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HomeMy WebLinkAboutEconomic Impact Study• Lambert Advisory ECONOMIC IMPACT ANALYSIS PARAMOUNT AT EDGEWATER SQUARE (Condominium and Retail Development) • - Prepared by - Lambert Advisoty, LC - Prepared for - Royal Palm Communities August 3, 2004 • • • • Economic Impact Analysis — Paramount at Edgewater Square Economic Impact Analysis Paramount at Edgewater Square Lambert Advisory has completed an Economic Impact Analysis for the development of Paramount at Edgewater Square (herein referred to as Paramount), a mixed -use residential and commercial project located on North Bayshore Drive between N.E. 20th Terrace and N.E. 21st Street in the City of Miami. The analysis estimates the tangible direct and indirect economic impacts that will be derived from the construction and operation of the development. This report identifies and quantifies the benefits created by the Paramount development, and can supplement the major use special permit application to be submitted to the City of Miami. The Paramount property is situated in the R-4 (with SD 20 Overlay) and C-1 (with SD 20.1 Overlay) zoning districts of downtown Miami, immediately west of Biscayne Bay. The property is adequately accessible to major thoroughfares including US 1 (Biscayne Boulevard), 1-95 and the Palmetto Expressway. The residential and retail development will have a positive impact on the surrounding community in terms of taxes, jobs, and general investment generated, and will also enhance the area's commercial/retail demand. This development will help maintain economic stability within the area and attract on -going investment during the next several years. We have completed this analysis on the basis of development and performance information (i.e., price, absorption, timing, costs) that has been provided by Royal Palm Communities. We have not independently verified this information or data. A profile of the project follows. Paramount at Edgewater Square Economic Impact Analysis Building Features & Profile General Features Site Size (Net) Building Height Number of Residential Units Retail Space (rentable area) Number of Parking Spaces Detailed Building Profile Gross Building Area (wlparking) Residential FAR Retail FAR Gross Parking Area 3.70 acres 47 stories 369 units 45,781 sq.ft. 690 spaces 957,069 sq.ft. 614,588 sq.ft. 45,781 sq.ft. 296,700 sq.ft. Note: Estimates are based upon date provided by Royal Palm Communities, and/or calculations made by Lambert Advisory, and may be subject to change. Source: Royal Palrn Communities, Lambert Advisory, 2004. • • • Economic Impact Analysis — Paramount at Edgewater Square Development of the Paramount property is expected to commence in mid-2005. The duration of construction is anticipated to be 24 months, with occupancy planned for mid-2007. Based upon the information provided, construction and subsequent operations of Paramount will generate considerable benefits to the immediate area, the City of Miami, and the metro -Miami community, There are four key areas in which the project will provide positive economic impacts: 1. Short-term construction employment and expenditure 2. Long-term residential and shopper expenditure 3. Long-term building employment and operating expenditure 4. Indirect 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 increases in revenue from primary sources, including employment, wages, and taxes. Accordingly, the impact from these key sources comes from two distinct measures: • Direct Expenditures — disbursements for site acquisition and development (hard and soft costs) • Indirect Expenditures — net additional expenditures that flow into the local economy as a result of the new development Estimates of the tangible impacts from direct and indirect expenditures are captured by this analysis. However, potential intangible impacts — such as the project's ability to serve as a catalyst for future development in the immediate area — are not included, as they are nearly impossible to quantify. Economic impacts from the four key sources are detailed in the following sections. 