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HomeMy WebLinkAboutFiscal and Economic Report 011311 presented to TC 020111 Eve r Va i l `� ' � + � Fiscal Impact Analysis � Prepared for: Town of Vail Prepared by: Economic & Planning Systems, Inc. January 13, 2011 ECt)rlqrrliC c�I'1�3rrp�rrl�SySt�n�rr1S,Ir7C. 73P I7i'h Sfrec�t, Suite 63(1 Denuer, CQ 802p2-351 T 3tl3 b�3 3557 te1 303�23 4p��fax EPS #20812 Berkefey Sacaan�ento Denver www.epsys.cnm Table of Contents 1. INTRODUCTION.................................................................................................... 1 Purpose ................................................................................................................... 1 ReportOrganization .................................................................................................. 1 Methodology ............................................................................................................3 Fiscal Model Organization...........................................................................................6 2. PROJECT OVERVIEW AND KEY ASSUMPTIONS.................................................................. 8 Development Program...............................................................................................8 KeyAssumptions .................................................................................................... 12 3. FISCAL IMPACTS ................................................................................................ 14 Summary of Fiscal Impacts ...................................................................................... 14 Existing Site Fiscal Conditions................................................................................... 18 General Fund Impacts ............................................................................................. 19 OtherFund Impacts ................................................................................................ 25 4. ECONOMIC IMPACTS ............................................................................................ 29 Summary of Retail Impacts...................................................................................... 29 EverVail Spending Flows ......................................................................................... 34 Retail Sales in Ever Vail Businesses........................................................................... 38 5. KEY FINDINGS AND RECOMMENDATIONS..................................................................... 42 List of Tables Table 1 Ever Vail Proposed Development Program ...........................................................8 Table 2 Ever Vail Estimated Market Values......................................................................9 Table 3 Ever Vail Retail and Commercial Development Program ...................................... 10 Table 4 Comparison of Ever Vail Retail Programs........................................................... 11 Table 5 Occupancy Assumptions.................................................................................. 12 Table 6 High Scenario Fiscal Impacts ........................................................................... 15 Table 7 Low Scenario Fiscal Impacts............................................................................ 16 Table 8 Current General Revenues from Ever Vail Site ................................................... 18 Table 9 High Scenario - General Fund Revenues and Expenses........................................ 20 Table 10 Low Scenario - General Fund Revenues and Expenses........................................ 21 Table 11 Summary of Ever Vail Sales Tax....................................................................... 23 Table 12 General Fund One-Time Revenues and Expenses ............................................... 24 Table 13 Capital Fund Impacts - High Scenario............................................................... 26 Table 14 Capital Fund Impacts - Low Scenario ............................................................... 27 Table 15 RETT, Vail Marketing District, and URA Revenues............................................... 28 Table 16 Summary of Town Retail Sales Flows with Ever Vail............................................ 31 Table 17 Vail Retail Inventory....................................................................................... 33 Table 18 Total Ever Vail Guest Spending Regardless of Location........................................ 35 Table 19 Ever Vail Guest Spending Capture Rates ........................................................... 36 Table 20 Ever Vail Guest Spending by Location ............................................................... 37 Table 21 Potential Erosion from Existing Business Districts............................................... 39 Table 22 Projected Sources of Sales in Ever Vail Retail..................................................... 40 Table 23 Projected Net Dollar Flows by Business District .................................................. 41 List of Figures Figure 1 Ever Vail Guest Spending Patterns ................................................................... 30 Figure 2 Net Dollar Flows vs. Existing Retail Sales .......................................................... 32 1. INTRODUCTION Purpose Economic & Planning Systems (EPS) was hired by the Town of Vail to conduct a fiscal and economic impact analysis of the proposed Ever Vail development. EPS' scope of work included two major tasks: Fiscal Impact Analysis - The fiscal impact analysis addresses the costs of providing Town services to the project compared to the revenues generated by the project. The fiscal analysis accounts for a range of funds including the General Fund, the Capital Fund, the RETT Fund, the Marketing Fund, and the URA Fund. Economic Impact Analysis - The economic impact analysis addresses the ways in which the project is expected to impact other sectors of the Vail economy and how these impacts can be mitigated. One of the key issues has been cannibalization (sales erosion). To address this issue, the Economic Impact Analysis quantifies retail sales flows by base area, Vail Village, Lionshead, and West Vail. The Economic Impact analysis also addresses other economic and policy issues (more qualitatively) such as the provision and filling of°hot beds," the capability to attract group sales, the ability of the project to fill shoulder seasons, and the economic goal of attracting and retaining jobs in more diverse economic sectors. Report Organization This report provides a comprehensive analysis of the Ever Vail projected impacts. It includes the following chapters: 1. Introduction - Identifies the purpose for the analysis and lists key issues to be evaluated. 2. Project Overview and Key Assumptions - Provides a summary of the project, a summary of how the program has changed, and lists the key assumptions used to determine the fiscal and economic impacts. 3. Fiscal Impacts - Identifies the full range of fiscal revenues and expenditure for five different Town funds. 4. Economic Impacts - Provides a basis for understanding sales flows into and within the Town of Vail. Estimates future sales flows and quantifies cannibalization impacts to existing retail nodes. 5. Recommendations - Lists key findings from this study and isolates key issues that warrant follow up based on this analysis. Economic& Planning Systems, Inc. 1 Ever Vail Fiscal Impact Analysis January i3, 2011 Summary of Previous Material On December 7, 2010, Economic & Planning Systems presented its analysis to the Vail Town Council regarding the fiscal and economic impacts of the proposed Ever Vail development. (Material used in the presentation was dated November 11, 2010.) During the presentation, Council members asked a series of questions. In response, EPS has provided this expanded report to address: • Follow Up Questions - This report provides a more detailed explanation of the methods and assumptions used in the analysis. The report describes the projections for each fund and links the narrative to detailed tables to provide a more incremental approach and an increase in the level of understanding of the models used in the analysis. It also addresses specific issues such as the Lionshead retail sales levels, lift ticket revenue projections, and revenue streams generated by the current improvements. • Revisions - A number of small revisions have been made to address comments and to correct minor errors. The changes show that the project will have a slightly better fiscal and economic impact on the Town than originally projected. None of the changes affect the overall conclusions. These revisions are summarized below. 1. Fiscal Impact Model Overview. The methodology section was revised and expanded to describe the organization of the Fiscal Impact Model and the functions of the various tables. 2. Lionshead food and beverage sales. Lionshead food and beverage sales are approximately $22.2 million, compared to the incorrect figure of $2.9 million shown previously. EPS overlooked a category of sales in the previous version and the model has been corrected. A small change to the erosion and sales flows estimates was required after this change, resulting in a minor difference in the sales flow figures (1.0 percent positive net sales flow versus 0.9 percent in this version). 3. RETT Fund. The figure reported in Tables 6 and 7 of the previous memo reflected the total for RETT from initial developer sales and the recreation impact fee. These two figures are now reported separately to clarify the individual revenue sources to the RETT fund. The ongoing revenues stated previously have not changed. 4. General Fund Expenses. The General Fund expenses under the cumulative scenario declined by $149,000. EPS mistakenly included the right-of-way maintenance cost twice in the cumulative impact. Because costs are now lower, the fiscal benefit is higher. 