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HomeMy WebLinkAboutTab 4 - Economic Impact Study080 KELL Economic Impact Analysis Submitted to: City of Miami Prepared For: RILEA GROUP Prepared by: SHARPTON, BRUNSON & COMPANY, P.A. One Southeast Third Avenue Suite 2100 Miami, Florida 33131 (305) 374-1574 1080 BRICKELL TABLE OF CONTENTS The Project Overview Executive Summary Introduction Summary of Benefits PAGE(S) 1 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: Summary of Economic Impact 13 Exhibit II: Impact and Other Fees 14 Project Overview 1080 Brickell is located at 1080 Brickell Avenue in the City of Miami, Florida (the Project). The Project consists of 315 condominium units, 1,326 square feet of retail space and 691 parking spaces. The gross lot area is 87,860 square feet (2.02 acres) and the net lot area is 68,360 square feet (1.57 acres). Excellent area demographics and a booming local economy enhance 1080 Brickell as one of the future premier multi -family opportunities. Targeted for completion in 2008, 1080 Brickell will set a new standard of excellence in South Florida condominium living. It is located on one of the last developable parcels on Brickell Avenue, which is considered the premier residential and office corridor in South Florida. With Mary Brickell Village currently under development one block away, 1080 Brickell will be situated in one of the most desirable locations in Miami. Within a 1/4 mile, Interstate 95/US-1 provides quick access to Coral Gables and Aventura while Interstate 395, within 2-1/2 miles, provides quick access to Miami Beach and MIA. One block away, the Metromover/Metrorail provides pedestrian access to Downtown Miami and as far south as Dade[and Mall. The proximity and ease of access of 1080 Brickell to the surrounding transportation network, creates a uniquely convenient and desirable address. -1- 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. This analysis encompasses the entire Project and estimates the economic and tax benefits for both its developmental and operational phases, The Project currently contemplated is comprised of the following components: ❑ 315 units of high -quality residential. ❑ 1,326 square feet of retail. ❑ 691 parking spaces. -2- Summary 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 employ- ment, public sector revenues and other economic benefits as a result of the development. Employment Employment considerations include the direct employment resulting from the Project. Average developmental construction phase employment will be for approximately 262 employees and the Project management is expected to employ 14 people for on- going maintenance and operations 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 $ 57,879,360 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 develop- ment. Annual tax revenue expected to be created totals $3,496,439. 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 determine 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 develop- mental and operational phases of the Project will approximate the following: One Time $ 198,855,550 Annual $ 1,240,272 Annual $ 2,893,968 3 Su ary Of Benefits Significant Community Benefits: • Jobs • Wages • Taxes Economic Activity Residents' Office Workers' and Retain/Restaurant Employees' Spending Impacting Local Businesses: Food r Recreation/Entertainment Transportation Retail The following table and charts summarize the economic impact of the 1080 Brickell project. CONSTRUCTION ANNUAL PERIOD IMPACT RECURRING Economic Activity Stimulated Output $ 198,855,550 $ 2,893,968 Wages 57,879,360 1,240,272 Taxes 3,496,439 $ 256,734,910 $ 7,630,679 Jobs Created 262 14 4 Objectives And DDefinitions 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 desig- nated area. The model is specifically tailored to the City of Miami (the City). Definition of Economic and Tax Impact The construction and subsequent oper- ation 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 multi- plier effect of respending and reinvesting, indirect economic benefits are added to the direct benefits brought about by initial construction expenditures, the expendi- tures 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 govern- mental 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 modem 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 insignifi- cant sum is left. se Objectives And Definitions 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 expendi- tures. 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 reve- nues 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 expendi- tures (exclusive of wages and taxes). 