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HomeMy WebLinkAboutEconomic Impact StudyECONOMIC IMPACT ANALYSIS LIMA o - Prepared by - Lambert Advisory, LC - Prepared for - Kobi Karp Architecture and Interior Design, Inc. November 4, 2005 o • Economic Impact Analysis —LIMA Economic Impact Analysis LIMA Lambert Advisory has completed an economic impact analysis for the development of LIMA, a condominium project located at 2955 Biscayne Boulevard 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 LIMA development, and can supplement the major use special permit application to be submitted to the City of Miami. The LIMA property is at the intersection of NE 29th Street and Biscayne Boulevard, and is accessible to major thoroughfares, including 1-95 and 1-195. 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 (i.e., price, absorption, timing, costs) that has been provided by Kobi Karp Architecture and Interior Design, Inc. We have not independently verified this information or data, A profile of the project follows. LIMA Economic Impact Analysis Building Features & Profile Site Size (Net) 1.41 acres Building Height 41 stories Number of Residential Units 211 units Parking 363 spaces Residential FAR Existing Commercial New Commercial (Retail) Gross Buildin• Area w/•orlon Source; Kobi Karp, Lambert Advisory, 2005. 251,600 sq.ft. 40,500 sq.ft. 7,600 sq.ft. 455,790 sq.ft Construction of LIMA is expected to commence in June 2006, with a duration of 18 months. Occupancy is planned for early 2008. Based upon the information provided, construction and subsequent operations of LIMA will generate considerable benefits to the immediate area, the City of Miami, and the metro -Miami community. There are four keyare as 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 2 • • Economic Impact Analysis -- LIMA 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 Kobi Karp Architecture and Interior Design, Inc. LIMA Economic Impact Analysis Development Costs Item Cost Hard Costs $50,320,000 Soft Costs $10,064,000 Total $60,384,000 Source: Kobi Karp, 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. Labor will account for approximately 60 percent ($30 million) of hard costs, and materials will account for 40 percent ($20 million). Over an estimated 18-month construction period, at an average annual construction wage of $44,5121 in Miami -Dade County, with a benefit/overhead multiplier of 1.4, there will be 323 Full Time Equivalent (FTE) jobs created. State of Florida ES-202, fourth quarter 2004 • Economic Impact Analysis — LIMA Additionally, over $1.2 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 percent and overhead of 30 percent, nearly $670,000 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 $1.9 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 LIMA is included in the following table. LIMA Economic Impact Analysis Impact and Other Fees Impact Fees: City of Miami Development Impact Fee (Ord. 10426) $245,380 City of Miami Development Impact Admin. Fee $7,361 Miami Dade County Roads $203,348 Miami Dade County Schools $360,101 $816,190 Tote Ofher!Non-Impact Fees: ,236 $297,63444 44 City of Miami Bonus Fees $6 Miami Dade W.A.S.A. Connection Fee$56,810 City of Miami Building Permit Fee Energy Installation Fee $41,529 M.U.S.P Application Fee $45,000 Dade County Code Compliance $30,192 Radon Gas Fee $4,153 Fire Plan Review Fee $3,738 Ground Cover Fee $1,228 Land Use/Zoning, Review for Building Permit $2,000 Certificate of Occupancy $250 Application Fee $35 TOTAL OTHER FEES $1,126,805 TOTAL PROJECT FEES $1,942,995 Source: City of Miami Planning, Building & Zoning; Miami Dade County; Kobi Karp; Lambert Advisory. Fees included above may be subject to change. • Economic Impact Analysis -- LIMA 2. Long -Term (On -Going) Resident Expenditure Based on demographic and rental housing trends in the area, the LIMA resident base is expected to consist primarily of younger working professionals. Considering the proposed average sale price of $512,000, it is assumed that the residents will be mostly middle and upper income individuals/households with incomes of at least $120,000. Therefore, with a total of 211 households in the building, total personal income for the building is estimated to be over $25 million. Estimating that approximately half of the owners will relocate from outside the City, nearly $13 million of marginal personal income will flow into Miami. We have estimated the marginal impact of $13 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. LIMA Area Expenditure Potential (from New -to -Miami LIMA Residents) 2008 Type of Good General Merchandise Apparel and Accessories Furniture and