its input and appropriate policy direction. The staff will submit the final draft report to the Commission for its general approval in January 2001. PREVIOUS RELEVANT BOARD ACTION: None STAFF RECOMMENDATION: None TOTAL COST: N/A BUDGETED: Yes N/A No COST TO COUNTY: N/A APPROVED BY: County Attorney N/A Risk Management N/ A DIVISION DIRECTOR APPROVAL: Tim rowth Management DOCUMENTATION: Included X To follow _ ,\N:t;~d Agenda Item #: ~ DISPOSITION: Industrial Economics, Inc. Fiscal Impacts Study EXECUTIVE SUMMARY CHAPTER 1 Monroe County and the State of Florida, with the assistance of the U. S. Environmental Protection Agency, are assessing the impacts of potential future development in the Florida Keys. As part of this effort, Industrial Economics, Incorporated (lEe) has developed a fiscal impact analysis of two alternative future development scenarios in Monroe County. This executive summary describes the background, results, and implications of the analysis; the subsequent chapters of the report discuss the analysis in greater detail. Supporting calculations and descriptions of database queries are provided in Appendices A and B, respectively. 1.1 BACKGROUND The State of Florida and Monroe County are assessing the fiscal impacts associated with implementation of the Monroe County Year 2010 Comprehensive Plan. As part of this effort, the county and state are examining the costs and revenues related to two alternative development scenarios after the county's Rate of Growth Ordinance (ROGO) reaches the end of its initial implementation in 2002. In the "growth scenario," the rate of growth established under ROGO will continue until 2010, at which time the county will purchase remaining buildable property. In the "no-growth scenario," development is capped when ROGO ends in 2002, and the county will then purchase all vacant buildable property from owners who are no longer able to obtain permits as a result of the growth limitations. Our analysis addresses the fiscal impacts to Monroe County and therefore focuses on the unincorporated areas of the county. However, the study area also includes the incorporated areas of Islamorada and Marathon and will consider the municipal costs and revenues associated with growth in those areas. In this report, our use of the word "county" includes all of these areas. This fiscal impact analysis is one element of a larger effort to assess development options and impacts on the Florida Keys and the implementation of the Monroe County Year 2010 Comprehensive Plan. This analysis considers only the costs of development options to the public sector (specifically, to county and county-level agencies). It does not address the total economic benefits or costs associated with the development scenarios, such as the benefits of job creation in 1-1 October 27, 2000 the growth scenario or the benefits associated with the value that Florida Keys' residents place on ecological preservation in the no-growth scenario. Furthermore, this analysis does not address the ability of the sensitive Florida Keys' ecosystems to absorb future development; a separate carrying capacity analysis is addressing this issue. Therefore, policy makers should use this fiscal impact analysis as a decision support tool, and consider the results of the analysis within the context of complementary analyses that examine other important issues and impacts related to growth and development. 1.2 SUMMARY OF METHODS AND RESULTS The fiscal impact analysis examines the costs and revenues to the county associated with development and land preservation in the growth and no-growth scenarios. We first identify the major categories of costs and revenues likely to be affected by development, and then estimate these costs and revenues for each scenario. Finally, we compare the total county costs and revenues and calculate net growth-related costs of continued ROGO growth through 2010 and, alternatively, of purchasing remaining available land. We provide results for four separate analyses reflecting different potential land purchase strategies that the county could consider in the no-growth scenario - the initial analysis, which assumes purchase of all available land in 2003, and three sensitivity analyses, which assume that the county purchases land over time and/or receives federal and state assistance in purchasing vacant land. Each case is described below. 