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Home My WebLink About2A - From ApplicantEconomic and Fiscal Impact Report for Palm Springs Fulfillment Center Project Applicant: PS Canyon Development LLC Date prepared: 1/8/25 Date updated: 1/21/25 Project Overview We have consulted with various professionals in putting together this study. Our goal was to analyze the economic and fiscal impacts of our proposed project, specifically as they relate to benefits for the City of Palm Springs. We feel confident in the veracity of all of the assumptions made, and included them throughout the document for clarity. An update was made on January 20, 2025 based on information provided from the City of Palm Spring’s economic director that clarified some previously made assumptions. Key Project Details: ● Building Size: 739,360 square feet ● Construction Cost: $145,000,000 ● Building Value: $259 per square foot ● Potential Uses: Warehouse or Fulfillment Center ● Estimated Job Wages: ○ Warehouse Jobs: $49,000 annually ○ Fulfillment Center Jobs: $59,000 annually ○ Administrative Jobs: $79,000 annually ● Key Tax Rates: ○ Payroll Tax Rate: 7.65% ○ Property Tax Rate (state): 1% (local share 8%) ○ Sales Tax Rate (state): 7.25% (local share: 1%) ○ Local Sales Tax Rate: 2% 1. Job Creation The project will create 553 direct construction jobs, as well as between 739 and 924 permanent warehouse or fulfillment center jobs, and 80 permanent administrative jobs. Construction Jobs: ● Assumption: Approximately 50% of the $145 million construction cost is allocated to labor. ● Labor Budget: $72,500,000 ● Average Annual Construction Wage: $87,500 ● Total Construction Job-Years: $72,500,000 ÷ $87,500 = 829 job-years ● Construction Timeline: 18 months ● Average Annual Jobs During Construction: 829 ÷ 1.5 years = 553 jobs per year Warehouse Jobs: ● Assumption: One job per 1,000 square feet of building space. ● Number of Jobs: 739 ● Average Wage: $49,000 ● Total Wages: $36,211,000 Fulfillment Center Jobs: ● Assumption: 1.25 jobs per 1,000 square feet. ● Number of Jobs: 924 ● Average Wage: $59,000 ● Total Wages: $54,516,000 Administrative Jobs: ● Assumption: Administrative jobs are less space-intensive, with about one job per 150 square feet. ● Number of Jobs: 80 ● Average Wage: $79,000 ● Total Wages: $6,320,000 Total Payroll by Use: ● Warehouse Total Payroll (warehouse + admin) = $42,531,000 ● Fulfillment Center Total Payroll (fulfillment center + admin) = $60,836,000 2. Payroll Taxes Construction and permanent jobs will meaningfully contribute to the state and local tax base through payroll taxes, which are calculated as 7.65% of total wages (FICA taxes for Social Security and Medicare). Construction Jobs: ● Total labor budget: $72,500,000 ● Payroll Taxes: $5,541,250 Warehouse: ● Total warehouse payroll: $42,531,000 ● Total Payroll Taxes: $3,253,912 Fulfillment Center: ● Total fulfillment center payroll: $60,836,000 ● Total Payroll Taxes: $4,651,914 3. Property Taxes The total property tax revenue is based on the building value and the property tax rate (1%). Regardless of use, the building could bring in $153,195 in property taxes for Palm Springs. Building Value: ● Building Size: 739,360 square feet ● Value per Square Foot: $259 ● Total Building Value: $191,483,240 ● Total Property Taxes (at 1%): $1,914,942 Local Property Tax Revenue for Palm Springs (8%): ● 8% Share of State Tax: $153,195 4. Sales Tax Revenue Construction sales tax Construction costs generate sales tax revenue based on the taxable materials used during construction, which could bring in $1,502,563 to Palm Springs during the 18 months of build up. Sales Tax Revenue: ● Construction Costs (exclusive of labor): $72,500,000 ● State sales Tax Rate: 7.25% ● Estimated Sales Tax Revenue: $5,256,250 ● Local Sales Tax Rate: 2% ● Local Sales Tax Revenue for Palm Springs (1% of 7.25%, and 2% local