5. General Fund Revenues. Revenues declined by $44,000 in Phase I and $18,000 in Phase II due to the elimination of the Road and Bridge Property Tax. Since the project is largely within the Lionshead URA, this revenue stream would be part of the increment captured by the URA. 6. A typographical error in Figure 1 (the dollar bill image) was corrected. Economic& Planning Systems, Inc. 2 Ever Vail Fiscal Impact Analysis January i3, 2011 Methodology This section provides an overview of the methodology used to perform the detailed calculations in the Fiscal Impact Model. Fiscal impact analysis (FIA) is a municipal financial planning and community development tool used to evaluate the impacts of land use decisions. It provides order-of-magnitude estimates of the impacts to a Town's ongoing revenues, operations and maintenance costs, and capital expenditures. The FIA can, however, identify specific project impacts to be addressed and mitigated such as extraordinary O&M costs or one-time capital costs triggered by the project. The analysis focuses on the Town's General Fund revenues and expenditures to estimate the net fiscal impact of the project. The General Fund is the major operating fund for the Town. The analysis also estimates the building and construction related revenues, the Real Estate Transfer Tax (RETT), construction use tax, lodging tax, the recreation impact fee, and property tax increment to the URA. The Town has many other smaller revenue sources. Most of these were not analyzed because they do not have a strong nexus to growth and development. In other words, they are determined by contractual agreements or formulas that are not directly linked to new growth and development. Expenditures are not estimated for the RETT, Vail Marketing District, or URA funds because expenditures from these funds are made on a discretionary basis as funds are available, and these expenditures may not be directly related to impacts generated by Ever Vail. Cost and Revenue Methodology The fiscal impact model uses the Town of Vail Budgets and Comprehensive Annual Financial Reports (CAFR) from 2006-2009 as the basis for estimating revenue and cost factors which are applied to estimate project specific impacts. The analysis compares annual ongoing revenues to ongoing annual expenditures (O&M). One-time capital costs are addressed separately. Two methods are used to estimate costs and revenues: case studies and average cost or revenue multipliers, as described below. Case Studies This refers to a specific calculation of the marginal costs or revenues derived from the Project based on available data. Case studies were developed for revenue sources when refined calculation methods were available. For example, property taxes are calculated from expected market values multiplied by the assessment ratio and then multiplied by the applicable mill rates. Sales tax revenues are calculated from estimated visitor expenditures. Police and fire impacts (calls for service) were estimated by constructing a per-unit comparison of call volume in Lionshead Village. Average Cost or Revenue Multipliers These are cost or revenue measures that are ratios of budget line items to known quantities such as population, housing units, or peak persons served. The variable "peak persons served" is defined as population plus visitors plus one-half of non-resident employees. Half of non-resident employees reflect the impacts of employees who are only present for a portion of a day. This estimating technique is used when more detailed data is not available. Revenues or Economic& Planning Systems, Inc. 3 Ever Vail Fiscal Impact Analysis January i3, 2011 expenditures can be expressed in terms of a cost or revenue per capita, per housing unit, or per peak person served, etc. Some costs and revenues do not increase at the same rate as the Town's growth. For example, general Town administration and government is a relatively fixed cost that does not increase by a one-to-one ratio with new development. The costs to provide other services such as police and fire are more directly tied to the increase in population and persons served generated by new development. To account for cost variability, a percentage adjustment is applied to gross average cost multipliers to reduce them to a net multiplier. One-Time vs. Ongoing Revenues New development generates two types of revenue to the General Fund: annual revenue and one- time revenue. Annual revenue includes property tax, sales tax, and lodging sales tax. One-time revenue includes building permit and plan review fees. Note that other Town Funds, such as Capital, RETT, Marketing, etc., are addressed following the General Fund discussion. Tax Revenues The tax revenues described below are ongoing annual revenues that will occur after the project is constructed and occupied, and will continue for the life of the project. The major ongoing tax revenues analyzed are described below: • Sales and Lodging Tax — The Town allocates about 60 percent of sales tax to the General Fund and 40 percent to the Capital Fund. Within the General Fund, sales tax accounts for 37 percent of all General Fund revenues. Sales tax includes the 4.0 percent general sales tax and the 1.4 percent lodging tax. The 4.0 sales tax applies to both retail sales and overnight lodging sales. The 1.4 percent lodging tax is dedicated to the Vail Marketing District and is not used to fund Town operations. • Property Tax — Property tax is normally a General Fund revenue. However, the Ever Vail project lies within the Lionshead Urban Renewal Area (URA). The URA collects property tax increment revenues in this area for 25 years after the date that the tax base for the URA was established. The tax base for tax increment revenues was established on December 31, 2004. Any new property tax revenue in the URA, including revenues generated by the Ever Vail project, flows to the URA rather than the General Fund until 2030 (December 31, 2029). The URA can use these revenues to fund a variety of functions or capital projects within the U RA. • Ski Lift Tax — This is a 4.0 percent sales tax on lift ticket sales. Lift tax revenue contributes to operating the Town's free bus service. Lift tax is calculated from net new skier visits, rather than the total number of skiers originating in the Ever Vail mountain portal. • Real Estate Transfer Tax (RETT) — This is a 1.0 percent transaction tax on the sale of real property in the Town of Vail. RETT revenues are restricted to the RETT Fund, which is used for parks, recreation, open space, and environmental sustainability. Economic& Planning Systems, Inc. 4 Ever Vail Fiscal Impact Analysis January i3, 2011 Construction Related Revenues Ever Vail will generate several revenue streams during the course of project construction. These are '�one-time" revenues in that they will end when the project is built out. The primary concern in the FIA is to ensure that the ongoing revenues will cover the costs of services, as construction-related revenues cannot be relied on if construction stops. However, construction fees and permits are roughly 15 percent of General Fund revenues, and are an important operating revenue source from year-to-year and should be accounted for in the analysis. • Construction Use Tax — The Town's 4.0 percent construction use tax is applied to the cost of materials. The construction use tax is dedicated to the Capital Fund. • Building Permit and Plan Review Fees — The Town charges a building permit fee based on the construction valuation and a plan review fee that is 65 percent of the building permit fee. Permit fees go to the General Fund. • Recreation Impact Fee — The Town charges a $1.00 per square foot recreation impact fee which is allocated to the RETT fund for parks, recreation, open space, and environmental sustainability. • Traffic Impact Fee — The Town has traditionally collected a traffic impact fee that is $6,500 per peak hour trip. It has been included in the analysis, recognizing that in previous project approvals, the Town has accepted public road improvements as a credit against the impact fee. Economic& Planning Systems, Inc. 5 Ever Vail Fiscal Impact Analysis January i3, 2011 Fiscal Model Organization EPS has provided Town staff with a detailed Fiscal Impact Model (a spreadsheet model) that contains all of the calculations and assumptions used in this analysis. Earlier drafts of the Model were also provided to Town Council. This section of the report provides an overview of the Model's organization for reference. The Table of Contents in the Fiscal Model (separate from this report) shows the general organization of the model, with table numbers and descriptions divided into major topic areas described below. The tables referenced in this section refer to the Fiscal Impact Model, not this report. Project Assumptions The development program and basic market assumptions are identified in this section of the Fiscal Model in Tables 1 through 8. Many costs and revenues are based on visitor days generated by the project. The calculation of net new visitor days is shown in Table 5. The project's peak population and visitors are also calculated in Table 6. The monthly occupancies used for calculating skier visits are shown in Table 8. Town Demographics and Budget Analysis This section of the model calculates the cost and revenue multiplier factors used for costs and revenues estimated with the average cost method. Table 9 estimates the total Town peak population. Table 10 is an estimate of second homes (not in the rental pool) used in Table 9. Tables 11 through 14 identify the various cost and revenues in the general fund, the methods used to estimate them (case studies or average cost method), and the resulting average cost and revenue multipliers. Table 15 describes the current sales tax structure in the Town. Revenue Analysis Tables 16 through 22 provide detailed case study estimates of the property tax, lodging tax, RETT, and lift tax revenues. Table 22 estimates the lift tax from only net new skier visits calculated from net new visitor days. Table 22a provides a total estimate of skiers that would originate in the Ever Vail portal, not including day skiers from parking. Cost Analysis Case studies for the major project costs are shown in Tables 23 through 28. These were developed with Town department heads and key staff. The transit impacts identified in Table 28 come from LSC Transportation Consultants. One-Time Fees and Revenues Tables 29 through 32 calculate one-time building and development fees from the development program. Actual fees will vary as more specific construction information becomes available. These revenues occur��one time" in that they only occur during construction. Economic& Planning Systems, Inc. 6 Ever Vail Fiscal Impact Analysis January i3, 2011 Results Tables Tables 33 through 38 combine the case study estimates and average cost/revenue estimates to calculate the annual net fiscal impact to the General Fund, shown in detail in Table 35. Table 36 shows one-time General Fund revenues. Table 37 shows the impact to the Capital Fund. Table 38 shows the impacts to the RETT, Vail Marketing District, and URA funds. Expenditures are not estimated for the RETT, Vail Marketing District, or URA funds because expenditures from these funds are made on a discretionary basis, as funds are available, and these expenditures may not be related to impacts generated by Ever Vail. Economic& Planning Systems, Inc. 7 2. PROJECT OVERVIEW AND KEY ASSUMPTIONS The purpose of this chapter is to summarize the proposed development program, isolate various elements within the program by use to evaluate fiscal impact, and provide assumptions about the functioning of the development that serve as the basis for the modeling. Development Program Residential The development program as proposed is summarized in Table 1. It includes a total of 530 residential units and hotel rooms. The hotel is currently proposed to be 102 rooms. A 76-unit °branded residence" condominium component would be associated with the hotel brand, management, and guest services. An additional 307 market rate condominiums are proposed, plus 26 deed restricted rental units and 19 deed restricted for-sale condominiums. The for-sale units would be deed restricted to Eagle County residents and full-time local employees. Compared to the earlier submittal, the residential program is largely the same; the major difference is that the hotel has been reduced to 102 rooms from 120 rooms. The retail program has also been scaled back significantly, as will be discussed below. The project was analyzed as a two phase project. The fiscal impact of each phase was modeled as