Wood County Project
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Wood County Project |
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Economic Impact Analysis – NWNA Wood County The following report provides a summary of the economic impact assessment associated with the construction and development of a NWNA – Ozarka bottled water processing and distribution facility located in Wood County, Texas. The purpose of this report is to assist NWNA, local government officials, economic development officials and the public to assess the economic impact of the proposed facility on the local economy. Direct Property Tax Revenue: Upon completion of the new NWNA – Ozarka facility, it is estimated that Wood County will realize approximately $210,000 annually in additional property tax revenue. The property tax revenue to Wood County includes an assessment by the special district for waste management. The Hawkins ISD will see an increase of over $550,000 per year in property tax receipts. The Harmony ISD can expect an increase of $43,000 annually in property tax revenue. These figures may increase slightly as the taxable inventory of the facility increases in future years. · All estimates are based upon expected construction values and the 2002 tax rates adopted by each relevant Wood County taxing jurisdiction. Direct Sales Tax Revenue: Local political jurisdictions within Wood County can expect to see their sales tax revenue increase as a result of this project. NWNA – Ozarka has estimated that it will have approximately $950,000 in local purchases of taxable goods within the county. These direct NWNA – Ozarka purchases will generate approximately $5,000 per year, based upon a 1.5% local sales tax rate. · Wood County collects a ½ cent sales tax to reduce property taxes. This will only reduce the county’s net tax receipts by the amount of the generated sales tax. There is zero net affect on the County’s overall revenue. Employment Projections: At the end of the first full year of operations, the NWNA – Ozarka project will employ 56 people with a projected payroll of $ 2.2 million, growing to 300 employees and almost $12 million in payroll by year 10. Furthermore, NWNA employees will spend a portion of their payroll dollars within the county on taxable items. It is estimated that this consumption will generate additional local sales tax revenue of $2,400 by the end of year 1 and grow to $12,800 by the time the facility reaches full employment in year 10. The NWNA employees can also be expected to pay over $144,000 in property taxes to local jurisdictions by year 10. Ancillary Impacts – The Multiplier Effect: Other businesses will soon employ more people in order to support the new business activity generated by the NWNA – Ozarka project and its employees. Approximately 220 new jobs will be created in the first year alone in order to support the new NWNA facility. By year 10 the number of support jobs will grow to over 1,670 and have a payroll of over $37 million. It is expected that by year 10, the support personnel will annually generate over $40,000 in sales tax revenue and over $453,000 in property tax revenue to Wood County taxing jurisdictions. Construction: During the construction of the NWNA – Ozarka facility and its support structures, Wood County and its various taxing jurisdictions can expect revenue in excess of $94,000 in property and sales tax generated by the contractors, their employees and local consumption.
Economic Impact Assessment Report on the NWNA – Ozarka Project Wood County, Texas Prepared by: Celero Group, L.P. Austin, Texas
December, 2001
NWNA - Ozarka Executive Summary
The Celero Group (Celero) has been engaged to perform a comprehensive economic and fiscal impact analysis on the proposed construction and development of a Perrier Group of America – Ozarka Spring Water (NWNA) bottled water processing and distribution facility located in Wood County, Texas. The purpose of this report is to assist NWNA, local government officials, economic development officials and the public to assess the economic impact of the proposed facility on the local economy. This report takes into consideration the fiscal impact to Wood County and to the other taxing entities affected by the construction and successful operation of this facility. This report does not consider any economic or financial incentives offered by any local governmental entity. Property Tax Revenue: Projected property tax revenue figures are based upon adopted 2002 tax rates and the estimated appraised value of the new construction and equipment for this project. Upon completion of the facility, it is estimated that Wood County will realize approximately $210,000 in additional property tax revenue. The property tax revenue to the county includes the special district for waste management. This figure will increase as the taxable inventory of the facility increases. The Hawkins ISD will see an increase of over $550,000 per year in property tax receipts. The Harmony ISD can expect a revenue stream of just over $43,000 per year. Wood County collects a ½ cent sales tax to reduce property taxes within the county. This will only reduce the county’s net tax receipts. It will have no appreciable affect on the amount of property taxes paid by NWNA – Ozarka. The scope of this report does not consider the implications of this facility on the Hawkins ISD funding situation as it relates to the State of Texas’ “Robin Hood” school funding structure. For the purposes of this report, real estate values have been held constant. The real estate market is uncertain and Celero has chosen not to speculate on future value fluctuations of real property in Wood County. Sales Tax Revenue: There will be significant sales tax revenue realized by various local jurisdictions within Wood County