Fiscal Sustainability Analysis: Nassau County

Fiscal Sustainability Analysis
Nassau County
Prepared for Citizens for a Better Nassau County| Yulee, FL | April 12, 2016
Robert Charles Lesser & Co. Real Estate Advisors | rclco.com
What did we do?

Analyze the current tax structure of the Nassau County budget and other
counties.
Examine recent development patterns in the county.
Utilize the fiscal impact analysis model to determine the net fiscal benefit
generated for the county by various land uses.
What did we learn?
Nassau Countys tax base is much more dependent on its residential tax
base than surrounding counties, counties of a similar size, and to Florida
as a whole.
Anemic growth in industrial and commercial land use development has
created a much greater reliance on residential property taxes to fund the
county government.
A lack of higher value industrial and commercial development contributed
to the recent 1 mill property tax increase.
Industrial development contributes a net fiscal benefit to the county 30X
greater than the average single family house.
2
Fiscal Sustainability Letter | Citizens for a Better Nassau County | April 7, 2016 | C6- 10946.02
Nassau County Budget Data
Millage Rates and Levied Property Taxes

Millage rates remained relatively constant until 2015 when a 1 mill increase was enacted
which resulted in an increase of approximately $5 million to the general fund.
A part of this can be attributed to the lack of growth in the commercial and industrial tax base
as shown in later slides.
$45,000,000
7.00
5.9768
$40,000,000
5.9768
6.00
$35,000,000
4.6761
$30,000,000
4.6827
4.9019
4.865
4.9019
4.9019
4.9768
5.00
4.4648
4.00
$25,000,000
$20,000,000
3.00
$15,000,000
1.5906
1.6694
1.6694
0.8467
0.8909
0.8843
1.6694
1.6694
1.6694
1.6694
1.6694
1.6694
1.6694
0.702
0.6651
0.6651
0.6651
0.5902
0.5902
0.5902
2010
2011
2012
2013
2014
2015
2016
2.00
$10,000,000
$5,000,000
$0
0.00
2007
2008
2009
General Fund Levied Taxes
MSTU Levied Taxes
Transportation Fund Levied Taxes
General Fund Millage Rate
MSTU Millage Rate
Transportation Fund Millage Rate
SOURCE: State of Florida County Municipal Data
1.00
Actual General Fund Revenues and Millage Rates

Property taxes currently make up 81% of total General Fund revenues. This increase was
primarily due to the recent 1 mill rate increase.
60,000,000
0.90
85%
78%
81%
79%
77%
0.80
76%
76%
73%
50,000,000
0.70
66%
40,000,000
0.60
0.50
30,000,000
0.40
20,000,000
0.30
0.20
10,000,000
0.10
0.00
2008
2009
2010
Actual General Fund Revenue
2011
2012
General Fund Property Taxes
2013
2014
2015
2016
Property Tax Percentage of General Fund
Fiscal Year Ending 2016 is based on Estimate of Actual General Fund Revenues. Budgeted Revenue is $61,828,767, including
$11,258,563 of cash forward.
Property Tax Revenues as a Percentage of Governmental Fund

Revenues
$100,000,000
66%
$90,000,000
$80,000,000
61%
60%
$70,000,000
$60,000,000
$50,000,000
64%
64%
59%
$40,000,000
$30,000,000
$20,000,000
62%
60%
58%
57%
56%
56%
56%
54%
$10,000,000
52%
$0
50%
Total Revenues
Total Property Taxes
Property Taxes Percentage of Total Revenues
Since its peak at 64% in 2009,

property taxes as a percentage of total
revenues for Nassau County has fallen
to 56%.
This reflects the downturn in the
economy in addition to growing budget
demands that must be fulfilled by other
funding sources since property taxes
alone cannot support as many of these
functions as it did in the past.
From 2008 to 2013, residential
property tax collections fell by 26%
while industrial property tax collections
fell by only 12%.
Even with the recent 1 mill rate
increase property taxes remain an
overall lower percentage of total
budget revenues.
Major Governmental Funds are General Fund, Transportation Fund, MSTU, One Cent County Surtax Fund, and Capital Projects Funds
Nassau County Breakdown of Total Levied Property Taxes