if it were a single standalone project; the fiscal impacts of Phase I and Phase II are reported separately. The cumulative impact of full buildout of both phases was also analyzed. EPS has modeled the east phase as Phase I. Phase I includes the hotel and retail/commercial space. Phase II, the western phase, is almost entirely residential. Table 1 Ever Vail Proposed Development Program Ever Vail Fiscal Impact Analysis Description Phase I Phase II Total East West Development Program Hotel 102 0 102 Branded Residences 76 0 76 Condominiums 158 149 307 Deed Restricted Rental 8 18 26 Deed Restricted For-Sale 12 7 19 Total Units 356 174 530 GRFA 468,067 315,273 783,340 Source:Vail Resorts Developmerrt Company,Economic&Planning Systems H:\2�12EVeVail FisralAnalysis\Motlels\[2J812-fscA matlel-12-292�10x1s]i-Lt+v R']2m Economic& Planning Systems, Inc. 8 Ever Vail Fiscal Impact Analysis January i3, 2011 Market values for the fiscal impact analysis were determined by EPS from research on several recently built and currently for-sale base area projects located throughout the Intermountain West. The market rate components are modeled at an average of $1,200 per square foot, or $1.8 million per unit, as shown in Table 2. The hotel market value is estimated to be $426,000 per room, based on 60 percent occupancy, a $350 per night average daily rate, 50 percent operating expenses, and a 9.0 percent capitalization rate. Vail Resorts Development Company (VRDC) staff has indicated that the deed-restricted for-sale units would be priced at approximately $400,000 per unit. Table 2 Ever Vail Estimated Market Values Ever Vail Fiscal Impact Analysis Description Phase I Phase II Avg.Sq.Ft. Hotel --- --- Branded Residences 1,500 1,500 Condominiums 1,500 1,500 Deed Restricted Rental 1,200 1,200 Deed Restricted For-Sale 1,250 1,250 Market Value/Sq. Ft. Hotel --- --- Branded Residences $1,200 $1,200 Condominiums $1,200 $1,200 Deed Restricted Rental --- --- Deed Restricted For-Sale $325 $325 Market Value/Unit Hotel $426,000 $426,000 Branded Residences $1,800,000 $1,800,000 Condominiums $1,800,000 $1,800,000 Deed Restricted Rental $102,000 $102,000 Deed Restricted For-Sale $406,250 $406,250 Source:Vail Resorts Developmem Company,Economic&Planning Systems H:\2�12 Eve Vail Fisral Analysis\Malels\[21812-fiscal modeFl2-292J10x1s]3NktAssunptbns Economic& Planning Systems, Inc. 9 Ever Vail Fiscal Impact Analysis January i3, 2011 Retail and Commercial The project is also proposed to contain approximately 123,000 square feet of mixed use retail and commercial space. However, less than half of the space or approximately 53,000 square feet is programmed as retail and food and beverage space. There is an additional 69,500 square feet of conference, meeting, skier services, spa, and office space, as shown in Table 3. The program also proposes additional parking. A total of 1,464 parking spaces will be constructed, 1,025 in Phase I and 439 in Phase II. Approximately 400 of the total count will be public spaces and are anticipated to be used by day skiers during the ski season. The balance fulfills requirements related to retail and residential uses. Table 3 Ever Vail Retail and Commercial Development Program Ever Vail Fiscal Impact Analysis Description Phase I Phase II Total East West Retail and F&B Restaurant 16,090 0 16,090 Nightclub 6,013 0 6,013 Sporting/Apparel 11,118 0 11,118 Spa and Other Leaseable Retail 5,881 0 5,881 Grocer 14,156 0 14,156 Subtotal 53,258 0 53,258 Other Commercial Space Skier Services-Ticketing 2,489 0 2,489 Ch ildren's Skier Services 0 12,114 12,114 Spa 9,870 0 9,870 Office 35,395 0 35,395 Meeting Spaces (incl. hotel) 9,663 0 9,663 Subtotal 57,417 12,114 69,531 T ota Is 110,675 12,114 122,789 Parking Public Spaces 200 200 400 General 825 239 1,064 Total Analyzed 1,025 439 1,464 Source:Vail Resorts&BBC Research,Economic&Planning Systems H:\2�12EveVai Flsc�alAn�ysis\Models\�31812-fiscA maleN22&2J10x1s]4Commvd�De�Prog Economic& Planning Systems, Inc. 10 Ever Vail Fiscal Impact Analysis January i3, 2011 The applicant has reduced by approximately half the amount of retail proposed in this submittal. The applicant is currently proposing 53,000 square feet of restaurant, spa, and leasable retail space. Earlier versions of the development program contained approximately 100,000 square feet of retail and restaurant space. The current proposal has been downsized, as shown in Table 4. Previously, EPS expressed concerns that the earlier proposal had too much retail space for the location and the size of the bed base proposed. A number of potential impacts to the Town were identified such as vacant retail space and a lack of vitality and potential impacts to the existing retail areas of the Town. The reduction in retail space was an outcome of several discussions and working meetings between Vail Resorts Development Company (VRDC), EPS, BBC Research working as VRDC's consultant, and Town of Vail Staff. A key factor used in these discussions was the amount of retail floor area that could be supported by reasonable assumptions about the expenditure potential from Ever Vail guests and residents. (Based on the immediate adjacency, the °right sizing" also accounted for future expenditure from Ritz Carlton guests.) There is now general agreement that the retail is appropriately sized, the supply reflects appropriate assumptions about demand, and that the resulting area has sufficient ballast to provide a high quality guest experience expected by visitors at a ski area base portal. Table 4 Comparison of Ever Vail Retail Programs Ever Vail Fiscal Impact Analysis Retail Development Current Proposal Previous Proposal Restaurant 16,090 24,000 Nightclub 6,013 6,000 Sporting/Apparel 11,118 36,000 Spa and Other Leaseable Retail 5,881 21,000 Grocer 14,156 13,000 Total 53,258 100,000 Source:Vail Resorts, Economic&Planning Systems H:\20612 Eve Vail Fiscal Analyse\Mo�ls\�2�12-f'scal model-ll-W-2010.>1s]Sheetl Economic& Planning Systems, Inc. 11 Ever Vail Fiscal Impact Analysis January i3, 2011 Key Assumptions EPS analyzed the project under"High" and "Low" scenarios to evaluate the project under different performance measures. The High Scenario reflects what EPS believes to be reasonable estimates of performance for a well located high quality base portal development with direct lift access. It was not designed to be an "optimistic" or'�aggressive" scenario. It does, however, assume that VRDC will actively market the project, pursue off-season business (group business, meetings, conferences, etc.) to fill hotel rooms and rental condominiums, and motivate owners to participate in a rental program. The °Low" scenario was designed to reflect "average" or °business-as-usual" performance for Vail properties. Occupancy is a key economic and fiscal driver; the occupancy assumptions are shown below in Table 5. In the High Scenario, the hotel is assumed to operate at 60 percent annual occupancy and 50 percent annual occupancy in the Low Scenario. Condominiums are modeled at 40 percent annual occupancy in the High Scenario and at 30 percent in the Low Scenario. Table 5 Occupancy Assumptions Ever Vail Fiscal Impact Analysis Description "High"Scenario "Low"Scenario % In Rental Pool Hotel 100% 100% Branded Residences 75% 65% Condominiums (Free Market) 50% 35% Deed Restricted Rental 0% 0% Deed Restricted For-Sale 0% 0% AnnualOccupancy Hote I 60% 50% Branded Residences 45% 40% Condominiums in Rental Pool 40% 30% Second Home Condominiums 20% 20% %of Guests Net New Hotel 70% 60% Branded Residences 70% 60% Condominiums in Rental Pool 50% 40% Second Homes 100% 100% Source:Vail Resorts,Economic&Planning Systems H:\2�12EvaVail FlscalAn2lysis\MOdels\['e08�2-fisc�mWeL122g2110x1s]She91 Economic& Planning Systems, Inc. 12 Ever Vail Fiscal Impact Analysis January i3, 2011 The percent of guests that are "net new" to Vail is also estimated. The hotel is assumed to draw 60 to 70 percent net new guests, based on interviews with hospitality consultants and hotel managers. Net new guests are lower for the condominiums, estimated at 40 to 50 percent. All second homeowners are assumed to be new; however, second homes have a fraction of the economic impact of hotel rooms and therefore do not have a large effect in the fiscal impact model. Another key assumption is that costs related to infrastructure internal to the project will be borne by Vail Resorts, not the Town of Vail. It is anticipated that Vail Resorts and the Town will establish a Title 32 Metropolitan District (metro district) for this purpose. At the time of service plan approval, it is recommended that a segregated revenue stream be established to cover operations and maintenance costs (as distinct from debt service for capital improvements) and that it be sized to ensure a level of service commensurate with Town of Vail standards. Finally, it is important to note that the fees included in the model are the best approximation available at this time. Actual fees and requirements applied at time of project approval or at time of building permit may differ, based on a modified development program and/or modified Town standards. Economic& Planning Systems, Inc. 13 3. FISCAL IMPACTS Summary of Fiscal Impacts The following is a summary of the key costs and revenues generated by the project, and the impacts by fund. Detailed results and supporting calculations can be viewed in the Fiscal Model that has been provided to Town Staff. A description of the methodology used and an overview of the Fiscal Model is also provided at the end of this memorandum. 1. At full buildout, the Ever Vail project is estimated to generate a positive fiscal impact to the Town. After accounting for high and low occupancy assumptions, the fiscal impact to the General Fund is estimated at $472,000 to $796,000 annually at full project buildout and stabilization. The higher range of estimated fiscal impacts reflects what EPS believes are reasonable assumptions for the performance of a high quality well performing base area resort project with direct lift access. It also presumes that VRDC will actively market the project to fill hotel beds, attract groups during the off-season, and encourage owners to participate in a rental program. The lower fiscal impact estimate represents more ��average" performance for Vail properties, with no special marketing or management strategies designed to maximize "hot beds." The project's actual performance will likely lie somewhere between the low and high estimates. The results of the fiscal impact analysis are summarized in Tables 6 and 7 for the High and Low Scenarios, respectively. 