as a result of this project. NWNA – Ozarka has estimated that it will purchase just under $1 million in taxable goods within the county. These local purchases will generate approximately $5,000 per year for local taxing jurisdictions, based upon a 1.5% (realized) local sales tax rate. Furthermore, NWNA employees will spend a portion of their payroll dollars within the county. It is estimated that this consumption will generate an additional $2,400 by the end of year 1 and grow to $12,800 by the time the facility reaches full employment (300 people) in year 10. Sales tax collected by the county is not considered as usable revenue as it is dedicated 100% to property tax reduction. As you can see from the attachment, county sales tax receipts are netted from the County’s property tax revenue. Employment Projections: NWNA – Ozarka has estimated that its will initially employ approximately 50 people with a ‘start-up’ payroll estimated at $1.9 million. NWNA projects that the facility will employ 300 people with almost $12 million in payroll by year 10. Via the Wood County Employment Multiplier as supplied by the BEA, it is estimated that an additional 1,679 jobs will be created in order to support the NWNA facility.NWNA - Ozarka Background & Objective
Background NWNA - Ozarka is proposing the development of a 400,000 square foot natural spring water production facility within Wood County, Texas. The NWNA development will require the acquisition of approximately 1,500 acres of in various Wood County taxing jurisdictions including the Hawkins and Harmony Independent School Districts. The NWNA – Ozark project plan calls for a twelve (12) month construction horizon. The construction phase will require significant resources including improvements to local infrastructure such as roads and electricity transmission capacity. Upon construction completion, NWNA will employ approximately 50 people at start up, with employment expected to grow to 300 by year 10 of operation. NWNA – Ozarka, as a concerned member of the local community has spent extensive time researching the social, environmental, and economic impact of this project on Wood County and its citizens. This report is a component of that extensive due diligence process. Objective NWNA - Ozarka has engaged the Celero Group to determine the economic impact of this development on the Wood County economy as well as the specific expected financial impact upon the local governments within Wood County. The report that follows is a critical assessment of the economic impact of this project on the local economy with special attention given to the potential direct financial impact on Wood County itself. The objective of this report is to provide NWNA, Wood County, other local governments and the public with an independent assessment of the expected financial and economic impact of the proposed development. NWNA - Ozarka Project Information
NWNA - Ozarka Critical Assumptions
Critical Assumptions: The Conclusions presented in this report are based on a comprehensive analysis of the information available from research tables, published governmental statistic and NWNA - Ozarka. There is an inherent assumption that the information provided by all sources is correct, complete and reliable. Celero has relied upon data provided by the client in the preparation of this assessment. No specific steps were taken to verify the client’s data accuracy. However, it is important to note that significant portions of the information provided by the client are in the from third party reports and data gleaned from industry knowledge. The analysis contained in this report is intended to provide timely and relevant information for the sole use of NWNA - Ozarka and the Wood County Industrial Commission. The information contained in this report is merely an estimate, based upon statistical models and formulas, of the economic impact of the proposed business venture. The reader should not interpret the findings of this report to constitute a recommendation as to the worthiness of NWNA – Ozarka or the proposed development for any public assistance, financial or otherwise. The Celero Group makes no warranty that the economic impact in this report can be realized given the uncertainty inherent in future economic conditions, geopolitical situations, real estate and retail markets. The conclusions in this report are based on certain assumptions about the future performance of the Texas economy as well as the global, national, regional economies and on other actors outside the control of the client. This report does not anticipate any major shifts in the cost of construction / development, tax laws, consumer confidence / spending, or financing costs. However, should a significant change in these factors occur, this would provide sufficient reason to update the report. NWNA - Ozarka Economic Basis
Economic Base Analysis In order to successfully calculate the expected impact of any new venture, it is incumbent upon the researcher to establish a base level of economic activity for the subject area. Wood County, in North East Texas is geographically aligned with the Tyler and Longview Texas Metropolitan Statistical Area (MSA). In every instance, this
report strives to use county level economic information, when county information
is not available, MSA, regional or state information is used to approximate the
Wood County economy. The Wood County economy,
like many in Texas is still based upon a rural model. There are limited
employment and retail outlets in the county able to satisfy consumers. As a
result, larger urban economies in Tyler and Longview capture a significant
portion of the Wood County disposable income. Wood County residents commute to
work outside of the county and also spend their disposable income outside of
Wood County.
