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HomeMy WebLinkAboutEconomic Impact StudySeptember 4, 2003 Mr. A. J. Cabrera, Jr. Miami River Village, LLC Miami, Florida Re: MUSP Impact Analysis Miami River Village Miami, Florida Dear Mr. Cabrera: Miami Economic Associates, Inc. (MEAT) has performed analysis to estimate the impacts that development of the proposed Miami River Village project in the Downtown Miami will have on the housing market in the City of Miami's Central Business District (CBD) as well as on the City's fiscal and economic condition. Miami River Village will be comprised of 1,304 high-rise condominium units. It will also include 32,532 square feet of retail and restaurant space and 92,043 square feet of condominium office space. The project is expected to be developed in three phases on a currently vacant parcel along the north shore of the Miami River within the City of Miami's Central Business District. The parcel is bounded on the north by S.W 3rd Street and is situated between the ramps of the South Miami Bridge to the east and the Metrorail guideway to the west. Information about MEAI and my personal resume are appended to this letter. The analysis presented in this letter was prepared utilizing data prepared by Robert Cruz, Ph.D., a specialist in quantitative economics, modeling and simulation analysis. Dr. Cruz is an Associate Professor in Economics at Barry University. He received his Ph.D. in economics from the University of Pennsylvania. This letter is organized as follows: Section Page Project Description 2 Summary of Findings 2 Impact of the Housing Market 2 Fiscal Impact 3 Economic Impact 4 Bases of Estimates 5 Conclusion 9 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fa= (305) 669-8534 Email: meaink@bellsauth.net Mr. A. J. Cabrera, Jr. Miami River Village, LLC September 4, 2003 Page 2 Project Description Miami River Village will be comprised of three residential towers containing a total of 1,304 condominium units. The project will also contain 32,532 net square feet of retail space and 92,0.43 square feet of condominium office space. A total of 1,992 parking spaces will provided. A mixture of one-, two- and three -bedroom condominium units will be offered that will generally range in size between 500 and 1,200 square feet. Two-bedroom/two-bath units will be the predominant unit type, accounting for approximately 60 percent of the project. The proposed units, exclusive of those at the penthouse level, are expected to sell for prices ranging from $150,000 to $460,000 (2003 Dollars). The "average" residential unit within the project will sell for $290,000. With respect to the commercial uses proposed within the project, the retail space and restaurant space is projected to lease at an average rate of $22.50 on a triple net basis (2003 Dollars). The office space will be offered as office condominiums at an average price of $275 per square foot (2003 Dollars). Development of Miami River Village will require the expenditure of approximately $205.0 million (2003 Dollars) for "hard construction". "Soft costs" including those relating to professional fees, permits, sales and leasing commissions, marketing developer overhead and administration, etc. will total $30 million (2003 Dollars). Therefore, $235.0 million will be spent to complete the project exclusive of land acquisition and construction loan financing costs and developer's profit. Summary of Findings Development of Miami River Village will be highly beneficial to the City of Miami in several important ways as summarized below. Impact on the Housing Market • Officials of the City of Miami as well the City's Downtown Development Authority (DDA) have long sought to attract new residential development to the City's Central Business District (CBD) in order to energize the area during night hours and on week -ends and to provide better market support for its retailers and food and beverage establishments. Toward this end, the City Commission has recently approved a number of new residential projects, including the development of 1,500 condominium units along with commercial uses in the DuPont Plaza area of the CBD. Other projects have been approved in the Omni -Edgewater and Brickell areas. Further indication is the City Commission's commitment to increasing the Downtown residential population was its decision to amend the City Code to permit residential developers to contract with the operators of existing parking facilities to provide the parking required for the residents of future projects instead requiring them to build new parking. This change will significantly improve project economics, thereby serving as an incentive for new residential construction. