Title
Department of Transportation recommending the Board consider the following:
1) Reduce the Traffic Impact Fees (TIF) due for Commercial Building Permits 339795 and 339798 for a development project located within the El Dorado Hills Business Park for a total of $27,789.08, pursuant to Board Policy J-7, Economic Development Incentives, and
2) Approve a budget transfer increasing revenue and appropriations to allow for a transfer of funds from the Transit Occupancy Tax (TOT) reserve to TIF in amount of $27,789.08. (4/5 vote required)
FUNDING: TOT Designated Reserve. (General Fund)
Body
DISCUSSION / BACKGROUND
On May 17, 2022, the Board of Supervisors approved Resolution 072-2022, which implemented the annual update to the Traffic Impact Fee (TIF) Schedule. The updated fees went into effect sixty (60) days after the adoption of the Resolution, and the 2022 TIF Schedule became effective Saturday, July 16, 2022. TIF is collected based on the fees in effect on the date of permit issuance rather than the date of the permit application, per the TIF Program Administrative Manual.
El Dorado Hills Retail Group, LLC (Owner), acting on behalf of Tractor Supply Company (Tractor Supply), applied for commercial building permits #339795 and #339798 on April 28, 2021. The project had a lengthy review period and was ultimately issued on July 19, 2022, two business days after the revised 2022 TIF fee became effective, resulting in the total TIF fee to increase from $211,156.42 to $238,945.50.
The Owner of the project was unaware of the pending increase in the TIF due and have stated they would have taken actions to secure the permit prior to the increase going into effect had they been aware of the situation. The Owner has requested a TIF reduction for the amount of the increase based upon the circumstances of this permit and the timing of the fee increase.
The El Dorado County General Plan Economic Development Element encourages the County to provide incentive programs to target new industries which diversify and strengthen our export base. Board of Supervisors Policy J-7 allows for incentives to encourage economic development within the County for targeted business sectors. Section II.B.3 of the Policy allows for the “Deferral/Reduction of Permit or Impact Fees” for businesses that generate high economic impact and provide a variety of employment opportunities for County residents. Given the specific circumstances of this development, staff believes a TIF reduction is appropriate and consistent under this Board Policy, and that a transfer of Transit Occupancy Tax (TOT) funds to the TIF Program to fund the incentive would be appropriate.
Tractor Supply is constructing a retail home and farm supply business in the El Dorado Hills Business Park, scheduled to open for business in late 2022 or early 2023. The business will increase services to the community, lessening the need for El Dorado Hills residents to travel to Folsom and Sacramento County (the location of the nearest comparable services) to obtain home and farm goods and supplies. The total project is valued at $1.9 million, which includes the land valuation and improvements. Tractor Supply's new facility will be utilized for their workforce and the public. Although the cost of this incentive would reduce the TOT reserve by $27,789.08, the project increases the assessed value of the land by $1.6 million, generating an increase of $4,300 in property tax annually. The County will immediately see a return on this fee reduction as the construction of the new building will increase property taxes collected by the County by roughly $4,300 per year, with a return on investment (ROI) realized in the sixth year of the project through increased property tax alone. In addition to increased property tax, this project will produce sales tax dollars, job creation and increased employment opportunities by improving workforce development skills. Tractor Supply is estimated to have annual sales of between $6 million and $8 million, generating between $400,000 and $580,000 in annual sales tax revenue while creating between 20 and 30 jobs for the community. These investment returns along with meeting several County Economic Development strategic goals helps nurture the County’s and community’s business-friendly environment.
The project also represents a commercial infill component to the El Dorado Hills Business Park. While the business park is the largest commercial and industrial land use opportunity to generate jobs and economic benefits within the County, it has been slow to build out. This project moves the business park closer to the goal of maximizing its ultimate economic benefit potential.
The Department is recommending the Board approve the request to reduce the TIF due and offset the $27,789.08 in incremental Traffic Impact Fees with TOT reserve funds.
ALTERNATIVES
The Board could choose not to approve the fee reduction, in which case the permit applicant would be required to pay the full TIF due under the 2022 TIF Schedule. Alternatively, the Board could approve a TIF reduction without a budget transfer from the TOT reserve funds, and reflect the TIF reduction as unrecognized revenue in the TIF Program fund accounts. If the fee reduction is approved but no TOT reserve fund budget transfer is approved, the TIF Program will reflect unrecognized revenues of $27,789.08.
PRIOR BOARD ACTION
As outlined in the Discussion/Background section above.
OTHER DEPARTMENT / AGENCY INVOLVEMENT
County Counsel; Chief Administrative Office; Planning and Building Department, Planning Division, Economic Development Unit
CAO RECOMMENDATION / COMMENTS
It is recommended that the Board approve this item.
FINANCIAL IMPACT
Approval of this item would decrease TIF revenue in the Zone 8, Highway 50, and Silva Valley Interchange TIF funds by a total of $27,790, and transfer funding from the TOT Reserve fund to the TIF funds by the same amount. This would reduce the amount of funds available in the designated reserve for other projects or economic incentives from $2,072,417 to $2,044,627. However, this partial TIF waiver will catalyze significant economic and employment benefits to the County. Economic growth will be realized by increased property and sales tax revenue as well as increased employment opportunities in the County.
CLERK OF THE BOARD FOLLOW UP ACTIONS
Obtain the Chair's signature on the budget transfer form and return to the
STRATEGIC PLAN COMPONENT
Good Governance: Evaluate requests and recommendations based on complete assessment of the best available information, with the goal of reaching well informed decisions.
CONTACT
Rafael Martinez, Director
Department of Transportation