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HomeMy WebLinkAboutEconomic Impact Study,Associa April 24, 2005 Mr. David Arditi Cardinal Symphony, LLC Miami, Florida Re: MUSP Impact Analysis — Proposed Cardinal Project Dear Ms. Dougherty: Miami Economic Associates, Inc. (MEAL) has performed analysis to estimate the benefits that development of the mixed -use project proposed by Cardinal Symphony, LLC at 1650 Biscayne Boulevard will provide to the City of Miami's housing market as well as its fiscal and economic condition. This letter, which is organized as shown below, provides the findings of our analysis and their bases: Section Page Project Description 1 Summary of Findings 2 Impact on the Housing Market 2 Fiscal Impact 2 Economic Impact 3 Bases of Estimates 4 Closing 8 Project Description Cardinal's proposed mixed -use project, which will be located at 1650 Biscayne Boulevard, will consist of 824 condominium units together with approximately 54,000 square feet of retail space and 49,000 square feet of office space. Sale of the condominium units is projected to generate approximately $450.0 million in gross receipts. The Cardinal project is expected to cost $220.0 million in hard construction costs. An additional $70.0 million will be expended for soft costs including sales commissions. According, the project will cost $290.0 million to develop exclusive of land acquisition costs, financing expenses and developer's profit. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (3051 669-0229 Fax: (3051 669-8534 Email: meainkfteltsouth.net Mr. David Arditi Cardinal Development Corp. April 24, 2005 Page 2 Summary of Findings Development of the mixed -use project proposed by Cardinal will be highly beneficial to the City of Miami in several important ways as summarized below. impact on the Housing Market • City officials have long sought to attract new residential development to the various neighborhoods of Miami to provide better market support for the retailers and food and beverage establishments operating within them and to enhance the City's tax base. Toward this end, the City Commission has recently approved a number of new residential projects in the DuPont Plaza, River, Brickell and Omni -Edgewater areas of the City. Approval of Cardinal's project will be consistent with the above -stated objectives. Fiscal Impact • Fiscal impact refers to the impact that the mix -use project proposed by Cardinal will have on the finances of the City of Miami. The benefits that it will provide to the City will be both non -recurring and recurring in nature. Non -recurring 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 Non -recurring Benefits • $ 382,950 in City building permit fees • $ 10,000 in City solid waste surcharge fees • $ 858,526 in City impact fees • $ 381,409 in Downtown DRI supplemental impact fees o Recurring Benefits • $ 3,183,175 annually in City General Fund ad valorem taxes • $ 346,940 annually in City Debt Service ad valorem taxes • $ 182,600 annually in Downtown Development Authority 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 occupational license fees (recurring) • Increased parking surcharge fees (recurring) 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. David Arditi Cardinal Development Corp. April 24, 2005 Page 3 o Other • While the focus of MEAI's fiscal analysis was on the City of Miami, the mixed -use project proposed by Cardinal will, as shown below, provide significant fiscal benefits to other non -municipal governmental jurisdictions that impact the lives of City residents: o $ 896,582 in County road impact fees (non -recurring) o $ 1,474,614 in School impact fees (non -recurring) o $ 2,167,462 in County General Fund ad valorem taxes (recurring) o $ 104,082 in County Debt Service ad valorem taxes(recurring) o $ 162,222 in Children's Trust ad valorem taxes (recurring) o $ 177,487 in County Library ad valorem taxes (recurring) o $ 2,954,468 in School Operating ad valorem taxes (recurring) o $ 218,024 in School Debt Service ad valorem taxes (recurring) o Increased County occupational license fees (recurring) Economic Impact • Economic impact relates to the impact that Cardinal's mixed -use project will have on the economy of the City rather than its finances. The economic benefits it will provide will also be non -recurring and recurring in nature. Salaries paid to construction workers will constitute an important non -recurring 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 Non -recurring • Approximately 90 percent of the $290.0 million that Cardinal will spend on hard and soft costs to develop the proposed mixed -use project will be spent within the City of Miami, producing an overall economic impact approximating $405.6 million when the multiplier effect is considered. • Project expenditures within the City of Miami will include an estimated $95.0 million for construction labor, an amount sufficient to pay approximately 2,180 construction workers their average annual wage of $44,350. o Recurring • A total of $37.3 million will be spent annually in shops and restaurants within the City of Miami by residents of and workers at Cardinal's proposed project. Additionally, $9.5 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 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. David Arditi Cardinal Development Corp. April 24, 2005 Page 4 will have an overall economic impact on the City of $54.0 million annually when the multiplier effect is considered. • A total of 360 people will be employed at Cardinal's project, inclusive of people involved in project operations, maintenance and parking. These workers, who will include City residents, will earn approximately $10.8 million annually. Bases of Estimates The materials that follow provide the assumptions used to estimate the fiscal and economic benefits that development of Cardinal's proposed project will provide to the City of Miami. All monetary amounts are stated in 2005 Constant Dollars. Project Characteristics • The mixed -use project will be located at 1650 Biscayne Boulevard within the City of Miami. It will also be within the jurisdictions of the City's Downtown Development Authority, Miami -Dade County and the Miami -Dade County Public School District. • The project will entail the construction of 1,774,000 gross square feet of building area. Of this amount, 1,211,000 square feet will pertain to the residential portion of the project including the square feet of livable space contained in the 824 condominium units as well as a proportional share of amenity, core, service and circulation areas. The remaining 563,000 square feet will comprise the commercial portions of the project and parking. • Cardinal's project will be configured approximately as follows: o Residential: 824 units with 1,057,000 square feet of saleable space o Office: 49,000 square feet o Retail: 54,000 square feet • Development of the proposed mixed -use project will cost approximately $220.0 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 an additional $70.0 million. Therefore, $290.0 million will be spent to complete the project exclusive of land acquisition costs, financing expenses and developer's profit. • The 824 condominium units will generate $450.0 million in gross sales proceeds based on an average price per square foot approximating $425. • 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, which in the case 