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HomeMy WebLinkAboutArt III Tab 6 - Economic Impact AnalysisMiami Economic Associates, Inc. January 24, 2006 SherIon Investments, LLC Miami, Florida Attn: Kristin Stringer Re: MUSP Impact Analysis — 600 Brickell Avenue Dear Ms. Stringer: Miami Economic Associates, Inc. (MEAT) has performed analysis to estimate the fiscal and economic benefits that the mixed -use project proposed for development at 600 Brickell Avenue will provide to the City of Miami. This letter, which is organized as shown below, provides the findings of our analysis and their bases: Section Page ' Project Description 2 Summary of Findings 2 Impact on the Housing Market 2 Fiscal Benefits 2 Economic Benefits 4 Bases of Estimates 4 Closing 9 The proposed project at 600 Brickell Avenue will be developed over an extended period of years with full development not expected to be completed until 2014. During this period the rates associated with ad valorem taxes are likely to be adjusted annually and other fee schedules may be adjusted. In this regard, it is particularly noted that Miami - Dade County and the Miami -Dade County Public School District are all in the process of reviewing and potentially modifying their impact fee rate schedules. The adjustments, if made, could significantly change the estimates contained in this report, generally producing substantially higher revenues. Project Description The mixed -use project proposed for development 600 Brickell Avenue will be developed in 2 phases. The first phase, which is scheduled for completion during the early portion 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (3051 669-8534 Email: meainkebellsouth.net SherIon Investments, LLC January 24, 2006 Page 2 of 2009, will be comprised of 546,691 square feet of office space and 24,701 square feet of retail space as well as 975 parking spaces. The second phase will also contain office and retail uses, 557,155 and 1,529 square feet respectively, as well as 130 condominium units, a 360-unit hotel and 1,195 parking spaces. Phase 2 is scheduled for completion by the end of 2014. The office space within the first phase of the proposed projects is expected to rent at a rate exceeding $40 per square foot on a full service basis within the rental rate for the retail space approximating $50 per square foot net. By the time the second phase of the project opens in 2014, these rates are expected to increase to approximately $50 and $65 per square foot, respectively. The average sales price for the 130 condominium units is anticipated to approximate $1.75 million in 2014. At .that time, the 360-unit hotel is expected to achieve an average daily rate approximating $600 per night, reflecting its luxury orientation, and a stabilized occupancy level of 75 percent. Development of the first phase of the proposed project is expected to cost $128.4 million in hard costs. An additional $34.2 million will be expended for soft costs inclusive architectural and engineering fees, marketing, leasing commissions, project overhead, etc. Accordingly, the first phase of the project will cost $162.6 million to develop exclusive of land cost and developer fees. The hard and soft costs required to develop the second phaseof the proposed project are expected to approximate $560.0 million in 2011 dollars, which is the date construction is estimated to commence. Summary of Findings Development of the mixed -use project proposed at 600 Brickell Avenue will be highly beneficial to the City of Miami in important ways, as summarized below: Impact on the Housing Market As the above project description indicates, the development proposed at 600 Brickell Avenue will primarily be comprised of non-residential units. Only 130 condominium units are proposed as part of the second phase of construction that is scheduled to commence in 2011. Development of these units will be dependent on market conditions at that time. To the extent that they are not market justified, the program for the projects second phase will be adjusted and modified plans submitted to the City for review. Fiscal Benefits • Fiscal Benefits refers to the positive impact that the proposed mixed -use project 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 as enumerated below. The estimates shown are based on the current millage and fee rates. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@beltsouth.net SherIon Investments, LLC January 24, 2006 Page 3 o Non -recurring Benefits • $ 678,766 in City building permit fees • $ 20,000 in City solid waste surcharge fees • $ 257,645 in City police impact fees • $ 425,410 in City fire impact fees • $ 185,842 in City general services impact fees • $ 514,670 in City park impact fees • $ 1,567,787 in Downtown DRI supplemental impact fees o Recurring Benefits • $ 6,917,743 annually in City General Fund ad valorem taxes • $ 622,633 annually in City Debt Service ad valorem taxes • $ 406,950 annually in Downtown Development Authority ad valorem taxes a 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 (recurring) • Increased occupational license fees (recurring) • Increased parking surcharge fees (recurring) • Increased revenue sharing funds (recurring) Other While