100 percent purchase of all available land in 2003. This initial analysis assumes that the county would provide all funds for land purchase, and would complete purchase of all vacant buildable land in 2003. This analysis provides the highest estimate of net costs associated with the no-growth scenario, because immediate purchase of land in 2003 results in the immediate assumption of debt service and land management costs related to the purchase, and the immediate loss of tax revenues related to the total value of the land. 100 percent purchase of all available land over eight years. This sensitivity analysis assumes that the county would provide all funds for land purchase, and would purchase all vacant buildable land in eight equal installments from 2003 through 2010. This analysis results in slightly lower net costs for the no-growth scenario, because the county would assume debt service and land management costs more gradually and would enjoy additional annual tax revenues on a portion of the land. 35 percent purchase of all available land in 2003. This sensitivity analysis assumes that the county would receive federal or state funding for 65 percent of the total land purchase price, and would complete purchase of all vacant buildable land in 2003. This analysis results in a more modest estimate of net costs associated with the no-growth scenario, because the county's land purchase and debt service costs would be reduced. 1-2 October 27, 2000 35 percent punhase of aD available laad over eight yean. 'Ibis sensitivity analysis assumes that the county would receive federal or state funding for 65 percent of the total land purchase price, and would complete purchase of all vacant buildable land in eight equal installments from 2003 through 2010. This 8IIaIysis JlIOVides the lowest estimate of net cosls for the no-growth scenario, because the county would reduce purchase and debt service costs due to federal and state support, and would assume costs more gradually while delaying the reduction of annual tax revenues. The results indicate that within the time frame of the analysis (2003 through 2010), the net cost to the county of the no-growth scenario would exceed the net costs associated with continued ROGO development in the growth scenario. I The difference ranges from a high-end estimate of $517 million (assuming that the county finances the purchase of all land in 2003) to a low estimate of $102 million (asswning that the county would obtain 65 percent of fimding from federal and state sources and would purchase the land over time). Exhibit I -1 provides a summary of the net costs associated with the growth and no-growth scenarios for e~h of these analyses. Exhibit I-I SUMMARY OF RESULTS Growth Scenario No-Growth Scenario Difference Between Land Purchase Strategy Net Costs Net Costs Scenarios 100 percent purchase of aU available $967 milJion $1,484 million S5 17 million land in 2003 Sensitivity Analyses 100 percent purchase of aU available S967 million SI,295 million $328 million land over eight years 35 percent purchase of all available $376 million S562 milJion S 186 million land in 2003 35 percent purchase of aU available S376 million $478 million $102 million land over eight vears Exhibit 1-2 presents a more detailed summary of the initial analysis identifying the costs and revenues for each of the major categories analyzed. I Note that both of these scenarios involve significant restrictions on residential growth. It is possible that the management and infrastructure costs associated with a more rapid rate of growth could exceed the revenues. 1-3 October 27,2000 Euibit 1-2 COMPARISON OF COSTS AND REVENUES FOR GROWI'H AND NO-GROWTH SCENARIOS Cateeory Growtla SeeDario No-Growtb Sceaario CHANGES IN COSTS County Services (Averue Costing Methodr $ 41.731.685 - Land Manaaement Costs - $ 22.602.683 Wastewater Infrastructure - $ 3,468.000 Water Supply Infrastructure $ 2.000.000 - Schools: ADnual Per Pupil Costs $ 22.974.]10 - Infrastructure (UDDer Keys) not estimDled - U.S. 1 Transportation $ 24.005.550 - Debt Servictf $ 97,800 $ 369,316,815 Land Acquisition CostsC $ 909,011.517 $ 1.048,957,097 Total Costs S 999.810.86% S 1.444.344.595 CHANGES IN REVENUES Prooenv Tax Revenues (losses) 520,014,692 $(39,757,814) Buildina Permits and Impact Fees 5 5,920.673 - Other Revenues' 5 6,668,487 - Total ReveDIIe5 $ 32,550.368 S (39,751,114) TOTAL COSTS - TOTAL REVENUES 100 Percent Durchase of land in 2003 S 967,217.011 S 1.484,10%,409 100 Percent ",,,'c"ase of '"nd DWr ag"t ye"" $ 967.217.0/1 S /.295.243.585 J5 Percent purc"ase of '""d i" 200J $ 376.359.525 S 562.224.366 J 5 Perce"t purcltase of ,,,,,d over ag"t years $ 376.359.525 S 478.390.012 Notes: . Includes costs related to: recreation and culture, public safety, transportation (non U.S. 1), economic environment, human services, court activities, general aovcmment, solid waste, and other physical environment. ~ Debt service costs for the growth scenario represent additional capital investment to the water supply infras1ruc:ture. Debt service costs for the no-growth scenario l'CprCSent the cost of land acquisition. We do not include debt service costs related to land acquisition in the growth scenario because this analysis does not extend past 20 I O. If we included debt service costs associated with purchasina the remaining developable land after 20 I 0, the 597,800 figure would increase by a range of $63 million (assumina the county buys 35 percent of the land between 2010-2018) to 5320 million (assumina the county purchases 100 percent of the land in 2010). C Land acquisition costs in the growth scenario assume that the county will purchase remainina developable land in 20 I O. This estimate does NOT reflect real increases in property values (i.e., net of inflation) over time (i.e., between 2003 and 2010). d Includes revenues related to 2asoline and one-cent sales taxes and county clerk fees and fines. 