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. David Arditi Cardinal Development Corp. April 24, 2005 Page 5 of Cardinal's proposed project would equate to $360.0 million. Assuming that 70 percent of the units are eligible for the Homestead Exemption, the total taxable value of the 824 units will be $345.6 million. • For the purpose of this analysis, the taxable value of office and retail space is assumed to be equivalent to their combined hard cost of construction, $19.5 million. • Based on the two preceding paragraphs, the total taxable value of Cardinal's proposed mixed use project will approximate $365.2 million. • Residents of the proposed condominium units will on average require an annual income of approximating $220,000 to qualify for ownership. Based on this estimate of average household income, it is projected that the people living at Cardinal's project will spend $36.3 million annually in retail and restaurant establishments. This projection assumes that they spend 20 percent of their income for that purpose. • Based on industry standards, it is anticipated that the proposed office and retail space will be occupied by 331 workers. This estimate assumes 4 workers per 1,000 square feet in the office space and 2.5 workers per 1,000 square feet in the retail space. When project operations, maintenance and parking personnel are accounted for, the total number employed at the proposed project will be 360 people. Assuming that they spend an average of $10 per day for food and other items while working, their expenditures would total $1.1 million. Non -recurring 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 parking garage space was charged for at the commercial rate. Based on the distribution of space by use previously discussed, building permit fees totaling $382,950 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 the new project including the roofing, electrical, plumbing, mechanical, elevator and swimming pool contractors will be required to pay fees on their work. Calculation of the fees that they will pay 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 will be used to address the impacts of the project on police, fire, parks, streets, storm sewers, solid waste and general services administration. The rates paid for projects constructed in the area of the City in which Cardinal will develop the proposed mixed -use project are $0.676 per square foot of new 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. David Arditi Cardinal Development Corp. April 24, 2005 Page 6 residential use and $1.398 per square foot of commercial use. Cardinal's project will contain 1,057,000 square feet of residential living area and a total of 103,000 square feet of commercial space. resulting in the payment of impact fees totaling $858,526. • 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 projects located in the area covered by the Downtown DRI. According to the current table of fee coefficients, the rate for residential units is $0.2821 per square foot. The rates for office and retail and recreational space are $0.861 and $0.76 per square foot, respectively. Based on these rates and the quantities of space associated with each use previously stated, it is estimated that a total of $381,409 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. In the eastern portion of the county, the rate for roads for condominiums is $877 per unit. The road impact fee rates for office and retail space in the eastern portion of Miami -Dade County are $2.484 and $0.967 per square foot for projects with 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. Accordingly, impact fees totaling $2,371,196 will need to be paid at the time Cardinal's building permit is issued. Of this amount, $896,582 will be applied to roads and $1,474,614 to 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 proposed project's estimated taxable value of $365.2 million. Entity Ratel$1000 Taxable Value Taxes City of Miami General Fund 8.71625 $ 3,183,175 Debt Service Fund 0.95000 $ 346,940 Downtown Development Authority 0.50000 $ 182,600 Miami -Dade County General Fund 5.93500 $ 2,167,462 Debt Service Fund 0.28500 $ 104,082 Children's Trust 0.44420 $ 162,222 Library 0.48600 $ 177,487 Miami -Dade County Public Schools Operating 8.09000 $ 2,954,468 Debt Service 0.59700 $ 218,024 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 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. David Arditi Cardinal Development Corp. April 24, 2005 Page 7 collected as a result of the development of the mixed -use project proposed by Cardinal will be dependent on the amount of these services used by the project's residents and commercial tenants; hence, it can not be quantified at this time. • Both the City of Miami and Miami -Dade County will collect occupational license fees from the occupants of the proposed office and retail space. The amount collected can not be estimated at this time since it will be dependent on the nature of the businesses housed in the office and retail space. • The City of Miami charges a 20 percent surcharge on parking fees. Patrons of and visitors to the proposed project's retail and office space would pay this surcharge. It is not possible at this time to estimate the amount that will be generated. • The City of Miami and Miami -Dade County participate in a number of revenue sharing programs including one that relates to the rebate of a portion of the State sales tax proceeds that are collected in Miami -Dade County. The amounts of revenue sharing revenues that will accrue to the City as a result of the proposed project can not be estimated at this time. Non -recurring Economic Benefits • It is estimated that approximately 90 percent of the $290.0 million that Cardinal will spend on the hard and soft costs to develop its proposed mixed -use project will initially be spent in the City of Miami. This estimate is based on an anticipation of the specific firms that 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 approximate $405.6 million based on application of a 1.554 multiplier. • MIG's input-output model further estimates that approximately $95.0 million of the moneys spent on hard costs within the City of Miami 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 2,180 workers on an annual basis at their average wage rate. Recurring Economic Benefits • The residents of Cardinal's proposed mixed -use project will spend $36.3 million annually in retail establishments and restaurants, approximately 70 percent of which, $15,2 million, will be spent within the City of Miami. Additionally, the on -site workforce will spend $1.1 million for food and other items while working. Finally, the project will generate approximately $9.5 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 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, David Arditi Cardinal Development Corp. April 24. 2005 Page 8 economic impact of these expenditures will be $54.0 million based on the application of a 1,5 multiplier. Based on wage data compiled by the Florida Agency on Workforce Innovation, it is anticipated that annual earnings of the 360 people who will be employed at Cardinal's proposed project on a full-time equivalent basis will average $30,000, or $10.8 million in total. Closing The analysis performed by MEAT demonstrates that mixed -use project proposed by Cardinal 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