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HomeMy WebLinkAboutM-84-0030Howard V. Gary City Manager e odriguez, Director Planning Department i January 11, 1984 Proposed Office Building at the Seaport This memorandum is intended to summarize the limited information that was made available to us; to identify issues pertaining to a proposed new development at the Seaport containing terminal facilities for cruise ships and, more to the point, a 16 story office and retail building; and to cite the City's opportunities to express its policy. This discussion raises serious issues of public policy. Project Description: The project involves a proposed joint agreement between the Seaport and a private development group, Worsham Brothers and Technidevelopment. The Seaport would lease to the developer 13.77 acres of undeveloped land on the south shore. In exchange for the free land lease, the developer would build a passenger terminal capable of handling two cruise ships at a time and support a total of three new cruise ships overall. These would bring to the Miami area an estimated 2,852 new permanent jobs for local residents and a total of 3,000 passengers every 2 weeks who would occupy 285 hotel rooms and patronize various local businesses and services. Development costs of the terminal facility are estimated at $8.6 million, and include fill, bulkhead, customs facility, •passenger lounge, surface parking, financing, and soft costs. The developer would also build on the site an office building of approximately 16 stories, and retail shops intended to serve the cruise ship passengers. The office space is intended to be leased to port related businesses such as cruise line companies and freight shippers. An unspecified number of parking spaces would be constructed at grade. Following is a summary of the latest available space projections: Gross Sq.Ft. Net Sq.Ft. Customs 31,900 28,000 Passenger Lounge 13,700 10,000 Retail 18,432 16,128 Office 286,100 245,407 Total 350,1-2 299,535 Page 1 of 5 84--30 I'^ Howard V. Gary January 11, 1984 The total project cost including the cruise ship terminal was estimated in August 1983 to be $32,580,855, of which $17 million was to be financed by industrial revenue bonds from Dade County and a $6,556,823 UDAG loan through the City. The potential for a $6 million federal UDAG is estimated to return a total of $8.2 million to the City over an 8 year period. These funds would be unencumbered and available for use in other City projects. This department has not evaluated the financial feasibility of the UDAG. Analysis: In order to develop a policy on this project, the following issues should be considered: 1. Cruise Ships - One of the principal project benefits claimed by the developers in the preliminary UDAG proposal is the introduction of three new cruise ships. Although there would be substantial benefits to the local economy from the cruise ships, it is logical to assume that the ability of the Seaport to attract three new cruise ships is totally independent of the need for private office and retail space at the terminal site. The real advantage of the project is to provide an $8.6 million terminal at no cost to Dade County. The question then, is whether the County could finance and build the terminal through other means. According to the Department of Community Development, the Seaport is currently at full bonding capacity. 2. Property Tax - The proposed project would pay property taxes to the City on the improvements intended for private office and retail uses, but not on the terminal facility or the land. Based on an assumed construction cost of $55 per square foot, the project could be expected to generate approximately $160,000 annually for the City of Miami general operating budget (1984 dollars). No research has been conducted on what City service costs would be on the Seaport. 3. Traffic - A typical office building of 286,000 sq.ft. can be expected to generate 3166 vehicle trips daily. At the PM peak hour, 83 inbound vehicles and 473 outbound vehicles could be expected. This compares to 1980 traffic counts at the entrance to the Seaport of 14,700 vehicles daily and 950 vehicles at the Friday PM peak hour. Although significant, the office traffic volumes, for a 10 year initial period, would have limited impact on the Seaport access routes for the following reasons: 1) the Seaport traffic does not peak at the normal AM and PM peak hour for office traffic except for Friday afternoons, from 5-6 PM when there is heavy cruise passenger traffic; and 2) a new 5 lane high level bridge is programmed for construction, which would have sufficient Page 2 of 5 84-30 ,A Howard V. Gary January 11, 1984 capacity through the year 1995, when a tunnel is proposed to be implemented. Following the year 1995, the office traffic becomes an incremental burden on a saturated traffic system unless an additional facility such as the tunnel is built. 4. Port Bridge - The consideration of the proposed office development raises the issue of the Port bridge. The public purpose for construction of the new high bridge has centered on the need to have adequate access for passengers and freight destined to and from the Port of Miami, a public facility, so that the future growth of the Port will not be hindered. This public purpose has been largely persuasive to the City in discussions concerning the transfer of the necessary mainland right-of-way for bridge purposes. The right-of-way necessary for the bridge, in turn, was obtained by the City after extensive litigation and funded by the "Parks for People" Bond Issue. In short, is a public purpose being served by surrendering parkland for a bridge which will enhance access not only to the Port but also the subject office development? 