HomeMy WebLinkAboutArticle III Tab 5 - Economic Impact StudyOctober 10, 2005
Gilberto Pastoriza, Esq.
Weiss Serota et al.
Miami, Florida
Re: MUSP Impact Analysis —
Dear Mr. Pastoriza:
Miami Economic Associates, Inc. (MEAT) has performed analysis to estimate the benefits
that the development of Oak Garden Homes in the 3100 block of N.W. 11t1 Street 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
1
Impact on the Housing Market
1
Fiscal Benefits
2
Economic Benefits
.3
Bases of Estimates
3
Closing
6
Project Description -
Oak Garden Homes will consist of 17 units inclusive of both single-family detached and
attached homes that will average over 1,500 square feet in size. Development of the
proposed project is expected to cost $2.4 million in hard construction costs. An
additional $150,000 million will be expended for soft costs including sales commissions.
According, the project will cost $2.55 million to develop exclusive of land acquisition
costs, financing expenses and developer's profit.
Summary of Findings
Development of Oak Garden Homes 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
6861 S.W. 89th Terrace Miami, Florida 33156
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Gilberto Pastoriza, Esq.
Weiss Serota et al
October 10, 2005
Page 2
and beverage establishments operating_ within them as well as to enhance the City's
tax base. The City has been experiencing considerable success in this regard;
however, the overwhelming preponderance of the development under construction,
approved and proposed consists of high-rise condominium projects in which the
average unit is inadequately sized for families and priced well above the means of
the majority of City -residents -at $350 per square foot and above. Oak Garden Homes
will provide an alternative to such projects.
Fiscal Impact
• Fiscal benefits refers to the positive impacts that the development of Oak Garden
Homes 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 s enumerated below
(2005 Constant Dollars):
Non-recurrinq-Benefits--
• $ 4,195 in City building permit fees
• $ 500 in solid waste surcharge fees
• $ 22,960 in City impact fees
o Recurring Benefits
• $ 30,506 annually in City General Fund ad valorem taxes
• $ 3,325 annually in City Debt Service ad valorem taxes
o Non -Quantifiable
• Trade -related fees for roofing, electrical, plumbing, mechanical, pool and
elevator work performed during construction (non -recurring) -
• Increased City utility taxes and franchise fees (recur -ring)
• Increased revenue sharing funds (recurring)
o Other
• While the focus of MEAI's fiscal analysis was on the City of Miami, Oak
Garden Homes will, as shown below, provide significant fiscal benefits to
other non -municipal governmental jurisdictions that impact the lives of
City residents:
o $ 18,194 in County road impact fees (non -recurring)
o $ 36,077 in School impact fees (non -recurring)
o $ 20,772 in County General Fund ad valorem taxes (recurring)
o $ 997 in County Debt Service ad valorem taxes(recurring)
o $ 1,555-in Children's Trust ad valorem taxes (recurring)
o $ 1,701 in County Library ad valorem taxes (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
Gilberto Pastoriza, Esq.
Weiss Serota et al
October 10, 2005
Page 3
o $ 28,315 in School Operating ad valorem taxes (recurring)
o $ 2,089 in School Debt Service ad valorem taxes (recurring)
Economic Benefits
• Economic benefits relates to the impact that the proposed Oak Garden Homes
project will have on the economy of the City rather than its finances. The economic
benefits it will provide will also be non-recurrinq and recurring in nature. Salaries paid
to construction workers will constitute an important non -recurring benefit. The
economic benefits summarized below are stated in 2005 Constant Dollars.
Non-recurrinq
• Approximately 90 percent of the $2.55 million that will be spent on hard
and soft costs to develop the proposed Oak Garden Homes project will be
spent within the City of Miami, producing an overall economic impact
approximating $3.6 million when the multiplier effect is considered.
• Project expenditures within the City of Miami will include an estimated
$1.0 million for construction labor, an amount sufficient to pay
approximately 23 construction workers their average annual wage of
$44,350.
o Recurring
• A total of $238,000 million will be spent annually in shops and restaurants
- within the City of Miami by project residents. Additionally, $89,260 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 $490,890 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 the proposed Oak Garden Homes project will
provide to the City of Miami. All monetary amounts are stated in 2005 Constant Dollars.
