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HomeMy WebLinkAboutPre-publication submittal - Miami Economics Associates, Inc Analysis 6-19-2022June 19, 2022 The Honorable Francis X. Suarez Mayor City of Miami 3500 Pan American Drive Miami, FL 33133 Re: Economic and Fiscal Benefits Analysis One Brickell City Centre ("OBCC") Dear Mayor Suarez: Miami Economic Associates, Inc. ("MEAI") has performed an analysis to estimate the economic and fiscal benefits that will be realized by the City of Miami as well as three other governmental jurisdictions as the result of the development of OBCC. It will be developed on a block that fronts on the west side of Brickell Avenue between SE 711 and 81h Streets. Based on current design concepts, we assumed for this analysis that OBCC will include a tower in the range of 60 stories, containing a gross rentable area of 1,595,668 square feet. Included in that space will be 1, 251,445 square feet of tenant - occupied office space and 40,275 square feet of retail and restaurant space. The project will also contain approximately 1,800 parking spaces. The other jurisdictions considered in our analysis include Miami -Dade County and the Miami -Dade County Public School District. Based on the information provided to MEAI by the co -developers of OBCC, Swire Properties and the Related Companies, it is anticipated that the office and retail space in OBCC will rent for an average of $100 per rentable square foot. It is further expected that it will take approximately 48 months to build the project and cost approximately $1.0 billion to construct it in terms of hard costs. An additional $568 million will be spent of soft costs including, but not limited to, architectural and engineering fees, other professional fees, building permit impact fees, project management, real estate taxes during the construction period, financing costs, marketing costs and commissions. Accordingly, development of OBCC will require the investment of nearly $1.57 billion exclusive of land cost. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (3051 669-0229 Fax: (8661 496-6107 Email: meaink0bellsouth.net The Honorable Francis X. Suarez, Mayor City of Miami June 8, 2022 Page 2 The estimates of economic and fiscal benefits presented in this report were calculated based on rates for taxes and fees that are subject to change as are the construction costs that we assumed in our analysis. Accordingly, the economic and fiscal benefits generated OBCC for the City of Miam and the other governmental jurisdictions enumerated above may vary from those estimated below. All monetary amounts in the remainder of this letter report are expressed in 2022 Dollars. Key Findings The key findings of the analysis performed by MEAT are as follows: Economic Benefits During the four-year period in which OBCC is being constructed, an average of approximately 3.500 jobs will be generated annually including 2,100 on -site full-time and part-time construction jobs (direct jobs). The remainder of the jobs will either be in businesses that support the construction industry such as building supply and trucking companies (indirect jobs) or in establishments in which the construction workers and the indirect workers spend their earnings (induced jobs). The workers occupying these direct, indirect and induced jobs are projected to earn more than $185.8 million in wages and salaries annually. After the development of OBCC has been completed, it is expected that 5,181 workers will be employed on -site annually on a full-time equivalent (FTE) basis. Approximately 10,900 indirect and induced workers will also be employed. The earnings of all these workers on an annual basis are expected to approximate $774.74 million. The above figures are understated for the following two reasons: 1) they do not consider the workers who will be employed on -site to market, lease and operate OBCC itself because the number of such workers will depend on the extent that certain functions are handled by outside contractors; and 2) it does not take into account the economic benefits that the OBCC because of the off -site expenditures of the on -site workers while working and those visiting OBCC while there on business. Fiscal Benefits During the period in which OBCC is being developed, the City will collect more than $7.34 million in general building permit, impact fees for police, fire and general services, and Downtown DRI supplemental impact fees, It will also collect trade - related building permit fees, but there is insufficient information currently available to estimate that amount of those fees. During that period, it will also pay Miami -Dade County more than $13.4 million for road impact fees. After the development of the OBCC is completed, the general/operating funds of the City of Miami, Miami -Dade County and the Public School District will collect approximately $17.7 million annually in ad valorem taxes, with the City's share Miami Economic Associates, Inc. 6861 S.W. 891h Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (866) 496-6107 Email: meaink0bellsouth.net The Honorable Francis X. Suarez, Mayor City of Miami June 8, 2022 Page 3 amounting to nearly $7.0 million. These figures are approximately 16.5 times the amount of ad valorem taxes that will be collected from the site in the current Fiscal Year. OBCC is expected to pay $729,000 annually to the City of Miami in parking surcharges. It will generate more than $1.56 annually local option sales taxes for Miami -Dade County annually. Finally, the City will collect utility taxes and franchise fees in amounts that cannot be currently estimated. The