the focus of MEAI's fiscal analysis was on the City of Miami, the mixed -use project proposed at 600 Brickell Avenue will, as shown below, provide significant fiscal benefits to other non -municipal governmental jurisdictions that impact the lives of City residents: o $ 1,863,928 in County road impact fees (non -recurring) c $ 318,240 in School impact fees (non -recurring) o $ 4,749,107 in County General Fund ad valorem taxes (recurring) o $ 231,962 in County Debt Service ad valorem taxes(recurring) o $ 349,000 in Children's Trust ad valorem taxes (recurring) c $ 395,555 in County Library ad valorem taxes (recurring) o $ 6,468,063 in School Operating ad valorem taxes (recurring) c $ 399,625 in School Debt Service ad valorem taxes (recurring) o $ 3,000,000 in tourist taxes o Increased County occupational license fees (recurring) c Increased local option sales tax revenues o Increased revenue sharing funds Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsouth.net Sherlon Investments, LLC January 24, 2006 Page 4 Economic Beneifts Economic Benefits relates to the positive impact that the proposed mixed -use project will have on the economy of the City rather than its finances. The economic benefits it will provide will also be non -recurring and recurring in nature. o . Non -recurring • Approximately 90 percent of the $722.6 million that will be spent on hard and soft costs to develop the proposed mixed -use project will be spent within the City of Miami, producing an overall economic impact approximating $1.0 billion when the multiplier effect is considered. • Project expenditures within the City of Miami will include an estimated $325.2 million for construction labor, an amount sufficient to pay approximately 3,211 construction workers, some of whom may be City residents, their average annual wages they are expected to earn when the two phases of the project are constructed. Recurring • When the proposed project is completed in 2014, a total of $118.3 million will be spent annually in within the City of Miami by residents of and hotel. guests and workers at the proposed project for room charges and in retail and food and beverage establishments. This figure also includes the transportation -related expenditures of the hotel guests. Additionally, $20.5 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.$208.2 million when the multiplier effect is considered. • A total of 3,980 people will be employed at the proposed project, inclusive of people involved in project operations, maintenance and parking. These workers, who may include City residents, will earn approximately $207.7 million. Bases of Estimates The materials that follow provide the assumptions used to estimate the fiscal and economic benefits that development of the proposed mixed -use project will provide to the City of Miami. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsouth.net SherIon Investments, LLC January 24, 2006 Page 5 Project Characteristics • At 600 Brickell Avenue, the proposed project will be located within the City of Miami as well as the jurisdictions of the City's Downtown Development Authority, Miami - Dade County and the Miami -Dade County Public School District. It will also be in the geographic area delineated for the Downtown DR!. • The project will entail the construction of 2,775,587 gross square feet of 'building area. Of this amount, 302,611 square feet will pertain to the residential portion, which will be comprised of 130 units, amenity and circulation areas. The remaining 2,472,976 square feet will be comprised of the commercial space, inclusive the office, restaurant and hotel uses and parking. • Development of the first phase of proposed mixed -use project will cost approximately $128.4 million to construct in terms of hard construction. Soft costs including those relating to professional fees, marketing, leasing commissions, permit fees, developer overhead, administration, etc. will total an additional $34.2 million. Therefore, $162.6 million will be spent to complete the initial phase of development exclusive of land acquisition costs and developer's fees. The second phase of . development is expected to require the expenditure of $560 million in hard and soft costs when construction commences in 2011 - • The Miami -Dade County Property Appraiser uses the market comparables approach in appraising the value of real property. Based on a review of comparable Class A office projects with auxiliary retail uses, it is estimated that the assessed value of the 1.130.079 cumulative square feet of office and retail space proposed for development in the two phases of the project would approximate $350 per square feet, or $395.5 million if assessed today. Assuming an appreciation rate of 3 percent per annum from 2005 through. 