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Hamilton Street

Parking and Zoning Analysis


Prepared for: Hamilton Street Advisory Board

ECONOMIC AND REAL ESTATE ANALYSIS FOR SUSTAINABLE LAND USE OUTCOMES™
[Project Name]
Hamilton Street Parking and Zoning Analysis: Economic and Fiscal Impact Analysis April 25, 2019

Table of Contents

EXECUTIVE SUMMARY 3

ECONOMIC IMPACT ANALYSIS 5


Key Findings 6
Methodology 7

FISCAL IMPACT ANALYSIS 11


Key Findings 12
Methodology 13

APPENDIX 21

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EXECUTIVE SUMMARY

ECONOMIC AND REAL ESTATE ANALYSIS FOR SUSTAINABLE LAND USE OUTCOMES ™
[Project Name]
Hamilton Street Parking and Zoning Analysis: Economic and Fiscal Impact Analysis April 25, 2019

Executive Summary
Franklin Township is currently analyzing a potentially large multi-family residential development to be located
along Hamilton Street in the area of Highland Avenue. The proposed 172-unit building is to contain a total of 362
bedrooms and be targeted at Rutgers University students.

To identify the potential economic impact of the proposed multi-family residential development in Franklin
Township, 4ward Planning estimated the potential economic impacts (employment, labor income, value added,
and output) of new student spending likely captured within the two-ZIP-Code Franklin Township study area.
According to the Rutgers Office of Financial Aid, the average off-campus student spends approximately $8,220
per year on books, travel, and other miscellaneous expenses (e.g., food, clothing, entertainment, etc.). Assuming
just 45 percent of selected student purchases are spent locally within the study area (as a percentage will be
purchased beyond the Township or online), it is estimated that the 362 new students would bring approximately
$1.3 million in direct new local annual spending. During the first year of project stabilization (2021), estimated
new student spending will support 11 full- and part-time jobs (largely food-service employment), and contribute
approximately $460,670 in labor income; $675,260 in value added; and $578,350 in total economic output
within the study area. Over the first 10 years of project stabilization (2021 to 2031), new student spending will
support $5.0 million in labor income, $7.2 million in value added, and $6.2 million in total economic output.
Thus, new student spending as a result of the proposed multi-family residential development would contribute
positively to the local economy.

Next, 4ward Planning conducted a fiscal impact analysis to identify the difference (a net positive $20,276)
between estimated local service costs ($171,428) during the first stabilized year) and prospective real property
tax revenues ($191,703). A net $632,361 increase in local school district revenues was also identified.

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ECONOMIC IMPACT ANALYSIS

ECONOMIC AND REAL ESTATE ANALYSIS FOR SUSTAINABLE LAND USE OUTCOMES ™
[Project Name]
Hamilton Street Parking and Zoning Analysis: Economic and Fiscal Impact Analysis April 25, 2019

Key Findings: Economic Impact Analysis

$8,220 per year on books, travel, and miscellaneous


According to the Rutgers Office of Financial Aid, the average off-campus student spends approximately $8,220
per year on books, travel, and other miscellaneous expenses (e.g., food, clothing, entertainment, etc.).

$1.3 million in direct new local annual spending


Assuming just 45 percent of selected student purchases are spent locally within the two-ZIP-Code Franklin
Township study area (as a percentage will be purchased beyond the Township or online), it is estimated that the
362 new students would bring approximately $1.3 million in direct new local annual spending.

11 new full- and part-time jobs


During the first year of project stabilization (2021), estimated student spending will support 11 full- and part-
time jobs (largely food-service employment) in the two-ZIP-Code Franklin Township study area.

$6.2 million in total economic output


During the first year of project stabilization (2021), student spending from the proposed project will contribute
approximately $578,350 in total economic output (direct, indirect, and induced). Over the first 10 years of
project stabilization (2021 to 2031), student spending will support $6.2 million in total economic output.

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[Project Name]
Hamilton Street Parking and Zoning Analysis: Economic and Fiscal Impact Analysis April 25, 2019

Methodology: General Input-Output Impact Modeling


4ward Planning utilized IMPLAN Professional 3.0, - a widely applied economic impact assessment software
system. IMPLAN is designed to simplify and expedite the input-output accounting process (e.g., commodity flows
from producers to intermediaries to final consumers, and all related multipliers associated with output and
employment for a given geography).