remainder of this letter report, which is organized as shown below, provides a fuller discussion of the findings of our analysis and their bases. Section Page Economic Benefits 3 Fiscal Benefits 5 Bases of Fiscal Estimates 6 Closing 8 Economic Benefits The term "economic benefits" relates to the positive impact that OBCC will have on the economy of the City of Miami and/or Miami -Dade County. The economic benefits that the project will provide will be both non -recurring and recurring in nature, with the former occurring during the construction period, the latter on an annual basis each year after the project has been fully completed. Table 1 below summarizes the economic benefits that OBCC will generate. The monetary amounts shown are expressed in 2022 Dollars. Table 1 Economic Benefits One Brickell City Centre (2022 Constant Dollars) Benefits Non -recurring Recurring Jobs Created Direct 2,112 5,181 Indirect 588 8,023 Induced 802 2,940 Total 3,502 16,144 Labor Income All workers $ 185,836,600 $ 774,742,700 Gross Domestic Product (Value-added) $ 235,238,000 $ 1,663,429,800 ** Annual amounts over the four-year construction period. Source: Swire Properties & Related Companies (Co -developers); IMPLAN; Miami Economic Associates, Inc. With respect to Table 1, the following points are noted: The estimates of job creation, labor income and gross domestic product (or value- added) were formulated using the IMPLAN Input -Output Model, which was Miami Economic Associates, Inc. 6861 S.W. 89=F Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (866) 496-6107 Email: meaink@bellsouth.net The Honorable Francis X. Suarez, Mayor City of Miami June 8, 2022 Page 4 developed at the University of Minnesota approximately 40 years ago and which has been updated on a continuing basis since. A description of the model may be found in the appendix to this report on page 9. The term "direct jobs" refers to jobs on -site. "Indirect jobs" are jobs in industries related to the on -site economic activity while "induced jobs" are jobs in economic sectors across the entirety of the economy in which the direct and indirect workers spend their earnings. Illustratively, during the construction period, the direct jobs would be filled by the on -site construction workers. The indirect workers would include people employed by building supply and trucking firms, among others, which provide goods and services that support the on -site construction activity. The Induced workers would include people working in supermarkets and doctors' offices, among other venues, that the direct and indirect workers patronize. The jobs shown in the Table may be occupied by people who live anywhere within Miami -Dade County and in some instances, they may live outside the County. However, it is expected that residents of the City of Miami will be included among those who occupy the jobs generated by OBCC on both a non -recurring and recurring basis. The estimates of non -recurring benefits are annual amount during the four-year construction period based on OBCC's estimated cost of hard construction, which will average $250.0 million per year. Soft costs were not included in the input to the model since the model estimates those expenses and their inclusion in the input would result in double -counting. The estimates of recurring benefits are annual amounts expressed for each year after development of the entire project has been completed and achieved stabilized level of utilization. The indirect and induced jobs as well as labor income and gross domestic product were estimated based on 5,181 direct employees on an FTE basis. That estimate assumes 1,251,445 square feet of tenant -occupied office space with an average of 4 workers per 1,000 square feet. It also assumes that 75 percent of the 40,275 square feet of retail and restaurant space is occupied by food and beverage establishments with an average of 5 workers per 1,000 square feet on an FTE basis and the remaining 25 percent by shops with 2.5 workers per 1,000 square feet on an FTE basis. Table 1 understates of the recurring benefits because it does not consider the workers who will be employed on -site to market, lease, operate and maintain OBCC itself inclusive of those involved with the parking facilities. The number of such workers will be dependent on the extent to which certain functions are handled by personnel employed by the project or by outside contractors. • Table 1 also understates the economic benefits that the OBCC will generate because it does not account for the off -site expenditures of the on -site workers while working and those visiting OBCC on business. Miami Economic Associates, Inc. 6861 S.W. 89fh Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (866) 496-6107 Email: meaink@belisouth.net The Honorable Francis X. Suarez, Mayor City of Miami June 8, 2022 Page 5 Fiscal Benefits The term "fiscal benefits" refers to the positive impact that the OBCC will have on the finances of the City of Miami and the other three jurisdictions in which it will be located. Table 2 summarizes the fiscal benefits that the project will generate for each jurisdiction on a non -recurring and recurring basis. Table 2 Summary of Fiscal Benefits One Brickell City Centre 2022 Constant Dollars Jurisdiction Non -recurring Recurring City of Miami Master Building Permit Fees $ 5,150,000 Trade -related Building Permit Fees ** Impact Fees $ 1,019,126 Downtown DR] Supplemental Impact Fees $ 1,173,354 Ad valorem Taxes General Fund $ 6,976,515 Debt Service Fund $ 293,475 Downtown Development Authority $ 425,971 Utility Taxes and Franchise Fees ** Parking Surcharge $ 729.000 