2. The fiscal impacts of both phases of the project are positive. Phase I (east) generates a larger benefit to the Town than Phase II (west) due to higher guest expenditure levels generated by the 102 hotel rooms, 76 branded residences, and 158 condominium units. The hotel is a key economic driver estimated to generate about 25 percent of the visitors and spending from the project under the High Scenario. The branded residences are modeled as performing similarly to the hotel and account for approximately 17 percent of total visitors and expenditures. As noted previously, Phase II does not include hotel rooms or branded residences. Retail sales and sales tax are derived from visitor spending, and Phase I generates more spending that Phase II. The annual net fiscal impact to the General Fund of Phase I by itself is estimated at $300,400 to $518,700. Phase II by itself has a fiscal impact of $100,100 to $205,200 per year. Economic& Planning Systems, Inc. 14 Ever Vail Fiscal Impact Analysis January i3, 2011 Table 6 High Scenario Fiscal Impacts Ever Vail Fiscal Impact Analysis By Phase-Standalone Cumulative Impact by Phase Fund Phase I Phase II Phase I Phases I&II General Fund Revenues $971,500 $412,100 $971,500 $1,383,500 Expenses [1] - 452 800 - 206 900 - 452 800 - 87 850 Net Fiscal Impact $518,700 $205,200 $518,700 $795,650 Capital Fund One-Time UseTax $9,291,760 $5,103,520 $9,291,760 $14,395,280 Annual Sales Tax $599,800 $258,464 $599,800 $858,232 RETT Fund One-Time Developer Sales $4,261,000 $2,710,000 $4,261,000 $6,971,000 Recreation Impact Fee $468.067 1 7 $468.067 $783.340 Total One-Time Revenue $4,729,067 $3,025,273 $4,729,067 $7,754,340 Annual Resales $192,000 $122,000 $192,000 $314,000 Vail Marketing District 1.4°/o Lodging Tax(Annual) $366,000 $168,000 $366,000 $534,000 Urban Renewal Authority General Fund Property Tax to URA[2] $258,000 $104,000 $258,000 $362,000 Other Taxing Entities Tax Increment 2 280 000 919 000 280 000 3199 000 Total Properly Tan Increment $2,538,000 $1,023,000 $2,538,000 $3,561,000 [1]Expenses by phase do not add to the cumVative impacts ofthe entire project. Police is not es6mated to need ad�tirnal staff to serve irxiividual phase; but would nced an estimated 1 officer to serve the project if both phases are built. Fire is estimated to need an addiUonal staff person to serve Phase I, which will also cover Phase I I. [2]The projectis largelywithin the Lionshead URA Th's revenue reverts to General Fund after URA expires in 2030. Source:Economic&Planning Systems H'\20812 Ever Vail Fisal Malysls\MOdels\[208t2-fiscalmodel-12-29-2�tOxIS�ES-1 Economic& Planning Systems, Inc. 15 Ever Vail Fiscal Impact Analysis January i3, 2011 Table 7 Low Scenario Fiscal Impacts Ever Vail Fiscal Impact Analysis B Phase-Standalone Cumulative Im act b Phase Fund Phase I Phase II Phase I Phases I&II General Fund Revenues $736,000 $298,100 $736,000 $1,034,000 Expenses[1] -$435,600 -$198,000 -$435,600 -$561,750 Net Fiscal Impact $300,400 $100,100 $300,400 $472,250 Capital Fund One-Time Use Tax $9,157,200 $5,103,520 $9,157,200 $14,260,720 Annual Sales Tax $457,096 $188,264 $457,096 $645,344 RETT Fund One-Time Developer Sales $4,261,000 $2,710,000 $4,261,000 $6,971,000 Recreation Impact Fee 468 067 315 273 468 067 783 340 Total One-Time Revenue $4,729,067 $3,025,273 $4,729,067 $7,754,340 Annual Resales $192,000 $122,000 $192,000 $314,000 Vail Marketing District 1.4% Lodging Tax(Annual) $294,000 $126,000 $294,000 $420,000 Urban Renewal Authority General Fund PropertyTax to URA[2] $248,000 $104,000 $248,000 $352,000 OtherTaxing Entities Tax Increment $2,193,000 919 000 $2,193,000 $3,112,000 Total Property Tax Increment $2,441,000 $7,023,000 $2,441,000 $3,464,000 [1]Expenses by phase do not add to the cumulative impacts of the entire project. Police is not estimated to need additional staff to serve individual phases, but would need an estimated 1 officer to serve the project if both phases are built. Fire is estimat�to need an additional staff person to serve Phase I, which will also cover Phase II. [2]The project is largely within the Lionshead URA. This revenue reverts to General Fund after URA expires in 2030. Source:Economic&Planning Systems H�\2�12EvaVail F'iscalAn�ySis\MWek\12-29-Lav\[21812-fsca muleF12-29-2p10lowxls]ES-1 Economic& Planning Systems, Inc. 16 Ever Vail Fiscal Impact Analysis January i3, 2011 3. Ever Vail is estimated to require additional staff for Police and Fire under the High and Low Scenarios. Police and Fire service demands were estimated by a comparative analysis of call volumes in Lionshead Village completed by EPS and Town staff. At full buildout of both phases, Police is forecasted to need one additional patrol officer at an annual cost of $77,150 plus a one-time training cost of $65,000. By themselves, neither phase triggers the need for an additional police officer. Cumulatively, however, demand for services will require a new position. Based on the forecasted call volume, the Fire Department will need an additional staff person to serve Phase I at an annual cost of $76,600 plus a one-time training and equipment cost of $7,800. 4. The largest impacts on Town services are to the Town's transit system. LSC Transportation Consultants completed a study of the impacts of Ever Vail on the Town's transit system. LSC estimated the need for three new buses at a cost of $600,000 each. The annual operations cost is estimated at $111,300. EPS has allocated the impacts to Phase I, as it generates the most visitor activity. 5. The project is largely within the Lionshead URA. Therefore, the majority of the property tax generated by the project will flow to the URA rather than the General Fund until 2030. At full buildout, the General Fund portion of the property tax increment generated by the project is approximately $360,000 per year. After the URA expires on December 31, 2029, this revenue will revert back to the General Fund, increasing the net fiscal impact by the same amount. The total property tax increment at buildout is approximately $3.5 million per year, based on the structure of the URA which redirects non-Town revenue streams to the URA. These funds can be used by the URA to fund eligible projects. 6. The Ever Vail development will generate substantial one-time revenues from construction use tax and permit fees. The construction use tax from Phase I is estimated at $9.3 million over the course of its construction, contributing to the Town's Capital Fund. The construction of Phase II would produce approximately $5.1 million in use tax. The total impact to the Real Estate Transfer Tax (RETT) fund for Phase I is $4.7 million, including $4.3 million in RETT from initial developer sales and $468,000 from the Recreation Impact Fee. Phase II would generate $2.7 million in RETT from initial sales and approximately $315,000 from the impact fee for a total of $3.0 million. The REl�" fund is used for park, open space, and sustainability projects. Permit and plan check fees are estimated at $3.1 million for Phase I and $1.7 million for Phase II. Permit and plan check fees are one-time revenues that contribute to the cost of development revue. Since they are one-time revenues during construction, they are not counted in the annual fiscal impact to the General Fund which reflects the project at buildout and stabilization. Economic& Planning Systems, Inc. 17 Ever Vail Fiscal Impact Analysis January i3, 2011 Existing Site Fiscal Conditions How much revenue does the site generate currently? The Ever Vail site has a variety of existing uses and structures on it, including the 20,000 square foot Vail Professional building (largely office), the 11,000 square foot Cascade Crossing retail building, a former gas station, the 11,000 square foot Glen Lyon Office Building, and the Vail Resorts Maintenance Yards. The major existing revenues from the site are $61,900 including $21,540 in retail sales tax to the General Fund, $14,360 in sales tax to the Capital Fund, and $26,000 in property tax. Table 8 Current General Revenues from Ever Vail Site Ever Vail Fiscal Impact Analysis Revenue F�cisting 4.0%Retail Sales Tax—General Fund $21,540 4.0%Lodging Tax $0 Sales Tax—Capital Fund $14,360 Property Tax-General Fund (4.69 mills) $26,000 T ota I $61,900 Source:Town of Vail Finance Department:Economic&Planning Systems H:\2�12 Eva Vail Fiscal AnAysis\MOdels\[�812-fiscal maleFl2-292J10xIS�ES-2 H4Af Economic& Planning Systems, Inc. 18 Ever Vail Fiscal Impact Analysis January i3, 2011 General Fund Impacts What are the major revenue sources that will impact the General Fund? What are the significant expenditures that will occur? Ongoing Revenues The largest sources of ongoing General Fund revenues are the 4.0 percent retail sales tax and the 4.0 percent lodging sales tax. The retail sales tax is generated through net new lodging visitor expenditures in Vail retail and food and beverage establishments. The 4.0 percent lodging sales tax is generated through the sale of net new room nights (and is distinct from the 1.4 percent lodging tax dedicated to marketing). Under both scenarios, lodging sales tax is the largest source of revenue from the project and is estimated to be $915,000 per year for the high scenario after buildout of Phase I and Phase II, as shown in Table 9. For the low scenario, this figure is estimated to be $719,000 as shown in Table 10. The cumulative retail sales tax from buildout of both Phases ranges from $250,000 to $372,000. Note that the general fund would not receive any property tax until 2030 (when the URA will sunset) because the project is largely within the Lionshead Urban Renewal Area, which collects the tax increment from new development, as will be discussed below. It should be noted that the revenue from lift tax is modest, at $47,000 annually in the High Scenario. Lift tax revenue shown is calculated from the estimated new skiers (and net new revenue) generated by Ever Vail Lodging. If these skier estimates are included with day visitors using the Ever Vail parking structure as well as Ever Vail guests that are not new to Vail, the total skier generation is approximately 7 percent of total annual skiers. This estimate is consistent with internal Vail Resorts estimates that the portal will accommodate approximately 10 percent of total annual volume. Ongoing Expenses The largest expenses to be generated by the Ever Vail project are expected to be in the Public Works, Transportation, Facility Maintenance, Police, and Fire Departments. Public Works Under Public Works, the maintenance of new landscaped medians, a new roundabout, and a wider road cross section is estimated to cost $149,000 per year. This includes snow removal, seasonal planting and maintenance, and seasonal holiday decorations consistent with what the Town provides at other major entry ways and intersections. Transit and Transportation LSC Transportation Consultants completed a study of the impacts of Ever Vail on the Town's transit system. LSC estimated the need for three new buses at a cost of $600,000 each. The annual operations cost is estimated at $111,300. EPS has allocated the impacts to Phase I, as it generates the most visitor activity. Economic& Planning Systems, Inc. 19 Ever Vail Fiscal Impact Analysis January i3, 2011 The new bus route is estimated to cost $111,300 per year to operate. Annual facility maintenance (wear and tear on public spaces and public facilities) is estimated to increase by $73,800 from the new visitor population generated by Ever Vail. Police and Fire There are also impacts to Police and Fire. The Police Department is projected to need an additional entry-level code enforcement officer after the construction of Phase I and Phase II, at a cost of $77,150 per year. The Fire Department would require a new crew member after the construction of Phase I at a cost of $76,600 per year. One-time training and equipment costs for new hires are not included in these figures but are included in capital expenditures below. Table 9 High Scenario - General Fund Revenues and Expenses Ever Vail Fiscal Impact Analysis B Phase