HomeMy WebLinkAboutEconomic Impact Analysis600 BISCAYNE
Economic Impact Analysis
Submitted to:
City of Miami
Prepared For:
TERRA DEVELOPERS
Prepared by:
SHARPTON, BRUNSON & COMPANY, P.A.
One Southeast Third Avenue
Suite 2100
Miami, Florida 33131
(305) 374-1574
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600 BISCAYN E
TABLE OF CONTENTS
THE PROJECT OVERVIEW
EXECUTIVE SUMMARY
Introduction
Summary of Benefits
PAGE(S)
2
3
OBJECTIVES AND DEFINITIONS
Objectives 5
Definition of Economic and Tax Impact 5
Direct and Indirect Effects 5
Measures of Economic Impact 6
Description of Results 7
DISCUSSION OF THE RESULTS BY ECONOMIC INDICATORS
Impact Indicators 8
Results of Indicators 8
Impact of Construction 8
Impact of Ongoing Operations 9
Impact on Local Tax Revenues 9
Analysis by Economic Indicators 9
Employment 9
Wages 10
Output 10
Local Taxes 11
Public Sector Cost 12
Impact Fees 12
EXHIBITS
Exhibit I:
Exhibit 1I:
Summary of Economic Impact
Impact and Other Fees
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Project Overview
600 Biscayne is located at the heart of the
downtown Biscayne corridor, bounded by
Biscayne Boulevard to the east, NE 6th
Street to the south, NE 2nd Avenue to the
west, and NE 7th Street to the north.
• A 62-story tower consisting of
approximately 1.9 million gross SF, on
a 1.44 acre site.
• Approximately 685 condominium
apartment units, along with related
parking spaces.
• The unit mix offered includes:
1-bedrooms ranging from 800 SF
to 950 SF
• 2-bedrooms (with dens) ranging
from 1,100 to 1,250 SF
• 3-bedrooms (with dens) ranging
from 1,950 SF to 2,150 SF
• 6,500 SF of ground floor space for
selected restaurant tenant.
• 21,100 SF outdoor amenities level
with two pools surrounded by a
landscaped rooftop garden.
• Proximity to existing, historic Freedom
Tower
A 12,000 SF museum, along with
a food and beverage component,
to be developed within the historic
building
Selected condominium amenities
to be programmed within the
historic building
• Scheduled for completion in 2009
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Introduction
This document represents an in-depth
economic and tax benefits analysis of
the developmental and operation of a
first class condominium building and
retail facilities,
The Project currently contemplated is
comprised of the following components:
❑ 685 units of high -quality residential.
❑ 6,500 square feet of restaurant.
L112,000 square foot museum with
food and beverage component in
existing Freedom Tower.
This analysis encompasses the
entire Project and estimates the
economic and tax benefits for both
its developmental and operational
phases.
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Sur mary of Benefits
The Project will bring significant
economic benefits to the city of
Miami (the City). This section
summarizes the impact of the
Project on employment, public
sector revenues and other economic
benefits as a result of the develop-
ment.
Employment
Employment considerations include
the direct employment resulting from
the Project. Average developmental
construction phase employment will
be for approximately 383 employees
and the Project management is
expected to employ 30 people for
on -going maintenance and opera-
tions of the facilities.
Wages
To compute the wages associated
with the new employment we started
with budgeted data directly related to
the developmental and operational
phases of the Project, and we
incorporated data from our research
on retail sales. Total direct and
indirect impacts expected from
wages associated with the new
development approximate the
following:
One Time $116,059,392
Annual $ 3,100,680
Tax Revenue
The estimate of the public sector
revenues associated with the
development includes taxes and
other revenues generated directly
by the Project. Although public
sector costs are important
elements in measuring fiscal
impact, these benefits have not
been quantified in this document.
This analysis only measures the
benefits derived from the
development. Annual tax revenue
expected to be created totals
$7,320,592.
Output
The estimate of total economic
impact is measured by total
output. This analysis measures
the economic impact of
developmental costs and ongoing,
operational expenditures. To de-
termine the effect of respending
within the City, we utilized a
multiplier to compute total direct
and indirect benefits. Total output
expected to be generated, as a
result of the developmental and
operational phases of the Project
will approximate the following:
One Time $ 409,702,402
Annual $ 6,295,320
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• ■ Summary of Benefits
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Significant Community Benefits:
Jobs
Wages
Taxes
Economic Activity
Residents', Office Workers' and Retail/Restaurant Employees' Spending
Impacting Local Businesses:
Food
Recreation/Entertainment
Transportation
:;- Retail
The following table and charts summarize the economic impact of the
600 Biscayne project.
CONSTRUCTION
PERIOD ANNUAL
IMPACT RECURRING
Economic Activity Stimulated
Output $409,702,402 $ 6,295,320
Wages 116, 059, 392 3,100, 680
Taxes 7,320.592
Jobs Created
$525,761,794 $ 16,716,592
383 30
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Objectives And Definitions
Objectives
The objective of this analysis is to provide
information on the various benefits
created by the Project and to prepare an
estimate of such benefits to the City.