1-4 October 27, 2000 1.3 ASSUMPTIONS AND LIMITATIONS OF THE ANALYSIS While these results indicate that growth scenario net costs are lower than the net costs associated with purchasing remaining buildable land in the no-growth scenario, they reflect a central assumption that land purchase price is not affected by timing (i.e.. that the real cost of purchasing land does not increase in excess of inflation). If, however, real estate prices increase, then the costs associated with delaying the purchase ofland in both scenarios increase. Real annual price increases (net of inflation) in excess of 5.5 percent over 10 years would erase the $517 million difference between the scenarios in the initial analysis. T ota! growth scenario costs would exceed no-growth scenario costs because the purchase of land in the growth scenario would be delayed until 2010.2 Note that this analysis does not address the issue of discounting future land purchases to reflect the benefit to the county of delaying expenses by opting to purchase land over time. The effect of discounting would be to offset at least a portion of the costs associated with changes in property values. We do not address discounting in relation to other county costs because these are generally constant costs incurred by the county in order to provide services. We do not address discounting in relation to land purchases because county land purchase in the growth scenario is uncertain. However, to fully consider the impact of opting to purchase land over time, the analysis should ideally consider land-specific land acquisition patterns in both scenarios, and should reflect both discount rates and increases in property values. Exhibit 1-2 indicates that in both scenarios, the single largest cost to the county is the cost of land acquisition. Other key cost categories are debt service and land management in the no- growth scenario and costs related to road and school services in the growth scenario. These elements of the analysis reflect simplifying assumptions that may underestimate growth-related costs, and may further complicate a simple comparison between growth alternatives based on the results of this - analysis alone. Assumptions in certain cost categories may underestimate the costs of growth. For example, school infrastucture costs related to growth in the Upper Keys are not included in the analysis and could potentially increase the total cost of growth by at least several million dollars. Similarly, debt service costs related to land acquisition in the growth scenario are omitted due to the time frame of the analysis, and could increase the costs of the growth scenario substantially. 2 The growth scenario does not address the use of undeveloped land remaining in 2010. TIris scenario may therefore omit significant future costs to the county (i.e., associated with growth after 2010 or with land acquisition). Therefore, to effectively compare the two scenarios we assume that development will cease in 2010 and the county will purchase remaining undeveloped land. However, land-related costs in the growth scenario still omit three additional potential costs: potential increases in property values, debt service costs of land purchases beginning in 2010, and land management costs beginning in 2010. 1-5 October 27, 2000 Other estimates are subject to considerable uncertainty. U.S. 1 transportation costs are preliminary estimates and may underestimate the costs of bridgework in the Keys, or alternatively may be incurred regardless of the growth scenario (resulting in no marginal cost associated with either scenario. Property value estimates do not predict real increases over the next ten years (therefore potentially underestimating the cost of delaying land pmchase in the growth scenario) and also do not address potential increases related to open space preservation (increasing potential property tax revenues in the no-growth scenario). Exhibit 1-3 summarizes the assumptions related to these cost categories and their implications for the analysis. Exhibit 1-3 MAJOR ASSUMPTIONS AND POTENTIAL IMPACTS ON RESULTS Cost Category Assumption Potential Effect on Analysis School Infrasnucture Not included in analysis. Would increase growth related costs by at least several million dollars. U.S. 1 Transportation Based on unofficial estimates; no- Could increase growth-related costs; growth scenario assumes only alternatively, could reduce growth-related costs minor road improvements. if both scenarios require major improvements. Debt Service. Growth scenario debt costs related Would increase growth scenario costs by $63 to land acquisition not included. million to $320 million.b Property Tax Revenues Property value increases