Cumulative Description Phase I Phase II Phase I Phase II Revenue Local Taxes: 4.0%Retail Sales Tax[1] $273,000 $100,000 $273,000 $372,000 4.0%Lodging Sales Tax $627,000 $288,000 $627,000 $915,000 Ski LiftTax $37,100 $9,900 $37,100 $47,000 Intergovernmental Revenue County Sales Tax $18,000 $6,000 $18,000 $25,000 County Road and Bridge Prop. Tax $0 $0 $0 $0 CigaretteTax $1,800 $900 $1,800 $2,600 Charqes for Services Fines and Forfeitures $7,500 $3,700 $7,500 $11,200 Other Charges,Services, and Sales 7 100 3 600 7 100 10 700 Total Revenue $971,500 $412,100 $971,500 $1,383,500 Expenses Municipal Services: Administrative $33,600 $16,800 $33,600 $50,300 Community Development $33,100 $16,500 $33,100 $49,700 Public Safety Police $0 $0 $0 $77,150 Fire $76,600 $0 $76,600 $76,600 Public Works and Transportation Right-of-Wayand Landscaping $149,000 $149,000 $149,000 $149,000 Transportation Operations [2] $111,300 $0 $111,300 $111,300 Facility Maintenance 49 200 24 600 49 200 73 800 Total Expenses $452,800 $206,900 $452,800 $587,850 Net Fiscal Impact $518,700 $205,200 $518,700 $795,650 [1]See attached sales tax and retail sales model. [2)LSC Transportation Consultants July 23,2010 Memorandum. Source:Economic&Plaming Systems H:\2�12EverVail FisralAn�yss\M�els\[2(1812-fscal model.xlsp-Gene21_FUnd_Fxpenses Economic& Planning Systems, Inc. 20 Ever Vail Fiscal Impact Analysis January i3, 2011 Table 10 Low Scenario - General Fund Revenues and Expenses Ever Vail Fiscal Impact Analysis B Phase Cumulative Description Phase I Phase II Phase I Phase II Revenue Local Taxes: 4.0%Retail Sales Tax[1] $182,000 $68,000 $182,000 $250,000 4.0%Lodging Sales Tax $504,000 $215,000 $504,000 $719,000 Ski Lift Tax $23,000 $4,200 $23,000 $27,200 Interqovernmental Revenue County Sales Tax $13,000 $4,000 $13,000 $17,000 County Road and Bridge Prop. Tax $0 $0 $0 $0 Cigarette Tax $1,500 $700 $1,500 $2,200 Charqes for Services Fines and Forfeitures $6,400 $3,200 $6,400 $9,500 Other Charges,Services, and Sales 6 100 3 000 6 100 9 100 Total Revenue $736,000 $298,100 $736,000 $1,034,000 Expenses Municipal Services: Administrative $28,600 $14,200 $28,600 $42,800 Community Development $28,200 $14,000 $28,200 $42,200 Public Safety Police $0 $0 $0 $77,150 Fire $76,600 $0 $76,600 $76,600 Public Works and Transportation Right-of-Wayand Landscaping $149,000 $149,000 $149,000 $149,000 Transportation Operations [2] $111,300 $0 $111,300 $111,300 Facility Maintenance 41 900 20 800 41 900 62 700 Total Expenses $435,600 $198,000 $435,600 $561,750 Net Fiscal Impact $300,400 $100,100 $300,400 $472,250 [1]See attached sales tax and retail sales model. [2]LSC Transportation Consultants July 23,2010 Memorandum. Source:Economic&Planning Systems H:\2�12 Eve Vail Fiscal Analysis\Mctle6\[�0812fisc2 metlel.xlsj3-General_Funtl_&peises Economic& Planning Systems, Inc. 21 Ever Vail Fiscal Impact Analysis January i3, 2011 Net Fiscal Impact to the General Fund What is the "bottom line" impact to the General Fund? How does it change if the project is built in phases? At full buildout, the Ever Vail project is estimated to generate a positive fiscal impact to the Town. After accounting for high and low occupancy assumptions, the fiscal impact to the General Fund is estimated at $472,000 to $796,000 annually at full project buildout and stabilization. The higher range of estimated fiscal impacts reflects what EPS believes are reasonable assumptions for the performance of a high quality, well-performing base area resort project with direct lift access. It also presumes that VRDC will actively market the project to fill hotel beds, attract groups during the off-season, and encourage owners to participate in a rental program. The lower fiscal impact estimate represents more °average" performance for Vail properties, with no special marketing or management strategies designed to maximize °hot beds." The project's actual performance will likely lie somewhere between the low and high estimates. The results of the fiscal impact analysis are summarized in Tables 6 and 7 and Tables 9 and 10 for the High and Low Scenarios, respectively. Impacts by Phase The fiscal impacts of both phases of the project are positive. Phase I (east) generates a larger benefit to the Town than Phase II (west) due to higher guest expenditure levels generated by the 102 hotel rooms, 76 branded residences, and 158 condominium units. The hotel is a key economic driver estimated to generate about 25 percent of the visitors and spending from the project under the High Scenario. The branded residences are modeled as performing similarly to the hotel and account for approximately 17 percent of total visitors and expenditures. As noted previously, Phase II does not include hotel rooms or branded residences. Retail sales and sales tax are derived from visitor spending, and Phase I generates more spending that Phase II. The annual net fiscal impact to the General Fund of Phase I by itself is estimated at $300,400 to $519,000. Phase II by itself has a fiscal impact of $100,100 to $205,200 per year. General Fund Sales Tax Calculations How is sales tax accounted for - is it generated from retail space or visitor expenditures? Sales tax is calculated from the spending by guests staying in Ever Vail lodging, and residents and second home owners living in the project. Guests spend money in Vail businesses, generating sales tax revenue to the Town. Guest spending is calculated from estimates of"net new" visitors discussed previously, rather than counting all guest expenditures as generating sales tax. As will be discussed under the Retail Impacts chapter, 90% of guest spending is estimated to occur in Vail. This results in $16.4 million in new sales in the Town after the buildout of both phases, as shown in Table 11. The remaining 10% of guest spending, or $1.7 million, is estimated to be "leakage" to other Vail Valley communities. Total new guest spending including Economic& Planning Systems, Inc. 22 Ever Vail Fiscal Impact Analysis January i3, 2011 leakage is projected to be $18.1 million. The $16.4 million in new sales translates to $372,000 in General Fund sales tax and $248,000 in Capital Fund sales tax. There is also a 15 percent County sales tax, of which 15 percent is remitted back to the Town, as shown. Table 11 Summary of Ever Vail Sales Tax Ever Vail Fiscal Impact Analysis Store Type Phase I Phase II By Phase Net New Sales Restaurant $5,432,000 $1,195,000 Retail $4,678,000 $1,810,000 Grocer/Conv. $2,150,000 $1,149,000 Total $12,260,000 $4,154,000 Existing Sales Tax 4.0%Town Sales Tax [1] General Fund (60%) �21,540 $272,700 $99,696 Capital Fund (40%) -$14,360 $181,800 $66,464 1.0%County Sales Tax Sales Tax $123,000 $42,000 15%to Town $18,000 $6,000 Cumulative Phase I Phase I &II Net New Sales Restaurant $5,432,000 $6,627,000 Retail $4,678,000 $6,486,000 Grocer/Conv. $2,150,000 $3,299,000 Total $12,260,000 $16,412,000 Existing Sales Tax 4.0%Town Sales Tax [1] General Fund (60%) �21,540 $272,700 $372,348 Capital Fund (40%) -$14,360 $181,800 $248,232 1.0%County Sales Tax Sales Tax $123,000 $164,000 15%to Town $18,000 $25,000 Source:Economic&Planning Systems H\2�12 Eva VaJ Fisc21 Analysis\MOdelS\�31812-EV S�es Tax Mojel 12-2&2710.x1s]BSales Tax Economic& Planning Systems, Inc. 23 Ever Vail Fiscal Impact Analysis January i3, 2011 General Fund One-Time Revenues and Costs What other General Fund Revenues will the project generate? Permit and plan check fees are estimated at $3.1 million for Phase I and $1.7 million for Phase II. Permit and plan check fees are one-time revenues that contribute to the cost of development revue. Since they are one-time revenues during construction, they are not counted in the annual fiscal impact to the General Fund which reflects the project at buildout and stabilization. The one-time revenues and costs to the General Fund are summarized in Table 12. At buildout, the project will have generated a total of $4.8 million in permit and plan review fees. These fees contribute to the cost of development review and other related administrative functions. It costs approximately $65,000 to train and equip a new police officer. A new firefighter costs approximately $7,800 to train and equip. These one-time revenues and expenses are the same in the high and low scenarios. Table 12 General Fund One-Time Revenues and Expenses Ever Vail Fiscal Impact Analysis Totals/ Phase I Phase II Buildout General Fund One-Time Revenues Building Permit Fee $1,875,184 $1,047,944 $2,923,128 Plan Review Fee $1,218,870 $681,164 $1,900,034 Total $3,094,054 $1,729,108 $4,823,162 General Fund One-Time Costs Police Training& Equip. $0 $65,000 $65,000 Fire Training& Equip. 7 800 � 7 800 Total $7,800 $65,000 $72,800 Source:Town of Vail;Economic&Planning Systems H:\2�12 Eva Vail Fisral Analysis\Medels\[A8�2-flsca maleFl2-2&2010x1s�i6-Ore Tlme Impat Economic& Planning Systems, Inc. 24 Ever Vail Fiscal Impact Analysis January i3, 2011 Other Fund Impacts Besides the General Fund, what are the impacts to other funds? Specifically, what are impacts to the RETT Fund? The other major funds analyzed include the: • Capital Fund • RETT fund • Vail Marketing District • Urban Renewal Authority (URA) For the Capital Fund, both revenues and expenses were analyzed. Spending from the other funds such as the URA was not analyzed because it is discretionary, is independent of conventional Town funds, and is structured in compliance with state regulations pertaining to URAs. Capital Fund Ever Vail will contribute construction use tax (one-time) and sales tax (annual) to the Capital Fund. The Town regulations mandate that all use tax be dedicated to capital projects. Regarding sales tax, the Town has historically allocated 40 percent of total sales tax revenue for capital projects, although this allocation has fluctuated moderately over time. Construction use tax is estimated at $14.4 million at project buildout, as shown in Table 13. Annual 4.0 percent sales and lodging sales tax to the Capital Fund is projected to be $600,000 under Phase I, $258,000 under Phase II, and $858,000 for the project at buildout. The Town has historically collected a traffic mitigation fee on a case-by-case negotiated basis. The fee is $6,500 per peak hour trip and would be approximately $2.5 million for Ever Vail. The transit analysis completed by LSC Transportation Consultants identified a need for three new transit buses at a cost of $1.8 million. The Low Scenario for the Capital Fund is shown in Table 14. The one-time revenues are the same as the High Scenario. Annual sales tax is $213,000 less. Economic& Planning Systems, Inc. 25 Ever Vail Fiscal Impact Analysis January i3, 2011 Table 13 Capital Fund Impacts — High Scenario Ever Vail Fiscal Impact Analysis Costs and Revenues Phase I Phase II Totals/Buildout One Time Revenues Construction Use Tax $9,291,760 $5,103,520 $14,395,280 Traffic Mitigation Fee[1] $1,251,250 $1,251,250 $2,502,500 Annual Sales Tax by Phase 4.0% Sa�es Tax (Annual) $181,800 $66,464 4.0% Lodging Sales Tax (Annual) 418 000 192 000 Total Sales Taxes $599,800 $258,464 Cumulative Sales Tax 4.0% Sales Tax (Annual) $181,800 $248,232 $248,232 4.0% Lodging Sales Tax (Annual) 418 000 610 000 610 000 Total Sales Taxes $599,800 $858,232 $858,232 Capital Fund Costs(3 Hybrid Buses @$600K ea.) $1,800,000 $0 $1,800,000 [1]The Fee is based on a Study