Our analysis is based on an economic
model, which estimates economic and tax
impacts of various Projects on a
designated area. The model is
specifically tailored to the City of Miami
(the City).
Definition of Economic and Tax Impact
The construction and subsequent
operation of the Project will create
important benefits within the City. These
benefits include new income, new jobs,
new tax revenue and new economic
activity impacting upon every sector of
the local economy. Moreover, through
the multiplier effect of respending and
reinvesting, indirect economic benefits
are added to the direct benefits brought
about by initial construction expenditures,
the expenditures from ongoing operations
and new spending at the retail
enterprises.
Direct and indirect Effects
The total economic impact of public and
private Projects and policies on a region
does not end with the impact from the
initial construction expenditures; the
continued benefits to the local economy
must also be considered. Income to firms
furnishing construction materials and
services is subsequently converted into
employee salaries, material purchases,
investment in plant and equipment,
savings, profits, purchases of services,
and a variety of other economic activities.
Income to laborers is subsequently
respent for purchasing of food,
housing, transportation, education,
entertainment, medical and dental
services, clothing, personal services,
and a wide variety of other goods
and services.
Furthermore, income to the
governmental unit is respent as
salaries, purchases, and support of
a variety of programs, including
education, transportation, and social
services. In turn, individuals, firms,
and governments furnishing these
goods and services again spend
their income for more purchases,
salaries, investments, and savings.
In this manner, indirect benefits
result each time the initial sum is
respent, and the additional sum
available in the local economy
induces further job creation,
business development and savings.
Quantification of these indirect
benefits has been the object of
considerable economic study.
Because economic relationships are
so complex in our modern society,
no single area or political unit is a
completely self-contained economic
unit. Therefore, purchases from
other areas and political units are
necessary, and goods services are
exported in return.
As purchases are made from other
units, some of the benefits of
economic respending are lost to the
local economy. Ultimately, a smaller
and smaller portion of the initial sum
would remain, until, after several
rounds of respending, an
insignificant sum is left.
5
• Objectives And Definitions
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The indirect effects can be viewed as
a set of "ripples" in the economy.
Indirect, like direct, resources require
labor, materials, equipment and
services for their production to induce
further job creation and spending of
wages.
The "ripple" of the indirect effect
multiplies the original impact of the
purchase. The common measure of
the magnitude of the "ripple" effect is
called a multiplier. A multiplier
measures the total magnitude of the
impact on each particular economic
indicator as a multiple of the initial,
direct effect. For instance, a
multiplier of "1" would signify no
"ripple" effects as the total impact is 1
times the initial impact, while a
multiplier of "2" would imply that the
total impact is 2 times the direct
effect.
The actual magnitude of a multiplier
depends on the likelihood the goods
and services purchased in a region
would be produced in, or provided
from the region.
The model we used to estimate the
total economic impact incorporates a
multiplier developed by utilizing past
consumption and production patterns
in the City.
There will be significant economic
benefit derived from the expenditures
of the residents of the Project on
eating, drinking, grocery, recreation,
retail etc. This report does not include
the economic impact of such
expenditures.
Measures of Economic Impact
Various measures can be used to
indicate the impact of a policy or
Project on a region. Specifically,
for this study, they are the
increases in local employment,
wages, tax revenue and output that
result. Definitions of these
measures are as follows:
Employment is measured full-time
equivalent jobs.
Wages include wages, salaries,
and proprietor's income only. They
may include non -wage
compensation, such as pensions,
insurance, and other fringe
benefits. Wages are assumed to
be expended by households in the
area at which the wage-earner
works.
Local taxes include additional
revenues from both ad valorem and
non ad valorem assessments.
Direct expenditures include those
sums expended for land
acquisition, site preparation and all
hard and soft costs associated with
a Project.
Indirect expenditures are those
sums expended within the local
economy as a result of the "ripple"
effect described earlier.
Output describes total economic
activity, and is essentially
equivalent to the sum of direct and
indirect expenditures (exclusive of
wages and taxes).
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Objectives And Definitions
Description of Results
For the purpose of describing the total
economic benefits of the Project, the
related expenditures and economic
activity stimulated have been broken
into two categories:
Developmental
Annual Recurring
Developmental expenditures include
those expenditures related to the design
and construction phase of the Project
and related amenities.
Annual recurring activities stimulated
are those expenditures incurred in
connection with the ongoing operation
of the Project.
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Discussion Of The Results By Economic
Indicators
Impact Indicators
We measured the Project's impact on
four commonly used indicators of
economic activity.