To adequately evaluate the prospective economic impacts of the proposed student housing project, 4ward
Planning purchased the most recent economic and demographic data file (2017) for Somerset County, New
Jersey. To identify the impacts specifically within Franklin Township, the analysis isolates project impacts within
the Township’s two postal ZIP Codes (08873 and 08823) closest to the project site (illustrated in more detail the
map on the following page). These data files, once combined with the IMPLAN Professional 3.0 software system,
permit the creation of a detailed Social Accounting Matrix (SAM) and location-specific multipliers for the area –
effectively recreating the local economy, as it might exist, today.

The proposed 172-unit building is to contain a total of 362 bedrooms and be targeted at Rutgers University
students. It is assumed that each bedroom would accommodate one new student, bringing 362 new students to
Franklin Township, with an annual spending average of $8,223 each (see Student Spending Profile slide for
further spending breakdown). Direct, indirect, and induced economic impacts associated with student spending
after student housing project stabilization (assumed to begin in 2021) were analyzed. All dollar figures, unless
otherwise stated, are presented in 2019 dollars.

*Although ZIP Code 08525 is located in Franklin Township, it is located far from the project site and was excluded from the analysis. ZIP Code 08540 was also excluded
from the analysis because the majority of the ZIP Code area is located beyond Franklin Township, in Mercer County, and far from the project site.

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[Project Name]
Hamilton Street Parking and Zoning Analysis: Economic and Fiscal Impact Analysis April 25, 2019

Methodology:
Franklin Township
Study Area by Project Site

ZIP Code

08873

08823

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[Project Name]
Hamilton Street Parking and Zoning Analysis: Economic and Fiscal Impact Analysis April 25, 2019

Economic Impact Analysis: Student Spending Profile


2017-2018 Rutgers Student Expenses: Off-Campus Students
According to the Rutgers Office of Under- Business
Graduate Professional Law School Average
Financial Aid (presented in the table to graduate School
the right), in addition to housing and Books $1,350 $1,350 $1,350 $1,350 $1,350 $1,350
Travel $3,111 $3,591 $3,111 $3,111 $3,111 $3,207
school tuition/fees, the average off-
Miscellaneous $3,136 $5,785 $3,137 $3,136 $3,137 $3,666
campus student spends approximately Total $7,597 $10,726 $7,598 $7,597 $7,598 $8,223
$8,220 per year on books, travel, and
other miscellaneous expenses (e.g.,
Spending Estimates for IMPLAN
food, clothing, entertainment, etc.). Average Annual Percentage Spent Average Annual Total Annual
Category Spending in Township Local Spending Local Spending
Assuming that an approximately 45 Books $1,350 60% $810 $293,220
Travel $3,207 10% $321 $116,093
percent share of this spending is spent
Miscellaneous $3,666 71% $2,610 $944,947
locally within the two-ZIP-Code Franklin Grocery Stores $990 95% $941 $340,461
Township study area (as a percentage is Dining Out $587 60% $352 $127,496
purchased beyond the Township or Convenience Stores $367 95% $349 $126,211
online), it is estimated that the 362 new Apparel $587 50% $294 $106,247
Entertainment $402 70% $281 $101,867
students would bring approximately
Technology $403 20% $81 $29,177
$1.3 million in direct new annual
Personal Care $330 95% $314 $113,487
spending. Total $8,223 45% $3,741 $1,354,260

Note: Student expenses exclude room and board, loan fees, or school tuition and fees.
Source: Rutgers Office of Financial Aid, 2017-2018; 4ward Planning Inc., 2019

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[Project Name]
Hamilton Street Parking and Zoning Analysis: Economic and Fiscal Impact Analysis April 25, 2019

Economic Impact Analysis: Student Spending Impacts


Based on student spending estimates presented on the previous page, during the first year of project
stabilization (2021), an estimated 11 full- and part-time jobs (largely food-service employment) will be
supported in the two-ZIP-Code Franklin Township study area - contributing approximately $460,670 in labor
income, $675,260 in value added, and $578,350 in total economic output. Over the first 10 years of project
stabilization (2021 to 2031), new student spending will support $5.0 million in labor income, $7.2 million in
value added, and $6.2 million in total economic output. As presented in the table below, the economic impact
analysis finds that new student spending as a result of the proposed multi-family residential development would
contribute positively to the local economy, as well as spillover into Somerset County.