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax (305) 669-8534 Email: meaink©bellsouth.net Mr. A. J. Cabrera, Jr. Miami River Village, LLC September 4, 2003 Page 3 • In addition to adding long -desired units to the CBD, Miami River Village will be beneficial in two additional ways as follows: o It will extend new housing development activity into a portion of the CBD where no construction.. is currentlyunderway;... and o It will provide for -sale units that will likely be more moderately priced than the overwhelming majority of those currently being proposed in Downtown Miami, thereby increasing the size and diversity of the CBD's potential residential market. Fiscal Impact Fiscal impact refers to the impact that Miami River Village will have on the finances of the City of Miami. The benefits that it will provide to the City will be both one-time and recurring in nature. One-time benefits will result from the payment of building permit fees and impact fees during the construction period. The primary recurring fiscal benefit will be ad valorem tax receipts. The benefits to the City are estimated to be as follows: o One-time (2003 Dollars) • $ 560,178 in City building permit fees • $ 30,000 in City solid waste surcharge fees • $1,089,286 in City impact fees • $ 470.397 in Downtown DRI supplemental impact fees o Recurring Benefits (2003 Dollars) • $2,691,894 annually in City General Fund ad valorem taxes • $ 360.568 annually in City Debt Service ad valorem taxes • $ 148,017 annually in DDA ad valorem taxes o Non -Quantifiable • Trade -related fees for roofing, electrical, plumbing, mechanical, pool and elevator work performed during construction (one-time) • Increased City utility taxes and franchise fees (recurring) • Increased City occupational license fees (recurring) o Other • The focus of MEAI's fiscal analysis was on the City of Miami; however, the proposed project will provide significant fiscal benefits to other non - municipal governmental jurisdictions that impact the lives of City residents. Illustratively in 2003 Dollars: Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel; (305) 689-0229 Fax (305) 669-8534 Email: meaink©belisouth.net Mr. A. J. Cabrera, Jr. Miami River Village, LLC September 4, 2003 Page 4 o $1,413,070 in County road impact fees (one-time) o $2,040,784 in School impact fees (one-time) o $1,743,340 in County General Fund ad valorem taxes (recurring) o $ 115,453 in County Debt Service ad valorem taxes(recurring) o $ 143,872 in County Library ad valorem taxes (recurring) o $2,510,954 in School Operating ad valorem taxes (recurring) o $ 227,946 in School Debt Service ad valorem taxes (recurring) o Increased occupational license fees (recurring) Economic Impact • Economic impact relates to the impact that Miami River Village will have on the economy of the City rather than its finances. The economic benefits it will provide will also be one-time and recurring in nature. Salaries paid to construction workers will constitute an important one-time benefit. The annual retail expenditures of the people working within the project and its hotel guests will comprise the recurring benefit. Miami River Village will economically benefit the City as follows: o One-time • Approximately 90 percent of the near $235.0 million required to construct and market Miami River Village will be spent within the City of Miami, producing an overall economic impact of $346.9 million when the multiplier effect is considered.' Project expenditures within the City of Miami will include an estimated $92.2 million for construction labor, an amount sufficient to pay approximately 2,080 construction workers their average annual wage of $44, 350. o Recurring • Miami River Village will house 469 workers including 20 who will be involved in property operations and maintenance, 81 retail and restaurant workers and 368 in financial, professional and business service firms. It is estimated that these workers will eam $20.9 million annually (2003 Dollars). • A total of $24.83 million (2003 Dollars) will be spent annually by Miami River Village residents in retail and food and beverage establishments within the City of Miami. An additional $7.94 million in ad valorem taxes will be paid to the City of Miami, Miami -Dade County and the School 1 When money is spent in a specific geographic area, it may circulate through the economy of that area additional times as the recipient uses it to purchase goods and services. "Multiplier effect" refers to the number of times that the same money circulates through the economy of the specific geographic area. Miami Economic Associates, Inc. 6861 S.W. 89t Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax (305) 669-8534 Email: mealnk@bellsouth.net Mr. A. J. Cabrera, Jr. Miami River Village, LLC September 4, 2003 Page 5 Board, all of which maintain their principal offices within the City. These expenditures will have an overall economic impact on the City of $49.2 million when the multiplier effect is considered. Bases of Estimates The materials that follow provide the assumptions used to estimate the fiscal and economic benefits that development of Miami River Village will provide to the City of Miami. Project Characteristics • Miami River Village will be located within the Central Business District of the City of Miami on a site between S.W. 311:1 Street to the north, the Miami River to the South, the ramps of the South Miami Bridge to the east and the Metrorail guideway to the west. The project will be located on property that is currently vacant. • Miami River Village will entail the construction of 2,588,289 gross square feet of building area. Of this amount, 1,737,880 square feet will pertain to the residential portion of the project while 151,008 square feet will comprise the commercial elements. These figures include an allocation of the circulation and back of the house space on a pro rata basis. The project's parking garages will contain of 699,401 square feet. • Development of Miami River Village will cost approximately $205.0 million (2003 Dollars) in terms of "hard construction" costs. "Soft costs" including those relating to professional fees, permits, sales and leasing commissions, marketing developer overhead