Analysis. Answers Jordan G. Levine Economist and Director of Economic Research Beacon Economics A Revenue Forecast The City of Hayward, California December 17, 2013 Beacon Economics, LLC pg
The Big Picture o Time-Series Econometric Approach Regression establishes historical relationships Historical correlations inform the future o Top-Down Modeling Technique Forecast U.S. economy, from employment to output U.S. forecast guides California model California model used to guide East Bay East Bay model drives sub-regional forecast o Holistic Approach to Revenue Forecasting Incorporates broad macro trends in Nation/State Combines trends with local-specific performance Accounts for previous blips and under-/over-performance pg
Bernanke was right things are improving. o Sure its been a recovery to forget The US never saw the typical post-recession bounce Economic Fundamentals have not returned to normal levels o Stop focusing on the levels. Watch the trends Economy seeing some modest acceleration despite headwinds Consumers holding steady despite tax increases Business investment soft, but earnings are solid Global economy gaining traction State and local government starting to turn the corner Interest rates still very low, Residential markets remain hot o Three Kinds of Problems Stimulative policies have to be unwound Medium term impacts of technological change Leaders focus on unimportant issues ignoring what truly matter pg3
The disappointing recovery pg4
Are common prescriptions remedies? pg5
Why the disappointing recovery? pg6
The local story o East Bay and Hayward are improving Slower out of the gate, but making progress Not isolated to one particular city or sector o East Bay was a growth region before Poised for ongoing acceleration May key strengths including: - Proximity to large employment centers - Relative affordability relative to neighbors to west o Better economy will mean better revenues for the City of Hayward in coming years pg
East Bay: slow out of the gate Region Feb-10 Oct-13 Change (000s) Change (%) San Luis Obispo 95.9 106.8 10.9 11.4 San Francisco (MD) 929.0 1,033.8 104.8 11.3 San Jose 847.1 939.6 92.5 10.9 Bakersfield 223.8 246.7 22.9 10.2 Orange County (MD) 1,345.3 1,441.0 95.7 7.1 Other Bay Area 343.4 366.2 22.8 6.6 San Diego 1,212.3 1,291.9 79.6 6.6 Central Coast 368.1 391.3 23.2 6.3 Other Southern California 315.5 332.6 17.1 5.4 Inland Empire 1,121.0 1,176.5 55.5 5.0 Los Angeles (MD) 3,755.3 3,941.1 185.8 4.9 Oakland (MD) 951.2 993.1 41.9 4.4 South Central Valley 654.6 673.4 18.8 2.9 North Central Valley 1,164.8 1,197.4 32.6 2.8 California 13,845.3 14,713.6 868.3 6.3 pg8
But things are improving pg9
Even better than they appear pg10
Residents matter for revenues Indicator Nonfarm Empl t Household Empl t Peak Month Mar-07 Jan-08 Peak Employment (000s) 1,051.0 1,211.4 Trough Month Aug-10 Dec-09 Trough Employment (000s) 937.9 1,138.0 Peak to Trough (000s) -113.1-73.4 Peak to Trough (%) -10.8-6.1 Current Month Oct-13 Oct-13 Current Employment (000s) 993.1 1,208.8 Trough to Current (000s) 55.2 70.9 Trough to Current (%) 5.9 6.2 Remaining to Peak (000s) -57.9-2.5 Remaining to Peak (%) -5.5-0.2 pg11
