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HomeMy WebLinkAboutTAB P - Economic Impact StudyMay 29, 2006 Jeffrey Bercow, Esq. Bercow & Radell Miami, Florida Re: MUSP Impact Analysis — City Square Residential Dear Ms. Bercow: Miami Economic Associates, Inc. (MEAT) has performed analysis to estimate the fiscal and economic benefits that the City Square residential project, which is proposed for development on Biscayne Boulevard between N.E. 141' and N.E. 151h Streets, 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 1 Summary of Findings 2 Impact on the Housing Market 2 Fiscal Benefits 2 Economic Benefits 3 Bases of Estimates 4 Closing 8 The analysis presented below is based on preliminary estimates of pricing and construction costs. These estimates are subject to change based on market conditions and cost parameters at the time development actually occurs and the changes may be significant. Project Description The City Square residential project will be comprised of 942 condominium units together with 13,413 square feet of retail space and 1,386 parking spaces. Based on the anticipated sales prices per square foot for the residential units, condominium safes will generate $580.8 million in gross sales proceeds. The retail space is expected to rent for $75 per square foot. Construction of the City Square residential project is expected to cost $302.2 million in hard costs. An additional $34.5 million will be expended for soft costs inclusive 6861 S.W. 89th Terrace Miami, Florida 33156 Tel; (305) 669-0229 Fax: (305) 669-8534 Email: meaink(dibellsouth.net Jeffrey Bercow, Esq. Bercow & Radell May 29, 2006 Page 2 architectural and engineering fees, marketing, commissions, project overhead, etc. Accordingly, the project will cost $336.7 million to develop exclusive of land cost, financing costs and developer's profit. Summary of Findings Development of the City Square residential project will be highly beneficial to the City of Miami in 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 and beverage establishments operating within them as well as to enhance the City's tax base. Toward this end, the City Commission has recently approved a number of new residential projects in the DuPont Plaza, River, Brickell and Omni -Edgewater areas of the City. Approval of the proposed project, which will be located in the Omni Community Redevelopment District, is consistent with the above -stated objectives. Fiscal Benefits • Fiscal Benefits refers to the positive impact that the proposed residential 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, which are based on current millage and fee rates, are expressed in 2006 Constant Dollars. o Non -recurring Benefits • $ 324.893 in City building permit fees • $ 10,000 in City solid waste surcharge fees • $ 103,648 in City police impact fees • $ 406,916 in City fire -rescue impact fees • $ 237,105 in City general services impact fees • $ 3,899,615 in City park impact fees • $ 489,442 in Downtown DRI supplemental impact fees n Recurring Benefits • $ 5,576,479 annually in Omni Community Redevelopment District increment revenues • $ 386,766 annually in City General Fund ad valorem taxes • $ 348,075 annually in City Debt Service ad valorem taxes • $ 227,500 annually in Downtown Development Authority ad valorem taxes Miami Economic Associates, inc. 6861 S.W. 89ih Terrace Miami, Florida 33156 Tel; (305) 669-0229 Fax: (305) 669-8534 Email; meaink@bettsouth.net Jeffrey Bercow, Esq. Bercow & Radell May 29, 2006 Page 3 ✓ 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 revenue sharing funds (recurring) o Other • While the focus of MEAI's fiscal analysis was on the City of Miami, City Square will, as shown below, provide significant fiscal benefits to other non -municipal governmental jurisdictions that impact the lives of City residents: a $ 842,967 in County road impact fees (non -recurring) a $ 1,287,438 in School impact fees (non -recurring) o $ 265,453 in County General Fund ad valorem taxes (recurring) a $ 129,675 in County Debt Service ad valorem taxes(recurring) o $ 195,104 in Children's Trust ad valorem taxes (recurring) o $ 221,130 in County Library ad valorem taxes (recurring) a $ 3,615,885 in School Operating ad valorem taxes (recurring) o $ 223,405 in School Debt Service ad valorem taxes (recurring) o Increased County occupational license fees (recurring) o Increased revenue sharing funds Economic Benefits • Economic Benefits relates to the positive impact that the proposed residential 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. e Non -recurring • Approximately 90 percent of the $336.7 million that will be spent on hard and soft costs to develop the City Square residential project will be spent within the City of Miami, producing an overall economic impact approximating $470.9 million when the multiplier effect is considered. • Project expenditures within the City of Miami will