1. Short -Term Construction Employment and Expenditure The impact from short-term construction employment and expenditure is directly associated with the project's development; the table below shows a summary of estimated development costs, as provided by Royal Palm Communities. Paramount at Edgewater Square Economic Impact Analysis Development Costs Item Cost Hard Costs $110,000,000 Soft Costs $40,000,000 Total $150,000,000 Source: Royal Palm Commurtties, 2004. • • • Economic Impact Analysis — Paramount at Edgewater Square The majority of development -related expenditures will be made in Miami -Dade County, and the City of Miami will capture the lion's share of these expenditures. Labor will account for approximately 60 percent ($66 million) of hard costs, and materials will account for 40 percent ($44 million). Over an estimated 24-month construction period, at an average annual construction wage of $36,7321 in Miami -Dade County, with a benefit/overhead multiplier of 1.4, there will be nearly 700 Full Time Equivalent (FTE) jobs created. Additionally, more than $3 million in professional fees are expected to be paid to Miami area firms (e,g., architecture, engineering, legal). Assuming an average profit margin of 15% and overhead of 30%, approximately $1.65 million in professional wages will be paid out by these firms. Impact and other fees payable to the City and County during the construction period will amount to approximately $4.1 million, which will be available for public expenditures associated with the project including developmental, administrative, permitting, schools, and other costs. A detailed profile of impact fees and other relevant non -impact fees paid to the City and/or Miami -Dade County as a result of the development of Paramount is included in the following table. State of Florida ES-202, third quarter 2003 • • • Economic Impact Analysis — Paramount at Edgewater Square Paramount at Edgewater Square Economic Impact Analysis Impact and Other Fees Impact Fees: Total City of Miami Development Impact Fee (Ord. 10426) $632,081 City of Miami Development Impact Admin. Fee $18,962 Miami Dade County Schools $790,020 TOTAL IMPACT FEES $1,441,063 Other/Non-Impact Pees: City of Miami Bonus Fees $1,772,390 Miami Dade W.A.S.A. Connection Fee $531,862 City of Miami Building Permit Fee $136,270 Energy Installation Fee $95,707 M.U.S.P Application Fee $45,000 Dade County Code Compliance $75,000 Radon Gas Fee $9,571 Fire Plan Review Fee $8,614 Ground Cover Fee $3,223 Land Use/Zoning, Review for Bldg.Permit $2,000 Certicate of Occupancy $250 Application Fee $35 TOTAL OTHER FEES $ 2,679,922 TOTAL PROJECT FEES $4,120,986 Source; City of Miami Planning, Building & Zoning; Miami Dade County; Roy& Palm Communities; Lambert Advisory. Fees included above may be subject to change. 2. Long -Term (On -Going) Resident and Shopper Expenditure Based on demographic and for -sale housing trends in the area, the Paramount resident base is expected to consist primarily of middle age working professionals and retirees. Considering the proposed average sale price of $750,000, it is assumed that the residents will be mostly upper income individuals/households with incomes of at least $180,000. Therefore, with a total of 377 households in the building, total personal income for the building is estimated to exceed $66.4 million. Estimating that at least one-half of the owners will relocate from outside the City, the marginal personal income that will flow into the Miami area will exceed $33.2 million. We have estimated the marginal impact of $33.2 million in household income on retail sales and space demanded, using the Lambert Advisory Retail Trade Model. The following table provides a summary of additional retail expenditure and demand for space as a result of development and sale of the units by 2008. • • • Economic Impact Analysis — Paramount at Edgewater Square Paramount at Edgewater Square Area Expenditure Potential (from New -to -Miami Paramount Residents) 2008 Type of Good Est. Marginal Growth Expenditure 2008 General Merchandise Apparel and Accessories Furniture and Home Equipment Electronic and Appliance Stores Sporting Goods, Books and Music Stores Miscellaneous Shoppers Goods Shoppers Goods - Sub -Total Food Stores Eating & Drinking Establishments Health & Personal Care Stores Liquor Convenience Goods - Sub-Totai Building Materials Total Source: Lambert Advisory, 2004, $734,412 $706,675 $292,871 $280,114 $267,180 $407,503 $2, 688, 656 $3,752,381 $2,321,300 $1,206,093 $80,502 $7,360,276 $723,649 $10,772,580 Sales Per Square Feet Square Foot Demanded $227 3,235 $290 2,436 $227 1,290 $200 1,401 $250 1,069 $420 970 $258 10,401 $422 $375 $407 $280 $401 8,892 6,190 2,963 288 18,333 $115 6,293 $308 35,027 In addition to the net new expenditures attributable to Paramount residents, the 45,781 square feet of ground -level retail planned will also attract retail expenditure — primarily from the area immediately surrounding the property, with limited additional support from visitors from outside of the area. Assuming that 20 percent of the expenditure in Paramount retail comes from outside the City, and based upon sales per square foot (for Shopper Goods) of $308, over $2.8 million will be expended within the City per year which is now going to other areas. 