Unemployment: Down for Right Reasons pg12
Broad-based recovery Industry Aug-10 Oct-13 Change Change (%) Leisure/Hospitality 86.4 96.5 10.2 11.8 Construction 47.5 53.9 6.4 13.5 Prof Sci and Tech 80.7 86.8 6.1 7.6 Education/Health 136.4 142.5 6.1 4.4 Retail Trade 100.4 104.8 4.4 4.4 Admin Support 47.3 51.0 3.8 8.0 Transport,Warehouse,Util. 30.9 34.7 3.8 12.2 Wholesale Trade 41.6 44.7 3.1 7.5 Management 25.1 27.9 2.9 11.4 Manufacturing 79.2 81.2 2.1 2.6 Other Services 35.1 35.6 0.4 1.3 Farm 1.4 1.5 0.1 5.8 NR/Mining 1.3 1.1-0.1-11.6 Financial Activities 48.2 47.7-0.4-0.9 Information 23.3 21.4-1.9-8.0 Government 154.6 163.1 8.5 5.5 Total Private 783.3 830.0 46.7 6.0 Total Nonfarm 937.9 993.1 55.2 5.9 pg13
Jobs created across wage spectrum Industry Aug-10 Oct-13 Change (000s) Change (%) 2012 Ann. Avg. Wage Leisure/Hospitality 86.4 96.5 10.2 11.8 23,093 Government 154.6 163.1 8.5 5.5 65,037 Construction 47.5 53.9 6.4 13.5 68,244 Prof Sci and Tech 80.7 86.8 6.1 7.6 97,349 Education/Health 136.4 142.5 6.1 4.4 62,863 Retail Trade 100.4 104.8 4.4 4.4 34,195 Admin Support 47.3 51.0 3.8 8.0 41,225 Transport,Warehouse,Util. 30.9 34.7 3.8 12.2 57,766 Wholesale Trade 41.6 44.7 3.1 7.5 73,365 Management 25.1 27.9 2.9 11.4 121,314 Manufacturing 79.2 81.2 2.1 2.6 86,462 Other Services 35.1 35.6 0.4 1.3 27,651 Farm 1.4 1.5 0.1 5.8 31,698 Real Estate 15.3 15.3 0.0 0.0 56,163 NR/Mining 1.3 1.1-0.1-11.6 111,210 Finance and Insurance 32.9 32.5-0.4-1.3 84,143 Information 23.3 21.4-1.9-8.0 108,708 Total Private 783.3 830.0 46.7 6.0 62,069 Total Nonfarm 937.9 993.1 55.2 5.9 62,500 pg14
Firms to continue expanding pg15
Not just the labor markets 2013 Central Coast Economic Forecast pg16
Spending continues to improve City 2012 YTD 2013 YTD Change (%) Martinez 326,732 392,635 20.2 San Ramon 560,442 672,606 20.0 Livermore 1,389,023 1,655,074 19.2 Union City 555,174 595,696 7.3 Newark 596,807 632,453 6.0 San Pablo 123,070 130,220 5.8 Alameda 466,133 491,868 5.5 Pleasanton 1,282,539 1,352,007 5.4 Fremont 2,244,488 2,338,520 4.2 Emeryville 500,095 516,227 3.2 Oakland 2,989,285 3,066,560 2.6 Dublin 1,061,588 1,079,965 1.7 Hayward 1,935,028 1,962,267 1.4 Berkeley 1,050,783 1,052,056 0.1 Hercules 101,191 100,438-0.7 Danville 331,963 327,277-1.4 Orinda 62,423 61,525-1.4 Antioch 701,922 683,409-2.6 East Bay Total 28,679,960 29,981,437 4.5 pg17
Not isolated to one type of spending Category 2012 YTD 2013 YTD Change (%) Autos/Transportation 26,753,603 29,705,003 11.0 Building/Construction 13,840,160 15,624,027 12.9 Business/Industry 33,100,177 31,989,701-3.4 Food/Drugs 10,940,838 11,327,213 3.5 Fuel/Service Stations 21,352,051 21,077,218-1.3 General Consumer Goods 38,870,482 41,545,195 6.9 Restaurants/Hotels 18,725,322 20,231,249 8.0 Total 186,903,567 197,452,752 5.6 pg18