include an estimated $136.0 million for construction labor, an amount sufficient to pay approximately 2,615 construction workers, some of whore may be City residents, their average annual wage of $52,000. o Recurring Miami Economic Associates, Inc. 6861 S.W. 891h Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsouth.net Jeffrey Bercow, Esq, Bercow & Radell May 29, 2006 Page 4 • A total of $29.3 million will be spent annually in within the City of Miami by residents of and workers at City Square residential project in retail and food and beverage establishments. Additionally, $11.6 million in ad valorem taxes and increment revenues will be paid to the City of Miami, its Omni Community Redevelopment District and Downtown Development Authority as well as Miami -Dade County and Miami -Dade County Schools, all of which maintain their principal offices within the City. These expenditures will have an overall economic impact on the City of $62,7 million annually when the multiplier effect is considered. • A total of 80 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 $2.0 million annually. Bases of Estimates The materials that follow provide the assumptions used to estimate the fiscal and economic benefits that development of the proposed residential project will provide to the City of Miami. All monetary values are stated in 2006 Constant Dollars. Project Characteristics • The City Square residential project will be located within the City of Miami and the jurisdictions of the City's Omni Redevelopment Districts and Downtown Development Authority as well as within the boundaries of the Downtown DR!. it will also be located within the jurisdictions of Miami -Dade County and the Miami -Dade County Public School District. • The project will entail the construction of 1,470,194 gross square feet of building area. Of this amount, 853,101 square feet will pertain to the residential portion of the project, which will be comprised of the condominium units as well amenity and circulation areas. Of this amount, 774,438 will be contained within the units. The remaining 617,093 square feet will be comprised of the retail space and parking. • The City Square residential project will cost approximately $302.2 million to construct in terms of hard construction. Soft costs including those relating to professional fees, marketing, commissions, permit fees, developer overhead, administration, etc. will total an additional $34,5 million. Therefore, $336.7 million will be spent to develop the project exclusive of land acquisition and financing costs and developer's profit. • Sale of the condominium units is expected to generate approximately $580.8 in sales proceeds. The capitalized value of the retail space based on the anticipated rental rate for the retail space will result in a market value approximating $10.0 million. Accordingly, the total market value for the project of will be $590.8 million. Miami Economic Associates, Inc. 6861 S.W. 89+11 Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsouth.net Jeffrey Bercow, Esq. Bercow & Rade[I May 29, 2005 Page 5 • According to the Constitution of the State of Florida, real property is supposed to be assessed at 100 percent of its market value. As a practical matter, the project will be placed on the tax rolls at an assessed value approximately 80 percent of market value, or in this case $472.6 million. Assuming that approximately 75 percent of the residential units qualify for the Homestead Exemption, the taxable value of the project will be $455.0 million. • Residents of the proposed condominium units will on average require an annual income approximating $220,000 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 $41A 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 retail space will be occupied by 34 workers. This estimate assumes 2.5 workers per 1,000 square feet. When project operations, maintenance and parking personnel are accounted for. the total number employed at the proposed project will be 80 people. Assuming that they spend an average of $10 per day for food and other items while working, their expenditures would total $292.000. 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 is charged for at the commercial rate. Based on the distribution of space by use previously discussed, building permit fees totaling $324,893 will be paid. A solid waste surcharge fee in the amount of $10,000, the maximum amount, 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 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. On high-rise units, fees will be paid on a per unit basis in the amounts of $95 for police, $409 for fire -rescue, $239 for general services and $3,959 for parks. The rates for retail space in the quality proposed are paid on a per square foot basis in the amounts of $0.751 for police, $0.302 for fire -rescue and $0.126 for general services. Impact fees totaling $4,647,284 