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HomeMy WebLinkAboutIII-4 Economic Impact Analysis• Lambert Advisory ECONOMIC IMPACT ANALYSIS Lafayette Square Apartments • - Prepared by - Lambert Advisory, LC - Prepared for - Lafayette Square Limited partnership June 17, 2005 • • • • Economic Impact Analysis Lafayette Square Economic Impact Analysis Lafayette Square Lambert Advisory has completed an economic impact analysis for the development of Lafayette Square, an affordable apartment project located at 150 NE 79th 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 Lafayette Square development, and can supplement the major use special permit application to be submitted to the City of Miami. The Lafayette Square property is at the intersection of NW 79th Street and Miami Avenue, and is accessible to major thoroughfares, including 1-95, US-441, and Biscayne Boulevard. The residential 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. We have completed this analysis on the basis of development and performance information (Le., price, absorption, timing, costs) that has been provided by Lafayette Square Limited Partnership. We have not independently verified this information or data. A profile of the project follows. Lafayette Square Economic impact Analysis Building Features & Profile Phase 1 Phase 2 Building Height 19 16 stories Number of Residential Units 160 146 units Parking 176 161 spaces Phases 1 & 2 Site Size (Net) 2.36 acres Gross Building Area (w/parking) 485,662 sq.ft. Residential FAR 305,045 sq.ft. Amenities 6,415 sq.ft. Source: Lafayette Square Limited Partnership, Lambert Advisory, 2005. Development of Lafayette Square is expected to commence in early 2006, with a duration of 28 construction months (versus calendar months, as construction phases will overlap). Occupancy is planned for early 2008. Based upon the information provided, construction and subsequent operations of Lafayette Square will generate considerable benefits to the immediate area, the City of • • • Economic Impact Analysis Lafayette Square 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 expenditure 3. Long-term building employment and operating expenditure 4. Indirect flow -through benefits 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 Lafayette Square Limited Partnership. Lafayette Square Economic Impact Analysis Development Costs Item Cost Hard Costs $34,390,000 Soft Costs $14,560,000 Total $48,850,000 Source: Lafayette Square Limited Partnership, 2005. The majority of development -related expenditures will be made in Miami -Dade County, and the City of Miami will capture a significant share of these expenditures. • • • Economic Impact Analysis — Lafayette Square Labor will account for approximately 60 percent ($21 million) of hard costs, and materials will account for 40 percent ($13 million). Over an estimated 28-month construction period, at an average annual construction wage of $39,260 r in Miami -Dade County, with a benefit/overhead multiplier of 1.4, there will be 161 Full Time Equivalent (FTE) jobs created. Additionally, nearly $1 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%, over $538,000 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 $23 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 Lafayette Square is included in the following table. 1 State of Florida ES-202, second quarter 2004 • • • Economic Impact Analysis — Lafayette Square Lafayette Square Economic Impact Analysis Impact and Other Fees Impact Fees: Total City of Miami Development Impact Fee (Ord. 10426) $286,437 City of Miami Development Impact Admin. Fee $8,593 Miami Dade County Roads $268,362 Miami Dade County Schools $467,303 $1, 030, 696 Other/Non-Impact Fees: City of Miami Bonus Fees $642,693 Miami Dade W.A.S.A. Connection Fee $427,788 City of Miami Building Permit Fee $64,919 Energy Installation Fee $47,925 M.U.S.P Application Fee $45,000 Dade County Code Compliance $24,475 Radon Gas Fee $4,792 Fire Plan Review Fee $4,313 Ground Cover Fee $2,059 Land Use/Zoning, Review for Building Permit $2,000 Certificate of Occupancy $250 Application Fee $35 TOTAL OTHER FEES $1,266,249 TOTAL PROJECT FEES $2,296,944 Source: City of Miami Planning, Building & Zoning; Miami Dade County; Lafayette Square Limited Partnership; Lambert Advisory. Fees included above may be subject to change. 2. Long -Term (On -Going) Resident Expenditure Lafayette Square Apartments will be an affordable housing project. As such, the resident base is expected to consist of lower -income households. Considering the proposed rental rates of $550, $650, and $750 for 1-, 2-, and 3-bedroom units, respectively, it is assumed that approximately 50 percent of the households will be families at 50 percent of Miami -Dade median family income (MFI, as determined by HUD), and 50 percent will be at 60 percent of MFI2. Therefore, with a total of 306 households in the building, total personal income for the building is estimated to be nearly $8 million. Estimating that approximately one -quarter of the owners will relocate from outside the City, nearly $2 million of marginal personal income will flow into Miami. 