2014, the assessed and taxable value of the office and retail space at the time the proposed project is completed in 2014 would be $516.0 million. • Comparables data indicates that if the 360 hotel units proposed for development in phase 2 of the project existed today they, would be assessed at approximately $250,000 per unit, or $90.0 million. Assuming an appreciation rate of 3 percent per annum from 2005 through 2014, the assessed and taxable value of the hotel component of the proposed project would be $117.4 million. • It is anticipated that the 130 condominium units proposed for development in the second phase of the proposed project will sell at an average price of $1.75 million, producing sales proceeds totaling $227.5. New condominium units are typically placed on the tax rolls for an amount approximating 80 percent of their sales price, in this case a total of $182.0 million. Assessed value if further reduced for tax purpose by the Homestead Exemption. Assuming that 60 percent of the proposed units qualify for the Homestead Exemption, the total taxable value of the condominium component of the proposed project would be $180.0 million. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305)-669-8534 Email: meaink@bellsouth.net SherIon Investments, LLC January 24. 2006 Page 6 • Based on the preceding 3 paragraphs, it is estimated that taxable value of the proposed project when fully completed in 2014 will be $813.9 million. • Residents of the proposed condominium units will on average require an annual income exceeding $500,000 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 $13.0 million annually in retail and restaurant establishments. This projection assumes that they spend approximately 20 percent of their income for that purpose. • Based on industry standards, it is anticipated that the proposed office and retail space will be occupied by 3,949 workers. This estimate assumes 4 workers per 1.000 square feet in the office space and 2.5 workers per 1,000 square feet in the restaurant space. When project operations, maintenance and parking personnel are accounted for, the total number employed at the proposed project will be 3,980 people. Assuming that at the time the project is fully completed in 2014, they spend an average of $15 per day for food and other items while working, their expenditures would total $14.9 million. The proposed hotel is expected to operate at an occupancy rate of 75 percent while achieving an average daily rate exceeding $500 per night. On this basis, it will generate room sales revenues approximating $49.3 million when it achieves a stabilized level of performance after opening in 2014. It is further estimated that each sold room night will result the expenditures for food and beverage, parking, taxi fares and rental cars as well as in retail establishments approximating $750. These expenditures will total $74.0 million. Non -recurring Fiscal Impacts The City of Miami charges building permit fees at a rate of $0.20 per gross square foot of multi -family residential construction and $0.25 per gross square foot of commercial construction. In calculating fees, the square footage associated with parking garage space was charged for at the commercial rate. Based on the distribution of space by use previously discussed, building permit fees totaling $678,766 will be paid. A solid waste surcharge fee in the amount of $20,000, or the maximum amount of $10,000 per phase, will be applied. • 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 projects 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. On high-rise units, fees will be paid on a per unit basis in the amounts of $95 for police, $409 for Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsouth.net SherIon Investments, LLC January 24, 2006 Page 7 fire -rescue, $239 for general services and $3,959 for parks. The rates for office space in the quantities proposed in each phase per square foot will be $0.176 for police, $0.317 for fire -rescue and $0.132 for general services. The rates paid for the quantity of retail space proposed in each phase of development per square foot will be $$0.751 for police, $0.302 for fire and $0.126 for general services. The rates per hotel unit will be $87 for police, $40 for fire and $16 for general services. Impact fees totaling $1,383,567 will be paid, of which $257,645 will be for police, $425,410 for fire -rescue. $185,842 for general services and $514,670 for parks. • In addition to the impact fees discussed in the preceding paragraph that are charged to projects anywhere within the City of Miami, supplemental impact fees are charged on projects located in the area covered by the Downtown DRI. According to the current table of fee coefficients, the rate for residential units is $0.558 per square foot. The rates for office and retail space are $1.094 and $1.332 per square foot, respectively. The rate for hotel use is $0.724. Based on these rates and the quantities of space/rooms associated with each use previously stated, it is estimated that a total of $1,567,787 in Downtown DRI supplemental impact fees will be paid. • New construction projects located in the City of Miami also need to pay impact fees to Miami -Dade County for roads and schools. In the eastern portion of the county, the rate for roads for condominiums and hotel units are $877 and $1,042 per unit, respectively. The road impact fee rates for office and retail space in the eastern portion of Miami -Dade County are $$1.356 and $1.255 per square foot for projects with the quantities of space proposed in phase 1. The office and retail rates for projects with the quantities of office and retail space proposed in phase 2 are $1.416 and $2.294 per square foot, respectively. 