Loading...
HomeMy WebLinkAboutArticle III - Tab 4 - Economic Impact Analysis• ECONOMIC IMPACT ANALYSIS TOWER 27 (Condominium and Retail Development) • - Prepared try - Lambert Advisory, LC - Prepared for - Cobalt Development July 7, 2003 • Economic Impact Analysis — Tower 27 Draft - For discussion purposes only Economic Impact Analysis Tower 27 Lambert Advisory has completed an Economic Impact Analysis for the development of Tower 27, a mixed use residential and commercial project located at the intersection of Southwest 27t" Avenue and Southwest 27 Street, in the City of Miami. The analysis contemplates the tangible direct and indirect economic impact which will be derived from the construction and operation of the development. The objective is to identify various benefits created by the Tower 27 development and prepare an estimate of such benefits to the City of Miami. The Tower 27 property is situated in Miami's Coconut Grove community, and is less than three miles from Miami's central business district. The property is adequately accessible to major thoroughfares including US 1, 1-95 and the Palmetto Expressway. The luxury residential and retail development will have a positive impact on the surrounding community in terms of taxes and jobs generated, general investment, as well as enhance the area's commercial/retail demand. This development will at the least help maintain economic stability wihtin the area and, if successful, attract on -going investment during the next several years. A profile of the project is as follows: Tower 27 Building Features & Profile General Features Site Size (Gross) Building Height Number of Residential Units Retail Space (rentable area) Number of Parking Spaces Detailed Building Profile Gross Building Area (wlparking) Maximum Development Area (FAR) Residential FAR Retail FAR Recreation Area Lobby/Admin. Area Gross Parking Area* 1.94 acres 14 stories 181 units 6,400 sq.ft. 307 spaces 324,800 sq.ft. 192,790 sq.ft. 181,390 sq.ft. 6,400 sq.ft. 3,000 sq.ft. 2,000 sq.ft. 132,010 sq.ft. Source: Cobalt Development Note: Lambert Advisory has not reviewed any development plans, schematics, and/or detailed physical information for the Tower 27 development. Estimates above based upon data provided by Cobalt, and/or estimates made by Lambert, which may be subject to change. • Economic Impact Analysis — Tower 27 Draft _ for discussion purposes only Development of the Tower 27 property is expected to commence construction by the fourth quarter of 2004. The construction process is anticipated to be approximately eighteen months, at approximately eighteen months, with occupancy planned for the first quarter of 2006. Furthermore, we have completed this analysis on the basis that the performance of the project in terms of sale price, absorption, timing, and costs will be provided by Cobalt Development. As such, we have not independently verified this information or data. Based upon the information provided, construction and subsequent operations of the Tower 27 development will generate considerable benefits to both the immediate area, the City of Miami and the metro -Miami community. There are four key areas where the project will provide positive economic benefit: • Short -Term construction employment and expenditure • Long -Term owner and shopper expenditure • Long -Term operating employment and operating expenditure • Indirect secondary and tertiary flow through benefits (real estate and retail) For both short-term and long-term impacts, which are detailed in the following analysis, the economic benefit to the area is the result of projected increase in revenue from primary sources including employment, wages, and taxes. Accordingly, the impact from these key sources comes from two distinct measures: 1.) Direct Expenditures — include disbursements for site acquisition and development (hard and soft costs); and, 2.) Indirect Expenditures — net additional expenditures that flow into the local economy as a result of the new development. We have made an attempt to quantify the tangible impacts from direct and indirect expenditures. However, potential intangible impacts such as the project's ability to serve as a catalyst for future development in the immediate area is not included in the analysis since it is almost impossible to capture these ethereal aspects of the project in numbers. The following analysis sets forth the economic impact the four key sources as follows: Impact from Short -Term Construction Employment and