6 Objectives And Definitions Description of Results For the purpose of describing the total economic benefits of the Project, the related expenditures and econ- omic 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 oper- ation of the Project, and the sales and expenditures of the retail enter- prises leasing space at the Project. -7- 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 Projects direct and indirect impact on the above economic indicators for Miami. A summary of such impact follows: DEVELOPMENT OUTPUT One Time: Direct Indirect Annual: Operational: Direct Indirect $ 105,819,258 93,036,292 $ 198,855,550 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 $134.6 million. Such activity will create approximately 262 new full time equivalent jobs and employ a maximum of 312 workers during peak periods. The workers will earn approximately $30.8 million in direct wages. WAGES TAXES EMPLOYMENT $ 30,800,000 27,079,360 $ 57,839,360 262 262 $ 1,540,000 $ 660,000 $ 3,496,439 14 1,353,968 580,272 $ 2,893,968 $ 1,240,272 $ 3,496,439 14 -8- Discussion 0 The Results By Economic indicators Impact of Ongoing Operations Asa result of the on -going operation and maintenance of the Project, Miami will gain approximately 14 new, permanent full-time equivalent jobs. The wages of the workers who obtain these positions will provide an impact of approximately $1.2 million annually. The total expenditures for the Project's operations, will provide a new, permanent impact of $2.9 million annually to the City's econ- omy. 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 bene- fits. 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 $3.5 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 econ- omic benefits to the City by identi- fying such benefits for each of the phases. The effects on economic indicators used to measure benefits (employ- ment, 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 develop- mental, operational and maintenance expenditures generate indirect econ- omic benefits. A portion of this employment occurs on -site as a result of new spending at the retail enter- prises, 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 262 employees over a twenty- four month period and the total on- going employment will average 14. The total on -going positions can be summarized as follows: Management Security Parking Maintenance/Facilities Retail -9- 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 follow- ing type of expenditures: Development costs expended in the City (100%) r° 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 $1Q0 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 prep- aration 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 $105.8 million, Total indirect output created by the direct respending in Miami is $93 million. Thus total Miami output from the development of the Project is $198.8 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. -10 Discussion Of 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 econ- omic indicator. To incorporate the potential respen- ding 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 as- sessed on the Project. The assess- ment 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 conserv- ative 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 $3.5 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 $ 1,144,196 67,310 1,069,819 785,503 102,984 38,366 80,368 65,425 66,098 5,183 13,462 57,725 $ 3,496,439 -11 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: 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 $906 thousand and other fees total approximately $713 thousand. These fees are shown in detail in Exhibit II. -12- Exhibit Lis Exhibit 1 Exhibit 1€ Summary of Economic Impact Impact and Other Fees Exhib Summary of Economic Impact OUTPUT WAGES EMPLOYMENT TAXES DIRECT DEVELOPMENTAL $ 105,819,258 $ 30,800,000 OPERATIONAL 1,540,000 660,000 TOTAL DIRECT 262 14 $ 3,496,439 107,359,258 31,460,000 276 3,496,439 INDIRECT DEVELOPMENTAL 93,036,292 27,079,360 OPERATIONAL 1,353,968 580,272 TOTAL INDIRECT TOTAL BENEFITS 94,390,260 27,659,632 $ 201,749,518 $ 59,119,632 276 $ 3,496,439 TOTAL DEVELOPMENTAL $ 198,855,550 $ 57,879,360 262 TOTAL OPERATIONAL 2,893,968 1,240,272 14 $ 3,496,439 TOTAL BENEFITS $ 201,749,518 $ 59,119,632 276 $ 3,496,439 _13m Exhibit II 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 638,517 553,578 220,884 Amount 1) City of Miami Developmental Impact Fee $ 256,260 2) Developmental Impact Administration Fee 7,688 3) Downtown Development Supplemental Fee 109,755 4) Miami -Dade County School Impact Fee 532,192 Total of all Impact Fees $ 905,895 C. Non -Impact Fees: 1) Miami Dade W.A.S.A. "connection fees" $ 440,834 2) Building Permit Fee 118,123 3) Installation Energy Fee 63,852 4) Major Use Special Permit Application Fee 30,000 5) Miami -Dade County Code Compliance 50,000 6) Radon Gas Fee 3,193 7) Fire Plan Review Fee 6,066 8) Ground Cover Fee 266 9) Land Use/Zoning 684 10) Zoning Review for Building Permit Fee 60 11) Certificate of Occupancy Fee 250 12) Application Fee 35 Total of all Non -Impact Fees $ 713,363 Total of all Fees for Project $ 1,619,258 Source: City of Miami Planning, Building and Zoning Department. Miami Dade County Impact Fees - 14 -