The percentage of total taxes in
Nassau
County
generated
by
residential uses has fallen slightly from
80% in 2008 to 78% in 2014.
90.00%
80.00%
70.00%
This has corresponded with a slight

increase in the percentage of overall
taxes coming from commercial and
industrial land uses which comprise
about 12% of total taxes.
60.00%
50.00%
40.00%
Residential property taxes make up a

greater share of the total property
taxes relative to surrounding counties,
counties of a similar size, and Florida
as a whole.
30.00%
20.00%
10.00%
0.00%
2008 2009 2010 2011 2012 2013 2014
Residential
Commercial
Industrial
Commercial and industrial property

taxes make up a lower share of total
property taxes than other counties
surveyed and Florida as a whole.
Property Tax Breakdown Between Nassau County and State of Florida

Nassau County
2% 3%
State of Florida
Nassau County has a

higher
percentage
of
property taxes generated
from residential uses than
the average county in
Florida.
78% of all taxes are from

residential uses in Nassau
County vs. 71% across
Florida.
Nassau County also has a

lower
percentage
of
property
taxes
being
generated from industrial
and commercial land uses
with only 12% coming from
those uses compared to
19% statewide.
2%
7%
4%
8%
10%
15%
78%
71%
Property Tax Breakdown of Nassau County and Surrounding Counties

Nassau County
2% 3%
10%
7%
Duval County
1% 10%
8%
21%
78%
Clay County
3%
2%
8%
15%
15%
74%
54%
6%
11%
Of
the
surrounding
counties, Nassau has the
highest
percentage
of
property taxes accruing
from residential lands at
78%.
Nassau County also has

the lowest percentage of
taxes
generated
from
industrial or commercial
lands with a total of just
12% from those land uses.
Duval, Clay and Baker
counties have totals of
29%, 16% and 17%,
respectively,
for
those
categories.
59%
Baker County
14%
Property Tax Breakdown of Nassau County and Counties Similar by

Population (65,000 to 100,000)
Amongst counties of
Nassau County
a
similar population, Nassau
County has a much higher
percentage of their property
taxes being generated by
residential development at
78% compared with 52% to
56% in Putnam, Columbia
and Highlands counties.
Putnam County
7%
3%
2%
10%
26%
52%
7%
78%
5%
Columbia County
9%
Nassau County also has

the lowest percentage of
property taxes in this peer
group being generated from
industrial or commercial
land uses with only 12%
coming from these land
uses.
The other counties range

from 14% to 22% of
property
taxes
being
generated from industrial
and commercial land uses.
Highlands County
11%
4%
13%
9%
18%
13%
56%
2%
17%
56%
10
Largest Taxpayers in Nassau County 2015

Rocktenns total assessed value of $148 million would equal approximately 805 average
houses in Nassau County.
Rank
1
2
3
4
5
6
7
8
9
10
Taxpayer
Taxable Assessed
Value
Rocktenn CP LLC
Ameliatel
Omni Amelia Island LLC
Rayonier Performance Fibers
Florida Power and Light Company
Florida Public Utilities Company
Rayonier Atlantic Timber Co
AGI Acquisitions LLC
Okefenokee Rural Electric
Omni Hotels Management Corp
TOTAL:
11
$147,702,879
$105,690,921
$91,034,357
$66,403,627
$42,774,216
$30,070,568
$28,560,706
$27,761,109
$20,565,395
$17,998,693
$578,562,471
Market Statistics
12
Nassau County Office Development Trends

Since 2013, there have been no new office building deliveries in Nassau County.
1,400,000
100,000
1,200,000
80,000
1,000,000
60,000
800,000
40,000
600,000
20,000
400,000
200,000
-20,000
2000
2001
2002
2003
2004
2005
Inventory SF
2006
2007
2008
Deliveries SF
2009
2010
2011
2012
Net Absorption SF Total
SOURCE: Costar
13
2013
2014
2015
2016
-40,000
Nassau County Retail Development Trends

Retail deliveries have slowed in recent years with very little development occurring in
2014 and 2015.
Absorption was actually -50,000 in 2014 meaning 50,000 sq. ft. of retail space was lost
in the market.
5,900,000
300,000
5,800,000
250,000
5,700,000
5,600,000
200,000
5,500,000
150,000
5,400,000
100,000
5,300,000
5,200,000
50,000
5,100,000
5,000,000
-50,000
4,900,000
4,800,000
-100,000
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
SOURCE: Costar
14
Inventory SF
Deliveries SF
Nassau County Industrial Development Trends

No new industrial development has occurred in Nassau County since 2009 6 years
without any new industrial in the county.
In 2010, 200,000 sq. ft. of industrial uses left the county; since then absorption has been
around zero meaning no new deliveries and no exits from the marketplace.
3,400,000
1,000,000
800,000
3,300,000
600,000
3,200,000
400,000
200,000
3,100,000
0
3,000,000
-200,000
-400,000
2,900,000
-600,000
2,800,000
-800,000
2000
2001
2002
2003
2004
2005
Inventory SF
2006
2007
2008
Deliveries SF
2009
2010
2011
2013
SOURCE: Costar
15
2012
2014
2015
2016
Fiscal Impact Analysis
16
What is Fiscal Impact Analysis?