completed by Kimley Horn forthe Town of Vail. Source:Economic&Planning Systems H:\2�12 Eva Vail Fiscal An2ysis\MOdels\[e'1J812-f scal medel-1 2-2 9 311 0x1s�37-Capdal Fuitl Economic& Planning Systems, Inc. 26 Ever Vail Fiscal Impact Analysis January i3, 2011 Table 14 Capital Fund Impacts — Low Scenario Ever Vail Fiscal Impact Analysis Costs and Revenues Phase I Phase II Totals/Buildout One Time Revenues Construction Use Tax $9,157,200 $5,103,520 $14,260,720 Traffic Mitigation Fee[1] $1,251,250 $1,251,250 $2,502,500 Annual Sales Tax by Phase 4.0% Sales Tax (Annual) $121,096 $45,264 4.0% Lodging Sales Tax (Annual) 336 000 143 000 Total Sales Taxes $457,096 $188,264 Cumulative Sales Tax 4.0% Sales Tax (Annual) $121,096 $166,344 $166,344 4.0% Lodging Sales Tax (Annual) 336 000 479 000 479 000 Total Sales Taxes $457,096 $645,344 $645,344 Capital Fund Costs(3 Hybrid Buses @$600K ea.) $1,800,000 $0 $1,800,000 [1)The Fee is based on a Study completed by Kimley Horn forthe Town of Vail. Source:Economic&Planning Systems H:\2�12 Eva Vail Fiscal An lysis\MOdels\12-29-Lav\[�0812-fiscal mmel-12-29-2010_low.xls]37-Cap�al Fund Economic& Planning Systems, Inc. 27 Ever Vail Fiscal Impact Analysis January i3, 2011 RETT, Marketing District, and URA Funds The one-time and annual revenues for the RETT, Vail Marketing District, and URA funds are shown below in Table 15. One-time RETT revenue comes from the initial developer sales of new units, estimated at $6.97 million for both phases. The Recreation Impact Fee is estimated at $783,000, making the total for recreation and open space purposes total $7.75 million. The annual revenue from resales is projected to be $314,000 for both phases, based on an estimate of 4.5 percent of all units turning over each year. The Vail Marketing District is funded by a 1.4 percent tax on lodging sales. Ever Vail would generate an estimated $534,000 per year in lodging tax. The URA revenues include both the Town's property tax as well as those of other taxing entities. In total, URA revenues are expected to be $3.5 million. After 2030 revenue from the Town's 4.69 mills will then flow back to the general fund. Table 15 RETT, Vail Marketing District,and URA Revenues Ever Vail Fiscal Impact Analysis Fund Phase I Phase II Totals/Buildout RETT Fund One Time Revenue RETT-Developer Sales $4,261,000 $2,710,000 $6,971,000 Recreation Impact Fee 468 067 315 273 783 340 Total One Time Revenue $4,729,067 $3,025,273 $7,754,340 RETT Fund Annual Revenue RETT on Resales $192,000 $122,000 $314,000 Vail Marketing District 1.4°/a Lodging Tax(Annual) $366,000 $168,000 $534,000 Urban Renewal Authority Property Tax Town Mill Levy(4.69 Mills) (Annual) [1] $258,000 $104,000 $362,000 Other Taxing Entities (Annual) $2,280,000 919 000 $3,199,000 Annual Property Tax Increment $2,538,000 $1,023,000 $3,561,000 [1]Reverts to General Fund after URA expires in 2030. Source:Economic&Planning Systems H:\2�12EVaVail FisralAna'ysis\Mo]els\�21812-flsc�mafeFl2-29-2JtOxls]38-0therFUncS Economic& Planning Systems, Inc. 28 4. ECONOMIC IMPACTS When new retail is introduced into a community, the new competition can cannibalize or erode sales from existing businesses. This Chapter provides a summary of the potential impacts to sales in existing business districts in Vail. The summary is followed by a more detailed presentation of the methods and assumptions used to estimate these potential impacts. Summary of Retail Impacts 1. The spending from new guests in Ever Vail is forecast to be $18.1 million per year with 90 percent of expenditures estimated to occur in the Town of Vail and 10 percent in the Vail Valley. The town derives most of its retail sales from visitor expenditures. Adding to the bed base will introduce new dollars into the Vail economy, contributing to additional retail sales. Ever Vail visitors are estimated to make 35 to 40 percent of their expenditures within Ever Vail, as shown in Figure 1. Approximately 50 to 55 percent of Ever Vail visitors' dollars are expected to occur within the Town of Vail in other retail locations such as Lionshead, Vail Village, and West Vail. The remaining 10 percent of expenditures are estimated to occur elsewhere in the Vail Valley, such as Beaver Creek, Avon, or Edwards. Similar to any guest in Vail, Ever Vail's guests will spend money in multiple locations in the Town. Economic& Planning Systems, Inc. 29 Ever Vail Fiscal Impact Analysis January i3, 2011 Figure 1 Ever Vail Guest Spending Patterns Ever Vail Fiscal Impact Analysis Total Spending $18.1 Million Down Ever Vail Vail Village, Lionshead, West Valley $6.8 Million Vail $9.6 Million $1.7M ►� {= r--�r--°;r-==�"�' �„�:a�>` ` _ . }�,��a�. _ ,T-_'��T°* C' 1""� r ;.,,�, - �8'li.'D�'R.•r.hylA oa'E 1'V�CHI," . . V ��L : Li S ' � L r�{. 1 '' ^. l;�k , N x AB 85295228 0 , .;. � ,� C:�;: , � �x < � >;�� •�e a.-�+ . .LI4���'• . ` ' "; -. �i' _ ��' � A8 85295228 C� ,� �e- m.�„�.,� � �..�� ��Y,� ��'.t,,_ � � -�,k�E_Q��. - � . sw�s � y 'i: .�._,,,,�,y,�z �� ' '� � �� 3/�' '� --- Su r W . `- f - i—t-- - -t i � � � '� '`�'_Y--..tt ,.�-� � Economic& Planning Systems, Inc. 30 Ever Vail Fiscal Impact Analysis January i3, 2011 2. The project is not expected to cannibalize (erode) a significant amount of sales from Vail Village or Lionshead. The West Vail area is estimated to see sa/es erosion of 1.1 percent. As new retail in Ever Vail is introduced, some sa/es from other Vail locations will flow to Ever Vail. At the same time, Ever Vail guests will spend money in existing retail establishments in Vail. In most cases and in total, the net dollar flows to existing retail areas are positive. In order for Ever Vail retailers to achieve a minimum level of viability, it is estimated that approximately $17 million in sales would be needed within Ever Vail businesses. Based on Ever Vail's location compared to other retail and lodging districts and the size and mix of retail proposed in Ever Vail, it is estimated that approximately 60 percent of sales would come from guest in the immediate area consisting of Ever Vail and the Ritz Carlton. The balance of 40 percent would need to come from guests staying elsewhere in Vail to support $17 million in sales in Ever Vail. Under these assumptions, Lionshead and Vail Village would "lose" respectively $2.5 and $2.9 million in sales to Ever Vail; however, this is estimated to be replaced by $2.9 to $5.5 million in expenditures from new Ever Vail guests spending money in Lionshead and Vail. Thus, net sales flows are expected to be positive for Lionshead and Vail Village. Due to the competition created by the proposed market, a 1 percent loss in sales is projected for West Vail. The sales flows are quantified below in Table 16 and Figure 2. Vail Village currently achieves $152.7 million in sales, while Lionshead achieves $51.9 million, and West Vail has $71.8 million in sales. The net dollar flows shown are less than 2 percent of existing sales and are only projected to be negative for West Vail. EPS believes that the strength of Lionshead and Vail Village will be the main draw for all Vail guests regardless of where their lodging is. Our opinion is that the removed location of Ever Vail is unlikely to draw significant amounts of sales away from existing retail areas. Table 16 Summary of Town Retail Sales Flows with Ever Vail Ever Vail Fiscal Impact Analysis Erosion to Ever Spending From Potential Dollar Flows Vail Ever Vail Net Dollar Flows Lionshead $2,510,000 $2,954,000 $444,000 Vail Village $2,994,000 $5,486,000 $2,492,000 WestVail $1,938,000 $1,166,000 - 772000 Total $7,442,000 $9,606,000 $2,164,000 Existing Sales Erosion as%of Potential Erosion vs.Existing Sales Net Dollar Flows (2009) Sales Lionshead $444,000 $51,953,000 0.9% Vail Village $2,492,000 $152,700,000 1.6% W est Vail - 772 000 $71,807,000 -1.1% Total $2,164,000 $276,460,000 0.8% Source:Economic&Planning Systems H12�12EvaVail FiscalAn�ysis\M�els\[ti812-EVSalesTaxM�el12-2321�O.x5]TadeES1 Economic& Planning Systems, Inc. 31 Ever Vail Fiscal Impact Analysis January 13, 2011 Figure 2 Net Dollar Flows vs. Existing Retail Sales Ever Vail Fiscal Impact Analysis $160,000,000 $140,000,000 $120,000,000 d $100,000,000 m N > m $80,000,000 o�{ a 0 �°. $60,000,000 o� .� � $40,000,000 $20,000,000 - $444,000 $2,492,000 $0 .. , � Lionshead Vail Village West Vail -$772,000 -$20,000,000 ■Net Dollar Flows Existing Sales(2009) Economic&Planning Systems, Inc. 32 Ever Vail Fiscal Impact Analysis January i3, 2011 3. The amount of retail and restaurant space proposed in Ever Vail is small in comparison to the Town's retail inventory and is forecasted to have a relatively small impact on existing retailers. VRDC and their consultants have worked closely with EPS to "right size" the amount of retail space in the project. This work has resulted in downsizing the retail from 100,000 to 120,000 square feet in earlier development plans to approximately 53,000 square feet, as currently proposed. This has been based on an expenditure analysis, qualitative analyses and comparisons of other base areas, and from a determination of the minimum numbers and types of services needed for a successful base area portal. The tenant mix is expected to cater largely to hotel and condominium guests rather than to create a new shopping destination in Vail. The amount of retail proposed would result in an 8 percent increase in the amount of retail space in Vail, as shown in Table 17. Table 17 Vail Retail Inventory Ever Vail Fiscal Impact Analysis Vail Village Lionshead West Vail Vail Ever Store Category #Retailers Sq.Ft. #Retailers Sq.Ft. #Retailers Sq.Ft. Total Vail Food&Beverage 54 205,000 21 58,500 11 27,000 290,500 22,103 Gallery/ArtBooks 14 21,000 0 0 0 0 21,000 TBD Clothing/Fur 32 48,000 8 13,000 0 0 61,000 5,559 Jewelry 12 8,500 2 3,200 0 0 11700 TBD Ski Equipment 14 36,000 16 28,000 2 16,000 80,000 5,559 Grocery/Liquor 2 1,400 1 1,000 4 108,000 110,400 14,156 Gift Shop 6 6,000 3 2,400 0 0 8,400 TBD Eyewear 2 1,100 1 350 0 0 1,450 TBD Miscellaneous 14 10,000 6 10,000 11 25,000 45,000 5,881 Total 150 337,000 58 116,450 28 176,000 629,450 53,258 Source:Town of Vail;Economic&Planning Systems H,�zm+ze�gvau c��in�anis�oacalzoeian�anoa�;.,islvau_aaau Economic& Planning Systems, Inc. 33 Ever Vail Fiscal Impact Analysis January i3, 2011 Ever Vail Spending Flows This section provides a summary of the methodology and calculations used to project guest spending and retail sales patterns after the Ever Vail project is constructed. The estimates of guest spending were made for two reasons: • First, to estimate sales tax revenue for the Fiscal Impact Analysis • Second, to project the future flow of guest spending and retail sales to estimate the potential impacts of Ever Vail on existing business districts. The complete set of calculations can be viewed in the Sales Tax Model. This is an abbreviated explanation. First, total expenditure potential is calculated. This is the total spending made by Ever Vail guests regardless of location. Next, a capture rate is applied to allocate spending to the Town of Vail and locations outside of Vail. Only expenditures made in Vail count towards Town sales tax and retail sales. Expenditure Potential Expenditure potential is estimated from net new visitor days. Net new visitor days are calculated by multiplying the number of lodging and residential units by a person per