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D. One -Time Construction Impacts As shown on Table 7, it is estimated that Phase 1 of the Medical Center will generate a cumulative total of $1.2 million in construction taxes to the City. There is, however, a significant degree of uncertainty about the City's ability to actually realize $1.2 million of tax revenue as it is contingent upon the City being designated as the "point of sale" for the purchase of at least 50% of the materials purchased to construct the Medical Center. If most materials are purchased from outlets outside of San Leandro or if San Leandro is not designated as the "point of sale," then the amount of sales/use tax generated by the construction of the Medical Center could be significantly less than the estimated amount of $1.2 million. E. Net Impacts Assuming Northern Parcel is Developed with Retail Center The analysis of the combined annual fiscal impacts of the proposed Medical Center and hypothetical retail development on the northern 25 acres is presented in Appendix Tables C-1 through C-4. As shown on Table C-2, it is estimated that the retail center would generate a significant net surplus to the General Fund of approximately $894,000 per year. These net new revenues from the retail development would off -set the $429,000 annual deficit projected for the Medical Center, yielding a projected net combined annual surplus of $465,000 to the City's General Fund. This assessment assumes that one of the retail anchors would relocate from another location in San Leandro and therefore would not generate new tax revenue to the City. F. Revenue Impacts of "Opportunity Cost" Sensitivity Scenarios In order to provide additional context for the evaluation of the annual revenue impacts to be generated by the proposed Medical Center, KMA estimated the revenue impacts of a range of hypothetical "opportunity cost" scenarios. As summarized below, if the Medical Center were subject to the payment of property taxes or if Kaiser made a payment in -lieu of property taxes, it is estimated that the Center would generate approximately $1.1 million of General Fund revenue beyond what is projected for the proposed Medical Center under its tax exempt status. With this additional revenue, the Medical Center would generate sufficient General Fund revenues to cover General Fund Service costs, providing an estimated annual surplus to the General Fund of $667,000. If a retail center were to be developed on the site instead of the Medical Center, it is estimated that the retail center would generate approximately $1 million of additional General Fund revenue beyond what is projected for the proposed Medical Center 3. The cost of providing city services to a retail center has not been evaluated, but based on the experiences of other retail centers, it is estimated that a retail center would generate a surplus to the City's General Fund. 3 As with the evaluation of a retail center on the northern property, it has been assumed that one anchor would be a relocated store from elsewhere in San Leandro and not generate any new sales tax revenues to the City. Keyser Marston Associates, Inc. Page 12 \\Sf-fs1\wp\19\19096\19096.036\003-001.doc; March 2009