will be paid on the City Square residential project, of which $103,648 will be for police, $406,916 for fire -rescue, $237,105 for general services and $3,899,615 for parks. Miarni Economic Associates, Inc. 6861 S,W, 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email; rneainkkbeilsouth-net Children's Trust 0.42880 $ 195,104 Library 0.48600 $ 221,130 Miami -Dade County Public Schools Operating 7.94700 $ 3,615,885 Debt Service 0.49100 $ 223,405 l Source: Miami -Dade County Property Appraiser; Miarni Economic Associates, Inc. Debt Service Fund 0.76500 $ 348,075 Downtown Development Authority 0.50000 $ 227,500 Miami -Dade County General Fund 5.83500 $ 2.654,925 Debt Service Fund 0.28500 $ 129,675 Jeffrey Bercow, Esq. Bercow & Radel! May 29, 2006 Page 6 • 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 gross square foot. The rate for retail space is $1.332 per square foot. Based on these rates it is estimated that a total of $489,442 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 is $877 per unit. The road impact fee rates for retail space in the eastern portion of Miami -Dade County is $1.255 per square foot for projects with the quantities of space proposed at City Square. 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 $2,130,405 will need to be paid at the time the building permit for the proposed project is issued. Of this amount, $842,967 will be applied to roads and $1,287,438 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 $455.0 million - Entity Rate/$1000 Taxable Value Taxes City of Miami General Fund 8.49950 $ 3,867,273 The City Square residential project will be located in the Omni Redevelopment District, Accordingly, both the City of Miami and Miami -Dade County will be required to annually fund the District Trust Fund with an amount equivalent to 95 percent of the funds they collect for their general funds on the difference between the current taxable value of the property on which the project will be constructed and the taxable value of the project when completed. For the purpose of this analysis, it is assumed Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tet: (305) 669-0229 Fax; (305) 669.8534 Email: meaink@betlsouth.net Jeffrey Bercow, Esq. Bercow & Rade11 May 29, 2006 Page 7 that the "incremental" value will be 90 percent of the proposed project's estimated taxable value. The general funds of the two jurisdictions will retain 100 percent of the taxes generated on the current value of the property and 5 percent of those generated on the incremental value. Accordingly, the District Trust Fund will receive $5,576,479 annually while the general funds of the City and the County will retain $386,766 and $265,453 annually, respectively. • 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 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 and Miami -Dade County participate in a number of revenue sharing programs that are based on population -based formulas. 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 Bents • It is estimated that approximately 90 percent of the $336.7 million that will be spent on the hard and soft costs to develop the proposed residential 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 $470.9 million based on application of a 1.554 multiplier. • MIG's input-output model further estimates that approximately $136.0 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 currently earns approximately $52,000 per year according to the Florida Agency for Workforce innovation. Therefore, the project's expenditure on construction labor would support approximately 2,615 workers, some of whom may be City residents, on an annual basis at their average wage rate. Recurring Economic Benefits • The residents of City Square residential project will spend $41.4 million annually in retail establishments and restaurants, approximately 70 percent of which, $29.0, will be spent within the City of Miami. Additionally, the on -site workforce will spend Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsouth.net Jeffrey Bercow, Esq. Bercow & Radell May 29, 2006 Page 8 $292,000 for food and other items while working. Finally, the project will generate approximately $11.5 million annually in ad valorem taxes and increment revenues for the City of Miami and its Omni Community Redevelopment District as well as Miami - Dade County and Miami -Dade County Schools, 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 $62.7 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 that the annual earnings of the 80 people who will be employed at the proposed project on a full-time equivalent basis, some of whom may be City residents, would average $25,000, or $2.0 million in total. Closing The analysis performed by MEAT demonstrates that City Square residential project will be highly 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. 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