Fiscal impact analysis determines a land uses net benefit contribution to a
local government.
For instance, every land use (residential, retail, office, industrial, etc.) creates
revenue for a local government in the form of property taxes, sales taxes,
charges for service, etc.
In addition, every land use creates expenses for local governments in the
form of charges for police, fire, roads, general government, parks, etc.
Net fiscal Benefit = Revenues Expenses
RCLCO has developed a fiscal impact analysis model for Nassau County.
The model is configured with local tax data, current budget, local
demographics, etc. in order to customize the model just for Nassau County
since every county/city is different.
The model is a useful tool for examining the potential impact of future land
use decisions on the countys budget and is often used during
comprehensive plan amendment hearings and other development approval
actions being considered around the state by locally elected bodies of
government such as a County/City Commission.
The following slides show the impact of various land use scenarios on
Nassau Countys budget.
17
Net Fiscal Impact of Land Uses in Nassau County

County average home generates only $2,500 in net fiscal benefit to the county over 20
years.
Retail generates 21X the average homes benefit and industrial generates 30X the
average homes benefit.
Sizes have been based off an equivalent sized home of 2,000 sq. ft.
Qty
(ERU)
Unit
Value/Unit
du
$205,000
$2,500
Retail
2,000
sf
$150
$52,000
21
Office
2,000
sf
$130
$30,000
12
Industrial
2,000
sf
$175
$75,000
30
Land Use
SF - County Ave.
18
20 Year
Benefit
X Greater than Ave.

SF
Fiscal Sustainability Analysis

Examing the net fiscal impact on a larger basis shows industrial development leading
the way with a $37 million benefit over 20 years.
Residential developments consisting of 500 houses at the county average price of
$205,000 will generate a benefit of $175,000 over the next 20 years.
A retail development of 200,000 sq. ft. generates a benefit of $5.2 million.
Conclusion: Diversification in the tax base is key to long-term sustainability for
the county. Industrial and other Commercial land uses can provide a large benefit
for the county in terms of return on dollars spent.
Land Use
Qty (ERU) Unit
Single Family House

Land Use
Industrial
Land Use
Retail
19
500
Qty
1,000,000
Qty
200,000
du
Unit
sf
Unit
sf
Value/Unit 20 Year Impact

$205,000
$175,000

$175
$37,000,000

$150
$5,200,000
Critical Assumptions
Critical Assumptions
Our conclusions are based on our analysis of the information available
from our own sources and from the client as of the date of this report.
We assume that the information is correct, complete, and reliable.
We made certain assumptions about the future performance of the
global, national, and local economy and real estate market, and on
other factors similarly outside either our control or that of the client. We
analyzed trends and the information available to us in drawing these
conclusions. However, given the fluid and dynamic nature of the
economy and real estate markets, as well as the uncertainty
surrounding particularly the near-term future, it is critical to monitor the
economy and markets continuously and to revisit the aforementioned
conclusions periodically to ensure that they are reflective of changing
market conditions.
We assume that the economy and real estate markets will grow at a
stable and moderate rate to 2020 and beyond. However, stable and
moderate growth patterns are historically not sustainable over extended
periods of time, the economy is cyclical, and real estate markets are
typically highly sensitive to business cycles. Further, it is very difficult to
predict when an economic and real estate upturn will end.
With the above in mind, we assume that the long term average
absorption rates and price changes will be as projected, realizing that
most of the time performance will be either above or below said
average rates.
As such, we recommend the close monitoring of the economy and the

marketplace, and updating this analysis as appropriate.
Further, the project and investment economics should be stress
tested to ensure that potential fluctuations in revenue and cost
assumptions resulting from alternative scenarios regarding the
economy and real estate market conditions will not cause failure.
In addition, we assume that the following will occur in accordance with
current expectations:
Economic, employment, and household growth.