5. Office Market - The market study conducted for the proposed project by Cushman and Wakefield found that most of the projected office space users (Port -related businesses) are currently located along Biscayne Boulevard between Bay Point and downtown. They occupy older buildings with a median rent of approximately $12.50 per square foot. Notably, the study found that although proximity to the Port is desirable to most Port -related business, there is very little actual travel to and from the Port by employees. The study concluded that there is little need for these businesses to be located within the Seaport itself, and that the cost of office space would be the determining factor in their decision to relocate to this project. Although projected leasing rates were not available, it can be assumed that the proposed office space could be developed at a lower cost than the $30.75 per square foot current average for new office space elsewhere in downtown, due to the followinz: a) land cost of $14 sq.ft. (based upon $8.6 million cost of the terminal facility), b) ability to provide ample surface parking on low cost land, and c) low interest financing through industrial revenue bonds and, perhaps, a UDAG. The proposed office space on the Seaport is not intended to be in direct competition with other new downtown office buildings because its projected users, the Port -related businesses, generally do not occupy office space with rent levels in excess of $18 per square foot. Rather, it would draw most of its tenants away from existing buildings in the Page 3 of 5 b4-30 As. r�� Howard V. Gary January 11, 1984 Biscayne Boulevard area. This raises a question, however, as to whether there would be any restrictions on the type of business that could occupy the Seaport office space. If it is not limited to cruise line companies and freight shippers, there would likely be competition from all sectors of the downtown office market (current average rents in downtown are ,115.47 per square foot). A related question is whether the proposed office space on the Seaport would be in competition for some of the same users projected for the World Trade Center building, for which the City has an approved $5 million UDAG. Tlie project, if approved and constructed, may become available for occupancy during a time period when the office market on the mainland may already be substantially overbuilt. The lease/rental inducements that could be offered to lessees by this office development would probably enable it to compete successfully but would further exacerbate the office market on the mainland. 6. Retail Market - The proposed project contains 18,432 gross square feet of retail space, intended to provided shoppers goods to cruise passengers. The proposed retail space on the Seaport is minimal. It would not affect the overall spending of a person who might plan to spend extra time in the Miami area for the purpose of shopping and entertainment. However, studies indicate that little shopping actually occurs in the downtown area by cruise passengers; thus, this market has been targeted by bayside and the downtown merchants. Any amount of retail space on the Seaport may complicate future efforts to attract cruise passengers to the downtown and bayside for unplanned short shopping trips. 7. Downtown Planning - Beyond the specifics of the current proposal, a question should be raised concerning the desirability of developing additional office, retail, and hotel uses on the Seaport in the future. The potential for air rights development on the Seaport is enormous. The land area of the Seaport exceeds any one of the existing downtown subareas, ie. brickell Avenue, the CBD, the Government Center, or the Omni area. Additional office, retail and hotel uses on the Seaport could add up to a significant effect on the rate of growth in other areas of downtown. If large sites are available on the Seaport at comparatively low cost, it will discourage redevelopment and infill of some smaller sites throughout downtown. The proposed five lane high level bridge will provide vehicular access to the Seaport during the inorning and evening weekday rush hours for the next ten years and eventually the proposed tunnel will add to the vehicular capacity. However, the Seaport is not served by rapid transit; and to the extent that it attracts Page 4 of 5 Aft Howard U. Gary January 11, 1984 office, hotel, and retail employee vehicles through the downtown, such growth would be counter productive to downtown and regional transportation policy. Opportunities to Express City Policy: This office development will set a precedent for the future development of the Seaport, introducing uses other than direct functions of the Seaport. While there are questions regarding the legality of the City's continued exercise of zoning authority over the Seaport, the City of Miami should have several opportunities to review and evaluate this project, through any or all of the following mechanisms: 1. Port of Miami Development Grder - Per Chapter 380 F.S., pertaining to Developments of Regional Impact, the City Commission issued the Development Order by Resolution 79-850; December 5, 1979, as amended by Resolution 82-459; May 27, 1982. As there is no mention in the Development Order of an office complex of the magnitude proposed, then a question of substantial deviation may be raised, possibly requiring the project to submit a new Application for Development Approval to the South Florida Regional Planning Council. 2. Zoning Ordinance 9500 - The Seaport is zoned Waterfront Industrial which provides for incidental directly -related offices as a permissible use. It would appear from the foregoing discussion that the proposed office development is neither "incidental" to the Seaport nor directly related to waterfront activity, and may in fact require re -zoning of the office tract to an appropriate zoning classification. The proposed office development also meets the criteria as a Major Use in excess of 200,000 square feet of office space and would require a Major Use Special Permit from the City Commission. 3. Biscayne Bay Management Agreement - The agreement, between the State of Florida and Dade County provides that the City of Miami, may at its option, prepare management plans for upland areas under its jurisdiction which will be submitted with the County plan. 4. Urban Development Action Grant Application - As discussed previously, the application would require City Commission approval. SR/JWM/vb cc: Dena Spillman, Director Community Development Page 5 of 5 S4-30