Impacts from New Student Spending


Detailed Economic Impacts (2021) Detailed Economic Impacts (2021-2031)
Description Direct Indirect Induced Total Direct Indirect Induced Total
Franklin Township (Study Area)
Employment (Annual) 9.6 0.3 0.9 10.8 9.6 0.3 0.9 10.8
Labor Income $383,163 $25,335 $52,171 $460,669 $4,135,412 $270,564 $562,710 $4,968,686
Value Added $529,865 $47,125 $98,269 $675,259 $5,707,908 $503,437 $1,059,910 $7,271,255
Output $360,944 $68,293 $149,110 $578,347 $3,853,898 $729,410 $1,608,273 $6,191,581
Somerset County
Employment (Annual) 14.9 0.6 2.2 17.7 14.9 0.6 2.2 17.7
Labor Income $614,716 $51,361 $130,687 $796,764 $6,637,111 $550,424 $1,410,194 $8,597,729
Value Added $819,929 $98,067 $232,653 $1,150,649 $8,841,002 $1,051,038 $2,510,478 $12,402,518
Output $529,741 $138,293 $359,564 $1,027,598 $5,673,777 $1,482,181 $3,879,921 $11,035,879
Difference
Employment (Annual) 5.3 0.3 1.3 6.9 5.3 0.3 1.3 6.9
Labor Income $231,553 $26,026 $78,516 $336,095 $2,501,699 $279,860 $847,484 $3,629,043
Value Added $290,064 $50,942 $134,384 $475,390 $3,133,094 $547,601 $1,450,568 $5,131,263
Output $168,797 $70,000 $210,454 $449,251 $1,819,879 $752,771 $2,271,648 $4,844,298
Source: IMPLAN, 4ward Planning, 2019

4WARD PLANNING INC


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FISCAL IMPACT ANALYSIS

ECONOMIC AND REAL ESTATE ANALYSIS FOR SUSTAINABLE LAND USE OUTCOMES ™
[Project Name]
Hamilton Street Parking and Zoning Analysis: Economic and Fiscal Impact Analysis April 25, 2019

Key Findings: Fiscal Impact Analysis

$20,276 net increase in municipal revenues in first stabilized year


Using the per capita fiscal impact analysis method, it is projected that the Franklin Township will see an
additional $171,428 of municipal service spending in the first stabilized year and $191,703 in new tax
revenues in the first stabilized year.

$632,361 net increase in school district revenues


Given that the project is not expected to generate any public school age children, no related public school
service costs are projected to be generated. Consequently, the project is projected to generate $632,361 in
school tax revenues with no offsetting student costs.

No additional fire or sanitation services are anticipated


Given that the prospective building will be no higher than five stories and there currently exist buildings in the
township exceeding that height, it is unlikely that the township’s fire department would need to purchase new
equipment or hire additional personnel to service the building. Further, as sanitation services will be provided
by a private cartage company, no service cost burden will be placed on municipal sanitation services.

4WARD PLANNING INC


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[Project Name]
Hamilton Street Parking and Zoning Analysis: Economic and Fiscal Impact Analysis April 25, 2019

Methodology: Fiscal Impact Analysis


4ward Planning performed a fiscal impact analysis on behalf of Franklin Township associated with the
prospective 172 unit, 362 bedroom student targeted multi-family building , comparing projected revenues
and service delivery costs associated with the project.

The steps are as follows:

• As provided by project sponsor, the development will have 172


total residential units, which will house an estimated 362
occupants (one person per bedroom). It is assumed that 100
percent of these residents will be new to Franklin Township.

• It is assumed that there will be no new employment associated


with the development, other than service contractors.