Occupational License Fees ** Total $ 7,342,480 $ 8,424,961 Miami -Dade Count Road Impact Fees $ 13,403,654 Ad Valorem Taxes General Fund $ 4,246,879 Debt Service Fund $ 461,825 Library Fund $ 258,440 Water & Sewer Service Charges ** Occupational License Fees ** Local Option Sales. Taxes $ 1,560,000 Total $ 13,403,654 $ 6,527,144 Miami -Dade Public School District Ad valorem Taxes Operating Fund $ 6,214,490 Debt Service Fund $ 163,800 Total $ 6,378,290 ** Amount cannot be estimated based on the information currently available. Source: Swire Properties & Related Companies (Co -developers); City of Miami; Miami -Dade County; Miami - Dade County Property Appraiser; Miami Economic Associates, Inc. With respect to Table 2, it should be noted that the amounts of ad valorem projected for each jurisdiction/fund are approximately 16.5 times the amount that will be collected for OBCC's site in the current fiscal year. It should also be noted that the estimates of ad valorem taxes in the Table are understated because they do not account for the taxes Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (866) 496-6107 Email: meaink@beltsouth.net The Honorable Francis X. Suarez, Mayor City of Miami June 8, 2022 Page 6 that will be collected on furniture fixtures and equipment in the project including in the tenant -occupied spaces_ Bases of Estimates of Fiscal Benefits The materials that follow explain how the estimates of fiscal benefits presented in Table 2 were calculated. All monetary amounts are in 2022 Dollars. Non -recurring Fiscal Impacts The amount the City of Miami collects for general building permits for a commercial project is based on the amount that will be spent to build it in terms of hard costs. The rate charged is 1.0 percent for all costs up to $30.0 million and 0.5 percent on all costs above that figure. Based on estimated hard construction costs approximating $1.0 billion, general building permit fees in the amount of $5,150,000 will be paid prior the construction of OBCC. The various trades involved in constructing a new project including the roofing, electrical, plumbing, structural, mechanical, elevator, and fire safety system contractors will also be required to pay permit fees on their work at a rate of 1.0 percent of the dollar value of their work. Calculation of the fees that the trades will pay requires that the project's final engineering drawings be completed, which has not yet occurred. Accordingly, the trade -related fees that will be paid cannot be quantified at this time. The City of Miami charges impact fees on all new non-residential construction projects for police, fire -rescue, and general services. Based on the quantities of development proposed and the City's current impact fee rate schedule, it is estimated that impact fees totaling $1,019,126 will be paid to the City of Miami with respect to OBCC. OBCC such which is in the Downtown Miami DRI area will also need to pay supplemental impact fee in the amount of $1,173,354. • A new construction project located in the City of Miami needs to pay impact fees to Miami -Dade County for roads. Based on the current fee schedule, $13,403,654 would need to be paid. The Miami -Dade Water & Sewer Department requires that connection fees be paid to activate water and sewer service for a new project. The amount that will need to be paid will be dependent on prospective usage and the number and size of the meters through which service is provided. Since these engineering parameters have not been established, a fee estimate cannot be formulated at this time. It should also be noted credits may be applied to account for the development currently on the project site that will be demolished in order the OBCC can be constructed. Recurring Fiscal Impacts The millage rates currently being levied for ad valorem tax purposes by the governmental entities referenced on Table 2 are shown in the table below, The ad Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (866) 496-6107 Email: meaink@bellsouth.net The Honorable Francis X. Suarez, Mayor City of Miami June 8, 2022 Page 7 valorem tax revenues projected were calculated by applying these millage rates to proposed project's estimated taxable value, which was assumed to be $910.0 million. That figure approximates 85 percent of the cost of hard construction together with the market value currently assigned by the Miami -Dade County Property Appraiser to the parcels of land on which OBCC will be built_ Entity Ratel$'I 000 Taxable Value Taxes City of Miami General Fund 7.6665 $ 6,976,515 Debt Service Fund 0.3225 $ 293,475 Downtown Development Authority 0.4681 $ 425,971 Miami -Dade Count General Fund 4.6669 $ 4,246,879 Debt Service Fund 0.5075 $ 461,825 Library 0.2840 $ 258,440 Miami -Dade County Public Schools Operating 6.8290 $ 6,214,490 Debt Service 0.1800 $ 163,800 Source: Swire Properties & Related Companies (Co -developers); Miami -Dade County Property Appraiser; Miami Economic Associates, Inc. • The City of Miami collects utility taxes and franchise fees from the providers of telephone, electric and other such services based on their revenues. The amount collected from the OBCC will be dependent on the amount of these services used by the project's residents, hotel guests and office workers as well as by the wellness center; therefore, it cannot be quantified at this time. • The City of Miami levies a surcharge in the amount of 15 percent on all fees paid to parking facilities within the City. OBCC's co -developers estimate that the annual revenue collected in each of the 1800 parking space will approximate $2,700, resulting in total revenues of $4.86 million