2 HUD FY 2005 Income Limits, February 11, 2005. 5 • Economic Impact Analysis Lafayette Square We have estimated the marginal impact of $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 of the apartments by 2008, Lafayette Square Area Expenditure Potential (from New -to -Miami Residents) 2008 Type of Good 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 -Total Estimated Marginal Growth Expenditure $44,433 $42,749 $17,719 $16,947 $16,165 $24,655 $162,669 $227,026 $140,443 $72,971 $4,871 $445,311 Building Materials $43,782 Total Source: Lambert Advisory, 2004. 3. Long -Term (On -Going) Building Employment and Operating Expenditure There are a number of areas where positive public benefits or economic impacts will result from the on -going operation of the residential development. These include: • Additional employment from operation of the apartment building; • Property tax revenue to the City of Miami and Miami -Dade County; and • Purchase of goods and services. We estimate that 10 FTE workers will be needed to operate the building — positions such as building managers, parking garage attendants, maintenance staff, and security personnel will need to be filled. At an average Miami -Dade County wage of $37,284 3 the operation of the building will generate approximately $400,000 in wages each year. Positions at various skill levels will be made available to area residents. Sales Per Square Foot $227 $290 $227 $200 $250 $420 Square Feet Demanded 196 147 78 85 65 59 $258 629 $422 $375 $407 $280 $401 538 375 179 17 1,109 $117 374 3 State of Florida ES-202, second quarter 2004 $651,762 $308 2,113 • • • Economic Impact Analysis --- Lafayette Square Additionally, an estimated $230,000 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 Lafayette Square 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 (2004) millage rate of 26,23895 (per thousand dollars of value), broken down as follows. Lafayette Square Economic Impact Analysis Ad Valorem Tax Breakdown Item City of Miami Operating City of Miami Debt School Operations School Debt Environmental Projects S. Florida Water Management FIND County Millage County Debt Children's Trust Library TOTAL Annual Milla e Tax, 8.7163 $377,479 0.950 $41,142 8.09 $350,358 0.597 $25,855 0.100 $4,331 0.597 $25,855 0.0385 $1,667 5.935 $257,030 0.285 $12,343 0.444 $19,237 0.486 $21,047 26.23895 $1,136,343 Source: Miami Dade County Property Appraiser, Lambert Advisory, 2005. Real property is typically assessed at between 80 and 90 percent of Fair Market Value. For the purposes of this analysis, we calculate ad valorem taxes for Lafayette Square based on 85 percent of development costs, including land acquisition ($43,307,500). Accordingly, the development should generate approximately $1.14 million in real property taxes by 2008. This represents an estimated net marginal increase of roughly $1.13 million over the ad valorem tax collection the City would receive if the property were valued at current use. 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 building operations employment. The 10 FTE jobs created as a result of building operations are assumed to have a 1.2 multiplier impact of 12 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. • • • Economic impact Analysis - Lafayette Square Lafayette Square Economic Impact Analysis Summary, Economic Impacts Short Term Construction Employment & Expenditure Full Time Jobs Direct Wages Professional Wages (Miami -Dade County) Impact Fees Toward Public Expenditure Total Impact, Short Term Const. Employment & Expenditure Long -Term (On -Going) Resident Expenditure Marginal Expenditure Growth - Residents (2008) Marginal Impact from On -Going Resident Expenditure Long -Term (On -Going) Building Employment and Operating Expenditure Full Time Jobs Total Direct Wages Created Goods & Service Purchased in Miami -Dade County Ad Valorem Taxes (2008) Total Impact from On -Going Operations of the Building/Retail Indirect Flow Through Benefits Full Time Jobs (Indirect) - Miami Dade County Total Indirect Wages Created Total Flow Through Indirect Benefits Source: Lambert Advisory, 2005. I m pact 161 $14,700,000 $500,000 $2, 300, 000 $17,600,000 $2,000,000 $2,000,000 10 $400,000 $230,000 $1,100,000 $1,700,000 12 $500,000 $500,000 Based upon the analysis set forth herein, the Lafayette Square project will dearly have a positive economic impact on both the City of Miami and Miami -Dade County. Total employment created during the development phase is approximately 161, with on -going annual employment of 22 FTE jobs. Accordingly, there is an estimated $17.6 million impact from short-term construction employment and expenditures, and a stabilized $3.7 million annual revenue stream from resident expenditures and building operations (including real property taxes).