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HomeMy WebLinkAboutTab 4-Economic Impact StudyECONOMIC IMPACT ANALYSIS BRICKELL STATION • - Prepared by - Lambert Advisoty, LC - Prepared for - The Related Group November 2005 • Economic Impact Analysis — Brickell Station Economic Impact Analysis Brickell Station Lambert Advisory has completed an economic impact analysis for the development of Brickell Station, a condominium project (with limited retail/commercial space) located on S.E. 1st Avenue, between S.E. 5th Street and S.E. 6th 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 thebenefits created by the Brickell Station development, and can supplement the major use special permit application to be submitted to the City of Miami. The Brickell Station property is located in downtown Miami, and is accessible to major thoroughfares, including I-95 and I-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 The Related Group; Lambert has not independently verified this information or data. Importantly, Lambert Advisory was not provided development cost data and/or timeline data; therefore, we have made certain assumptions related to construction (hard and soft) costs and timing which may be subject to change. Furthermore, Lambert does not attest to the accuracy of these estimates and as such should not be relied upon beyond the scope of this analysis. A profile of the project follows. Brickell Station Economic Impact Analysis Building Features & Profile Site Size (Net) 0.46 acres Building Height (Floors) 53 Floors Number of Residential Units 232 units Parking 307 spaces Residential FAR Existing Commercial New Commercial (Retail) Gross Building Area (w/parking) Source: The Related Group, Lambert Advisory, 2005. 286,814 sq.ft. 0 sq.ft. 4,978 sq.ft. 524,161 sq.ft. Construction of Brickell Station is expected to commence in June 2006, with a duration of 18 months., Occupancy is planned for early 2008. 2 Economic Impact Analysis - Brickell Station Based upon the information provided and estimates made, construction and subsequent operations of Brickell Station will generate considerable benefits to the immediate area, the City of 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 (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: Brickell Station Economic Impact Analysis Development Costs Item Cost Hard Costs $56,400,000 Soft Costs $10,530,000 Total $66,930,000 Source/Note: Development costs above represent estimates made by Lambert Advisory and may be subject to change. Lambert Advisory has not verified the accuracy of this information. 3 Economic Impact Analysis — Brickell Station 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 ($33.8 million) of hard costs, and materials will account for 40 percent ($22.6 million). Over an estimated 18-month construction period, at an average annual construction wage of $44,5121 in Miami -Dade County, with a beneft/overhead multiplier of 1.4, there will be 362 Full Time Equivalent (FTE) jobs created. Additionally, over $1.3 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 $740,000 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 $1.4 million, which will be available for public expenditures associated with the project including developmental, administrative, permitting, schools, and other costs2. 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 Brickell Station is included in the following table. t State of Florida ES-202, fourth quarter 2004 2 Lambert Advisory calculates impact and other fees based upon physical characteristics of the development (as provided by Developer) utilizing impact/other fee factors provided by the City of Miami and/or Miami Dade County. There may items for which additional fees may be collected by the City/County (eg. Tree Trust) and/or State (eg. Energy Conservation) that has not been included herein. As a result, there will be some variation between the impact and other fees provided herein and the actual fees that may be paid upon commencement of the development process. 4 Economic Impact Analysis — Brickell Station Brickell Station Economic Impact. Analysis Impact and Other Fees Impact Fees: Total City of Miami Development Impact Fee (Ord. 10426) $275,297 City of Miami Development Impact Admin. Fee $8,259 Miami Dade County Roads $215,451 Miami Dade County Schools $405,279 $904,286 Other/Non-Impact Fees: City of Miami Bonus Fees $0 Miami Dade W.A.S.A. Connection Fee $326,076 City of Miami Building Permit Fee $73,128 Energy Installation Fee $42,380 M.U.S.P Application Fee $45,000 Dade County Code Compliance $33,465 Radon Gas Fee $4,238 Fire Plan Review Fee $3,814 Ground Cover Fee $400 Land Use/Zoning, Review for Building Permit $2,000 Certificate of Occupancy $250 Application Fee $35 TOTAL OTHER FEES $ 530,787 TOTAL PROJECT FEES $1,435,073 Source: City of Miami Planning, Building & Zoning; Miami Dade County; The Related Group; Lambert Advisory. Fees above may be subject to change. 