unit factor, an annual occupancy factor, a net new adjustment discussed previously, and by 365 days. Visitor days are converted to expenditure potential by multiplying by a dollar per day per person spending figure derived from research by the hospitality industry and visitor intercept surveys in Colorado mountain resorts. The resulting expenditure potential, regardless of where expenditures are made, is estimated at $18.1 million at buildout, as shown in Table 18. Spending by Location The capture rate estimates for guest and resident spending are shown in Table 19. Because Vail has one of the largest concentrations of resort retail in North America, it is estimated to capture the vast majority of guest expenditures (approximately 90 percent). In other words, Vail has a large selection and critical mass of retail space that creates a competitive shopping destination compared to other locations in the Vail Valley. Within Vail, guests (with the exception of parking guests) are estimated to make 25 percent of their retail purchases in Ever Vail and 65 percent in other Vail locations. The retail °capture" in Ever Vail is estimated to be low because it will be much smaller and have a more limited selection than Vail Village and Lionshead Village. Because Ever Vail is proposed to contain a specialty foods market, it is estimated that it will capture 50 to 75 percent of guest spending on Convenience Goods. The remaining spending would be made largely in West Vail grocers. For the third (and final) category of sales, Food and Beverage (dining out), about half of guest spending would occur in Ever Vail, as shown. Economic& Planning Systems, Inc. 34 Ever Vail Fiscal Impact Analysis January 13, 2011 Table 18 Total Ever Vail Guest Spending Regardless of Location Ever Vail Fiscal Impact Analysis Visitor $IPers.IDay Expenditure Potential by Phase Cumulative Expenditure Potential Description Days Retail Conv. F&B Total Retail Conv. F86 Total Retail Conv. F&B Total Phasel Hotel 31,270 $60 $10 $100 $170 $1,876,000 $313,000 $3,127,000 $5,316,000 $1,876,000 $313,000 $3,127,000 $5,316,000 Branded Residences in Rental Pool 19,660 60 30 75 165 1,180,000 590,000 1,475,000 3,244,000 1,180,000 590,000 1,475,000 3,244,000 Condos in Rental Pool 20,180 60 30 40 130 1,211,000 605,000 807,000 2,623,000 1,211,000 605,000 807,000 2,623,000 Second Home Condos 15,000 30 30 20 80 450,000 450,000 300,000 1,200,000 450,000 450,000 300,000 1,200,000 Residents[1] --- --- --- --- -- 289,000 189,000 85,000 563,000 289,000 189,000 85,000 563,000 Parking Day Visitors[1] --- --- --- --- --- 243,500 74,875 224,625 543,000 243,500 74,875 224,625 543,000 Totals 86,110 $5,249,500 $2,221,875 $6,018,625 $13,489,000 $5,249,500 $2,221,875 $6,018,625 $13,489,000 Phase II Hotel 0 $60 $10 $100 $170 $0 $0 $0 $0 $1,876,000 $313,000 $3,127,000 $5,316,000 Branded Residences in Rental Pool 0 60 30 75 165 0 0 0 0 1,180,000 590,000 1,475,000 3,244,000 Condos in Rental Pool 19,030 60 30 40 130 1,142,000 571,000 761,000 2,474,000 2,353,000 1,176,000 1,568,000 5,097,000 Second Home Condos 10,880 30 30 20 80 326,000 326,000 218,000 870,000 776,000 776,000 518,000 2,070,000 Residents[1] --- --- --- --- --- 377,000 247,000 111,000 735,000 666,000 436,000 196,000 1,298,000 Parking Day Visitors[1] --- --- --- --- --- 243.500 74,875 224.625 543.000 487,000 149.750 449.250 1,086.000 Totals 29,910 $2,088,500 $1,218,875 $1,314,625 $4,622,000 $7,338,000 $3,440,750 $7,333,250 $18,111,000 Source:Economic&Planning Systems [1]See Appendi x Tabl es A1 through A3 for further detai I. H'�20812EVaVell FlsalAneyslsVvlalels\�21812£VSgasTexMOiel12-29A1dx15]2-EVFendPOt Economic&Planning Systems, Inc. 35 Ever Vail Fiscal Impact Analysis January 13, 2011 Table 19 Ever Vail Guest Spending Capture Rates Ever Vail Fiscal Impact Analysis °/a Spent in Ever Vail %Spent Elsewhere in Vail %Spent Outside Vail(Leakage) Total Phase Retail Conv. F&B Retail Conv. F&B Retail Conv. F&B Retail Conv. F&B By Phase-Standalone Phase I Hotel 25% 75% 40% 65% 25% 50% 10% 0% 10% 100% 100% 100% Branded Residences in Rental Pool 25% 75% 40% 65% 25% 50% 10% 0% 10% 100% 100% 100% Condos in Rental Pool 25% 65% 35% 65% 35% 55% 10% 0% 10% 100% 100% 100% Second Home Condos 25% 50% 35% 65% 40% 55% 10% 10% 10% 100% 100% 100% Residents 10% 35% 10% 55% 50% 70% 35% 15% 20% 100% 100% 100% Parking Day Visitors 50% 100% 50% 50% 0% 50% --- --- --- 100% 100% 100% Phase II Hotel --- --- --- --- -- -° -- --- °- --- --- --- Branded Residences in Rental Pool --- --- --- --- --- --- --- --- --- --- --- --- Condos in Rental Pool 0% 0% 0% 90% 100% 90% 10% 0% 10% 100% 100% 100% Second Home Condos 0% 0% 0% 90% 90% 90% 10% 10% 10% 100% 100% 100% Residents 0% 0% 0% 65% 85% 80% 35% 15% 20% 100% 100% 100% Parking Day Visitors 0% 0% 0% 100% 100% 100% --- --- --- 100% 100% 100% Cumulative Phase I Hotel 25% 75% 40% 65% 25% 50% 10% 0% 10% 100% 100% 100% Branded Residences in Rental Pool 25°/o 75% 40% 65% 25% 50% 10% 0% 10°/o 100% 100°/a 100°/a Condos in Rental Pool 25% 65% 35% 65% 35% 55% 10% 0% 10% 100% 100% 100% Second Home Condos 25% 50% 35% 65% 40% 55% 10% 10% 10% 100% 100% 100% Residents 10% 35% 10% 55% 50% 70% 35% 15% 20% 100% 100% 100% Parking Day Visitors 50% 100% 50% 50% 0% 50% --- --- --- 100% 100% 100% Phase I&II Hotel 25% 75% 40% 65% 25% 50% 10% 0% 10% 100% 100% 100% Branded Residences in Rental Pool 25% 75% 40% 65% 25% 50% 10% 0% 10% 100% 100% 100% Condos in Rental Pool 25% 65% 35% 65% 35% 55% 10% 0% 10% 100% 100% 100% Second Home Condos 25% 50% 35% 65% 40% 55% 10% 10% 10% 100% 100% 100% Residents 10% 35% 10% 55% 50% 70% 35% 15% 20% 100% 100% 100% Parking Day Visitors 50% 100% 50% 50% 0% 50% --- --- --- 100% 100% 100% Source:Economic&Plarming Systems H:\2�12 Eve Vail Fisral Analysis\Malels\[21812-EV Saes Tax Mo]el 12-29D10 xls]3Captve Rat¢ Economic&Planning Systems, Inc. 36 Ever Vail Fiscal Impact Analysis January i3, 201i After applying spending capture rates to expenditure potential, dollars of spending are calculated for Vail by locations within Vail, summarized in Table 20. Of the $18.1 million in total spending, $16.4 million is estimated to occur in Vail, or 90 percent of total spending in all store categories. This $16.4 million of spending in Vail generates sales tax. Within Vail, 35 percent of spending in Vail is assumed to occur in Lionshead, or $2.95 million. Sixty-five percent of guest spending in Vail, or $5.5 million, is assumed to occur in Vail Village because of its larger concentration of retail and food and beverage options. There is a small difference in total spending between Tables 17 and 19 due to spreadsheet rounding. Table 20 Ever Vail Guest Spending by Location Ever Vail Fiscal Impact Analysis Expenditures and Sales Generated by Ever Vail Factors Calculations Total Spending by Ever Vail Guests/Residents In Ever Vail $6,806,000 38% In Vail, Not in Ever Vail A $9,606,000 53% Leakage/ Down Valley Spending $1,704,000 9% Total Spending $18,116,000 100% Estimated Spending by Location In Ever Vail $6,806,000 38% Lionshead A X 35% $2,954,000 16% Vail Village AX 65% $5,486,000 30% WestVail $1,166,000 6% Down Valley/ Leakage $1,704,000 9% Total Spending $18,116,000 100% Economic& Planning Systems, Inc. 37 Ever Vail Fiscal Impact Analysis January i3, 201i Retail Sales in Ever Vail Businesses If Ever Vail retail is to achieve a minimum level of viability, it would need to achieve $18.8 million in sales. As shown above, guests are expected to spend only $6.8 million within the project. If guests are only spending $6.8 million in the project, $12 million in sales would need to come from other sources: either inflow from outside Vail, or by capturing sales from existing Vail businesses by offering a competitive and attractive shopping and dining experience. The Ritz Carlton project will add 116 lodging units and generate additional guest expenditure potential. Since it is located immediately adjacent to Ever Vail it is therefore highly likely that Ritz guests will make some of their expenditures in Ever Vail. It is estimated that 40 percent of Ritz expenditures will be made in Ever Vail, or $4.6 million. The detailed calculations can be seen in the Sales Tax Model provided to Town staff. The remaining $7.4 million in sales would need to come either from inflow or through cannibalizing sales from existing businesses through competition. As shown below in Tables 21 through 23, the impact of Ever Vail retail is expected to be minor compared to the total sales levels of Vail Village, Lionshead, and West Vail. Potential Erosion The sales levels in Vail business districts are compared to the $7.4 million in sales that would need to come from cannibalization, as shown in Table 21. Vail Village achieved $152.7 million in sales in 2009, while Lionshead achieved $51.9 million. For confidentiality purposes, West Vail is combined with Cascade Village, East Vail, and Sandstone, referred to as "West Vail" for brevity. In total, West Vail had $71.8 million in sales. Approximations of erosion from each area are shown in total dollars and as a percentage of existing sales. However, as shown previously, Ever Vail guests will also spend money in these other Vail locations, offsetting cannibalization that may occur. This net dollar flow will be estimated separately from potential cannibalization. The sales flows from existing retail nodes are estimated to be $2.9 million in sales come from Vail Village, which is equivalent to 2 percent of its annual sales. For Lionshead, it is estimated to lose $2.5 million in sales, or 5 percent of existing sales. The impact to West Vail is estimated at roughly 5 percent of grocery and Convenience Goods sales, or $1.9 million. As shown, total cannibalization to Ever Vail would need to be $7.4 million in order to achieve $18.8 million in sales. The projected total sales in Ever Vail by source are summarized in Table 22. At the buildout of Phases I and II, $6.8 million in sales would come from Ever Vail Guests. The Ritz Carlton would generate $4.6 million in sales in Ever Vail (and additional spending elsewhere). Cannibalization from Vail Village, Lionshead, and West Vail could contribute $7.4 million if Ever Vail offers a competitive and attractive retail environment. Total sales from all sources are projected to be $18.8 million under these assumptions. Economic& Planning Systems, Inc. 38 Ever Vail Fiscal Impact Analysis January 13, 2011 Table 21 Potential Erosion from Existing Business Districts Ever Vail Fiscal Impact Analysis Vail Village Lionshead Village West Vail %of Existing %of Existing %of Existing Potential Erosion Description 2009 Sales Sales $Erosion 2009 Sales Sales $Erosion 2009 Sales Sales $Erosion to Ever Vail A By Phase Phasel Restaurant $6Q218,000 2.0°/o $1,204,000 $22,158,000 5.0% $1,108,000 $16,243,000 0.0% $0 $2,312,000 Retail $89,484,000 2.0% $1,790,000 $28,037,000 5.0% $1,402,000 $16,798,000 0.0% $0 $3,192,000 Convenience Goods $2,998,000 0.0% �0 $1,758,000 0.0% �0 $38J66,000 5.0% $1,938,000 $1,938,000 Total $152,700,000 $2,994,000 $51,953,000 $2,510,000 $71,807,000 $1,938,000 $7,442,000 Phase II Restaurant $60,218,000 0.0% $0 $22,158,000 0.0% $0 $16,243,000 0.0% $0 $0 Retail $89,484,000 0.0% $0 $28,037,000 0.0% $0 $16,798,000 0.0% $0 $0 Convenience Goods $2,998,000 0.0% �0 $1,758,000 0.0% �0 $38J66,000 0.0% �0 �0 Total $152,700,000 $0 $51,953,000 $0 $71,807,000 $0 $0 Cumulative