HomeMy WebLinkAboutArticle III - Tab 4 - Economic Impact Analysis•
ECONOMIC IMPACT ANALYSIS
TOWER 27
(Condominium and Retail Development)
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- Prepared try -
Lambert Advisory, LC
- Prepared for -
Cobalt Development
July 7, 2003
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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.
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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):
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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.
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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
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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.
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