Expenditure The impact from short-term construction employment and expenditure is directly associated with the project's development; the following table details estimated development costs as provided by Cobalt Development (rounded): • • • • Economic impact Analysis — Tower 27 Draft - for discussion purposes only Development Costs Tower 27 Item Cost Hard Costs $ 24,000,000 Soft Costs (includes contingency, profit) $ 8,000,000 Total! $ 32,000,00O Note: Hard and soft costs represent an estimated allocation of Total cost provided by Cobalt Development. While the vast majority of expenditure of each of these items will be made within Miami - Dade County, the City of Miami will capture a significant share of the outflow from development. Of hard costs, approximately 60 percent ($14.4 million) will be spent in labor and 40 percent ($9.6 million) in materials. Over an estimated 18 month construction period at an average annual construction wage of $34,420 in Miami -Dade County' and a 1.4 times benefit/overhead multiplier per worker, there will be nearly 200 Full Time Equivalent (FIE) jobs created over the period. Additionally, it is assumed that more than $2.0 million will be spent in professional fees entirely to Miami area firms. Given an average profit margin of 15% and 30% overhead for these firms, this equates to $1.1 million in total professional wages. Taxes and impact fees to the City and County during the construction period will be approximately $1 million which will be available for public expenditures associated with the project including developmental, administrative, permitting, schools, and other costs. A detail profile of impact fees and other relevant non -impact fees paid to the City and Miami -Dade County as a result of the development of Tower 27 is included in the following table: State of Florida 2002 ES-202 (Quarterly) Economic .Impact Analysis — Tower 27 Draft - for discussion purposes only Tower 27 Economic Impact Analysis Impact and Other Fees Impact Fees: Total City of Miami Development Impact Fee (Ord. 10426) $178,012 City of Miami Development Impact Admin. Fee $5,340 Miami Dade County Schools $277,288 TOTAL IMPACT FEES $460, 640 Other/Non-Impact Fees: Miami Dade W.A.S.A. Connection Fee $255,135 Building Permit Fee $34,903 Roadway Impact Fee $173,185 Variance Fee (height) $12,697 Energy Installation Fee $24,319 M.U.S.P Application Fee $65,000 Dade County Code Compliance $16,000 Radon Gas Fee $2,432 Fire Plan Review Fee $2,189 Ground Cover Fee $828 Land Use/Zoning, Review for Bidg.Permit $786 Certicate of Occupancy $250 Application Fee $35 TOTAL OTHER FEES $587,758 TOTAL PROJECT FEES $1,048,398 Source: City of Miami Planning, Building & Zoning Dept.; Miami Dade County; Cobalt Development On -Going Impact from Tenant and Shopper Expenditure Based upon demographic and rental housing trends in the area, Tower 27 resident base is expected to primarily be younger working professionals. Considering the proposed average sale price of $250,000, it is assumed that the residents will comprise mostly middle and upper income individual/households with a 2002 median household income of at least $85,000. Therefore, with a total of 181 households in the building, total personal income for the building is estimated to exceed $15.4 million. Assuming 50 percent of the owners will be new residents to the City, the marginal added personal income to flow into the Miami area is in the range of $7,7 million. To measure the marginal impact of $7.7 million in household income on retail sales and additional space demanded, we have used the Lambert Advisory Retail Trade Model to develop estimates. The full model is included as an Attachment to this report, but the following table highlights additional retail expenditure and demand for space as a result of development and sale of the units by early 2006. • Economic Impact Analysis — Tower 27 Draft -.for discussion purposes only Tower 27 Area Expenditure Potential (From Net New Miami — Tower 27 Residents) 2006 Type of Good Estimated Marginal Growth —rower 27 Expenditure (2006) Sales per Square Foot Square Feet Demanded General Merchandise $170,279 $227 750 Apparel & Accessories $163,825 $290 560 Furniture, Home & Equip. $67,904 $227 299 Electronic & Appliance Stores $64,947 $200 325 Sporting Goods $61,948 $250 248 Misc. Shoppers Goods $94,483 $420 225 Shoppers Goods Sub -Total $623,386 $258 2,412 2,400 Food Stores $1,012,890 $422 Eating & Drinking Establishments $650,363 $375 1,734 Drug $279,642 $407 