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HomeMy WebLinkAboutEconomic Impact Analysis• • • February 5, 2004 Mr. Reinaldo Borges Borges t Associates, P.A. Miami, Florida Re: MUSP Impact Analysis - Infinity Dear Mr. Borges: Miami Economic Associates, Inc. (MEAT) has performed analysis to estimate the impacts that development of the proposed Infinity project will have on the housing market in the City of Miami as well as on the City's fiscal and economic condition. Infinity will be a 53- story structure located at 60 Coral Way. It will contain 426 high-rise condominium units and their associated amenities, 4,654 square feet of retail space, 46,386 square feet of office space and parking for all the enumerated uses in excess of code. 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 2 Economic Impact 3 Bases of Estimates 4 Conclusion 8 6861 S.W. 89th Terrace Mimi, Florida 33156 Tel: (305) 669-0229 Fax (305) 669-8534 Email: meainktbellsouth.net Mr. Reinaido Borges Borges + Associates, P.A. February 5, 2004 Page 2 Project Description Infinity will be constructed on a .99 (net) acre site that is located at 60 Coral Way within the City of Miami. The 53-story project will contain a total of 426 for -sale loft and flat units, inclusive of studio, 1-bedroom, 2-bedroom and 3-bedroom offerings. Units within the project will range in size from 508 to 2,388 square feet, with the average unit approximating 1,100 square feet. Original offering prices range from $159,900 to in excess of $1 million, depending on unit size and location within the building. It is anticipated that the proceeds from the sale of units will approximate $155.3 million. Infinity will also include the development of 4,654 square feet of retail space, 46,386 square feet of office space and 585 parking spaces, which are 96 more than is required by code. It is anticipated that the commercial space will rent for approximately $30 per square foot net. Development of Infinity will require the expenditure of approximately $74.5 million (2004 Dollars) for "hard" construction. "Soft" costs including those relating to professional fees, permits, sales and leasing commissions, marketing, developer overhead, administration, etc. will total $15.3 (2004 Dollars). Therefore, $89.8 million will be spent to complete the project exclusive of land acquisition, financing costs, permit fees and developer's profit. Summary of Findings Development of Infinity will be highly beneficial to the City of Miami in several important ways, as summarized below. Housing Impact • City officials have long sought to attract new residential development to the core areas of Miami 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. They have also sought to foster more economic diversity within the City, which is currently one of the poorest major metropolitan areas in the nation. Toward this end, the City Commission has recently approved a number of new residential projects in the DuPont Plaza and Omni - Edgewater areas and along the River as well as in the Brickell Avenue area, which is where Infinity will be located. • 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 critical masses of residential units with access to transit. Infinity is located at the southern terminus of the Metromover system and with easy walking distance of Metrorail, Fiscal Impact • Fiscal impact refers to the impact that Infinity 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 Miami Economic Associates, Inc. 6861 S.W. 89Th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meainkebeilsouth.net Mr. Reinaldo Borges Borges + Associates, P.A. February 5, 2004 Page 3 in nature. One-time benefits will result from the payment of building permit and other 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 2004 Constant Dollars: o One-time • $ 177,990 in City building permit fees • $ 10,000 in City solid waste surcharge fees • $ 389,782 in City impact fees • $ 163,181 in Downtown DRI supplemental impact fees • $ 700,350 in affordable housing bonus fees o Recurring Benefits • $ 1,130,203 annually in City General Fund ad valorem taxes • $ 139,260 annually in City Debt Service ad valorem taxes • $ 64,473 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, Infinity will, as shown below, provide significant fiscal benefits to other non - municipal governmental jurisdictions that impact the lives of City residents: o $ 499,501 in County road impact fees (one-time) o $ 683,133 in School impact fees (one-time) o $ 769,672 in County General Fund ad valorem taxes (recurring) o $ 36,749 in County Debt Service ad valorem taxes(recurring) o $ 64,473 in Children's Trust ad valorem taxes (recurring) o $ 62,677 in County Library ad valorem taxes (recurring) o $ 1,085,459 in School Operating ad valorem taxes (recurring) o $ 87,940 in School Debt Service ad valorem taxes (recurring) Economic Impact • Economic impact relates to the impact that Infinity 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 Miami Economic Associates, Inc, 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fa= (305) 669-8534 Email: meainlc@belisauth.net Mr. Reinaldo Borges Borges + Associates, P.A. February 5, 2004 Page 4 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. 0 One-time • Approximately 90 percent of the near $89.8 million spent on hard and soft costs to develop Infinity will be spent within the City of Miami, producing an overall economic impact of $125.6 million when the multiplier effect is considered. • Project expenditures within the City of Miami will include an estimated $37.3 million for construction labor, an amount sufficient to pay approximately 840 construction workers their average annual wage of $44, 350. o Recurring • Infinity will employ 210 workers in for property operations and maintenance who will eam in excess $8.5 million annually. • A total of $8.7 million will be spent annually by Infinity residents and workers in retail and restaurant establishments within the City of Miami. An additional $3.5 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 $18.3 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 Infinity will provide to the City of Miami. All monetary amounts are stated in 2004 Constant Dollars. Project Characteristics • Infinity will be located at 60 Coral Way within the City of Miami. It will also be located within the boundaries of the Downtown Miami DRI area and the jurisdiction of the City of Miami's Downtown Development authority. It will also be within the jurisdictions of Miami -Dade County and the Miami -Dade County Public School District. • Infinity