sales tax) ○ 1% Share of state tax: $52,563 ○ 2% local tax: $1,450,000 ○ TOTAL: $1,502,563 Operational sales tax Operational sales tax revenue depends on the type of use (warehouse or fulfillment center). The local Palm Springs share of sales tax could be $1,532,323 annually for a warehouse, and $7,661,618 annually for a fulfillment center. Warehouse: ● Assumption: A warehouse primarily supports local businesses and employees through operations and related activities. The majority of sales are expected to come from employee spending and ancillary taxable purchases made in the community. ● Estimated Local Sales: $73,936,000 annually ($100 per square foot, low end of industry average). ● State sales Tax Revenue: $5,360,360 ● Local Sales Tax Revenue for Palm Springs (1% of 7.25%, and 2% local sales tax) ○ 1% Share of state tax: $53,603 ○ 2% local tax: $1,478,720 ○ TOTAL: $1,532,323 Fulfillment Center: ● Assumption: A fulfillment center processes taxable sales from e-commerce activities. These sales are often subject to state and local taxes. The estimated sales is based on Industry benchmarks for e-commerce fulfillment centers, the expected volume of sales processed at the facility, and an assumption that a portion of e-commerce sales are taxable and credited to the local jurisdiction. ● Estimated Local Sales: $369,680,000 annually ($500 per square foot, low end of industry average). ● State sales Tax Revenue: $26,801,800 ● Local Sales Tax Revenue for Palm Springs (1% of 7.25%, and 2% local sales tax) ○ 1% Share of state tax: $268,018 ○ 2% local tax: $7,393,600 ○ TOTAL: $7,661,618 5. Induced Economic Impact The economic multiplier effect estimates how additional income (e.g., wages) circulates through the local economy. The typical multiplier for wages in the Inland Empire (a region with a strong manufacturing and retail base) is around 1.5–2.0, meaning that for every $1 spent, an additional $1.50 to $2.00 of economic activity is generated within the local economy. Assumptions: ● Economic Multiplier: 1.8 (reflects the a conservative regional impact of wages spent locally) ● Direct Wages: Total payroll by use (construction and warehouse or fulfillment center, including administrative jobs). Construction: ● Labor Budget: $72,500,000 ● Induced Economic Impact: $130,500,000 Warehouse: ● Total Payroll: $42,531,000 ● Induced Economic Impact: $76,555,800 Fulfillment Center: ● Total Payroll: $60,836,000 ● Induced Economic Impact: $109,504,800 6. Permitting and Development Impact Fees Large-scale industrial developments like this project generate significant one-time revenue for the city through permitting and development impact fees. These fees help fund infrastructure improvements and city services to support the new development. Palm Springs could expect to bring in between $4,421,800 and $6,625,000 in fees for this project. Assumptions: ● Building Permit Fees: Typically 0.5% to 1% of total construction costs. ● Development Impact Fees: Estimated at $5-7 per square foot, based on local standards. Estimated Fees: ● Building Permit Fees: ○ Low estimate (0.5%): $725,000 ○ High estimate (1%): $1,450,000 ● Development Impact Fees: ○ Low estimate ($5): $3,696,800 ○ High estimate ($7): $5,175,520 Total One-Time Revenue for Palm Springs: ● Low Estimate: $4,421,800 ● High Estimate: $6,625,500 Total Economic Impact Summary Impact Category Warehouse Fulfillment Center Construction Jobs 553 jobs per year (18 months) 553 jobs per year (18 months) Construction permit + fees $4,421,800 to $6,625,000 $4,421,800 to $6,625,000 Permanent Jobs Created 819 jobs 1,004 jobs Local Property Taxes $153,195 $153,195 Local Sales Tax Revenue (Construction) $1,502,563 $1,502,563 Local Sales Tax Revenue (Operations) $1,532,323 $7,661,618 Induced Economic Impact (Construction) $130,500,000 $130,500,000 Induced Economic Impact (Permanent Jobs) $76,555,800 $109,504,800