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Home My WebLink AboutTAB P - Economic Impact StudyMiami Economic Associates, . Inc. April 5, 2006 Mr. Jalali Hassan 732 LLC Miami, Florida Re: MUSP Impact Analysis — Loftika Dear Mr Hassan: Miami Economic. Associates, Inc. (MF I} has performed analysis to estimate the fiscal and economic benefits that the Loftika mixed -use project, which is proosed for development at 3293 Ni.W. r 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 � Pa Project Description 1 Summary of Findings 2 Impact on the. Housing Market 2 Fiscal Benefits 2 Economic Benefits 3 Bases of Estimates 4 Closing 7 The analysis presented below is based on preliminary estimates of pacing 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 Loftika mixed -use project will be comprised of 183 condominium units and 11,313 square feet of retail space, all of which will be offered to the market on a fOr-sale as opposed to rental basis. Based on the anticipated .sales prices per square foot for both the residential units and the retail space, gross sales proceeds approximating $94.8 million will be generated. 6661 S.W. 89th Terrace Miami, Florida 33156 Tel: 1305# 669•0229 Fax: (305# 669.8534 Email: rneaink6bellsoutb.net Mr, Jalali Hassan 732 LLC April 5, 2006 Page 2 Construction of Loftika is expected to cost $43.0 million in hard costs. An additional $6.4 million will be expended for soft costs inclusive architectural and engineeting fees, marketing, sales commissions, project overhead, etc, Accordingly, the project will cost $49.4 million to develop exclusive of land cost and developer fees, Summary of Findings Development of Loftika 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 ithe City's tax base, Toward this end, the City Commission has recently approved a rurnber of new residential projects in the DuPont Plaza, River, Brickell and Omni -Edgewater areas of the City. Approval of the proposed project, which is consistent; with the above -stated objectives, will extend new residential development to an !additional sector of the City. Fiscal Benefits • Fiscal Benefits refers to the positive impact that Loftika 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 below, which are based on the current rniilage and fee rates, are 2006 Constant Dollars, n Non -recurring Benefits • $ 99,789 in City building permit fees • $ 10,000 in City solid waste surcharge fees • $ 25,881 in City police impact fees • $ 78,263 in City fire -rescue impact fees • $ 45,162 in City general services impact fees • $ 724,497 in City park impact fees o Recurring Benefits • $ 615,354 annually in City General Fund ad valorem taxes • $ 55,386 annually in City Debt Service ad valorem taxes c Non -Quantifiable • Trade -related fees for roofing, electrical, plumbing, mechanical pool and elevator work performed during construction (non -recurring) Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax (305) 669-8534 Email: meaink ellsouth net Mr. Jalali Hassan 732 LLC April 5, 2006 Page 3 • Increased City utility taxes and franchise fees (recurring) • Increased occupational license fees (recurring) • Increased parking surcharge fees (recurring) • Increased revenue sharing funds (recurring) O Other = While the focus of MEAI's fiscal analysis was on the City of Miani, Loftika will, as shown below, provide significant fiscal benefits to other non - municipal governmental jurisdictions that impact the Iivesi of City residents: a $ 174,689 in County road impact fees (non -recurring) o $ 346,827 in School .impact fees (non -recurring) o $ 422,454 in County General Fund ad valorem taxes (recurring) o $ 20,634 in County Debt Service ad valorem taxes(recLrring) c $ 31,045 in Children's Trust ad valorem taxes (recurring) o $ 35.186 in County Library ad valorem taxes (recurring) a $ 575,363 in School Operating ad valorem taxes (recurring) a $ 35,548 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 Loftika 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. • Non -recurring • Approximately 90 percent of the $49.4 million that will be spen$ 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 $69.1 million when the multiplier effect is consider'd. • Project expenditures within the City of Miami will include an:stimated $19.4 million for construction labor, an amount suflicientl to pay approximately 373 construction workers, some of whom ma)),be City residents, their average annual wage of $52,000. o Recurring • A total of $4.5 million will be spent annually in within the City of Miami by residents of Loftika in retail and food and beverage establis"hrnents. Additionally, $1,8 million in ad valorem taxes will be paid to the City of Miami Economic Associates, Inc. 6861 5,W, 890i Terrace Miami, Florid j 33156 Tel; (305) 669-0229 Fax: (305) 669-8534 Email: meaink2beiisouth.net Mr. Jalali Hassan 732 LLC April 5, 2006 Page 4 Miami, Miami -Dade County and the School Board, all of which 1 maintain their principal offices within the City. These expenditures will have an overall economic impact on the City of $12.3 million annually when the multiplier effect is considered. • A total of 35 people will be employed at the proposed project, inbiusive of people involved in project operations, maintenance and parking. These workers, who may include City residents, will earn approximately $875,000 annually. Bases of Estimates The materials that follow provide the assumptions used to estimate the f!scal and economic benefits that development of Loftika will provide to the City of Miami. All monetary values are stated in 2006 Constant Dollars, Project Characteristics • Loftika will be located within the City of Miami as well as the jurisdictions of Miami - Dade County and the Miami -Dade County Public School District. • The project will entail the construction of 459,346 gross square feet of building area. Of this amount, 300,949 square feet will pertain to the residential portipn of the project, which will be comprised of the 183 condominium units as well an}enity and circulation areas. The saleable residential area will total 255,807 square 'feet. The remaining 158,397 square feet will be comprised of the retail space and parking. Development of Loftika will cost approximately $43.0 million to construct it terms of hard construction. Soft costs includingthose relating to professional fees, marketing, sales commissions, permit fees, developer overhead, administration, etc. Will total an additional $6.4 million. Therefore, $49.4 million will be spent to develop the project exclusive of land acquisition costs and developer's fees. • Sale of the project's 183 condominium units and 11,313 square feet of retail space is expected to generate approximately $94.6 million in sales proceeds. • 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, condominium units and retail space are initially placed on the tax rolls at approximately 8:0 percent of their market value, or in this case $75.7 million. Assuming that approxi4nately 75 percent of the residential units qualify for the Homestead Exemption, the taxable value of the project will be $72.4 million. 