• This analysis uses the per capita fiscal impact method, in which
additional costs per new resident are calculated to determine the
predicted total amount of new spending that will be required
from the Township.

• Township revenues attributable to the development are


composed of real property tax payments, based on the building’s
capitalized value at stabilization (24 months after opening).

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[Project Name]
Hamilton Street Parking and Zoning Analysis: Economic and Fiscal Impact Analysis April 25, 2019

Projected Township of Franklin Municipal Costs


4ward Planning analyzed inputs to calculate the various service and capital costs associated with the
proposed new development.

• According to the Census Bureau’s American Community Survey 2017 one-year data profile, the estimated
2017 population of Franklin Township is 66,746. For simplicity, we have assumed this population value
holds through 2019.

• 2018 is the latest calendar year (CY) budget available to analyze for this analysis. While the CY 2018 total
municipal budget is $60,855,068, not all of this value is used for purposes of deriving a per capita
service cost. Specifically, and by looking at projected revenues, we exclude budget funds which are,
typically, not likely to be influenced by net new population within the municipality. Generally, this will
exclude the following categories of budget revenues: Surplus Anticipated, Miscellaneous Revenues, and
Receipts from Delinquent Taxes. Two of these categories (Surplus Anticipated and Receipts from
Delinquent Taxes) are predicated on prior year(s) experience and would have no relationship to new
residents settling in town. Miscellaneous revenues, generally, are associated with grants, payment-in-lieu-
of taxes (PILOTs), and other special revenue categories that are not predicated on population change.

• Consequently (and as shown in the appendix), $38,504,927 (equivalent to the amount of the township’s
budget to be raised by local taxes) is the value used for deriving the per capita service cost value.

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[Project Name]
Hamilton Street Parking and Zoning Analysis: Economic and Fiscal Impact Analysis April 25, 2019

Projected Township of Franklin Municipal Costs


• In order to derive per capita service cost (e.g., what is likely to be expended on each new resident moving to
the township), 4ward Planning divided the 2018 amount to be raised by taxes ($38,504,927) by the 2019
population estimate (66,746), resulting in per capita spending of approximately $577. Township spending,
however, also applies to those who work in Franklin but do not live there. The method for estimating the share
of per capita spending which is likely attributable to servicing residents, versus local workers and visitors, is as
follows:
Step 1
Identify the total number of residential land parcels within the township;
Identify the total number of commercial and industrial land parcels in the township;
Divide the total number of residential land parcels by the combined total of residential, commercial
and land parcels, yielding a percentage;
Divide the total number of commercial and industrial land parcels by the combined total of
residential, commercial and land parcels, yielding a percentage;

Step 2
Identify the total residential assessment value within the township;
Identify the total commercial and industrial assessment value within the township;
Divide the total residential assessment value by the combined total residential, commercial and
industrial assessment value , yielding a percentage;
Divide the total commercial and industrial assessment value by the combined total residential,
commercial and industrial assessment value , yielding a percentage;

Step 3
Average the percentages obtained for residential and commercial and industrial values.

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[Project Name]
Hamilton Street Parking and Zoning Analysis: Economic and Fiscal Impact Analysis April 25, 2019

Projected Township of Franklin Municipal Costs


Below are calculations and derived percentage shares of per capita expenditures related to residential
development, and commercial and industrial development:

Total Residential, Commercial and Industrial Parcels 20,792


Total Residential Parcels 20,062
Total Commercial and Industrial Parcels 730

Residential Parcel Percentage 96.5%


Commercial and Industrial Parcel Percentage 3.5%

Total Residential, Commercial and Industrial Assessment Value $9,634,860,300


Total Residential Assessment Value $6,521,617,200
Total Commercial and Industrial Assessment Value $3,113,243,100

Residential Parcel Percentage 67.7%


Commercial and Industrial Parcel Percentage 32.3%

Residential Average 82.1%


Commercial and Industrial Average 17.9%

Based on the above calculations, the estimated share of per capita municipal spending ($577) that is attributable
to residential service delivery is 82.1 percent ($474), with the balance, 17.9 percent ($103) attributable to
commercial and industrial service delivery.