and administration, etc. will total $30 million (2003 Dollars). Therefore, $235.0 million will be spent to complete the project exclusive of land acquisition and construction loan financing costs and developer's profit. • Miami River Village, when fully competed, will consist of 1,304 condominium units, Two -bedroom units will predominate; however, one -bedroom and three -bedroom units will also be offered. The units will generally range from 500 to 1,200 square feet in size and be priced, exclusive of penthouses, from $150,000 to $460,000 (2003 Dollars). The "average» unit will sell for $290,000, producing a total sell -out value of $378.16 million (2003 Dollars). • Miami River Village will contain 32,532 net square feet of retail space. The market value of this space, assuming a net rental rate of $22.50 per square (2003 Dollars) and a 10 percent capitalization rate, will be $7,319,700 (2003 Dollars). • The 92,053 square feet of office space will be offered to the market on a "for -sale" basis at an average price of $275 per square foot. The total market value of this space will be $25,311,825. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: mealnic@beilsouth.net Mr. A. J. Cabrera, Jr. Miami River Village, LLC September 4, 2003 Page 6 • The Constitution of the State of Florida mandates that the real property be assessed at 100 percent of market value. The total market value of Miami River Village inclusive of the residential units and the retail and office space will be $410,791.525 (2003 Dollars). However, as a general rule, property is assessed at a rate approximating. 80. percent _of..market value when newly placed on. the tax rolls.. At8© percent, the assessed value of Miami River Village will be $328,633,220. The taxable value, after deduction of the $25,000 Homestead Exemption on each of the 1,304 condominium units, will be $296.033, 220 (2003 Dollars). • Residents of the proposed condominium units will on average require an annual income of $136,000 to qualify for ownership. Based on this income estimate, it is projected that the people living at Miami River Village will spend $35.47 million annually (2003 Dollars) in retail and food and beverage establishments. This projection assumes that they spend 20 percent of this income for this purpose. • Miami River Village will employ 20 people to operate and maintain the project. Additionally, 81 people will work in the project's retail space, assuming a ratio of 2.5 employees per 1,000 square feet. The proposed office condominium space will house 368 workers, assuming a ratio of 4 workers per 1,000 square. A total of 469 people will be employed at the project. One-time Fiscal Impacts • The City of Miami charges building permit fees at a rate of $0.20 per gross square foot of multi -family residential construction and $0.25 per gross square foot of commercial construction. In calculating fees, the square footage associated with the parking garage is charged for at the commercial rate. Based on the distribution of space by use discussed previously, building permit fees totaling $560,178 will be paid. A solid waste surcharge fee in the amount of $10,000, the maximum amount, will be applied to each building permit, or $30,000 total assuming the project is permitted in three phases. • The various trades involved in completing a new project including the roofing, electrical, plumbing, mechanical, elevator and swimming pool contractors are required to pay fees on their work. Calculation of the fees that are paid requires that the project's final engineering drawings be completed, which has not yet occurred. Accordingly, the fees that will be paid can not be quantified at this time. A solid waste surcharge is applied to these fees. • The City of Miami charges impact fees on new construction projects based on square footage. The fees are used to address the impacts of the project on police, fire, parks, streets, stormwater, solid waste and general administration services. The rate paid is $0.676 per square foot of new residential use and $1.398 per square foot of non-residential use. For impact fee purposes, Miami River Village will consist of 1,353,743 square feet of residential use and 124,575 square feet of non-residential space, resulting in City impact fees totaling $1,089,286. Miami Economic Associates, Inc. 6861 S.W. 89+h Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax(305) 669-8534 Email: meainkkbellsouth.net Mr. A. J. Cabrera, Jr. Miami River Village, LLC September 4, 2003 Page 7 • In addition to the impact fees discussed in the preceding paragraph that area charged to projects anywhere within the City of Miami, supplemental impact fees are charged on all projects located in the area covered by the Downtown DRI. The rates vary depending on use. According to the current table of fee coefficients, the residential rate...is...