1 • Residents of the proposed condominium units will on average require vin annual income approximating $175,000 to qualify for ownership. Based on this estimate of average household income, it is projected that the people living at the proposed Miami Economic Associates, Inc, 6861 S.W. 89th Terrace Miami, Florid 33156 Tel: {305) 669.0229 Fax: (305) 669.8534 Email: meainkQbellsoath.het Mr. Jalali Hassan 732 LLC April 5, 2006 Page 5 project will spend $6:4 million annually in retail and restaurant establishments. This projection assumes that they spend approximately 20 percent of their incorde for that purpose. • Based on industry standards for employment in retail and office uses, it is anticipated that the proposed commercial space at Loftika will be occupied by 28 workers, This estimate assumes .2.5 workers per 1,000 square feet of retail space. When project operations, maintenance and parking personnel are accounted for, the totill number employed at the proposed project will be 35 people, Non -recurring Fiscal Impacts • The City of Miami charges building permit fees at a rate of $0.20 per gro>s 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 $99,789 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 contractos 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 ha not yet occurred. Accordingly, the fees that will be paid can not be quantified at th)s time, A solid waste surcharge is applied to these fees, • The City of Miami charges impact fees on new construction projects. Or 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 $873,803 will be paid on the Laftika mixed -use project, of which $25,881 Will be for police, $78,263 for fire -rescue, $45,162 for general services and $724,497 for parks. • 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 fe0 rates for retail space in the eastern portion of Miami -Dade County is $1.255 square foot, respectively, for projects with the quantities of space proposed at Loftika, The base fee per unit for school impact fees is $6 t2. An additional amount of $p.918 per square foot is then applied. Accordingly, impact fees totaling $521,516 will need to be paid at the time the building permit for the proposed project is issued. Of this amount, $174,689 will be applied to roads and $346,827 to schools, Recurring Fiscal Impacts Miami Economic Associates, Inc, 6861 S.W. 89th Terrace Miami, Florida 33156 Tel; (305) 669.0229 Fax: (305) 669-8534 Email: meaink@bellsouth jiet Mr. Jatali Hassan 732 LLC April 5, 2006 Page 6 • The millage rates currently being levied for ad valorem tax purposes by the governmental entities referenced in the Summary of Findings are shown inithe table immediately following. The ad valorem tax revenues projected in the •Surinmary of Findings were calculated by applying the millage rates shown to propose projects estimated taxable value of $72.4 million. Entity Ratef$1000 Taxable Value Taxes C' of Miami i .. General Fund 8.49950 $ 615,354 Debt Service Fund 0.76500 55.385 , 111iarni-Dade County General Fund 5.83500 $ 422,454;� Debt Service Fund 0,28500 $ 20,6341 Children'sTrust 0.42680 $ 31,045` Library I 0.48600 $ 35486i Miami -Dade County Public Schools 1 Operating 7.94700 $ 576,363 Debt Service 0.49100 $ 36,548 Source: Miami -Dade County Property Appraiser; Miarn Econcrosc Associates, Inc. • 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 depr ndent on the amount of these services used by the Loftika's residents and c ,rnmerciai 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 Loftika's proposed retail space. The amount collected can not be estimated at this time since it will be dependent on the nature of the bLisinesses housed in the office and retail space. • The City of Miami charges a 20 percent surcharge on parking fees. Matrons of Loftika's retail space would pay this surcharge. It is not possible at this time to estimate the amount that will be generated. • The City of Miami and Miami -Dade County participate in a number o revenue sharing programs that are based on population -based formulas. The ar; ounts 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 Benefits It is estimated that approximately 90 percent of the $49.4 million that will be spent on the hard and soft costs to develop Loftika 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 modes of Minnesota Miami Economic Associates, inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (.305) 669-8534 Email: meaink@belisouth.net Mr, Jalali Hassan 732 LLC April 5, 2006 Page 7 IMPLAN Group (MIG), which is one of the nation's foremost econometric Efirms, the overall economic impact of these expenditures will approximate $69.1 million based on application of a 1.554 multiplier. • MIG's input-output model further estimates that approximately $19.4 minion of the moneys spent on hard costs within the City of Miami will be spent for Ibor. 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 projects expenditure on construction labor would; support approximately 373 workers, some of whore may be City residents, on an annual basis at their average wage rate. Recurring Economic Benefits • The residents of Loftika will spend $6.4 million annually in retail establishriients and restaurants, approximately 70 percent of which, $4,5, will be spent within the City of Miami. Additionally, the project will generate approximately $1.8 annua111y in ad valorem taxes for the City of Miami, Miarni-Dade County and the School Board, 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 $12..3 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 35 people who will be employed at the proposed project on a full-timeequivalent basis, some of whom may be City residents, would average $25,000, or $875,000 in total. Closing The analysis performed by MEAI demonstrates that the development of the Isoftika will be beneficial to the City of Miami both fiscally and economically. It will also e-enforce the City's efforts to re-establish its core areas as residential communities, Sincerely, Miami Economic Associate, Inc. 7.7 Andrew Dolkart President Miami Economic Associates, Inc. 6661 S.W. 89th Terrace Miami, Florida 33456 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meainktIbellsouth:net