Those indicators are:
Jobs
Wages
Total output
Local taxes
Results of Indicators
Exhibit I details the Project's direct and
indirect impact on the above economic
indicators for Miami. A summary of
such impact follows:
DEVELOPMENT
(One Time) OUTPUT
Direct $ 218,019,584
Indirect 191,682,818
ANNUAL
Operational:
Direct
Indirect
$ 409,702,402
3,350,000
2,945,320
$ 6,295,320
The economic indicator most commonly
measured, and publicly reported on to
gauge the economic impact of a public
Project is output. The impact of a
Project on the indicator output is often
referred to as the Project's economic
impact.
Impact of Construction
The site preparation and construction
expenditures, including soft costs and
impact fees are estimated at $273.7
million. Such activity will create
approximately 383 new full time
equivalent jobs and employ a maximum
of 478 workers during peak periods.
The workers will earn approximately
$61 million in direct wages.
WAGES TAXES EMPLOYMENT
$ 61,760,000
54,299,392
$ 116,059,392
$ 1,650,000
1,450,680
$7,320,592
383
383
30
$ 3,100,680 $7,320,592 30
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Discussion Of The Results By Economic
Indicators
Impact of Ongoing Operations
As a result of the on -going operation and
maintenance of the Project, Miami will
gain approximately 30 new, permanent,
full-time equivalent jobs. The wages of the
workers who obtain these positions will
provide an impact of approximately $3.1
million annually.
The total expenditures for the Project's
operations, will provide a new, permanent
impact of $6.3 million annually to the
City's economy. This impact consists of
the effects of the direct expenditures from
the maintenance, security and day-to-day
operation of the Project, and the multiplied
effects of such spending thus creating
indirect benefits.
Impact on Local Tax Revenues
As a result of the construction and
operation of the Project, various state, city
and city governments and agencies would
gain an estimated annual tax benefit of
$7.8 million.
Analysis by Economic Indicators
Our analysis of the economic and tax
benefits of the Project was done by each
major phase of the Project. We identified
the major phases to be developmental
and operational.
This analysis determines the economic
benefits to the City by identifying such
benefits for each of the phases.
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The effects on economic indicators
used to measure benefits
(employment, wages, output and
taxes) were computed for each
phase.
Employment
Employment is one of the most
important economic benefits of the
Project. It is one of the most
accessible and direct benefits for the
City's residents and it's residents and
is a primary means by which
developmental, operational and
maintenance expenditures generate
indirect economic benefits. A portion
of this employment occurs on -site as
a result of new spending at the retail
enterprises, and a portion is derived
from on -going operations of the
Project. Further employment is
generated off -site by the expenditures
of employees of the Project and
businesses located in the Project, at
area businesses.
As can be seen in Exhibit I, total
short-term (developmental)
employment will average 383
employees over a thirty month period
and a total on -going employment will
average 30.
The total on -going positions can be
summarized as follows:
Management
Security
y Parking
Maintenance/Facilities
Retail
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Discussion Of The Results By Economic
Indicators
Wages
The analysis deemed wages are a direct
by-product of employment. As discussed
in the above section, both on -site and off -
site jobs are created. There were both
temporary and permanent in nature.
To compute the wages associated with
the new employment we started with
budgeted data directly related to the
developmental and operational phases of
the Project.
Employment, such as construction related
employment, was obtained directly from
construction estimates. These numbers
were tested for reasonableness.
Output
The output generated, as a result of the
development and operations of the
Project, is caused by the following type of
expenditures:
Development costs expended in the
City (100%)
Annual operational expenditures of
management company
New spending in the locality by
employees of businesses
located in the Project
To incorporate the impact of dollars
being respent and/or reinvested in the
City, a multiplier was applied to total
direct output. A multiplier of 1.8792
was used to determine total direct
and indirect output created by the
Project. This multiplier indicates that
for every $100 spent in Miami,
another $187.92 will be respent or
reinvested in Miami. This multiplier
was obtained from the Dade City
Planning Department.
Direct output from the developmental
phase of the Project is primarily a
result of developer costs. These
costs include land acquisition, site
preparation and soft and hard costs
relating to the Project's construction.
To determine the total output we
determined what development costs
were expected to be or had been
spent in Miami.
Total direct output during the
development phase is $218 million.
Total indirect output created by the
direct respending in Miami is $192
million. Thus total Miami Output from
the development of the Project is
$410 million.
The final component of output results
from the direct operating expenditures
of the Project, and the indirect
benefits created as a result of the
multiplier effect on direct output.
The Developer provided us with an
annual operating budget for the
Project. An overall assumption was
made that all expenditures would be
spent initially in the City.
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Discussion 0# The Results By Economic
Indicators
Output (Contd.)
The total operating expenditures
incorporate all estimated expenses of the
ongoing operation of the Project. The
impact of the retail enterprises was
measured separately as an economic
indicator.
