Economic and Fiscal Impacts Generated by Apple in Cupertino
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Economic and Fiscal Impacts Generated by Apple in Cupertino – Current Facilities and Apple Campus 2 Prepared for: Apple Inc. May 2013 TABLE OF CONTENTS Page I. Introduction 1 A. Apple’s Current Facilities in Cupertino and the Apple Campus 2 Building Program 1 B. Growth Scenario Evaluated in the Fiscal and Economic Report 3 II. Executive Summary 4 A. Full-Time Jobs 4 B. Employee Income 5 C. Apple’s Support of Other Local Businesses 5 D. Recurring Annual Fiscal Impacts on the City of Cupertino 6 E. Recurring Annual Property Tax Revenues to Local Public Agencies ..................... 6 F. Recurring Annual Sales Tax Revenues to the Santa Clara Valley Transportation Authority (VTA) ................................................................................................................7 G. Construction Jobs 7 H. Construction-Related “One Time” Revenues to the City of Cupertino 7 I. Construction-Related “One-Time” Revenues to the VTA 8 J. Apple Investment in Public Improvements & Community Benefits 8 III. Findings and Conclusions 10 A. Recurring Annual Economic Impacts 10 B. Recurring Annual Fiscal Impacts on the City of Cupertino 13 C. Construction Period Impacts 17 D. Local Property Tax Revenues to Service Districts 19 E. Sales Tax Revenues to the Santa Clara Valley Transportation Authority (VTA) 19 F. Economic Impacts on the Cities of Santa Clara and Sunnyvale 20 IV. Methodology and Assumptions 23 V. Indirect and Induced Impacts and the IMPLAN Model 30 A. IMPLAN Model Description 30 B. Application of the IMPLAN Model to Estimate Job and Employee Compensation Impacts 31 VI. Limiting Conditions 32 Supporting Tables Table 1: Summary Base and Projected Cupertino-based Apple Employment Table 2: Summary Base and Projected Cupertino-based Apple Employee Salaries Table 3: Place of Residence of Cupertino- based Apple Employees Table 4: Base and Projected Cupertino-based Apple Employment Table 5: Base and Projected Cupertino-based Apple Employee Salaries Table 6: Economic Impacts – Cupertino Table 7: Economic Impacts – Sunnyvale Table 8: Economic Impacts – Santa Clara Table 9: Economic Impacts – Cupertino, Sunnyvale, and Santa Clara Table 10: Economic Impacts – Santa Clara County Table 11: Summary Estimated Annual Fiscal Impact on the City of Cupertino Generated by Apple Table 12: Base and Projected Cupertino-based Apple Employee Resident Equivalents Table 13: City of Cupertino Demographic Data Table 14: City of Cupertino Revenue Source Assumptions 2010/11, 2012/13 Table 14a: Annual City of Cupertino Revenues Generated by Apple Table 14b: Assessed Property Values and Property Tax Revenues - Cupertino Properties Owned or Leased by Apple Table 14c: Annual Sales and Use Tax Revenue to City of Cupertino Generated by Apple Table 14d: Annual Sales Taxes to City of Cupertino Generated by the Purchases of Apple Employee Residents Table 15: City of Cupertino Service Expenditure Assumptions 2010/11, 2012/13 Table 15a: Annual City of Cupertino Service Expenditures Generated by Apple Table 16: Estimated Apple Campus 2 Construction-Related Government Fee Payments Table 17: Summary Annual Sales and Use Tax Revenue to the Santa Clara Valley Transportation Authority Generated by Apple Sales in Cupertino Table 18: Annual Sales and Use Tax Revenue to the Santa Clara Valley Transportation Authority Generated by Apple Sales in Cupertino Appendix Tables A-1: Summary of City of Cupertino General Fund Revenue Sources FY 2011/12, FY 2012/13 A-2: Summary of City of Cupertino General Fund Budget Expenditures FY 2011/12, FY 2012/13 A-3: Cupertino Real Estate Owned or Leased by Apple in 2010, 2012 A-4a: Taxable Retail Sales Import and Export 2010 A-4b: Taxable Retail Sales Import and Export 2012 A-5: Taxable Retail Sales Generated by 2010 Cupertino Facilities Employees A-6: Taxable Retail Sales Generated by 2012 Cupertino Facilities Employees A-7: Taxable Retail Sales Generated by Future Cupertino Facilities with Apple Campus 2 Employees A-8: Annual Sales Tax Revenues Generated by Cupertino-based Apple Employees; Cities of Cupertino, Sunnyvale, and Santa Clara I. INTRODUCTION The following report has been prepared by Keyser Marston Associates, Inc. (KMA) for the City of Cupertino under contract with Apple Inc. The report addresses the economic and fiscal impacts generated by Apple’s presence in Cupertino, both currently and upon the completion of Apple Campus 2. The principal objectives of the analysis are to evaluate the following: . The on-going economic impact and benefits of Apple to the City of Cupertino; . The ongoing economic impacts and benefits to the City of Santa Clara, City of Sunnyvale, and the broader region of Santa Clara County; . Apple’s recurring annual fiscal impacts on the City of Cupertino; . The construction-related impacts of Apple Campus 2 on Santa Clara County; and . The construction-related tax and fee revenues to be received by the City of Cupertino and other local public agencies from