Another significant factor limiting the ability
of Wood County to capture disposable income is its status as a “Dry” county
under Texas law. Statistics from the U.S. Department of Commerce’s Bureau of
Economic Analysis indicate that the average Texan spends 1.4694 percent of their
total income on Alcohol and Tobacco products.
Wood County’s current unemployment rate is 4.9%
based upon a workforce of 14,401 people. Current Wood County population
estimates are 34,443 individuals.
NOTE:
All dollar estimates and figures in this report are based upon current pricing
and CPI information. These numbers do not reflect inflation, raises, or other
trending factors. For the purpose of this report, all dollar figures are held
constant in year 2000 dollars.
NWNA
- Ozarka
Property Tax Revenue
The direct revenue impact on the Wood County
governmental entities is derived from a number of sources. The NWNA Project
will impact the governmental revenue figures through increased property values
therefore ad-valorem tax receipts and through increased retail sales tax
receipts. Real property tax revenue figures are based upon the improvements
NWNA will make to the property. This report does not consider the increase in book
valuation that may or may not be realized by the local governments as a result
of the NWNA transaction.
The estimates of local governmental revenue
provided in this report were derived from proprietary economic impact models
based upon statistical data from a number of sources. (Please refer to the
sources list in the appendix.)
Ad-Valorem Tax Revenue:
Ad-valorem tax revenue calculations are based upon the estimated value of the
buildings and inventory multiplied by the county’s combined current tax rate of
$.4580 / $100 valuation, ($.44 / $100 County and $.018 / $100 Special Waste
Management District). This table does not take into consideration the
depreciation of equipment, inventory fluctuations, or increased real property
values. Real estate markets show historic trends of increased value, but for
the purpose of this model, values are held constant. Finally, it is estimated
that Wood County can expect a .6125 capture rate for employee tax receipts.
Upon completion it is expected that the
NWNA facility will generate annual tax revenue according to the following table. NWNA - Ozarka Sales Tax Revenue
The State of Texas will receive 6.25% of each taxable transaction. Up to a 2% sales tax, in addition to the 6.25% collected by the State, is dedicated to the various Wood County governmental entities. The 2% local tax will vary by retail location within the county and the governmental entity receiving the sales tax proceeds. The figure included in this model represents the expected sales tax receipts, reduced by a factor of .3784 as retail outlets from outside of Wood County capture some of the consumer spending represented by the NWNA – Ozarka project. It is estimated that Wood County will see a significant increase in Sales Tax receipts due to the NWNA – Ozarka project. Wood County collects ½ cent sales tax to reduce property taxes. Direct taxable consumption by the NWNA facility will result in a 14 ¢ property tax reduction for each man, woman and child in Wood County. In the first full year of operation, the NWNA employees, based upon consumption and payroll estimates, can be expected to generate in excess of $ 2,394 in sales tax revenue for local taxing jurisdictions. (This figure represents 1.5% local sales tax rate.) Upon full employment, this figure will increase to over $12,800 annually. It is also important to note that our model calculates the ancillary benefits and likely purchases of people not directly attributable to the NWNA – Ozarka facility. (A complete explanation of the ancillary benefits is found later in this report.) Local governmental sales tax revenue could reach as much as $15,000 in year one and as much as $58,500 annually upon full employment at the NWNA plant. The Table below illustrates the expected sales tax receipts (based upon 1.5% local sales tax):
NWNA - Ozarka Other Impacts
Service Revenue: As the NWNA project is developed and begins operations, there will be a slight increase in the population as workers migrate to the area to fill both NWNA jobs and support jobs. Local governments can expect to realize some limited revenue from construction permits and impact fees, as well as revenue generated by city services such as water and waste-water utilities. For the purposes of this model, Celero has calculated minimal net revenue to local governments associated with the in-migration of employees to the area. As more employees move into the area, cities within Wood County will capture some revenue based upon franchise fees, utility fees and other revenue events. Macro Economic statistics provided by the U.S. Department of Labor indicate that the average rural household in the U.S. expends $1,267 on utilities and other nominal governmental fees. Based upon 3.81 persons per household, a community can expect to realize $332.55 per capita in utility revenue from new persons moving to the area as a result of the NWNA project.