Other forecasts of trends and demographic and economic patterns,
including consumer confidence levels.
The cost of development and construction.
Tax laws (i.e., property and income tax rates, deductibility of
mortgage interest, and so forth).
Availability and cost of capital and mortgage financing for real
estate developers, owners and buyers.
Competitive projects will be developed as planned (active and
future) and that a reasonable stream of supply offerings will satisfy
real estate demand.
Major public works projects occur and are completed as planned.
Should any of the above change, this analysis should be updated, with
the conclusions reviewed accordingly (and possibly revised).
Our analysis does not consider the potential impact of future economic
shocks on the national and/or local economy, and does not consider the
potential benefits from major "booms that may occur. Similarly, the
analysis does not reflect the residual impact on the real estate market
and the competitive environment of such a shock or boom. Also, it is
important to note that it is difficult to predict changing consumer and
market psychology.
21
General Limiting Conditions

Reasonable efforts have been made to ensure that the data contained
in this study reflect accurate and timely information and are believed to
be reliable. This study is based on estimates, assumptions, and other
information developed by RCLCO from its independent research effort,
general knowledge of the industry, and consultations with the client and
its representatives. No responsibility is assumed for inaccuracies in
reporting by the client, its agent, and representatives or in any other
data source used in preparing or presenting this study. This report is
based on information that to our knowledge was current as of the date
of this report, and RCLCO has not undertaken any update of its
research effort since such date.
Possession of this study does not carry with it the right of publication
thereof or to use the name of "Robert Charles Lesser & Co." or
"RCLCO" in any manner without first obtaining the prior written consent
of RCLCO. No abstracting, excerpting, or summarization of this study
may be made without first obtaining the prior written consent of
RCLCO. This report is not to be used in conjunction with any public or
private offering of securities or other similar purpose where it may be
relied upon to any degree by any person other than the client without
first obtaining the prior written consent of RCLCO. This study may not
be used for any purpose other than that for which it is prepared or for
which prior written consent has first been obtained from RCLCO.
Our report may contain prospective financial information, estimates, or

opinions that represent our view of reasonable expectations at a
particular time, but such information, estimates, or opinions are not
offered as predictions or assurances that a particular level of income or
profit will be achieved, that particular events will occur, or that a
particular price will be offered or accepted. Actual results achieved
during the period covered by our prospective financial analysis may
vary from those described in our report, and the variations may be
material. Therefore, no warranty or representation is made by RCLCO
that any of the projected values or results contained in this study will be
achieved.
22

Fiscal Sustainability Analysis: Nassau County

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Fiscal Sustainability Analysis

Robert Charles Lesser & Co. Real Estate Advisors | rclco.com

What did we do?

Nassau County Budget Data

Millage Rates and Levied Property Taxes

General Fund Levied Taxes

MSTU Levied Taxes

Transportation Fund Levied Taxes

General Fund Millage Rate

MSTU Millage Rate

Transportation Fund Millage Rate

SOURCE: State of Florida County Municipal Data

Actual General Fund Revenues and Millage Rates

Actual General Fund Revenue

General Fund Property Taxes

Property Tax Percentage of General Fund

Property Tax Revenues as a Percentage of Governmental Fund

Since its peak at 64% in 2009,

Nassau County Breakdown of Total Levied Property Taxes

This has corresponded with a slight

Residential property taxes make up a

Commercial and industrial property

SOURCE: State of Florida County Municipal Data

Property Tax Breakdown Between Nassau County and State of Florida

Nassau County has a

78% of all taxes are from

Nassau County also has a

SOURCE: State of Florida County Municipal Data

Property Tax Breakdown of Nassau County and Surrounding Counties

SOURCE: State of Florida County Municipal Data

Nassau County also has

Property Tax Breakdown of Nassau County and Counties Similar by

Nassau County also has

The other counties range

SOURCE: State of Florida County Municipal Data

Largest Taxpayers in Nassau County 2015

SOURCE: State of Florida County Municipal Data

Nassau County Office Development Trends

Net Absorption SF Total

Nassau County Retail Development Trends

Net Absorption SF Total

Nassau County Industrial Development Trends

Net Absorption SF Total

Fiscal Impact Analysis

What is Fiscal Impact Analysis?

Net Fiscal Impact of Land Uses in Nassau County

X Greater than Ave.

Fiscal Sustainability Analysis

Qty (ERU) Unit

Single Family House

Value/Unit 20 Year Impact

Value/Unit 20 Year Impact

Value/Unit 20 Year Impact

As such, we recommend the close monitoring of the economy and the

Economic, employment, and household growth.

General Limiting Conditions

Our report may contain prospective financial information, estimates, or

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