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HomeMy WebLinkAboutEconomic Impact StudySeptember 22, 2004 Mr. A. J. Cabrera, Jr. Epoch Corporation Miami, Florida Re: MUSP Impact Analysis River Front Miami, Florida Dear Mr. Cabrera: Miami Economic Associates, Inc. (MEAT) has performed analysis to estimate the impacts that development of the proposed River Front 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. River Front will be comprised of 1,424 high- rise condominium units. It will also include 41,994 square feet of retail and restaurant space and 52,800 square feet of condominium office space. The project will consist of 3 buildings on the eastern half of vacant parcel along the north shore of the Miami River immediately west of the South Miami Avenue Bridge within the City of Miami's Central Business District. The property on which the three buildings will be constructed is 7.12 acres (gross) in size and is bounded on the north by S.W 3rd Street. This letter is organized as follows: Section Page Project Description 1 Summary of Findings 2 Impact of the Housing Market 2 Fiscal Impact 2 Economic Impact 3 Bases of Estimates 4 Conclusion 8 Project Description River Front will be comprised of three residential towers containing a total of 1,424 condominium units. The project will also contain 41,994 net square feet of retail space and 52,800 square feet of condominium office space. A total of 1,671 parking spaces will be provided, a number that substantially exceeds the code requirement. 6861 S.W. 89' Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meainkCJbellsouth.net Mr. A. J. Cabrera, Jr. Epoch Corporation September 22, 2004 Page 2 A mixture of one-, two- and three -bedroom condominium units will be offered. The "average" residential unit within the project will sell at a price equating to $325 per square foot. 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 (2004 Dollars). The office space will be offered as office condominiums at an average price of $275 per square foot (2004 Dollars). Development of River Front will require the expenditure of approximately $400.0 million (2004 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 $60 million (2004 Dollars). Therefore, $460.0 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 River Front 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. • In addition to adding long -desired units to the CBD, River Front will be beneficial because it will extend new housing development activity into a portion of the CBD where no construction is currently underway. Fiscal Impact • Fiscal impact refers to the impact that River Front 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 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. Epoch Corporation September 22, 2004 Page 3 benefit will be ad valorem tax receipts. The benefits to the City, which are stated in 2004 Dollars, are estimated to be as follows: o One-time • $ 599,602 in City building permit fees • $ 30,000 in City solid waste surcharge fees • $1,428,362 in City impact fees • $ 476,429 in Downtown DRI supplemental impact fees o Recurring Benefits (2003 Dollars) • $4,221,772 annually in City General Fund ad valorem taxes • $ 520,344 annually in City ❑ebt Service ad valorem taxes • $ 240,990 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: o $1,432,706 in County road impact fees (one-time) o $2,631,223 in School impact fees (one-time) o $2,875,864 in County General Fund ad valorem taxes (recurring) o $ 137,313 in County Debt Service ad valorem taxes(recurring) o $ 234,155 in County Library ad valorem taxes (recurring) o $ 240,900 o $4,055,792 in School Operating ad valorem taxes (recurring) o $ 328,588 in School Debt Service ad valorem taxes (recurring) o increased occupational license fees (recurring) Economic impact • Economic impact relates to the impact that River Front 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 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. Epoch Corporation September 22, 2004 Page 4 within the project and its hotel guests will comprise the recurring benefit. River Front will economically benefit the City as follows: 0 One-time • Approximately 90 percent of the near $398.0 million cost to construct and market River Front will be spent within the City of Miami, producing an overall economic impact of $537.0 million when the multiplier effect is considered.' • Project expenditures within the City of Miami will include an estimated $150.0 million for construction labor, an amount sufficient to pay approximately 3,380 construction workers their average annual wage of $44,350. o Recurring • River Front will house 336 workers, probably including some City residents, who collectively will earn in excess of $15.0 million annually. • A total of $49.8 million will be spent annually by River Front residents in retail and food and beverage establishments within the City of Miami. An additional $12.7 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 $71.6 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 River Front will provide to the City of Miami. All monetary figures are expressed in 2004 Dollars. Project Characteristics • River Front will be located within the Central Business District of the City of Miami on a site between S.W. 3rd 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. At this location, it will also be within the areas of concern of the City's Downtown Development Authority and Downtown DRI as well as the jurisdictions of Miami -Dade County and the Miami - Dade County Public School District. 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. 