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[Project Name]
Hamilton Street Parking and Zoning Analysis: Economic and Fiscal Impact Analysis April 25, 2019

Projected Multi-family Assessment Value


All residential units developed are to be for-rent (apartments). Generally, tax assessors in New Jersey utilize
the income approach to determining value for a multi-family residential development (whether the units are
to be rented or sold). Accordingly, we employ this method for purposes of identifying the likely market value
which would be derived by an independent tax assessment.

Using the income approach, the tax assessor identifies a capitalized value for the stabilized development
(stabilization of the property, typically, occurs after the building is 95 percent occupied) by aggregating the
annual effective rent (potential gross rent less rental income lost due to vacant units or non-payment of rent)
for all apartment units in the subject rental building or complex, then estimating the annual net operating
income (NOI) and dividing this value by market based capitalization rate (cap rate).

The NOI is the effective rental income less general building operating expenses (e.g., utility costs,
maintenance, insurance, security, landscaping, taxes, etc.). NOI typically ranges from 55 to 75 percent of
effective rental income and for purposes of this analysis, we have elected to use 75 percent of the effective
rental income, which is comparable to the NOI percentage shares for 449 and 507 Hamilton Street projects.

A cap rate is a local area market measure indicating the ration of net operating income to the building’s
estimated property value. Cap rates can and do vary according to the market risk associated with the class
of property and current demand-supply factors for that property type. A low cap rate (4 to 6 percent) is
indicative of a lower risk investment and strong market fundamentals. A high cap rate (8 to 10 percent)
suggest greater market risks due to soft demand or other macro economic factors. We utilize a cap rate of
5.5 percent for purposes of this analysis, based on area cap rates for newer multi-family residential projects.

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[Project Name]
Hamilton Street Parking and Zoning Analysis: Economic and Fiscal Impact Analysis April 25, 2019

Projected Multi-family Assessment Value


Identified in the below table are the assumptions utilized within the income approach to deriving a
capitalized building value at stabilization (typically, occurring between 24 and 36 months after the building
opens). The number of units and monthly rents are provided the project sponsor.

The capitalized value is akin to the assessment value the local tax assessor would utilize (recognizing that a
newly constructed building’s assessment value and market value are nearly equivalent, based on the income
approach to valuation:

Gross Net
Monthly Annual Annual
Units Rent Rent Rent
1BR 16 $1,200 $230,400 $218,880
2BR 122 $1,600 $2,342,400 $2,225,280
3BR 34 $1,900 $775,200 $736,440 Capitalized
NOI Cap Rate Value
Total 172 $3,348,000 $3,180,600 $2,385,450 5.5% $43,371,818

Occurring at stabilization between 24 and


36 months of the building’s opening.

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[Project Name]
Hamilton Street Parking and Zoning Analysis: Economic and Fiscal Impact Analysis April 25, 2019

Projected Municipal Service Cost and Revenue Summary


Based on the foregoing development assumptions, municipal per capita service costs, and derivation of the
property’s stabilized value, utilizing the income approach to valuation, the annual net fiscal impacts to the
township of Franklin and the Franklin Township Public School District, during the first stabilized year, are exhibited
below:
Estimated Municipal Service Costs

Per Capita Expenditure $577

Residential Related $474

New Residents 362

Resident Expenditures $171,428

Municipal and School District Revenues

Municipal School
Stabilized Cap Value Rate 1 Rate 1
$43,371,818 $0.44/$100 $1.46/$100

$191,703 $632,361

Net Revenues $20,276 $632,361

1 2018 tax rates for Franklin Township identified via NJ Department of Community Affairs

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[Project Name]
Hamilton Street Parking and Zoning Analysis: Economic and Fiscal Impact Analysis April 25, 2019

Projected Township of Franklin Municipal Costs (cont.)


• As the proposed development will be serviced by a commercial cartage company, there is not expected to
be any burden placed on Franklin Township’s local sanitation department.

• As the proposed building will be no higher than five stories, and given there currently exist several
commercial buildings in Franklin Township, equaling or exceeding that height, it is assumed no new fire
equipment will be necessary to service the project.