Home Equipment Electronic and Appliance Stores Sporting Goods, Books, Music Stores Miscellaneous Shoppers Goods Shoppers Goods - Sub -Total Food Stores Eating & Drinking Establishments Health & Personal Care Stores Liquor Convenience Goods - Sub -Total Building Materials Total Source: Lambert Advisory, 2005 Estimated Marginal Sales per Expenditure Growth Square 2008 Foot Square Feet Demanded $285,565 $227 1,258 $274,741 $290 947 $113,878 $227 502 $108,918 $200 545 $103,889 $250 416 $158,451 $420 377 $1,045,443 $258 4,044 $1,459,056 $422 3,457 $902,602 $375 2,407 $468,971 $407 1,152 $31,302 $280 112 $2, 861, 930 $401 7,128 $281,380 $115 2,447 $4,188,753 $308 13,620 • Economic Impact Analysis - LIMA In addition to the net new expenditures attributable to LIMA residents, the 7,600 square feet of new 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 LIMA retail comes from outside the City, and based upon sales per square foot of $308, nearly $470,000 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 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 condominium community and stores; • Property tax revenue to the City of Miami and Miami -Dade County; and • Purchase of goods and services. We estimate that seven FTE workers will be needed to operate the building and eight FTE workers will be employed in the retail stores, 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 $42,6922 the operation of the building will generate nearly $700,000 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 7,600 square feet of new retail space. Assuming the net new retail expenditure in stores totals $470,000, approximately $33,000 in additional sales tax will be collected from retail sales. Additionally, an estimated $200,000 in goods and services related to building maintenance will be purchased annually within Miami -Dade. This includes cleaning services, maintenance supplies, utilities, etc. 2 State of Florida ES-202, fourth quarter 2004 • • Economic Impact Analysis — LIMA Finally, the development of LIMA 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. LIMA Economic Impact Analysis Ad Valorem Tax Breakdown Item Millage Annual Tax City of Miami Operating 8.7163 $516,276 City of Miami Debt 0.950 $56,270 School Operations 8.09 $479,182 School Debt 0.597 $35,361 Environmental Projects 0.100 $5,923 South Florida Water Management 0.597 $35,361 FIND 0.0385 $2,280 County Millage 5.935 $351,538 County Debt 0.285 $16,881 Children's Trust 0.444 $26,311 Library 0,486 $28,786 TOTAL 26.23895 $1,554,170 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 LIMA based el on 85 percent of development costs, including property acquisition (app Y million). Accordingly, the development should generate approximately $1.6 million in real property taxes by 2008. This represents an estimated net marginal increase of roughly $1.4 million over the ad valorem tax collection the City would receive if the property were valued at current use. • • Economic Impact Analysis ---- LIMA 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 and retail employment. The 14 FTE jobs created as a result of building and retail operations are assumed to have a 1,2 multiplier impact of 18 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. LIMA Economic Impact Analysis Summary, Economic Impacts Impact Short Term Construction Employment & Expenditure 323 Full Time Jobs $21,600,323 Direct Wages $800,000 Professional Wages (Miami -Dade County) Impact Fees Toward Public Expenditure $1,900,000 Total Impact, Short Term Const. Employment & Expenditure $24,300,000 Long -Term (On -Going) Resident Expenditure $2,000,000 Marginal Expenditure Growth — Residents (2008) Marginal Impact from On -Going Resident Expenditure $2,000,000 Long -Term (On -Going) Building Employment and Operating Expenditure Full Time Jobs $600 Q144 Total Direct Wages Created Sales Tax from Additional Retail Sales (2008) $33,000 Goods & Service Purchased in Miami -Dade County $190,000 Ad Valorem Taxes (2008) $1,600,000 Total Impact from On -Going Operations of the Building/Retail $2,400,000 Indirect Flow Through Benefits 18 $700,0 8 Full Time Jobs (Indirect) — Miami Dade County Total Indirect Wages Created 700,000 Total Flow Through Indirect Benefits Source: Lambert Advisory, 2005. Based upon the analysis set forth herein, the LIMA 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 323, with on -going annual employment of 32 FFE jobs. Accordingly, there is an estimated $24.3 million impact from short-term construction employment and expenditures, and a stabilized $4.4 million annual revenue stream from resident expenditures and building operations (including real property taxes).