NWNA
- Ozarka
Ancillary Impact – Multiplier Effect
Any new economic activity in a community has an
ancillary affect on the area, often referred to as the “direct economic spin
off” of a given project. For instance, because of the NWNA – Ozarka development
in Wood County, other businesses are likely to construct new facilities in order
to support the project and its employees. However, two separate circumstances
affect this calculation.
It is important to remember that not all persons
employed by NWNA - Ozarka will live in Wood County and not all retail needs of NWNA
employees can be met by stores within the county. Over time, this creates
a greater demand for more economic development and activity within Wood County
to satisfy this need. However, in the short term, NWNA – Ozarka employees will
look to larger regional retail and residential hubs to satisfy demand. As a
result, Wood County does not realize as much economic activity as a larger more
diverse economy.
Another critical factor affecting the overall
economic impact of the project is the exporting nature of the NWNA – Ozarka
business model. NWNA – Ozarka will export in excess of 99% of its products out
of Wood County. The net result is a large direct influx of payments made to
local residence and citizens. NWNA – Ozarka is not purchasing its raw materials
from outside of the area, (i.e. sending cash outside of Wood County), therefore
the overall impact of export sales have a greater ancillary effect on the local
economy.
The net result of the NWNA development is that
retail businesses will slowly grow in order to meet the demands of the NWNA employees as well as the supporting businesses and their employees. Also, the
NWNA employees, and the employees of the support businesses will demand new
housing opportunities within Wood County. All of these items will generate
revenue for the local governments in Wood County.
These ancillary impacts are measured utilizing
statistical ‘multipliers.’ The U.S. Bureau of Economic Analysis has developed a
comprehensive formula to produce multipliers for a given geographic area. RIMS
II multipliers specifically for Wood County were procured and utilized to
illustrate the multiplier affect of the NWNA – Ozark project on Wood County.
NWNA
- Ozarka
Ancillary Impact – Multiplier Effect
(cont.)
Ancillary
Benefits – Multipliers
An expanding industry can
have economic impacts beyond the jobs and income generated by the original
business. We generally rely on trained economists to help us understand and
decipher complex economic data that can explain these “ripple effects” of new
industries and business expansion. Economic multipliers help us predict or
quantify the projected and historic effects of a new or expanding business.
When used wisely, multipliers provide planners and decision makers with
estimates of employment, gross sales, tax receipts, income and spending that
result from new economic activity.
A multiplier is a single
number, which summarizes the total economic benefit resulting from a change in
the local economy. For example, a new manufacturing facility or an increase
in lending by a local bank can spur ripple effects or spin-off activity.
Multipliers measure the economic impact of these new economic activities,
including the resulting spin-off activity.
The following example
illustrates the multiplier concept. $1 is received into the local economy
from the export sales of a commodity. Of this one dollar, 40 cents is spent
for goods and services within the community. The firms and individuals who
receive this 40 cents spend 16 cents within the community. Of the 16 cents,
only six cents is spent locally and so on. The total amount of money received
by local firms and residents as a result of the initial $1 in added earnings
is $1.66. Therefore, the multiplier is 1.66.