3. Long -Term (On -Going) Building Employment and Operating Expenditure There area number of areas where positive public benefits or economic impacts will result from the on -going operation of the residential and retail space. These include: • Additional employment from operation of the condominium community and stores; • Property tax revenue to the City of Miami and Miami -Dade County; • Increased sales tax revenue from stores to State and County; and • Purchase of goods and services. We estimate that 12 FTE workers will be needed to operate the building and 46 FTE workers will be employed in the retail stores. Positions such as building managers, • • Economic Impact Analysis — Paramount at Edgewater Square parking garage attendants, maintenance staff, retail workers, and security personnel will need to be filled. At an average Miami -Dade County wage of $35,8202 the operation of the building and stores will create approximately $2.1 million in wages each year. Positions at various skill levels will be made available to area residents. Increased sales tax revenue will result from the operation of the 45,781 square feet of retail space. Assuming the net new retail expenditure in stores totals $2.8 million, approximately $169,000 in additional sales tax will be collected from retail sales. Additionally, it is estimated that nearly $500,000 in goods and services related to building maintenance will be purchased annually within Miami -Dade, This includes cleaning services, maintenance supplies, utilities, etc. Finally, the development of Paramount 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 (2003) millage rate of 26.918 (per thousand dollars of value), broken down as follows. Paramount at Edgewater Square Economic Impact Analysis Ad Valorem Tax Breakdown Item Annual Mil#age Fax I City of Miami Operating 8.7625 $2,115,826 City of Miami Debt 1.080 $260,781 School Operations 8.418 $2,032,642 School Debt 0.682 $164,678 Environmental Projects 0.100 $24,146 S. Florida Water Management 0.597 $144,154 FIND 0.0385 $9,296 County Miliage 5.969 $1,441,297 County Debt 0.285 $68,817 Children's Trust 0.500 $120,732 Library 0.486 $117,351 TOTAL 26.918 $6,499,720 Source: Miami Dade County Property Appraiser, Lambert Advisory, 2004. Real property is typically assessed at between 80 and 90 percent of Fair Market Value. For this analysis, we calculate ad valorem taxes for Paramount based on a market value of $240 million, or 85 percent of the estimated value of the residential, retail, and parking uses. Accordingly, the development should generate approximately $6.5 million in real property taxes by 2008. This represents an estimated net marginal increase of roughly $6.2 million over the ad valorem tax collection the City would receive if the property were valued at the current use (with an estimated assessment in 2003 at $10.0± million). 2 State of Florida ES-202, third quarter 2003 • • • Economic Impact Analysis — Paramount at Edgewater Square 4. 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 58 FTE jobs created as a result of building and retail operations are assumed to have a 1.2 multiplier impact of 70 additional jobs. This multiplier is derived from the U.S. Department of Commerce's 1999 RIMS II model, and identifies indirect secondary and tertiary impacts created throughout the region due to the "ripple effect" of the primary employment. Paramount at Edgewater Square Economic Impact Analysis Summary, Economic Impacts Impact Short Term Construction Employment & Expenditure Full Time Jobs 700 Direct Wages $51,400,000 Professional Wages (Miami -Dade County) $1,700,000 Impact Fees Toward Public Expenditure $4,100,000 Total impact, Short Term Const. Employment & Expend. $57,20[000 Long -Term (On -Going) Resident and Shopper Expenditure Marginal Expenditure Growth — Residents (2008) $10,800,000 Marginal Expenditure— Paramount Shoppers (2008) $2,800,000 Marginal Impact from On -Going Resident and Shopper Expend, $13,600,000 Long -Term (On -Going) Building Employment and Operating Expenditure Tull Time Jobs 58 Total Direct Wages Created $2,100,000 Sales Tax from Additional Retail Sales (2008) $169,000 Goods & Service Purchased in Miami -Dade County $500,000 Ad Valorem Taxes (2008) $6,500,000 Total Impact from On -Going Operations of the Building/Retail $9,200,000 Indirect Flow Through Benefits Full Time Jobs (Indirect) — Miami Dade County 70 Total Indirect Wages Created $2,500,000 Total Flow Through Indirect Benefits $2,500,000 Source: Lambert Advisory, 2004. Based upon the analysis set forth herein, the Paramount project will clearly have a positive economic impact on both the City of Miami and Miami -Dade County. Total employment created during the development phase is approximately 700, with on -going annual employment of 128 FTE jobs. Accordingly, there is an estimated $57.2 million impact from short-term construction employment and expenditures, and a stabilized $23 million annual revenue stream from resident/shopper expenditures and building operations (including real property taxes).