the construction of Apple Campus 2. A. Apple’s Current Facilities in Cupertino and the Apple Campus 2 Building Program Apple Inc.’s worldwide corporate headquarters facility, which is known as the Infinite Loop Campus, is located at 1 Infinite Loop in the City of Cupertino. The 856,000 square foot campus houses approximately 3,000 employees. In order to accommodate its 13,000 additional employees based in Cupertino, Apple has had to purchase or lease more than 2 million square feet of additional space in Cupertino and in nearby cities. Apple has been assembling properties for the purpose of building a second campus over several years, including the 100-acre property that formerly served as the headquarters of Hewlett Packard. The aggregate development site for Apple Campus 2 approximates 176 acres and is shown on the following map. Keyser Marston Associates, Inc. Page 1 \\Sf-fs2\wp\16\16043\001\001-007.docx Apple Cupertino Campus E. Homestead Avenue E. Homestead Avenue PROPOSED APPLE CAMPUS 2 SITE N. Wolfe Road N. Wolfe N. De Anza Boulevard N. Tantau Avenue N. Tantau Interstate 280 N. Wolfe Road N. Wolfe Stevens Creek Boulevard Stevens Creek Boulevard EXISTING APPLE INFINITE LOOP CAMPUS PROPOSED APPLE CAMPUS 2 Apple presented its most recently updated plans for Apple Campus 2 in April 2013. The campus’ centerpiece will be an iconic circular office building that will accommodate up to 12,000 employees. The building will be four-stories in height and total 2.8 million square feet. Additional Apple Campus 2 Phase 1 facilities include an auditorium, fitness center, parking structures, buildings to house research and development and a central plant. The capacity of Phase 1 will be 13,000 employees. A breakdown of the planned improvements for Phase 1, excluding the parking structures, is as follows: Phase 1 Apple Campus 2 Building Area Main Building 2,820,000 sf Auditorium 120,000 sf Fitness Center 100,000 sf Research Facilities 300,000 sf Central Plant 80,000 sf Total GBA 3,420,000 sf There is a Phase 2 building program, which would add about 300,000 square feet and accommodate up to 1,200 employees, bringing the total capacity of Apple Campus 2 to 14,200 employees. Since the timing of that Phase is uncertain, it has not been included in this analysis. In order to build Apple Campus 2, the existing 2.65 million square feet of office buildings and related improvements on the property will be demolished. The footprint of the new building program will be significantly smaller, permitting extensive on-site open space. B. Growth Scenario Evaluated in the Fiscal and Economic Report Apple has experienced extraordinary success and growth by any standard. The company’s net sales increased more than six-fold between 2006 and 2012, from $24.6 billion to $156.6 billion, with an average annual growth rate in excess of 36%. Apple is among the largest publicly traded companies in the world by market capitalization and is one of the largest technology companies in the world by revenue and profit. The number of Apple employees based in Cupertino has increased at an average annual rate of 18% over the past five years. For purposes of this analysis, however, a more conservative growth rate of 10% is being used. With a 10% annual growth rate, 7,400 employees will be hired between June 2013 and the completion of Apple Campus 2 in 2016, resulting in a projected total employee count of 23,400. Keyser Marston Associates, Inc. Page 3 \\Sf-fs2\wp\16\16043\001\001-007.docx II. EXECUTIVE SUMMARY With net annual sales in excess of $156 billion, 16,000 employees currently based in the Cupertino area, and annual purchases from local Silicon Valley-based businesses of $4.6 billion, Apple is a cornerstone of the Silicon Valley economy and of the fiscal resources of the City of Cupertino. The completion of Apple Campus 2 is vital to the region for a number of reasons. It will: 1) enable Apple to continue to remain in Cupertino; 2) enable Apple to add an estimated 7,400 new high-quality jobs; 3) increase revenues of local businesses and support additional job growth throughout the region; and 4) enhance tax revenues to the City of Cupertino and other cities and public agencies. A. Full-Time Jobs Apple is the second largest technology employer in Silicon Valley, with approximately 16,000 full-time employees based in the Cupertino area. Approximately 12,100 additional jobs in Santa Clara County are generated indirectly through expenditures by Apple and Apple employees. By the time Apple Campus 2 is available for occupancy in 2016, it is expected that 7,400 new Apple employees will be based in the Cupertino area. The total number of Santa Clara County- wide jobs supported by Apple is expected to be about 41,100. Employment Impacts on Direct Total Santa Clara County Employment Employment 2012 Cupertino Area Facilities 16,000 28,100 Net New with Apple Campus 2 7,400 13,000 Total with Apple Campus 2 23,400 41,100 Apple’s 16,000 employees make it Cupertino’s largest single employer, accounting for approximately 40% of the City’s job base.