Hayward taxable sales pg19
Outsiders having an impact pg20
Drawing in visitors Airport Sep-13 YTD Change YTD (%) Orange County - SNA 7,106,824 8.2 Los Angeles - LAX 49,841,945 4.2 San Jose - SJC 6,400,068 3.9 San Diego - SAN 13,233,395 2.0 San Francisco - SFO 33,441,630 0.4 Sacramento - SMF 6,511,132-1.1 Oakland - OAK 7,315,994-3.1 Burbank - Bob Hope 2,886,945-5.5 Long Beach - LGB 2,216,633-8.8 Ontario - ONT 2,920,793-9.1 California Totals 131,654,056 2.1 pg21
U.S. competitive again good for CA pg22
TOT forecast to improve pg23
Real estate a driver of growth pg24
Local residential market City 2012 2013 Change (%) Sales Alameda 302 326 7.8 Concord 1,011 1,035 2.4 Oakland 2,412 2,435 0.9 Fremont 1,368 1,299-5.0 Hayward 1,072 1,009-5.8 Berkeley 509 456-10.4 Brentwood 811 725-10.6 Antioch 1,319 1,158-12.2 Richmond 682 589-13.7 Oakland MD 19,826 19,262-2.8 Median Prices Oakland 287,404 449,423 56.4 Richmond 147,940 225,506 52.4 Hayward 287,336 401,626 39.8 Concord 303,248 415,341 37.0 Antioch 207,405 271,704 31.0 Brentwood 316,579 400,123 26.4 Alameda 568,791 694,878 22.2 Fremont 564,221 672,694 19.2 Berkeley 659,777 768,450 16.5 Oakland MD 358,842 483,948 34.9 pg25
Fewer distressed units in the mix City 2012 2013 Change (%) Defaults Brentwood 463 158-65.8 Richmond 477 174-63.5 Concord 666 250-62.4 Hayward 775 292-62.2 Fremont 558 236-57.7 Berkeley 120 54-55.4 Oakland 1,383 623-54.9 Alameda 138 64-53.8 Antioch 880 439-50.1 Oakland MD 11,375 4,398-61.3 Foreclosures Alameda 75 17-77.0 Berkeley 65 19-70.7 Fremont 237 70-70.4 Hayward 369 121-67.2 Concord 402 133-67.0 Brentwood 220 74-66.5 Antioch 518 184-64.5 Richmond 277 119-57.2 Oakland 747 328-56.1 Oakland MD 5,527 2,020-63.5 pg26
Demand drivers still solid pg27
Forecasting return to normal pg28
Apartment market is hot pg29
Builders getting back to business City 2012 YTD 2013 YTD Change Multi-Family Units WALNUT CREEK 15 125 733.3 FREMONT 45 202 348.9 EMERYVILLE 256 712 178.1 NEWARK 2 5 150.0 LAFAYETTE 46 108 134.8 HAYWARD 37 86 132.4 OAKLAND 221 445 101.4 EAST BAY 2013 1944-3.4 Single-Family Units ORINDA 4 43 975.0 BERKELEY 4 15 275.0 ALBANY 1 2 100.0 PITTSBURG 112 197 75.9 BRENTWOOD 194 327 68.6 WALNUT CREEK 17 24 41.2 PLEASANT HILL 3 4 33.3 OAKLEY 123 159 29.3 FREMONT 110 141 28.2 LIVERMORE 74 92 24.3 DUBLIN 491 583 18.7 LAFAYETTE 12 14 16.7 HAYWARD 135 155 14.8 EAST BAY 1913 2295 20.0 pg30
Commercial: slower out of the gate pg31
Markets are improving Location Offices (Q3-13) Office Change (YoY, %) Retail (Q3-13) Retail Change (YoY, %) Location Offices (Q3-13) Office Change (YoY, %) Retail (Q3-13) Retail Change (YoY, %) Cost of Rent Vacancy Rate Bakersfield 19.54 0.98 20.90-0.95 Inland Empire 21.28-0.23 20.63 0.29 Los Angeles 32.76 1.64 29.50 1.27 East Bay 26.26 1.27 28.14 0.75 Orange Co. 27.45 2.20 31.14 1.43 Sacramento 23.71 0.08 21.98 0.78 San Diego 28.59 1.20 28.78 1.41 San Fran. 43.69 7.72 33.14 0.85 San Jose 31.68 5.28 31.36 1.75 Bakersfield 11.50-0.50 9.70-1.10 Inland Empire 24.00-0.50 10.00-0.20 Los Angeles 15.80 0.00 6.00-0.10 East Bay 17.90-0.60 6.30 0.10 Orange Co. 17.30-1.70 5.60-0.20 Sacramento 21.30 0.40 12.50 0.10 San Diego 16.30-0.50 6.20-0.20 San Fran. 13.30-0.10 3.90 0.00 San Jose 18.60-1.00 5.80-0.10 pg32