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 $2,182,168 will need to be paid at the time the building permit for the proposed project is issued. Of this amount, $1,863,928 will be applied to roads and $318,240 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 $813.9 million. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink©bellsouth.net SherIon Investments, LLC January 24, 2006 Page 8 Entity i Rate/$1000 Taxable Value . Taxes City of Miami General Fund 8.49950 $ 6,917.743 Debt Service Fund 0.76500 $ 622,633 Downtown Development Authority 0.50000 $ 406,950 Miami -Dade County General Fund 5.83500 $ 4,749,107 Debt Service Fund 0.28500 _ $ 231,962• Children's Trust 0.42880 $ 349,000 Library 0.48600 $ 395,555 Miami -Dade County Public Schools I Operating 7-.94700 $ 6,468.063 Debt Service 0.49100 $ 399.625 • Miami -Dade County will collect tourist taxes at a rate of 6 percent on room sales in the proposed hotel. Based on the estimated stabilized level of room sales after 2014* of $49.3 million, taxes approximating $3 million will be collected • 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 the proposed project 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. • Both the City of Miami- and Miami -Dade County will collect occupational license fees from the occupants of the proposed office and retail space. The amount collected can not be estimated at this time since it will be dependent on the nature of the businesses housed in the office and retail space. • The City of Miami charges a 20 percent surcharge on parking fees. Patrons of and visitors to the proposed project's office and retail space as well as its hotel would pay this surcharge. It is not possible at this time to estimate the amount that will be generated. • Miami -Dade County will collect local option sales tax at a rate of 1 percent on all rents paid for office and retail space at the proposed project, all room and food and beverage sales at the proposed hotel and retail expenditures within the proposed retail space. The amount collected, which will be equally divided to support the Health Trust and transit, can not be estimated 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. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink©bellsouth.net SherIon Investments, LLC January24, 2006 Page 9 Non -recurring Economic Benefits • It is estimated that approximately 90 percent of the $722.6 million that will be spent on the hard and soft costs to develop the proposed mixed -use project 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 Minnesota IMPLAN Group (MIG), which is one of the nation's foremost econometric firms, the overall economic impact of these expenditures will approximate $1.0 billion based on application of a 1.554 multiplier. • MIG's input-output model further estimates that approximately $325.2 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 currently earns approximately $52,000 per year according to the Florida Agency for Workforce Innovation. Assuming a 3 percent growth rate, the average wage rate during the construction of phase 1 will approximate $55,000 while during phase 2 it will approximate $62,000. Therefore, the project's expenditure on construction labor would support approximately 3,211 workers on an annual basis at their average wage rate. • Recurring Economic Benefits When the proposed project is fully developed in 2014, its residents of will spend $13.0 million annually in retail establishments and restaurants, approximately 70 percent of which, $9.1 million, will be spent within the City of Miami. Additionally, the on -site workforce will spend $14.9 million for food and other items while working. Guests in the hotel will spend a $49.3 in room charges and an additional $74.0 million for food and beverage, transportation -related costs and in retail establishments. Approximately, 60 percent, or $45.0 million, of the latter figure will be spent in the City of Miami. Finally, the project will generate approximately $20.5 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-outputmodel, the total economic impact of these expenditures will be $208.2 million annually based on the application of a 1.5 multiplier. • Based on wage data compiled by the Florida Agency on Workforce Innovation, it is anticipated that if the proposed project existed today, the annual eamings of the • 3.980 people who will be employed at the proposed project on a full-time equivalent basis would average $40,000, or $159.2 million in total. Assuming wages and salaries increase at a rate of 3 percent per year, this figure would escalate to $207.7 million at the time the proposed project is completed in 2014. Closing The analysis performed by MEAI demonstrates that the mixed -use project proposed for development at 600 Brickell Avenue will be highly beneficial to the City of Miami both Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink©bellsouth.net SherIon investments, LLC January 24, 2006 Page 10 fiscally and economically. It will also re -enforce the City's efforts to re-establish its core areas as residential communities. 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