will entail the construction of 816,213 gross square feet of building area. Of this amount, 521,268 square feet will pertain to the residential portion of the project. This area includes the space contained in the 426 residential units and their Miami Economic Associates, inc. 6861 S.W. 89" Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax (305) 669-8534 Email: meaink@bellsouth.net Mr. Reinaldo Borges Borges + Associates, P.A. February 5, 2004 Page 5 associated amenities as well as an allocation of the project's core, service and circulation areas. The commercial portion of the project will total 54,987 square feet, including an allocation for core, service and circulation space. The remainder of the space, 239,958 square feet, will contain the 585 parking spaces and their associated driveways. • Development of Infinity will cost approximately $74.5 million to construct in terms of hard construction. Soft costs including those relating to professional fees, sales and leasing commissions, marketing developer overhead, administration, etc. will total $15.3 million. Therefore, $89.8 million will be spent to complete the project exclusive of land acquisition, financing costs, permit fees and developer's profit. • At the current offering prices, Infinity's 426 units will generate $155.3 million in sales proceeds. The "average" unit will be priced at approximately $365,000 • 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, $124.2 million. Assuming that 70 percent of the units are eligible for the Homestead Exemption, the taxable value of Infinity's residential units will be $116,745,000. • For the purpose of this analysis, it is assumed that the commercial space within the project will lease for approximately $30 per square foot net, which would translate into market value of $300 per square foot at a 10 percent capitalization rate. Therefore, the total assessed and taxable value of the commercial space would be $12.2 million, bringing the total taxable value of the project to $128,945,000. • Residents of the proposed condominium units will on average require an annual income of approximately $140,000 to qualify for ownership. Based on this income estimate, it is projected that the people living at Infinity will spend $11.9 million annually in retail and restaurant establishments. This projection assumes that they spend 20 percent of this income for this purpose. • It is anticipated that approximately 210 people will work at Infinity inclusive of office and retail workers and project staff. Their expenditures during the workday for food and other retail items are expected to approximate $500,000 annually. One-time Fiscal Impacts • The City of Miami charges building permit fees at a rate of $0.20 per gross square foot of mufti -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 $177,990 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. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fmc (305) 669-8534 Email: meaink@l6ellsouth,net Mr. Reinaldo Borges Borges + Associates, P.A. February 5, 2004 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 will be 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 and $1.398 per square foot of commercial use. Infinity will contain 471,047 square feet of living area and 51,040 of commercial space, resulting in the payment of impact fees totaling $389,782. • 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. The commercial rates are $0.861 for office space and $0.760 for retail space. Based on these rates, a total of $163,181 in Downtown DRI supplemental impact fees will be paid. • The City of Miami permits projects within specific sections of the City to purchase a 25 percent F.A.R. bonus by paying moneys into an affordable housing fund, Infinity will pay $700,350 to the fund. 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 eastem portion of Miami -Dade County is $2.294 and $2.484 per square foot, respectively, for the quantities of space proposed. 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, Infinity will contain a total of 471,047 square feet in its 426 residential units. Accordingly, impact fees totaling $1,192,634 will need to be paid at the time the project's Building permit is issued. Of this amount, $499,501 will be applied to roads, $693,133 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 Infinity's estimated taxable value of $128,945,000. Miami Economic Associates, inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax (305) 669-8534 Email: meainkebellsouth.net Mr. Reinaldo Borges Borges + Associates, P.A. February 5, 2004 Page 7 Entity Ratel$1f 0 Taxable Value Taxes City of Miami General Fund 8.7650 $ 1,130,203 Debt Service Fund 1.0800 $ 139,260 Downtown Development Authority 0.5000 $ 64,473 Miami -Dade County General Fund 5.9690 $ 769,672 Debt Service Fund 0.2850 $ 36,749 Children's Trust 0.5000 $ 64,473 Library 0.4860 $ 62,677 Miami -Dade County Public Schools Operating 8.4180 $ 1,085,459 Debt Service 0.6820 $ 87,940 Source: Miami -Dade County Property Appraiser; Miami Economic Associates, lnc. • 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 Infinity 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 $89.8 million that will be spent on the hard and soft costs associated with development of Infinity 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 $125.6 million based on application of a 1.554 multiplier. • MIG's input-output model further estimates that approximately $37.3 million of the moneys spent on hard costs within the City of Miami to construct Infinity 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 840 workers on a full-time equivalent (FTE) annual basis at their average wage rate. Recurring Economic Benefits • As discussed previously, it is estimated that 210 people will be employed at Infinity. Based on wage and salary data compiled by the Florida Agency for Workforce innovation for the types of workers anticipated, it is estimated that the earnings of these individuals will exceed $8.5 million annually. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: nsealnk6beilsouth.net Mr. Reinaldo Borges Borges + Associates, P.A. February 5, 2004 Page 8 70 percent of this amount, $8.7 million, will be spent within the City of Miami. Additionally, the project will generate nearly $6.9 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 $23.4 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 MEAT demonstrates that development of Infinity 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 areas 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: meainkateltsouth.net