Building resuming slowly City 2013 YTD Change (%) Antioch 11,239,754 913.8 Pleasant Hill 17,492,651 833.2 Dublin 32,278,554 689.2 Union City 29,036,493 395.1 San Pablo 3,287,620 287.0 El Cerrito 3,121,041 209.4 Oakley 3,300,851 187.0 Hercules 889,877 175.5 Hayward 46,604,326 143.1 Fremont 187,260,767 142.3 Emeryville 39,230,368 114.7 Alameda 14,021,776 111.2 San Ramon 84,595,566 99.7 Richmond 53,170,313 97.0 San Leandro 29,286,602 66.6 Walnut Creek 25,730,506 50.4 Danville 4,359,842 49.7 Martinez 6,888,761 39.1 Brentwood 3,745,599 38.4 Berkeley 33,163,398 17.6 Oakland 38,172,898 2.4 East Bay Total 879,493 62.5 pg33
Property taxes pg34
The Forecasts pg35
3-year economic forecast Indicator 2013 2014 2015 2016 Total Population 2,635,218 2,659,270 2,685,351 2712818.75 Pop. Growth (%) 0.84 0.91 0.98 1.02 Unemployment Rate 7.3 6.6 5.9 5.2 Total Nonfarm Employment 991.0 1,008.4 1,037.4 1,066.6 Employment Growth (%) 1.2 1.8 2.9 2.8 Median Home Price 463,363 535,265 566,807 587,713 Home Price Growth (%) 33.0 15.5 5.9 3.7 Home Sales 26,128 28,801 29,959 30,208 Home Sales Growth (%) -1.4 10.2 4.0 0.8 Nonresidential Permit Values ($ Millions) 864.1 951.9 1,003.2 1,085.7 Nonres. Permit Growth (%) 4.9 10.2 5.4 8.2 Single-Family Building Permits (000s) 2.6 3.5 4.7 5.4 Multi-Family Building Permits (000s) 2.5 3.0 4.3 5.1 Taxable Sales ($ Millions) 41,245 43,468 45,972 48,543 pg36
5-year revenue forecast Revenue Stream FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 Net Assessed Valuation 14,875,241 15,785,266 16,785,046 17,728,092 18,585,002 19,399,275 Growth (%) 2.61 6.12 6.33 5.62 4.83 4.38 Property Tax Revenues 39,181,750 41,578,777 44,212,222 46,696,229 48,953,351 51,098,166 Growth (%) 9.71 6.12 6.33 5.62 4.83 4.38 Sales Tax Revenues 28,534,228 29,388,050 29,848,421 31,605,309 33,209,792 34,495,909 Growth (%) 8.30 2.99 1.57 5.89 5.08 3.87 Transient Occupancy Tax 1,678,589 1,791,037 1,859,695 1,945,020 2,028,086 2,120,167 Growth (%) 14.50 6.70 3.83 4.59 4.27 4.54 Property Transfer Tax 4,595,640 5,081,208 6,373,808 7,319,699 7,796,151 8,185,106 Growth (%) -3.82 10.57 25.44 14.84 6.51 4.99 Business License Tax 2,493,454 2,636,751 2,715,302 2,882,210 3,006,825 3,158,511 Growth (%) 0.40 5.75 2.98 6.15 4.32 5.04 pg37
Wrap-up o Local economy has been slower out of the gate o But East Bay and Hayward are in a recovery: Employment is growing Consumers are spending Housing and apartments are hot New construction is bouncing back Many local strengths to leverage going forward o Forecasting continued growth in 2014 and beyond pg38
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