Project Characteristics
• Oak Garden Homes will be located on the 3100 block of N.W. 11th Street, placing it
within the City of Miami as well as the jurisdictions of Miami -Dade County and the
Miami -Dade County Public School District.
• The project will entail the construction of 27,966 gross square feet of building area.
Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156
Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsouth.net
Gilberto Pastoriza, Esq.
Weiss Serota et al
October 10, 2005
Page 4
• Development of the proposed project will cost approximately $2.4 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 $150,000 million. Therefore, $2.55 million will be spent to
complete the project exclusive of land acquisition costs, financing expenses and
developer's profit.
• The 17 units will be sold for an average price of $290,000. 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 for new units approximate -80 percent of market value, in this case $3.9
million.- Assuming that 100 percent of the residential units are eligible for the
Homestead Exemption, the total taxable value of the proposed units will be $3.5
million.
Residents of the proposed units will on average require an annual income of
approximating $100,000 to qualify for ownership. Based on this estimate of average
household income, it is projected that the people living at the proposed project will
spend $340,000 million annually in retail and restaurant establishments. This
projection assumes that they spend approximately 20 percent of their income for that
purpose.
Non -recurring Fiscal Impacts
The City of Miami charges building permit fees_at a rate of $0.15 per gross square
foot, which will result in fees being paid totaling $4,195. A solid waste surcharge fee
in the -amount of'$0.20 per $100 of estimated -construction cost will be also charged
to a maximum of $500. The maximum amount will be paid,
• 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, storrti sewers, solid waste and general services administration.
The rates paid for projects constructed in the area of the City in which the proposed
project will be developed are $0.821 per square foot of new residential use. Based
on the project's square feet of residential living area, City impact fees totaling
$22,960 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, -
Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156
Tel: (305) 669-0229 Fax: (305)-669-8534 Email: meaink@bellsouth.net
Gilberto Pastoriza, Esq.
Weiss Serota et al
October 10, 2005
Page 5
the rate for roads $1,242 per single-family detached unit and $877 per single-family
attached unit. The project will consist of 9 detached and 8 attached units. 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 $54,271 will need to be
paid at the time the building permit for the proposed project is issued. Of this amount,
$18,194 will be applied to roads and $36,077 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 $3.5 million.
_
Entity
Rate/$1000
Taxable Value
Taxes
City of Miami
General Fund
8.71625
$ 30,506
Debt Service Fund
0.95000
$ 3,325
Miami -Dade County
-
General Fund -
- 5.93500
$ 20,772
Debt Service Fund
0.28500
$ 997
Children's Trust
0.44420
$ 1,555
Library
0.48600
$ 1,701
Miami -Dade County Public Schools
Operating
8.09000
$ 28,315
Debt Service
0.59700
$ 2,089
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 of the development of Oak Garden Homes 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.
• 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 $2.55 million that will be spent on
the hard and soft costs to develop Oak Garden Homes 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.
Miami Economic Associates, Inc. 6861 S.W. 89th-Terrace Miami, Florida 33156
Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsouth.net
Gilberto Pastoriza, Esq.
Weiss Serota et al
October 10, 2005
Page 6,
Minnesota IMPLAN Group (MIG), which is one of the nation's foremost econometric
firms, the overall economic impact of these expenditures will approximate $3.6
million based on application of a 1.554 multiplier.
• MIG's input-output model further estimates that approximately $1.0 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 23 workers
on an annual basis at their average wage rate. Some of these workers may be
residents of the City.
Recurring Economic Benefits
The residents of Oak Garden -Homes will spend $340.000 million annually in retail
establishments and restaurants, approximately 70 percent of which, $238,000
million, will be spent within the City of Miami. The project will generate approximately
$89,260 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 $490,890 based on the application of a 1.5 multiplier.
Closing
The analysis performed by MEAI demonstrates that the development at Oak Garden
Homes will be 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
while providing an alternative to the high-rise condominium projects that predominate the
new development activity within the City. -
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