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HomeMy WebLinkAboutEconomic Impact AnalysisAssociaes January 19, 2005 Mr. Reinaldo Borges Borges + Associates, P.A. Miami, Florida Re: MUSP Impact Analysis — Infinity II Dear Mr. Borges: Miami Economic Associates, Inc. (MEAD has performed analysis to estimate the impacts that development of the proposed Infinity II project will have on the housing market in the City of Miami as well as on the City's fiscal and economic condition. This letter, which is organized as shown immediately below, provides the results of our analysis. Section Page Project Description 1 Summary of Findings 2 Housing Impact 2 Fiscal Benefits 2 Economic Benefits 3 Bases of Estimates 4 Closing 8 Project Description Infinity II will be constructed on a site that located on the southwest corner of the intersection of Coral Way and South Miami Avenue. The 65-story project will contain a total of 527 condominium units that are expected to generate sales proceeds approximating $255 million. Infinity II will also include 42,888 square feet of commercial space retail space and 704 parking spaces. The developer anticipates selling the commercial space for a total of $12.8 million. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (3051 669-0229 Fax: (3051 669-8534 Email: meainkebellsouth.net Mr. Reinaldo Borges Borges + Associates, P.A. January 19, 2004 Page 2 Development of Infinity II will require the expenditure of approximately $120.2 million (2005 Dollars) for "hard" construction. "Soft" costs including those relating to professional fees, permits, sales and leasing commissions, marketing, developer overhead, administration, etc. will total $38.4 million (2005 Dollars). Therefore, $158.6 million will be spent to complete the project exclusive of land acquisition, financing costs, permit fees and developer's fees and profit. Summary of Findings Development of Infinity ll 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. Toward this end, the City Commission has recently approved a number of new residential projects in the along the Miami River and in the DuPont Plaza and Omni -Edgewater areas of the City as well as in the Brickell Avenue area, where Infinity II 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 a critical mass of residential units with access to transit. Infinity II is located at the southern terminus of the Metromover system and with easy walking distance of Metrorail, Fiscal Benefits • Fiscal benefits refers to the positives impacts that Infinity ll will have on the finances of the City of Miami. These benefits will be both one-time and recurring 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 2005 Constant Dollars: o One-time • $ 296,786 in City building permit fees • $ 10,000 in City solid waste surcharge fees • $ 518,935 in City impact fees • $ 226,733 in Downtown DRI supplemental impact fees • $ 1,036,218 in affordable housing bonus fees 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. Reinaldo Borges Borges + Associates, P.A. January 19, 2004 Page 3 o Recurring Benefits • $ 1,786,831 annually in City General Fund ad valorem taxes • $ 194,750 annually in City Debt Service ad valorem taxes • $ 102,500 annually in DDA ad valorem taxes o Non -Quantifiable Benefits • Trade -related fees for roofing, electrical, plumbing, mechanical, pool and elevator work performed during construction (one-time) • lncreased utility taxes and franchise fees (recurring) • lncreased occupational license fees (recurring) • lncreased parking surcharge fees (recurring) o Other • While the focus of MEAI's fiscal analysis was on the City of Miami, Infinity II will, as shown below, provide significant fiscal benefits to other non - municipal governmental jurisdictions that impact the lives of City residents: o $ 566,865 in County road impact fees (one-time) a $ 945,810 in School impact fees (one-time) o $ 1,216,675 in County General Fund ad valorem taxes (recurring) o $ 58,425 in County Debt Service ad valorem taxes(recurring) o $ 91,061 in Children's Trust ad valorem taxes (recurring) o $ 99,630 in County Library ad valorem taxes (recurring) o $ 1,658,450 in School Operating ad valorem taxes (recurring) o $ 122,385 in School Debt Service ad valorem taxes (recurring) o Increased County occupational license fees (recurring) Economic Benefits • Economic benefits relates to the positive impacts that Infinity II will have on the economy of the City rather than its finances. The economic benefits provided 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 2005 Constant Dollars. o One-time • Approximately 90 percent of the near $158.6 million spent on hard and soft costs to develop Infinity II will be spent within the City of Miami, producing an overall economic impact of $221.8 million when the multiplier effect is considered. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax; (305) 669.8534 Email: meainkQbellsouth.net Mr. Reinaldo Borges Borges + Associates, P.A. January 19, 2004 Page 4 • Project expenditures within the City of Miami will include an estimated $54.0 million for construction labor, an amount sufficient to pay approximately 1,218 construction workers their average annual wage of $44,350. © Recurring • Infinity II will house 175 workers including those employed in the proposed office and retail space and personnel involved in property operations and maintenance. They will earn in excess $7.0 million annually. • A total of $14.8 million will be spent annually by Infinity II residents and workers in retail and restaurant establishments within the City of Miami. An additional $5.3 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 $30.1 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 II will provide to the City of Miami. All monetary amounts are stated in 2005 Constant Dollars. Project Characteristics • Infinity II will be located on the southwest corner of the intersection of Coral Way and South Miami Avenue in the City of Miami. It will also be located within the boundaries of the Downtown Miami DRI area and the jurisdictions of the City of Miami's Downtown Development Authority as well as Miami -Dade County and the Miami - Dade County Public School District. • Infinity II will entail the construction of 1,334,333 gross square feet of building area. Of this amount, 735,944 square feet will pertain to the residential portion of the project inclusive the space contained in the 527 residential units and their associated amenities as well as an allocation of core, service and circulation areas. The remainder of the space, 598,389 square feet, will contain the project's commercial space and parking facilities. • In order to develop Infinity II in the manner planned, the project will take advantage of 3 provisions of the City's zoning code regarding FAR bonuses, one of which, that pertaining to affordable housing, regards the payment of a fee equating to $12.40 per square foot. Fees will be paid for 83,566 square feet. 