89th Terrace Miami, Florida 33156 Tel; (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsouth.net Mr. A. J. Cabrera, Jr. Epoch Corporation September 22, 2004 Page 5 • River Front will entail the construction of 3,085,005 gross square feet of building area. Of this amount, 1,916,923 square feet will comprise the residential portion of the project while 94,794 square feet will comprise the commercial elements on a net basis. The remaining square footage will be comprised of parking and circulation. • Development of River Front will cost approximately $332.0 million 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 $66.0 million. Therefore, $398.0 million will be spent to complete the project exclusive of land acquisition and construction loan financing costs and developer's profit. • As indicated above, River Front will contain a total of 1,916,923 square feet of saleable space in its 1,424 condominium units. The units will sell at an average price equating to $325 per square foot, producing total sales revenues approximating $623.0 million. • River Front will contain 41,944 net square feet of retail space. The market value of this space, assuming a net rental rate of $22.50 per square and a 10 percent capitalization rate, will approximate $9.4 million. • The 52,400 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 approximate $14.4 • 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 River Front inclusive of the residential units and the retail and office space will approximate $646.8 million However, as a general rule, property is assessed at a rate approximating 80 percent of market value when newly placed on the tax rolls. At 80 percent, the assessed value of River Front will be $517.4 million. The taxable value, after deduction of the $25,000 Homestead Exemption on each of the 1,424 condominium units, will be $481.8 million. • Residents of the proposed condominium units will on average require an annual income of $175,000 to qualify for ownership. Based on this income estimate, it is projected that the people living at River Front will spend $49.8 million annually in retail and food and beverage establishments. This projection assumes that they spend 20 percent of this income far this purpose. • River Front will employ 20 people to operate and maintain the project. Additionally, 105 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 211 workers, assuming a ratio of 4 workers per 1,000 square. A total of 336 people will be employed at the project. Miami Economic Associates, Inc. 6861 S.W. $9th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsauth.net Mr. A. J. Cabrera, Jr. Epoch Corporation September 22, 2004 Page 6 One-time Fiscal Impacts • The City of Miami charges building permit fees at a rate of $0.20 per gross square foot of multifamily 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 $599,602 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, River Front will consist of square feet of residential use and 94,794 square feet of non-residential space, resulting in City impact fees totaling $1,428,362. • 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, respectively. Based on these rates, a total of $476,429 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, River Front will contain a total of 1,353,743 square feet in its 1,424 residential units. The quantities of retail and office space subject to impact fees are 41,994 and 52,800 square feet, respectively. Accordingly, a total of $4,063,929 will be paid to the County in impact fees prior to commencing 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. Epoch Corporation September 22, 2004 Page 7 construction of River Front. Of this amount, $1,432,706 will be applied to roads, $2,631,223 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. Ad valorem tax revenues were calculated by applying the millage rates shown to River Front' estimated taxable value of $481.8 million. Entity Rate/$1 000 Taxable Value Ad Valorem Tax Revenues City of Miami General Fund 8.7625 $4,221,772 Debt Service Fund 1.0800 520,344 Downtown Development Authority 0.5000 240,900 Miami -Dade County General Fund 5.9690 2,875,864 Debt Service Fund 0.2850 137,313 Library 0.4860 234,155 Children's Fund 0.5000 240,155 Miami -Dade County Schools Operating 8.4180 4,055,792 Debt Service 0.6820 328,588 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 River Front will be dependent on the amount these services are used by the project's residents and commercial 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 River Front; 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 River Front; hence, it can not be quantified at this time. One -Time Economic Benefits • it is estimated that approximately 90 percent of the nearly $398.0 million that will be spent on the hard and soft costs associated with development of River Front 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 River Front project. According Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@belisouth.net Mr. A. J. Cabrera, Jr. Epoch Corporation September 22, 2004 Page 8 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 $537.0 million based on application of a 1.5 multiplier. • MIG's input-output model further estimates that approximately $150 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 project's expenditure on construction labor would support approximately 3,389 workers at their average annual wage rate. Recurring Economic Benefits • As discussed previously, a total of 336 will be employed at River Front. Based on wage and salary levels reported by the Florida Agency for workforce innovation, it is estimated that these workers will earn in excess of $15 million annually. • The residents of River Front will spend $49.8 million annually in retail establishments and restaurants. It is estimated that approximately 70 percent of this amount, $35.0 million will be spent within the City of Miami. Additionally, the project will generate approximately $12.7 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. The total economic impact of these expenditures will be $71.6 million based on the application of a 1.5 multiplier. Conclusion The analysis performed by MEAI demonstrates that development of River Front 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. is AoGiites, 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@bellsouth.net