per year. On that basis, the City will collect parking surcharge fees of $729,000 annually. The Miami -Dade Water & Sewer Department will provide water and sewer services to the OBCC. The service fees that will be generated will be a determined by usage and the number and size of the meters through which service is provided. Since the engineering parameters of the proposed project are not yet known, an estimate of the service fees earned cannot be formulated at this time. • Both the City of Miami and Miami -Dade County will collect occupational license fees from the occupants of the proposed office space and retail space. The amounts collected cannot be estimated at this time since they will depend on the exact nature of the businesses housed in OBCC, which is not currently known. Miami -Dade County will collect a 1-cent County option sales tax on all rents and parking fees paid at the OBCC The amounts collected will be shared equally by the Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (866) 496-6107 Email: meaink@bellsouth.net The Honorable Francis X. Suarez, Mayor City of Miami June 8, 2022 Page 8 Miami -Dade Health Trust and Miami -Dade Transit. Assuming a stabilized level of occupancy of 95 percent, rent and parking revenues would approximate $$156.0 million annually, resulting in sale County option sales tax revenue of $1,560,000 annually. The County will also collect County option sales taxes on the sales in the retail and restaurant space; however, that amount cannot be currently estimated since an estimate of the sales volumes that will be recorded in that space is not available. Closing The analysis performed by MEAI demonstrates that development of the One Southside Park would be highly beneficial fiscally to the City of Miami, Miami -Dade County, and the other jurisdictions in which it will be located. It will also provide employment opportunities for residents of the City of Miami and/or Miami -Dade County both on non -recurring basis while it is being built and on annual recurring basis after construction has been completed. Sincerely, Miami Economic Associates, Inc. Andrew Dolkart President cc: Commissioner Alex Diaz de la Portilla, District 1 Commissioner Ken Russell, District 2 Commissioner Joe Carollo, District 3 Commissioner Manolo Reyes, District 4 Commissioner Christine King, District 5 City Manager Arthur Noriega Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (866) 496-6107 Email: meaink@bellsouth.net The Honorable Francis X. Suarez, Mayor City of Miami June 8, 2022 Page 9 Appendix Minnesota IMPLAN Input -Output Model The Minnesota IMPLAN Input -Output Model relies on multiplier analysis which quantifies the cumulative effect of dollars inserted into the regional economy. As a dollar moves through the region, it creates additional revenue for linked businesses and/or their employees who also spend that money. More simply, expenditures dispersed by one entity become revenue to another, continuing an economic cycle which ultimately dissipates, bleeding into other regions or areas. Although several economic models are available, they work in fundamentally similar ways and center on the same indicators. The Minnesota IMPLAN model was initially created over 35 years ago at the University of Minnesota and has been upgraded on a continuing basis in the ensuing years. The multiplier impacts calculated by the Minnesota IMPLAN model are based on input- output methodology, which explicitly considers the inter -industry linkages that exist within an economy. Each industry needs labor and inputs from other industries to produce economic output. Whenever an industry experiences an increase in the demand for its output, many other industries within that economy indirectly experience an increase in demand as well because of these inter -industry linkages. This increase in demand that results from the need for material inputs is called the indirect effects. In addition, an increase in production within a region also leads to an increase in household income through the hiring of workers, which in turn generates further demands for goods and services within the region. Firms also need to expand their base of physical capital to meet higher levels of demand, and this too stimulates regional economic growth. The latter effects are referred to as induced effects. The inter -industry linkages and the induced effects on consumer and capital spending lead to successive rounds of production, and this process results in an increase in output that exceeds the initial change in demand, or a multiplier effect. Similarly, the increase in household income will exceed the initial payroll increase encountered in the industry that experienced the original increase in demand. The total change in employment in the regional economy is a multiple of the direct change in employment. In addition to estimating employment, MEAT also used the Minnesota IMPLAN model to quantify the total earnings or labor income of the direct, indirect and induced workers as well as the total gross domestic product, or value added, that would result from the efforts of the direct, indirect and induced employees. Labor income consists of all forms of employment income including wages and salaries and proprietor income. Gross domestic product (GDP), also known as value-added, is the increased value of a product or service as the result of the economic inputs (labor and capital) expended at a given stage, GDP is the sum of wages and salaries, proprietor income, interest and indirect business taxes. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (866) 496-6107 Email: meaink@bellsouth.net