related to Would decrease property tax losses in no- open space preservation are not growth scenario. included in analysis. Land Acquisition Costs. Real increases in property values Would increase land acquisition costs in over time are not considered in growth scenario. Real annual increases of analysis. more than 5.5 percent would result in growth scenario costs that exceed those for the no- growth scenario. · Future land acquisition costs and related debt service costs are not discounted. Discounting these costs would decrease present value of land acquisition costs, particularly in the growth scenario, which delays purchase of available land. b The range of potential debt service costs associated with growth scenario land acquisition represents eight years of fmancing costs assuming that the county will fmance 90 percent of its purchase of available land in 2010; the low-end estimate (i.e., $63 million) assumes that the county will fmance the purchase on5 percent of the available land over eight years, and the high-end estimate (i.e., $320 million) assumes that county will fmance the purchase ofallland in 2003. Because of the time frame of the analysis and the conservative assumptions regarding timing and growth related costs, we do not consider the results of this analysis to be a conclusive indication that net costs of growth are less than net costs associated with land acquisition and management over the long term. Moreover, because this analysis has not addressed any finite limits on development 1-6 October 27,2000 indicated by the ongoing carrying capacity analysis, or the total economic and social costs and benefits of alternative development scenarios, these estimates should not be considered in isolation to determine future land-use policies of Monroe County. . 1.4 POLICY IMPLICATIONS' The results of this analysis suggest several important implications for policy makers. Timing of land acquisition is criticaL A key assumption driving the analytic results is that land acquisition costs do not reflect real increases in property values over the next decade.3 This assumption, together with the relatively short time frame of the analysis, suggests that the county should determine the extent to which hurricane evacuation and carrying capacity studies limit the total development that the Florida Keys can support. If limiting development and acquiring remaining land in the county is imperative, the process of acquiring remaining land should begin soon. To the extent that the county must fund land acquisition, the costs will likely be lower in the short term than over the long term. Attention to the benefits and costs of growth is important. The analysis does not address the actual value that people place on environmental resources, or the impacts that growth may have on the quality of life. While it is beyond the scope of the fiscal impact analysis to address these issues, they could have an impact on total costs and revenues at the county level, and are important in fully considering the benefits and costs of alternative development scenarios. Alternative land protection measures would reduce costs. Given that the major costs associated with the no-growth scenario are related to land acquisition, the county would benefit from developing land conservation programs and measures to reduce its need to purchase and manage undeveloped properties. The county could, in conjunction with local land conservancies, explore other options including conservation easements, purchase of development rights, transfer of development rights (TDRs) or the use of state and federal funding for land acquisition efforts.4 3 The estimated market value of the vacant buildable land used in this analysis ($1,049 million) reflects the average sale price of vacant parcels in the year 2000. 4 We recognize that the cost savings to the county of a conservation easement is dependent upon the difference in a property's assessed value before and after a proposed easement. It is feasible that an easement could reduce a parcel's value significantly (i.e., the cost to the county of extinguishing a parcel's development rights may be approximately equal to the "fee simple" acquisition costs). If this is the case, it is unlikely that conservation easements would significantly reduce the cost of land acquisition. 1-7 October 27, 2000 PROPOSED OUTLINE FOR REPORT ON IMPLEMENTING THE COMPREHENSIVE PLAN: FISCAL COSTS AND FUNDING A. INTRODUCTION AND SUMMARY 1. Background a. Purpose b. Scope c. Assumptions d. Content 2. Executive Summary a. Conclusions b. Recommendations B. COSTS OF PLAN IMPLEMENTATION 1. Infrastructure to Serve Existing Development and Planned Growth (2002) 2. Required Studies and New Programs 3. Land Acquisition Program 4. Total Implementation Costs C. FUNDING STRATEGY 1. Fair Share Cost Allocation 2. Proposed Funding Sources by Cost Category 3. New Funding Initatives D. IMPLEMENTATION ALTERNATIVES 1. Implementation Issues 2. Alternatives APPENDIX - Industrial Economics Report