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HomeMy WebLinkAboutEconomic Impact AnalysisOctober 3, 2003 Mr. Reinaldo Borges Borges + Associates, P.A. Miami, Florida Re: MUSP Impact Analysis Rosabella Condominiums Miami, Florida Dear Mr. Borges: Miami Economic Associates, Inc. (MEAI) has performed analysis to estimate the impacts that development of the proposed Rosabella condominium project will have on the housing market in the City of Miami's as well as on the City's fiscal and economic condition. Rosabella will be a 27-story structure containing of 258 high-rise condominium units together with their associated parking and amenities. In order to construct the project, several 2-story buildings on the southern edge of the project site that are owned by the "I AM" Sanctuary will be demolished and a new church building will be constructed on the northwest comer of the property. The project site, which is 1.72 acres in size (net), is located on the east side of Biscayne Boulevard between N.E. 22nd Street and N. E. 22"d Terrace. 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 4 Conclusion 8 6861 S.W. 89+h Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fa= (305) 669.8534 Email: meaink©bellsouth.net Mr. Reinaldo Borges Borges + Associates, P.A. October 3, 2003 Page 2 Project Description The proposed Rosabella condominium project will be constructed on a 1.72 (net) acre site that is located on the east side of Biscayne Boulevard between N.E. 22"`' Street and N.E. 22"d Avenue within the City of Miami. Development of the project will necessitate the demolition of two existing single family residences on the northwest comer of the property. When the project is completed, that portion of the site will be occupied by a new church facility for the "I AM" Sanctuary, which will replace several buildings currently owned by the Sanctuary on the southern edge of the property. Rosabella will be a 27-story structure containing 258 units that will include townhouse, loft and flat offerings. The average unit price is expected to approximate $250,000 (2003 Dollars). The structure will also contain 470 parking spaces and a variety of amenities including a lounge, weight and aerobics rooms, 2 pools, a spa and a tennis court. Development of Rosabella will require the expenditure of approximately $38.0 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 $6 million (2003 Dollars). Therefore, $42.0 million will be spent to complete the project exclusive of land acquisition, construction loan financing costs and developer's profit. Summary of Findings Development of Rosabella will be highly beneficial to the City of Miami in several important ways as summarized below. Housing Impact • Officials have long sought to attract new residential development to the core areas of the City in order to energize them during night hours and on week -ends and to provide better market support for the retailers and food and beverage establishments operating within them. Toward this end, the City Commission has recently approved a number of new residential projects in DuPont Plaza and Brickell Avenue areas of the City as well as in Omni -Edgewater area, where Rosabella will be located. • Rosabella will be located in relatively easy walking distance of the new Performing Arts Center that is now under construction. Its development is partially being funded through the use of tax increment revenues provided by the City's Omni Redevelopment District. Development of the Performing Arts Center appears to be serving as the catalyst for new construction in the Omni -Edgewater areas that its proponents predicted it would be; however, the success of that facility will, in turn, be dependent on the creation of a lively environment in the surrounding area that its prospective patrons will perceive to be safe and that contains such facilities as restaurants that will enhance their experience attending the concerts, operas and ballets that are staged within it. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 FaEc (305) 669.8534 Email: meaintk©bellsouth.net Mr. Reinaldo Borges Borges + Associates, PA. October 3, 2003 Page 3 Significant efforts are underway to improve traffic flow in the core areas of the City of Miami. Critical to the success of those efforts is to establish within them a critical mass of residential units. Fiscal Impact • Fiscal impact refers to the impact that Rosabella 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 recumnq in nature. One-time benefits will result from the payment of building permit fees during the construction period. The primary recurring fiscal benefit will be ad valorem tax receipts. The benefits that will accrue to the City are estimated below in 2003 Constant Dollars: o One-time • $ 92,190 in City building permit fees • $ 10,000 in City solid waste surcharge fees • $132,226 in City impact fees • $ 72,498 in Downtown DRI supplemental impact fees o Recurring Benefits • $395,627 annually in City General Fund ad valorem taxes • $ 48,762 annually in City Debt Service ad valorem taxes • $ 22,575 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) o Other • While the focus of MEAI's fiscal analysis was on the City of Miami; Rosabella will, as shown below, provide significant fiscal benefits to other non -municipal governmental jurisdictions that impact the lives of City residents: o $226,266 in County road impact fees (one-time) o $337,457 in School impact fees (one-time) o $269,500 in County General Fund ad valorem taxes (recurring) o $ 12,868 in County Debt Service ad valorem taxes(recurring) o $ 21,943 in County Library ad valorem taxes (recurring) o $380,073 in School Operating ad valorem taxes (recurring) o $ 30,792 in School Debt Service ad valorem taxes (recurring) Miami Economic Associates, Inc. 6861 S.W.89+11Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax (305) 669-8534 Email: meainkabellsauth.net Mr. Reinaldo Borges Borges + Associates, P.A. October 3, 2003 Page 4 Economic impact • Economic impact relates to the impact that Rosabelia 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 and restaurant expenditures of the project's residents will comprise a recurring benefit. The economic benefits summarized below are stated in 2003 Constant Dollars. o One-time • Approximately 90 percent of the near $42,0 million spent on hard and soft costs to develop Rosabelia will be spent within the City of Miami, producing an overall economic impact of $65.3 million when the multiplier effect is considered. • Project expenditures within the City of Miami will include an estimated $16.2 million for construction labor, an amount sufficient to pay approximately 365 construction workers their average annual wage of $44,350. o Recurring • Rosabelia will employ 12 workers in for property operations and maintenance who will earn approximately $317,000 annually. • A total of $3.64 million will be spent annually by Rosabelia residents in retail and restaurant establishments within the City of Miami. An additional $1.2 million in ad valorem taxes will be paid to the City of Miami, Miami -Dade County and the School Board, all of which maintain their principal offices within the City. These