To incorporate the potential respending
and reinvesting in Miami, the multiplier
effect was measured. By applying a
multiplier of 1,8792 to the total direct
output from operating expenditures and
the retail enterprises, we determined total
output (direct and indirect) from on -going
operating expenditures and retail sales.
Local Taxes
A key and significant benefit generated
from the development and operation of
the Project is taxes. Several types of tax
revenue will be generated from this
Project including ad valorem taxes.
Specific ad valorem taxes include real
and personal property taxes. Other
taxes include occupational taxes and
community development taxes.
New real property taxes will be assessed
on the Project. The assessment is
based on a predetermined mileage rate
being applied to the taxable value of the
real property. We computed real
property taxes for the developmental
phase based on the cost of the
development of the Project.
This assessment base is very
conservative since tax on real property
typically is assessed on appraised
values and not actual cost.
The basis for ongoing taxes is also
overall cost. The mileage rate was
obtained from the City Tax Collectors
office relative to the Project's location.
The Projected annual real property
taxes are approximately $7.3 million.
Total ad valorem taxes assessed by
Miami -Dade County are allocated
based on mileage rates to certain
governmental entities, Listed below is
the allocation of Projected tax revenue.
City Operating
City Miscellaneous
School Operating
County Operating
Debt Service - City
Debt Service -County
South Florida Water
Library Operating
School Debt Service
Florida Inland Navigation
Environmental Projects
Children's Trust
TOTAL.
$ 2,386,344
136,890
2,214,877
1,624,882
260,091
78,027
163,446
133,057
163,446
10,541
27,378
121,613
$ 7,320,592
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Discussion Of The Results By Economic
Indicators
Local Taxes (Contd.)
Although not quantified, the City, through its
receipt of allocated state sales taxes will
receive an additional benefit as a result of the
development and operation of the Project,
and from the retail enterprises.
Public Sector Costs
Impact fees
Very significant factors in measuring the
economic impact on a specific region of a
Project are impact and other required
development fees. A summary of these fees
are listed below:
y City of Miami Developmental Impact Fee
• City of Miami Developmental Admin Fee
• Downtown Development Supplemental
Fee
• Miami -Dade County School Impact Fee
• Building Permit Fee
Installation Energy Fee
Other Fees
For the purpose of this economic impact
analysis, fees are included as a part of the
direct development cost (output). Impact fees
total approximately $2.2 million and other
fees total approximately $1.6 million. These
fees are shown in detail in Exhibit ll.
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• Exhibit List
Exhibit I
Exhibit it
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Summary of Economic Impact
impact and Other Fees
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Exhibit I
OUTPUT
WAGES EMPLOYMENT TAXES
DIRECT
DEVELOPMENTAL
OPERATIONAL
TOTAL DIRECT
INDIRECT
DEVELOPMENTAL
OPERATIONAL
TOTAL INDIRECT
TOTAL BENEFITS
TOTAL DEVELOPMENTAL
TOTAL OPERATIONAL
$ 218,019,584
3,350,000
221,369,584
191,682,818
2,945,320
194, 628,138
$ 61,760,000
1,650,000
63,410,000
54,299,392
1,450,680
55,750,072
$ 415,997,722 $ 119,160,072
$ 409,702,402 $ 116,059,392
6,295,320
3,100,680
383
30 $ 7,320,592
413
7,320,592
413 $ 7,320,592
383
30 $ 7,320,592
TOTAL BENEFITS $ 415,997,722 $ 119,160,072 413 $ 7,320,592
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• Exhibit = I
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IMPACT AND OTHER FEES:
A. Development Square Footages:
1) Total gross building area (with parking)
2) Maximum development area (FAR)
3) Gross parking area
B. Impact Fees:
Square Footage
1,992,850
1,135,925
415,224
Amount
1) City of Miami Developmental Impact Fee $ 681,092
2) Developmental impact Administration Fee 20,433
3) Downtown Development Supplemental Fee 237,723
4) Miami -Dade County School Impact Fee 1,264,409
Total of all Impact Fees $ 2,203,657
C. Non -Impact Fees:
1) Miami Dade W.A.S.A. "connection fees" $ 961,655
2) Building Permit Fee 267,182
3) Installation Energy Fee 199,285
4) Major Use Special Permit Application Fee 30,000
5) Miami -Dade County Code Compliance 87,500
6) Radon Gas Fee 9,964
7) Fire Plan Review Fee 18,932
8) Ground Cover Fee 493
9) Land UselZoning 571
10) Zoning Review for Building Permit Fee 60
11) Certificate of Occupancy Fee 250
12) Application Fee 35
Total of all Non -Impact Fees $ 1,575,927
Total of all Fees for Project $ 3,779,584
Source: City of Miami Planning, Building and Zoning Department.
Miami Dade County Impact Fees
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