Phasel Restaurant $60,218,000 2.0% $1,204,000 $22,158,000 5.0% $1,108,000 $16,243,000 0.0% $0 $2,312,000 Retail $89,484,000 2.0% $1,790,000 $28,037,000 5.0% $1,402,000 $16,798,000 0.0% $0 $3,192,000 Convenience Goods $2,998,000 0.0% $0 $1,758,000 0.0% $0 $38,766,000 5.0% $1,938,000 $1,938,000 Total $152,700,000 $2,994,000 $51,953,000 $2,510,000 $71,807,000 $1,938,000 $7,442,000 Phase II Restaurant $60,218,000 2.0% $1,204,000 $22,158,000 5.0% $1,108,000 $16,243,000 0.0% $0 $2,312,000 Retail $89,484,000 2.0% $1,790,000 $28,037,000 5.0% $1,402,000 $16,798,000 0.0% $0 $3,192,000 Convenience Goods $2.998,000 0.0% �0 $1,758,000 0.0% �0 $38,766,000 5.0% $1,938,000 $1,938,000 Total $152,700,000 $2,994,000 $51,953,000 $2,510,000 $71,807,000 $1,938,000 $7,442,000 Source:Economic&Planning Systems H:\2�12 Ever Va9 Flsral Nna'ysis\MMels\�31812-EV S�es Tax MMeI 12-242J1 dx6�i2-Erosim Economic&Planning Systems, Inc. 39 Ever Vail Fiscal Impact Analysis January 13, 2011 Table 22 Projected Sources of Sales in Ever Vail Retail Ever Vail Fiscal Impact Analysis Project Visitors/ Total Sales Residents, and Ritr Carlton Vail Village Lionshead West Vail In Ever Vail Description Parking Spending Spending [1] Erosion [2] Erosion [2] Erosion [2] Businesses By Phase Phasel Restaurant $2,349,000 $1,586,250 $1,204,000 $1,108,000 $0 $6,247,250 Retail $1,331,000 $1,395,900 $1,790,000 $1,402,000 $0 $5,918,900 Convenience Goods/Market $1,437,000 $1,586,250 � � $1,938,000 $4,961,250 Total $5,117,000 $4,568,400 $2,994,000 $2,510,000 $1,938,000 $17,127,400 Cumulative Phasel Restaurant $2,349,000 $1,586,250 $1,204,000 $1,108,000 $0 $6,247,250 Retail $1,331,000 $1,395,900 $1,790,000 $1,402,000 $0 $5,918,900 Convenience Goods/Market $1,437,000 $1,586,250 � � $1,938,000 $4,961,250 Total $5,117,000 $4,568,400 $2,994,000 $2,510,000 $1,938,000 $17,127,400 Phase I &II Restaurant $2,816,000 $1,586,250 $1,204,000 $1,108,000 $0 $6,714,250 Retail $1,857,000 $1,395,900 $1,790,000 $1,402,000 $0 $6,444,900 Convenience Goods/Market $2,133,000 $1,586,250 $0 $0 $1,938,000 $5,657,250 Total $6,806,000 $4,568,400 $2,994,000 $2,510,000 $1,938,000 $18,816,400 Percent of Ever Vail Sales Restaurant 42% 24% 18% 17% 0% 100% Retail 29% 22% 28% 22% 0% 100% Convenience Goods/Market 38% 28% 0% 0% 34% 100% Total 36% 24% 16% 13% 10% 100% Source:Economic&Planning Systems Economic&Planning Systems, Inc. 40 Ever Vail Fiscal Impact Analysis January i3, 2011 Net Dollar Flows Ever Vail guests will make expenditures within Ever Vail as well as other business districts in Vail. By comparing guest expenditures in other locations to the potential sales cannibalization to Ever Vail from other business districts, the net dollar flows are estimated in Table 23. The total spending from Ever Vail Guests in other areas is estimated at $9.6 million, including $2.9 million in Lionshead, $5.5 million in Vail Village, and $1.2 million in West Vail. Potential erosion has been estimated at $7.4 million, resulting in a positive $2.2 million net dollar flow to existing business districts, or $2.2 million in new sales, or a 0.8 percent increase in total sales in these areas. Lionshead and Vail Village are likely to experience a modest increase in sales of 1 to 2 percent with the Ever Vail project. West Vail could lose a small amount of sales, estimated at -1.1 percent. This is due to competition from the proposed Market, which is a store type that does not currently exist in Vail today. It would compete with the prepared and specialty foods sections of the grocery stores, and possibly with beer, wine and liquor stores. Table 23 Projected Net Dollar Flows by Business District Ever Vail Fiscal Impact Analysis Erosion to Ever Spending From Potential Dollar Flows Vail Ever Vail Net Dollar Flows Lionshead $2,510,000 $2,954,000 $444,000 Vaii Village $2,994,000 $5,486,000 $2,492,000 WestVail $1,938.000 $1,166,000 - 772000 Total $7,442,000 $9,606,000 $2,164,000 Existing Sales Erosion as% of Potential Erosion vs.Existing Sales Net Dollar Flows (2009) Sales Lionshead $444,000 $51,953,000 0.9% Vail Village $2,492,000 $152,700,000 1.6% West Vail - 772 000 $71,807,000 -1.1% Total $2,164,000 $276,460,000 0.8% Source:Economic&Planning Systems H:\2�12 Eva Vail Fl scal An�ysis\MNels\[31812-EV Sales Tax M�el 12-232�10 x Is]Tade ES 1 Economic& Planning Systems, Inc. 41 5. KEY FINDINGS AND RECOMMENDATIONS 1. Ever Vail development would expand the Town's economic base by expanding visitation. The visitor and resort economy forms a substantial portion of the Town of Vail's economic base. If successful, the hotel and overnight rental condominiums in Ever Vail project will bring additional visitors to the Town, expanding the resort and visitor based economy year round. Because a significant percentage of the users projected to occupy or visit the Ever Vail project are estimated to be net new (approximately 50 to 70 percent based on the occupancy rates of the various buildings within the project), there will be an overall expansion of visitation to Vail. From a fiscal perspective, the Town is expected to experience a positive impact from the Ever Vail project coming from new guests (new room night sales and new expenditures). Retail sales are projected to be net positive in two of the three existing retail centers in Vail, with West Vail seeing a modest contraction. Regarding lodging, the development will introduce new lodging competition in the Vail market and some existing hotels and condo-hotels will be impacted. Consideration: The hotel is an important part of the project and would be most beneficial if constructed in Phase I. 2. The hotel provides the most fiscal and economic benefit to the Town. Hotels have a larger fiscal impact to the Town than a condominium project with a rental program due to higher annual occupancies. The Ever Vail hotel is projected to operate at 60 percent annual occupancy compared to 40 percent annual occupancy for condominiums. The hotel is also expected to bring a larger share of net new guests. From the Fiscal Model, EPS estimates that one hotel room has a fiscal impact of 1.3 times that of one condominium unit in a rental program. The economic benefit to the Town in terms of spending is also larger for hotels compared to condominiums. EPS estimates that one hotel room generates 2.3 times more retail and food and beverage expenditures than a condominium. Consideration: The hotel is an important part of the project and would be most beneficial if constructed in Phase I. 3. The Ever Vail Hotel could bring additional summer and shou/der season business by marketing to groups and events. The 102 room Ever Vail hotel is proposed to include 6,291 square feet of ineeting space with a seating area of 4,951 square feet. At 20 square feet per guest, this space could accommodate groups of at least 250 people. There is an additional 3,372 square feet of meeting space proposed in the mixed use portion of the project. Groups of this size (250 or more) need a block of at least 200 rooms that can be sold together. The off seasons present an opportunity to expand group business, as occupancies are low and it is easier to assemble a large block of rooms. Because the hotel room count falls below this threshold, the Economic& Planning Systems, Inc. 42 Ever Vail Fiscal Impact Analysis January i3, 2011 developer and property managers will need to encourage that condominium owners participate in a rental program to leverage the economic impact of the meeting space. Consideration: Pursue an effective incentive program that motivates an adequate number of condominium owners to join a rental program. Request that VRDC demonstrate a business model for attracting groups and off season business. 4. The Town and Vail Resorts should strive to provide a consistently high quality visitor experience. Part of Vail's success is the consistently high quality guest experience on the mountain and in the Town. Guests should see no difference in the quality of maintenance and services on property maintained by Vail Resorts or the Town. The Ever Vail project should continue the high quality of service and experience by ensuring that public spaces are maintained to the same, or higher, standards as areas maintained by the Town. The operations and maintenance budget for the metropolitan district(s) needs to be adequately funded the segregated from debt service to ensure consistently high standards of upkeep. Consideration: Ensure that Ever Vail will maintain the property and public areas to the same standard as the Town by ensuring the service plan for any future metropolitan districts include a distinct mill levy dedicated to Operations & Maintenance. 5. The 35,000 square feet of office space will make a modest contribution to the Town's economic diversity. The Ever Vail project will replace the existing 31,000 square feet of office space on the site with 35,000 square feet of new space. Currently, it is anticipated that half of the space will be occupied by Vail Resorts Development Company by moving their current operations from Avon to Vail. The remaining space would be available for lease to local professionals and businesses. The employees in this space will add vitality to Ever Vail year round. Consideration: Encourage office development in Phase I. 6. The fiscal and economic analysis indicates that cannibalization of existing retail and restaurant sales by Ever Vail businesses will be minimal. The development team has reduced the amount of retail as a result of discussions with EPS, Town Staff, and other stakeholders in order to address concerns about right-sizing the retail hub. When EPS first became involved in the project, the retail program was proposed to include approximately 100,000 square feet of retail and food and beverage space. Through a collaborative process, EPS, and VRDC and its consultants agreed that the project was over- retailed for this location and the size of the surrounding bed base. The retail program was reduced to approximately 53,000 square feet. New retail space in Ever Vail will have a minimal impact on existing retailers in Vail for two reasons. First, the amount of space is small in comparison to the current retail inventory. Ever Vail would add 53,000 square feet of retail and food and beverage space to an existing inventory of 629,000 square feet, an increase of 8.5 percent. Ever Vail retail would be one-half the size of Lionshead Village and one-seventh the size of Vail Village, requiring proportionally less in sales to be successful. Second, Ever Vail is also expected to generate new visitation and new expenditures, adding to the overall level of guest spending in Vail. Economic& Planning Systems, Inc. 43 Ever Vail Fiscal Impact Analysis January i3, 2011 This study determined that any sales erosion that occurred from Lionshead or Vail Village would be °cancelled out" by new expenditures. Erosion from West Vail grocers to the proposed market in Ever Vail was estimated at 1.1 percent. 7. The responsibility for the cost of three transit buses shou/d be considered in ongoing discussions and negotiations. The transit analysis completed by LSC Transportation Consultants identified a need for three new transit buses at a cost of $1.8 million. The responsibility for this cost will be part of future discussions and negotiations between VRDC and the Town. Economic& Planning Systems, Inc. 44