expenditures will have an overall economic impact on the City of $7.3 million annually 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 Rosabelia will provide to the City of Miami. All monetary amounts are stated in 2003 Constant Dollars. Project Characteristics • Rosabelia will be located along the east side of Biscayne Boulevard between N.E. 22nd Street and N.E. 22nd Terrace within the City of Miami. It will also be located within the boundaries of the Downtown Miami DRI area and the jurisdiction of the Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax (305) 669-8534 Email: mealnkebellsouth.net Mr. Reinaldo Borges Borges + Associates, P.A. October 3, 2003 Page 5 City of Miami's Downtown Development authority. It will also be within the jurisdiction of Miami -Dade County and the Miami -Dade County Public School District. • Rosabella will entail the construction of 421,243 gross square feet of building area. Of this amount, 262,408 square feet will pertain to the residential portion of the project inclusive the space contained in the 258 units as well as core, service, circulation and amenity areas. The project's 470 parking spaces and their associated driveways will account for the remaining 158,835 square feet. • Development of Rosabella will cost approximately $36 million in terms of hard construction. Soft costs including those relating to professional fees, permits, sales and leasing commissions, marketing developer overhead and administration, etc. will total $6 million. Therefore, $42.0 million will be spent to complete the project exclusive of land acquisition, construction loan financing costs and developer's profit. These figures include the costs associated with constructing a new church facility for the "I AM" Sanctuary on the northwest comer of the project site to replace existing buildings owned by the Sanctuary along the southern edge of the property that will be demolished to make room for Rosabella. • The 258 units that will be contained within Rosabella's 27-story structure will include townhouse, loft and flat offerings. It is anticipated that the average unit price will approximate $250,000, producing total sales revenues of $64,500,000. • The Constitution of the State of Florida mandates that real property be assessed for ad valorem tax purposes at 100 percent of market value. However, as practical matter assessed values approximate 80 percent of market value, or in this case, $51,600,000. Assuming that all of the units are eligible for the Homestead Exemption, Rosabella's taxable value will be $45,150,000. • Residents of the proposed condominium units will on average require an annual income of $100,000 to qualify for ownership. Based on this income estimate, it is projected that the people living at Rosabella will spend $5.2 million annually in retail and restaurant establishments. This projection assumes that they spend 20 percent of this income for this purpose. • Rosabella will employ 12 people to operate and maintain 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 space is charged for at the commercial rate. Based on the distribution of space by use discussed previously, building permit fees totaling $92,190 will be paid. A solid waste surcharge fee in the amount of $10,000, the maximum amount, will be applied. Miami Economic Associates, Inc. 6861 S.W. B9th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669.8534 Email: meaink@beilsouth.net Mr. Reinaldo Borges Borges + Associates, P.A. October 3, 2003 Page 6 • 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, storm sewers, solid waste and general services administration. The rate paid is $0.676 per square foot of new residential use. Rosabella will contain 195,600 square feet of living area, resulting in the payment of $132,226 in City impact fees. • In addition to the impact fees discussed in the preceding paragraph that are 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. According to the current table of fee coefficients, the residential rate is $281 per unit. Based on these rates, a total of $72,498 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 previously discussed, Rosabella will contain a total of 195,600 square feet in its 258 units. Accordingly, impact fees totaling $563,723 will need to be paid at the time the project's Building permit is issued. Of this amount, $226,266 will be applied to roads, $337,457 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 Rosabella's estimated taxable value of $45,150,000. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax (305) 669-8534 Entail: mealnk©bellsouth.net Mr. Reinaldo Borges Borges + Associates, P.A. October 3, 2003 Page 7 Entity Ratel$1000 Taxable value City of Miami General Fund 8.7625 Debt Service Fund 1.0800 Downtown Development Authority 0.5000 Miami -Dade County General Fund 5.9690 Debt Service Fund 0.2850 Library 0.4860 Miami -Dade County Schools Operating 8.4180 Debt Service 0.6820 I eRi Lie Miarni_nadP C:nunty 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 Rosabella will be dependent on the amount these services are used by the project's residents. The amount that will be collected can not be quantified at this time. One -Time Economic Benefits • It is estimated that approximately 90 percent of the nearly $42.0 million that will be spent on the hard and soft costs associated with development of Rosabella 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 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 $65.3 million based on application of a 1.554 multiplier. • MIG's input-output model further estimates that approximately $16.2 million of the moneys spent on hard costs within the City of Miami to construct Rosabella will be spent for labor. The average construction worker in Miami -Dade County eams approximately $44,350 per year, according to the Florida Agency for Workforce Innovation. Therefore, the project's expenditure on construction labor would support approximately 365 workers on a full-time equivalent (FTE) annual basis at their average wage rate. Recurring Economic Benefits As discussed previously, 12 people will be employed at Rosabella_ Based on wage and salary data compiled by the Florida Agency for Workforce innovation for the types of workers anticipated, it is estimated that they will eam approximately $317,000 annually. Miami Economic Associates, Inc. 6861 S.W. 89a+ Terrace Miami, Florida 33156 Tel: (305) 669-0229 Faxc (305) 669-8534 Email: meaink@beltsouth.net Mr. Reinatdo Borges Borges + Associates, P.A. October 3, 2003 Page 8 • The residents of Rosabella will spend $5.2 million annually in retail establishments and restaurants. It is estimated that approximately 70 percent of this amount, $3.64 million will be spent within the City of Miami. Additionally, the project will generate nearly $1.2 million annually 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 $7.3 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 Rosabella will be highly beneficial to the City of Miami both fiscally and economically. it will also re -enforce the City's efforts to re-establish its core area's as residential communities. 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: meaink©betisauth.net