$281 per unit. The... rates ...for ..office and ...retail space are $0.76 and $0.861 per square foot. Based on these rates, a total of $470,397 in Downtown DRI supplemental impact fees will be paid. • New construction projects located in the City of Miami also need to pay impact fees to Miami -Dade County for roads and schools. Residential projects located in the eastern portion of the county pay $877 per unit for roads. The road impact fee rate for retail and office space in the eastern portion of Miami -Dade County is $1.255 and $2.484 per square foot, respectively. The base fee per unit for school impact fees is $612. An additional amount of $0.918 per square foot is then applied. As discussed in the preceding paragraph, Miami River Village will contain a total of 1,353,743 square feet in its 1.304 residential units. The quantities of retail and office space subject to impact fees are 32,532 and 92,043 square feet, respectively. Accordingly, a total of $2,453,854 will be paid to the County in impact fees prior to commencing construction of Miami River Village. Of this amount, $1,413,070 will be applied to roads, $2,040,784 for schools. Recurring Fiscal Impacts • The millage rates currently being levied for ad valorem tax purposes by the governmental entities referenced in the Summary of Findings are shown in the table immediately following. The ad valorem tax revenues projected in the Summary of Findings were calculated by applying the millage rates shown to Miami River Village' estimated taxable value of $324,788,000 (2003 Dollars). Entity Ratef$1000 Taxable Value City of Miami General Fund 8.8500 Debt Service Fund 1.2180 Downtown Development Authority 0.5000 Miami -Dade County General Fund 5.8890 Debt Service Fund 0.3900 Library 0.4860 Miami -Dade County Schools Operating 8.4820 Debt Service 0.7700 Source: 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 as a result the development of Miami River Village will be dependent on the amount these services are used by the project's residents and commercial Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel; (305) 669-0229 Fax: (305) 669-8534 Email: meainkebeilsouth.net Mr. A. J. Cabrera, Jr. Miami River Village, LLC September 4, 2003 Page 8 tenants/occupants. The amount that will be collected can not be quantified at this time. • Businesses operating within the City of Miami pay occupational license fees on an annual basis, The amount that the City will receive will be dependent on the specific mix of businesses that occupy the commercial space proposed for development at Miami River Village; hence, it can not be quantified at this time. • Businesses operating within the City of Miami also pay occupational license fees to Miami -Dade County on an annual basis. The amount that the County will receive will be dependent on the specific mix of businesses that occupy the commercial space proposed for development at Miami River Village; hence, it can not be quantified at this time. One -Time Economic Benefits • It is estimated that approximately 90 percent of the nearly $235.0 million that will be spent on the hard and soft costs associated with development of Miami River Village will initially be spent in the City of Miami. This estimate is based on an anticipation of the specific firms will be involved in implementation of the Miami River Village project. According to the input-output model of Minnesota IMPLAN Group (MIG), which is one of the nation's foremost econometric firms, the overall economic impact of these expenditures will be $346.9 million based on application of a 1.554 multiplier. • MIG's input-output model further estimates that approximately $92.2 million of the moneys spent within the City of Miami to construct the proposed project will be spent for labor. The average construction worker in Miami -Dade County earns approximately $44,350 per year, according to the Florida Department of Labor and Employment Security. Therefore, the projects expenditure on construction labor would support approximately 2,080 workers on a full-time equivalent (FTE) annual basis at their average wage rate. In fact, since the project will be built in phases that which will each take approximately 2 years to complete, it will employ a smaller number of people but over a period of years. Recurring Economic Benefits • As discussed previously, a total of 469 will be employed at Miami River Village. Based on wage and salary data compiled by the Florida Department of Labor & Employment Security for the types of workers anticipated, it is estimated that they will earn $20.9 million annually (2003 Dollars). • The residents of Miami River Village will spend $35.47 million annually (2003 Dollars) in retail establishments and restaurants. It is estimated that approximately 70 percent of this amount, $24.83 million will be spent within the City of Miami. Additionally, the project will generate approximately $7.94 million annually (2003 Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax (305) 669-8534 Email: meaink©bellsouth.net Mr. A. J. Cabrera, Jr. Miami River Village, LLC September 4, 2003 Page 9 Dollars) in ad valorem taxes for the City of Miami, Miami -Dade County and the School Board, all of which maintain their principal offices within the City. According to the MIG input-output model, the total economic impact of these expenditures will be $49.2 million based on the application of a 1.5 multiplier. Additional impact will result from the non -labor expenditures made for property maintenance. A maintenance budget is not presently available. Conclusion The analysis performed by MEAI demonstrates that development of Miami River Village will be fiscally and economically highly beneficial to the City of Miami. It will also assist the City in meeting its housing objectives in the Downtown area. MEAI is available to respond to questions regarding its analysis and the conclusions stated herein. We can be reached at (305) 669 — 0229. Sincerely, Miami Economic Associates, Inc. Andrew Dolkart President Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meainkkbelisouth.net