• At 362 new residents (one occupant per bedroom), representing just one-half of one-percent of the
current township’s population, hiring of additional personnel (e.g., fire, police, administrative, and public
works) is not anticipated.

• As no public school-age children are anticipated within the college targeted housing project, no new
public school district service costs are anticipated, as a result of the project being developed.

• Finally, and based on the above assumptions and findings, the net increase in municipal tax revenues
may be considered a worst-case scenario and, therefore, it is highly likely that the true net new service
costs will far exceed the identified.

4WARD PLANNING INC


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APPENDIX

ECONOMIC AND REAL ESTATE ANALYSIS FOR SUSTAINABLE LAND USE OUTCOMES ™
[Project Name]
Hamilton Street Parking and Zoning Analysis: Economic and Fiscal Impact Analysis April 25, 2019

Definitions
Employment: Includes all full- and part-time jobs

Direct effects: A series (or single) of production changes or expenditures made by producers/consumers as a
result of an activity or policy

Indirect effects: The impact of local industries buying goods and services from other local industries

Induced effects: The response by an economy to an initial change (direct effect) that occurs through re-
spending of income received by a component of value added

Labor Income: All forms of employment income, including employee compensation (wages and benefits) and
proprietor income

Output: Represents the value of industry production. In IMPLAN these are annual production estimates for the
year of the data set and are in producer prices. For manufacturers this would be sales plus/minus change in
inventory. For service sectors production = sales. For retail and wholesale trade, output = gross margin and
not gross sales.

Value Added: The difference between an industry’s total output and the cost of its intermediate inputs. Value
added consists of compensation of employees (inclusive of benefits) and proprietor (i.e., payments received
by self-employed individuals), other property type income (payments for rents, royalties and dividends), and
business taxes on production and imports less subsidies.

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[Project Name]
Hamilton Street Parking and Zoning Analysis: Economic and Fiscal Impact Analysis April 25, 2019

Economic Impact: General Input-Output Impact Modeling


Direct Effects: The set of Indirect Effects: The impact of local Induced Effects: The response by an
expenditures applied to the predictive industries buying goods and services economy to an initial change (direct
model (multipliers) for analysis. It is a from other local industries. The cycle effect) that occurs through re-
series (or single) of production of spending works its way backward spending of income received by a
changes or expenditures made by through the supply chain until all component of value added. IMPLAN’s
producers/consumers as a result of money leaks from the local economy. default multiplier assumes that labor
an activity or policy. Applying these The impacts are calculated by income is not a leakage from the
initial changes to the multipliers in an applying Direct Effects to the Type I regional economy but is recirculated
IMPLAN model will then display how Multipliers. through the household spending
the region will respond, economically, patterns causing further local activity.
to these initial changes.

Source: IMPLAN, 4ward Planning, 2019

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[Project Name]
Hamilton Street Parking and Zoning Analysis: Economic and Fiscal Impact Analysis April 25, 2019

Municipal Budget Values

Franklin Township CY 2018 Budget


Surplus Anticipated $7,271,686
Miscellaneous Revenues $13,078,455
Receipts from Delinquent Taxes $2,000,000
Amount to be Raised by Taxes $38,504,927

Total $60,855,068
Source: Franklin Township, 2019

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[Project Name]
Hamilton Street Parking and Zoning Analysis: Economic and Fiscal Impact Analysis April 25, 2019

General & Limiting Conditions


4ward Planning Inc. has endeavored to ensure that the reported data and information contained in this report are
complete, accurate, and relevant. All estimates, assumptions, and extrapolations are based on methodological techniques
employed by 4ward Planning Inc. and believed to be reliable. 4ward Planning Inc. assumes no responsibility for
inaccuracies in reporting by the client, its agents, representatives, or any other third party data source used in the
preparation of this report.

Further, 4ward Planning Inc. makes no warranty or representation concerning the manifestation of the estimated or
projected values or results contained in this study. This study may not be used for purposes other than that for which it is
prepared or for which prior written consent has first been obtained from 4ward Planning Inc. This study is qualified in its
entirety by, and should be considered in light of, the above limitations, conditions, and considerations.

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For more information, please contact:

Todd J. Poole
267.480.7133
tpoole@landuseimpacts.com