2. Long -Term (On -Going) Resident Expenditure Based on demographic and for -sale housing trends in the area, the Brickell Station resident base is expected to consist primarily of younger working professionals. Considering the proposed average sale price of roughly $585,000, 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 232 households in the building, total personal income for the building is estimated to be nearly $32 million. Estimating that approximately half of the owners will relocate from outside the City, and accounting for a slight reduction for second home (non resident buyers), over $16 million of marginal personal incomewill flow into Miami. We have estimated the marginal impact of $16 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 2009. Economic Impact Analysis— Brickell Station Brickell Station Area Expenditure Potential (from New -to -Miami Brickell Residents) 2009 Type of Good Estimated Marginal Expenditure Growth 2010 Sales per Square Feet Square Foot Demanded 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 $366,317 $352,432 $146,081 $139,718 $133,267 $203,258 $227 $290 $227 $200 $250 $420 1,614 1,215 644 699 533 484 $1,341,073 $1,871,648 $1,157,840 $601,587 $40,154 $258 $422 $375 $407 $280 5,188 4,435 3,088 1,478 143 $3, 671, 228 $401 9,144 Building Materials $360,948 $115 3,139 Total $5,373,250 Source: Lambert Advisory, 2005 $308 17,471 In addition to the net new expenditures attributable to Brickell Station residents, the 5,415 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 Brickell Station retail comes from outside the City, and based upon sales per square foot of $308, approximately $335,000 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 eight FTE workers will be needed to operate the building and six 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 $42,6923 the operation of the building 3 State of Florida ES-202, fourth quarter 2004 Economic Impact Analysis,— Brickell Station will generate approximately $600,000 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 5,415 square feet of new retail space. Assuming the net new retail expenditure in stores totals $335,000, approximately $24,000 in additional sales tax will be collected from retail sales. Additionally, an estimated $260,000 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 Brickell Station 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 (2005) millage rate of 25.4728 (per thousand dollars of value), broken down as follows. Brickell Station Economic Impact Analysis Ad Valorem Tax Breakdown Item Millage Annual Tax City of Miami Operating 8.4995 $1,006,600 City of Miami Debt 0.765 $90,599 School Operations 7.947 $941,168 School Debt 0.491 $58,149 Environmental Projects 0.100 $11,843 South Florida Water Management 0.597 $70,703 FIND 0.0385 $4,560 County Millage 5.835 $691,042. County Debt 0.285 $33,753 Children's Trust 0.429 $50,807 Library 0.486 $57,557 TOTAL 25.473 $3,016,781 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 Brickell Station based on 85 percent of total sales proceeds (unit sale value). Accordingly, the development should generate approximately $3.0 million in real property taxes by 2008/9. This represents an estimated net marginal increase of roughly $2.0± 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 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 17 additional jobs. This multiplier is derived from the U.S. Economic Impact Analysis — Brickell Station 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. Brickell Station Economic Impact Analysis Summary, Economic Impacts Impact Short Term Construction Employment & Expenditure Full Time Jobs 362 Direct Wages $24,200,000 Professional Wages (Miami -Dade County) $700,000 Impact Fees Toward Public Expenditure $1,400,000 Total Impact, Short Term Const. Employment & Expenditure $26,300,000 Long -Term (On -Going) Resident Expenditure Marginal Expenditure Growth — Residents (2009) $5,400,000 Marginal Impact from On -Going Resident Expenditure $5,400,000 Long -Term (On -Going) Building Employment and Operating Expenditure Full Time Jobs 14 Total Direct Wages Created $600,000 Sales Tax from Additional Retail Sales (2009) $23,000 Goods & Service Purchased in Miami -Dade County $290,000 Ad Valorem Taxes (2009) $3,000,000 Total Impact from On -Going Operations of the Building/Retail $3,900,000 Indirect Flow Through Benefits Full Time Jobs (Indirect) - Miami Dade County 16 Total Indirect Wages Created $700,000 Total Flow Through Indirect Benefits $700,000 Source: Lambert Advisory,2005. Based upon the analysis set forth herein, the Brickell Station 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 362, with on -going annual employment of 30 FTE jobs. Accordingly, there is an estimated $26.0± million impact from short-term construction employment and expenditures, and a stabilized $9.0± million annual revenue stream from resident expenditures and building operations (including real property taxes). 8