Communities often wish to know the number of
jobs that will be created as a result of a new economic activity or to measure
the historic affect of an increase in economic activity by a particular firm
or industry. The employment multiplier measures the total change in
employment resulting from an initial change in employment of an industry. The
additional employment in the new activity multiplied by the employment
multiplier for the industry provides an estimate of the total new jobs created
in the area.
Another common tool is the Earnings
Multiplier. The earnings multiplier measures the total increase in earnings
by households in the local economy resulting from a $1 change in earnings paid
directly to households employed by the expanding industry.
Note:
The preceding explanation of Multipliers relies heavily on Wayne P. Miller’s
“Economic Multipliers: How Communities Can Use Them for Planning”, Chief
Economist with the University of Arkansas’ Cooperative Extension Service.
NWNA
- Ozarka
Ancillary Job Impact
An analysis of the information provided, coupled
with statistical data provided by the Texas Workforce Commission, BEA, and BLS
indicates that the NWNA – Ozarka project will employ as many as 300 FTE workers
by its tenth (10th) year of operation. (A full time equivalent [FTE]
employee is defined as someone who works at least 35 hours per week or a
combination of workers who’s hours total at least 35 hours per week.) NWNA
indicates that it will initially employ approximately 50 people in the Wood
County facility when it begins full time operations.
Wood County will also realize construction jobs
during the development of the NWNA facility in Wood County. Based upon normal
construction characteristics of industrial projects, we are able to project the
creation of 65 FTE construction jobs created in Wood County. These jobs will
only last during the construction phase of the project and will cease to exist
upon final build out and completion. It should also be noted that at any given
time, there will likely be more than 65 individuals working on the NWNA project.
However, the figure cited above is based upon a one – year, full time equivalent
employment pattern.
Employment and payroll estimates are generated
by comparing payroll figures to the appropriate average wage, adjusted for
inflation, to the employment location. NWNA – Ozark has provided information on
employment estimates as well as payroll categories. These figures were
coordinated with the statistical source information to complete the estimates.
The table in the addendum to this report has a complete matrix of statistical
wage rates, and per capita earning information for standard jobs within the
North East Texas region.
The multipliers provided by the BEA give estimates of the number of new jobs
created in Wood County as a result of the 300 employees of NWNA - Ozarka.
BEA multipliers for the appropriate industries, mineral extraction, food
processing, construction, etc., were utilized to estimate the direct employment
impact of the NWNA employees. (The BEA multiplier tables are included in the
appendix of this report.) These figures indicate an additional 1,679
jobs will be created to directly support the NWNA – Ozarka facility in Wood
County. Definitions &
BEA Multiplier Tables
NWNA - Ozarka Methodology
Methodology: Celero completed the following tasks while undertaking the objective of this report:
¨ Compiled rural economic data relative to the local economy ¨ Reviewed historical economic impacts relevant to similar developments. ¨ Prepared statistical models representing various revenue sources to Wood County ¨ Compiled economic statistical data relevant to local employment, retail, commercial and residential impacts. ¨ Prepared statistical input / output analysis for affecting economic impacts and the estimated revenues associated with the proposed development. ¨ Analyzed all of the above to provide an economic model predicting the likely economic impact of this development to the local economy and the likely revenue to Wood County.
NWNA - Ozarka Sources The following sources were utilized to provide statistical, economic, employment, or other valuation figures: Fiscal Impact Analysis in Land Use Planning – National Resource Development Council on Smart Growth Reorganization of the Workplace and Service Industry – Clair Brown, University of California, Berkley Economic Impact of Manufacturing – Larry Leistritz, North Dakota State University Sales and Use Tax – Historical Trends - Texas Comptrollers Office Retail Abstracts – U.S. Department of Commerce RIMS II – US Bureau of Economic Analysis Consumer Spending and Personal Income – Jim Moll, Bureau of Economic Analysis, U.S. Department of Commerce. Texas Perspectives in Job Growth – Texas Workforce Commission Cost of Governmental Services in a Growing Economy – Urban Land Institute Wood County Economic Profile, Bureau of Labor Statistics – U.S. Department of Labor
Economic Impact Table
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