Comprehensive Fiscal Analysis of the Proposed Incorporation of Carmel Valley

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Comprehensive Fiscal Analysis of the Proposed
Incorporation of Carmel Valley
Presentation to the Monterey County
LAFCO Prepared by Economic Planning Systems,
Inc. December 6, 2004
www.epsys.com
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Purpose of the Public Review Draft of CFA

• Analyze new citys fiscal feasibility as
  mandated by State law
• Estimate property tax transfer
• Estimate Revenue Neutrality
• Discuss plan for provision of public services
• Evaluate factors affecting feasibility of new
  city

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Incorporation Description

• Boundaries
• Contracts with County Departments (i.e., roads,
  police protection, and building inspection)
• Reorganization Impacts (i.e., County Service
  Areas)
• Other Service Provision Impacts (i.e., Wildland
  Fire Protection State Responsibility Areas)

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Feasibility Conclusions

• Carmel Valley generates positive fiscal
  balance prior to making mitigation payments to
  County
• County revenues transferred to the City not equal
  to expenditures transferred, requiring fiscal
  mitigation
• After making an annual mitigation payment, the
  new city is expected to experience annual
  deficits in its initial years of operation
• The first years fund balance may not be
  sufficient to cover annual deficits and establish
  reasonable reserve funds

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Feasibility Conclusions (cont.)

• Conclusions assume reduction in the States
  distribution of motor-vehicle license fee revenue
• The financial forecast is sensitive to future
  events, e.g., legislation, commercial
  development, sales and transient occupancy tax
  revenues
• Proposed boundary modifications to residential
  and commercial areas do not significantly affect
  feasibility of incorporation

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Fiscal Results
Item Third Year Seventh Year
General Fund Revenues 8.0
mill. 8.3 mill. Expenditures
(5.8 mill.) (5.5 mill.) Net Annual
2.2 mill. 2.8 mill. Fiscal
Mitigation (2.5 mill.) (2.5
mill.) Net Annual (after mitg.) (300,000)
300,000 Surplus (at end of year) 600,000
300,000
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General Fund Revenues
Item Third Year Seventh Year
Property Tax 1.4 mill. 1.6
mill. Hotel Tax 3.5 mill. 3.5
mill. Sales Tax 1.7 mill. 1.8
mill. Other 1.4 mill. 1.4
mill. Total 8.0 mill. 8.3 mill.
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General Fund Expenditures
FTEs Item Third Year Seventh
Year (Year 7)
General Govt. 1.3 mill. 1.3 mill.
9.0 Planning Bldg. 1.0 mill.
900,000 10.0 Police 2.0 mill.
2.1 mill. contract Other 1.5 mill.
1.2 mill 1.0 Total 5.8 mill.
5.5 mill. 20.0
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Summary of Next Steps

• Provide feedback on Public Review Draft of CFA
• Start revenue neutrality negotiations between
  proponents and County
• Complete Public Hearing Draft including final
  determinations on
• Financial feasibility
• Revenue neutrality payment
• Reorganization impacts