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. Reinaldo Borges Borges + Associates, P.A. January 19, 2004 Page 5 • Development of Infinity II will cost approximately $120.2 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 $38.4 million. Therefore, $158.6 million will be spent to complete the project exclusive of land acquisition, financing costs and developer's fees and profit. • At current offering prices, the 527 units proposed at Infinity II will generate approximately $255.0 million in sales proceeds. 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, $204.0 million. Assuming that 70 percent of the units are eligible for the Homestead Exemption, the taxable value of Infinity Il's residential component will be $194.8 million. • It is estimated that the 42,888 square feet of commercial space within Infinity 1I will be sold as non-residential condominium units for approximately $12.8 million. Therefore, the total assessed and taxable value of the commercial space would be $10.2 million. • Based on the two preceding paragraphs, it is estimated that Infinity II will have a total taxable value of $205.0 million. • Residents of the proposed condominium units will on average require an annual household income approximating $193,500 to qualify for ownership. Based on this income estimate, it is projected that they will spend $20.4 million annually in retail and restaurant establishments. This projection assumes that they spend 20 percent of their income for this purpose. • It is anticipated that approximately 175 people will work at Infinity I! inclusive of office and retail workers and project staff involved in property maintenance and operations. 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 $296,786 will be paid. A solid waste surcharge fee in the amount of $10,000, the maximum amount, will be applied. • 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. 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. Reinaldo Borges Borges + Associates, P.A. January 19, 2004 Page 6 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 II will contain 678,961 square feet of living area and 42,888 of commercial space, resulting in the payment of impact fees totaling $518,935. • 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 $0.281 per square foot. The commercial rates are $0.861 for office space and $0.760 for retail space. Infinity Il's commercial space will include 33,165 square feet of office use and 9,723 square feet of retail use. Based on these rates, a total of $226,733 in Downtown DRI supplemental impact fees will be paid. • In order to access the affordable housing FAR bonus, a fee totaling $1,036,218 will be paid. This figure equates to 83,566 square feet at a rate of $12.40 per square foot. • 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 office and retail space in the eastern portion of Miami -Dade County is $2.484 and $2.294 per square foot, respectively, for the quantities of space proposed. The base fee for school impact fees is $612 per unit. An additional amount of $0.918 per square foot is then applied. As previously discussed, Infinity II will contain a total of 678,961 square feet in its 527 residential units. Accordingly, impact fees totaling $1,512,675 will need to be paid at the time the project's Building permit is issued. Of this amount, $566,865 will be applied to roads, $945,810 for schools. Recurring Fiscal Impacts • The millage rates currently being levied for ad valorem tax purposes by the governmental entities in whose jurisdictions Infinity II will be located are shown in the table immediately following. The ad valorem tax revenues projected in the table are based on Infinity Il's taxable value of $205.0 million. 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. Reinaldo Borges Borges + Associates, P.A. January 19, 2004 Page 7 Entity Rate!$1000 Taxable Value Taxes City of Miami General Fund 8.71625 $ 1,786,831 Debt Service Fund 0.95000 $ 194,750 Downtown Development Authority 0.50000 $ 102,500 Miami -Dade County General Fund 5.93500 $ 1,216,675 Debt Service Fund 0.28500 $ 58,425 Children's Trust 0.44420 $ 91,061 Library 0.48600 $ 99,630 Miami -Dade County Public Schools Operating 8.09000 $ 1,658,450 Debt Service 0.69700 $ 122,385 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 Infinity II 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. • The City of Miami charges a parking surtax on transient parking fees. Employees housed within the commercial space at Infinity 11 and people visiting their establishments will generate such surtax revenues; however, the amount they will produce can not be calculated at this time. • Businesses located in the commercial space at Infinity 11 will pay occupational fees to both the City of Miami and Miami -Dade County. Since the amounts paid will be dependent on the type and sizes of the business, the amount of fees paid can not be calculated at this time. One -Time Economic Benefits • It is estimated that approximately 90 percent of the nearly $158.6 million that will be spent on the hard and soft costs associated with development of Infinity II 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 $221.8 million based on application of a 1.554 multiplier. • MIG's input-output model further estimates that approximately $54.0 million of the moneys spent on hard costs within the City of Miami to construct Infinity 11 will be spent for labor. The average construction worker in Miami -Dade County earns approximately $44,350 per year, according to the Florida Agency for Workforce Innovation. Therefore, the project's expenditure on construction labor would support approximately 1,218 workers at their average annual wage rate. 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. Reinaldo Borges Borges + Associates, P.A. January 19, 2004 Page 8 Recurring Economic Benefits • As discussed previously, it is estimated that 175 people will be employed at Infinity II. 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 $7.0 million annually. • As discussed previously, the residents of Infinity II and its workforce will spend $20.4 million annually in retail establishments and restaurants. It is estimated that approximately 70 percent of this amount, $14.3 million, will be spent within the City of Miami. An additional $0.5 million will be spent by the people working at the project. The project will also generate $5.3 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 $30.1 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. Closing The analysis performed by MEAI demonstrates that development of Infinity II 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: meaink@bellsouth.net