HomeMy WebLinkAboutLetterJanuary 30, 2009
Mr. Peter G. Hernandez, P.E.
City Manager
City of Miami
444 S.W. 2nd Avenue 10`" Floor
Miami, Florida 33130
Dear Mr. Hernandez:
Miami Economic Associates, Inc. (MEAT) was retained by the City of Miami to assist in
formulating a basis for levying a fee when developers seek to construct passageways
over public rights-of-way, inclusive of streets and alleys, for the purpose of creating
internal connections between portions of their projects that would otherwise be
separated by the rights-of-way. We understand that the Office of the City Attorney further
instructed that the basis for levying the fee should be applicable to projects throughout
the City of Miami on an equitable basis.
The purpose of this letter. which is organized in the manner indicated immediately
below, is to provide with our recommendation.
Background 1
Conceptual Basis for the Proposed Fee 3 _^
Fee Calculation Methodology _3
Background
In recent years there have been a number of instances in which developers have been
authorized to construct passageways over public rights-of-way, inclusive of both streets
and alleys, for the purpose on internally connecting portions of their projects that would
otherwise be separated by the rights -of way. In essence, they have received permits to
use publicly -owned airspace for private purposes. Generally, these passageways have
6861 S.W. 89th Terrace Miami, Florida 33156
Tel: (3051669-0229 Fax: (866) 486-6107 Email: meaink0belisouth.net
Mr. Peter G. Hernandez, P.E.
City of Miami
January 30, 2009
Page 2
been of limited size, essentially being equivalent in length to the rights-of-way being
spanned, in width to a hallway and in height to a building story. However. there has been
at least one instance, potentially more, that the air rights structure has been considerably
greater in scale, providing passageway at multiple levels between the buildings flanking
the right-of-way.
Recently, the Public Works Department recommended to the Miami City Commission
that approval be given for the construction of such passageways in return for the
provision of a "public benefit". However, there was apparently concern on the part of
members of the Commission that the determination of "public benefit" is subjective. In
some instance, the supposed "public benefit" could be of dubious value such as the
provision of open space that is difficult to access and/or maintain. In others, there may
be real value; however, there may still be question as whether the value is of
commensurate with the financial benefits that could accrue to the developer,
notwithstanding that the City limits use of the space constructed over rights-of-way is
limited to pedestrian and vehicular circulation only. No space that can be occupied on a
rental or sales basis is allowed within air rights structure. The following are examples of
how construction of passageways over rights-of-way could financially benefit the
developers seeking permission to build them:
A developer owns two parcels of land. one of which fronts on a major roadway that
provides a prestigious "address" or excellent visibility and/or accessibility while the
second fronts on a less prominent right-of-way "behind" the first. By connecting the
two parcels by a passageway, the developer can effectively imbue the second parcel
with the attributes of the first, which could potentially enable higher rents or sales
prices to be charged.
A developer proposes a mixed-use project inclusive of office, hotel and retail uses on
parcels separated by a right-of-way in which certain uses such as the retail space
are not incorporated into the development on both parcels. The construction of a
passageway over the right-of-way could facilitate movement from the office space
and/or hotel on the parcel without retail space to that with such space, thereby
increasing the potential retail traffic. which in turn can result in higher rental rates
being charged for the retail space.
We understand that because of these and similar issues that the City administration has
been tasked with the responsibility of formulating a basis for levying a fee on developers
seeking to span public rights-of-way with passageways. As discussed in the introductory
paragraph to this letter, it was further instructed that the basis for the fee should be
applicable to projects throughout the City of Miami on an equitable basis.
When MEAL was asked to assist in formulating a basis for the proposed fee, the
following additional requirements were imposed.
• The fee be easy for the staff of the Public Works Department to administer, and
Miami Economic Associates, Inc. 6864 S.W. 89th Terrace Miami, Florida 33156
Tei: (305) 669-0229 Fax: (866) 496-6107 Email: meainkgbellsouth.net
Mr. Peter G. Hernandez, P. E.
City of Miami
January 30, 2009
Page 3
• That calculating the amount of fee to be charged, information readily available from
public sources of information and/or the developer will be used.
Conceptual Basis for the Proposed Fee
MEAI believes that the proposed fee should be established based in the following
concepts:
• Monetary value can be assigned to air rights, including those over public property.
in a manner similar to real estate as the public/private partnerships that exist at
Miami -Dade County metrorail stations have shown.
Real property values --- hence; air rights as well --- vary by location based on
variety of factors that are ultimately defined by market conditions. Based on this
concept, MEAL does not believe that a single rate can be fairly established for all
situations where the construction of passageways over public rights -of -ways is
allowed. Rather in each instance the value of the air rights per square foot of
building should be based on the value of the land underlying the subject project per
square foot of building. This, however, should be done utilizing a set of procedures
that would apply to all applications regardless of location within the City of Miami for
passageways over public rights of way.
It should be noted that developers given permission to construct passageways in air
rights over public rights-of-way will not take to title to those air rights but rather will only
acquire a use right. The argument could be made that this may entitle the developer to a
discount from what would be paid if the air rights were in fact being conveyed by deed.
However, MEAL believes that the since the use right will potential last for a number of
decades, the level of appropriate discount immaterial in terms of monetary value.
Fee Calculation Methodology
Calculation of the fee that should be charged a specific project can be easily
accomplished by employing the following procedures:
Step 1
The first step for calculating the fee that should be charged to a specific project seeking
to construct a passageway over a public right-of-way is to determine the land value of
the parcels on which the proposed project will be constructed on a per square foot of
building basis. This can be accomplished as follows:
• Require the developer to provide at its expense an appraisal performed by a
qualified land appraiser acceptable to the City that estimates the land values of the
parcels on which the project will be constructed.
Miami Economic Associates, Inc. 6861 S.W. 8" Terrace Miami, Florida 33156
Tei: (305) 669-0229 Fax: (866) 496-6107 Email: meaink6belisouth.net
Mr. Peter G. Hernandez, P.E.
City of Miami
January 30. 2009
Page 4
Determine based on the zoning code that is applicable --- 11000 or Miami 21 ---
the amount of building square footage that can be constructed by right inclusive of
parking.
Calculate the land value per square foot of building by dividing the total appraised
land value of the parcels comprising the project site by the amount of building
square footage that can be constructed on those parcels by right inclusive of
parking.
Step 2
The second step in the methodology is to estimate the value of the air rights that will
be used by a proposed passageway. This would simply be accomplished by
multiplying the land value per square foot building exclusive of parking determined in
Step 1 by the total square footage of the proposed passageway including multiple
levels.
Closing
MEAL appreciates having the opportunity to be of service to the City of Miami.
Sincerely,
Miami Economic Associates, Inc.
Andrew Dolkart
President
Miami Economic Associates, Inc. 6561 S.W. 89th Terrace Miami, Florida 33156
Tet: (305) 669-0229 Fax: (866) 496-6107 Email: meaink@bellsouth.net