687 Liquor $18,665 $280 67 Convenience Goods Sub -Total $1,961,560 $401 4,888 Building $139,820 $115 1,216 [ Total $2,101,380 $258 8,516 In addition to the impact that Tower 27 residents will have both locally and regionally, the development includes 6,400 square feet of retail that will occupy the ground floor of the building. This additional retail space will primarily attract expenditure from the area surrounding the property, with limited additional support from visitors from outside of the area. Assuming that 20 percent of the expenditure in Tower 27 stores comes from outside of the City, and based upon a Sales per Square Foot (for Shopper Goods) of $258, dose to $310,000 will be expended within the City per year which is now going to other areas. Impact from On -Going Operations of the Building There are a number of areas where there will be positive public benefit or economic impact from the on -going operation of the residential and retail space. These include: • Additional Employment from Operation of the Condominium Community and Store • Property Tax Revenue to the City of Miami and Miami -Dade County • Increased Sales Tax Revenue from Store to State and County • Purchase of Goods and Services We estimate that approximately six FTE workers will be needed to operate the building and five FTE workers for the store(s). Skills ranging from building management, parking garage attendants, maintenance staff, retail workers, and security personnel will be • • • • Economic Impact Analysis Tower 27 Draft for discussion purposes only required. At an average Miami -Dade County wage of $34,6352 the operation of the building and stores will create approximately $380,000 in wages each year. Jobs created will be available to a wide range of area residents with various skill levels. Increased sales tax revenue would result from the operation of the retail space of 6,400 square feet. Assuming the net new retail expenditure in stores totals $310,000, approximately $20,000 in additional sales tax will be collected from retail sales. Additionally, an estimated $150,000 in goods and services will be purchased on an annual basis within Miami -Dade. This includes cleaning services, maintenance supplies, utilities, etc. Finally, the Tower 27 development will provide significant benefit to the City and County by way of real property and personal property (ad valorem) taxes. The tax amount is based upon the County Tax Collector's (2002) millage rate of 26.8205 (per thousand dollars of value), broken down as follows: Tower 27 Economic Impact Analysis Ad Valorem Tax Breakdown Item Annual Millage Tax City of Miami Operating 8.850 $345,809 City of Miami Debt 1.218 $47,593 School Operations 8.482 $331,430 School Debt 0.77 $30,087 Environmental Projects 0.100 $3,907 S. Florida Water Management 0.597 $23,327 FIND 0.0385 $1,504 County Millage 5.889 $230,110 County Debt 0.39 $15,239 Library 0.486 $18,990 TOTAL 26.8205 $1,047,998 Source: Dade Miami Dade County Property Appraiser Real property is typically assessed at between 80 and 90 percent of Fair Market Value, For this analysis, we estimate ad valorem taxes for Tower 27 based upon 85 percent of the projected average sale price of $250,000, plus the retail area valued at $120 per square foot, or $39,0 million in assessed value. Therefore, the real property taxes that will be generated annually from the property should exceed $1,05 million by 2007. Accordingly, this represents an estimated net marginal increase of roughly $900,000+ over the ad valorem tax collection the City would receive if the property were valued at an estimated land assessment of $5+ million. 2 State of Florida 2002 ES-202 (Quarterly) Economic impact Analysis — Tower 27 Draft - for discussion purposes only Indirect Flow -Through Benefits There will be a number of long term indirect flow through benefits beyond construction from the project particularly from the increase in retail and operations employment. The six FTE jobs created as a result of building operations is assumed to have a multiplier impact of 6 additional jobs. Additional retail employment at the property is expected to add an additional five jobs from the multiplier impact. All multipliers are derived from the U.S. Department of Commerce's 1999 RIMS II model. These are indirect secondary and tertiary impacts which are created as the ripple impact of the primary employment related to the operation of the building and new retail space which will be felt throughout the region. • •