HomeMy WebLinkAboutEconomic Impact AnalysisEconomic Impact Analysis
Submitted to:
City of Miami
Prepared For:
MIAMI HOTEL INVESTMENTS GROUP, INC.
Prepared by:
SHARPTON, BRUNSON & COMPANY, P.A.
One Southeast Third Avenue
Suite 2100
Miami, Florida 33131
(305) 374-1574
(
CIV CA TO EFTS
TABLE OF CONTENTS
The Project Overview
Executive Summary
Introduction
Summary of Benefits
PAGE(S)
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
❑iscussion 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 .ve iew
The Civica Towers project is located
at 1050 NW 14th Street in the City of
Miami, Florida (the Project). The
Project will reposition the current
Days inn hotel into a newly rebuilt
mixed -use development consisting of
430 hotel keys, 390,827 square feet
of office space, 19,655 square feet of
retailfrestaurant, and 837 parking
spaces. The gross lot area is 142,412
square feet (3,27 acres) and the net
lot area is 79,115 square feet (1.82
acres).
The Project is strategically located
across the street from Jackson
Memorial Hospital. The extensive
medical complex includes Cedars
Medical Center, Bascom Palmer Eye
Institute, Miami School of Medicine,
and the VA Memorial Hospital.
The Project site is located in the heart
of the Civic Center area (the urban
core of Miami) and is directly around
the corner from the new Winn Dixie
supermarket. It is situated within
Spring Gardens, a proud historical
neighbor -hood that borders the
Miami River and the Seybold Canal.
In addition, the Project is near the
Pope Life Institute, Orange Bowl
Stadium, and Miami Justice building.
It is also near the State Attorney's
Office and within walking distance to
the Metro Public Rail, wholesale
shopping district, and the newly built
American Airlines Arena.
The Project is minutes from Miami
international Airport, South Beach,
and the Port of Miami, which is the
number one gateway for cruise ships
in all of Florida. The Hospital District,
is currently under a $1 billion dollar
expansion program which will be
implemented over the next 9 years to
upgrade and expand all of its
facilities. This will not only enhance
local business, but will also provide
many new potential buyers that can
purchase in the Project's multi -use
complex. In addition, a new 35-story
office building, which was recently
purchased by the University of Miami
for the use of its own employees, has
obtained approval and is now
currently under construction. This new
400,000 square foot building will
provide new jobs in the area. All of
these new jobs are a great source of
new potential first-time home owners
for the new condominium project.
Approximately 80,000 people work in
this hospital district and many of its
employees will be excellent candi-
dates for purchasing a first-time
condominium residence, along with all
of the other intended facilities.
-1-
Introduction
This document represents an in-depth economic and tax benefits analysis of the
development and operation of a first class hotel, office complex, and retail
The Project currently contemplated is comprised of the following components:
Li 430 hotel keys
O 390,827 units of high -quality residential
LJ 19,655 square feet of office space
• 14,007 square feet of retail/restaurant
LJ 837 parking spaces
This analysis encompasses the entire Project and estimates the economic and
tax benefits for both its developmental and operational phases.
- 2 -
Summa 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 386 employees
and the Project management is
expected to employ 30 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 $ 82,215,000
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 $5,209,241,
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 $ 310,955,176
Annual $ 2,508,732 Annual $ 5,853,708
- 3 -
Su a f Benefits
Significant Community Benefits:
✓ Jobs
• Wages
• Taxes
• Economic Activity
Residents' and Office Workers' Spending Impacting Local Businesses:
• Food
Recreation/Entertainment
Transportation
• Retail
The following table and charts summarize the economic impact of the Civica Towers
project,
CONSTRUCTION ANNUAL
PERIOD IMPACT RECURRING
Economic Activity Stimulated
Output $ 310,955,176 $ 5,853,708
Wages 82,215,000 2,508,732
Taxes 5,209,241
$ 393,170,176 $ 13,571,681
Jobs Created 386 30
4-
Objectives f .nd a initions
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 modern 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.
5_
Objectives ectives 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 theft 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-
bj ctiv s And a initions
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:
r 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_
iscussion The esul s
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 Project's 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
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 $205
million. Such activity will create
approximately 386 new full time
equivalent jobs and employ a
maximum of 476 workers during peak
periods. The workers will earn
approximately $44 million in direct
wages.
WAGES TAXES EMPLOYMENT
$ 165,472,103 $ 43,750,000 386
145,483,073 38,465,000
$ 310,955,176 $ 82,215,000 386
$ 3,115,000 $ 1,335,000 $ 5,209,241 30
2,738,708 1,173,732
$ 5,853,708 $ 2,508,732 $ 5,209,241 30
_g_
scussjrn f T e esults
By Economic Indicators
Impact of Ongoing Operations
As a result of the on -going operation
and maintenance of the Project,
Miami will gain approximately 30
new, permanent full-time equivalent
jobs. The wages of the workers who
obtain these positions will provide an
impact of approximately $2.5 million
annually.
The total expenditures for the
Project's operations, will provide a
new, permanent impact of $5.9
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 $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 386 employees over a thirty
month period and the total on -going
employment will average 30.
The total on -going positions can be
summarized as follows:
Management
Security
Parking
Maintenance/Facilities
Retail
- 9 -
iscussion f The esu
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%)
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.
s
A multiplier of 1.8792 was used to
determine total direct and indirect
output created by the Project. This
multiplier indicates that for every $100
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 $165 million.
Total indirect output created by the
direct respending in Miami is $146
million. Thus total Miami output from
the development of the Project is
$311 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-
iseussiOn T e esults
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 $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
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
$1,738,165
1,625,178
1,193,270
156,444
58,283
122,088
99,388
100,411
7,873
20,450
87,691
$ 5,209,241
- 11 -
iscusson f The esul s
By Economic Indicators
Local Taxes (Contda)
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 develop-
ment fees. A summary of these fees are listed
below:
• City of Miami Developmental impact Fee
• City of Miami Developmental Admin Fee
• Miami -Dade County Roadway impact 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 $762 thousand and other
fees total approximately $914 thousand. These
fees are shown in detail in Exhibit II.
-12-
Exhibit List
Exhibit i
Exhibit il
Summary of Economic impact
impact and Other Fees
Exhibit1
Summary _ o is impact
OUTPUT WAGES EMPLOYMENT TAXES
IRECT
DEVELOPMENTAL
OPERATIONAL
TOTAL DIRECT
INDIRECT
DEVELOPMENTAL
OPERATIONAL
165,472,103
3,115.000
43,750,000
1,335,000
168,587,103 45,085,000
145,483,073
2,738,708
38.465,000
1.173,732
386
30 $ 5,209,241
416 5,209,241
TOTAL INDIRECT 148,221,781 39,638,732 -
TOTAL BENEFITS
$ 316,808,884 $ 84,723,732 416 $ 5,209,241
TOTAL DEVELOPMENTAL $ 310,955,176 $ 82,215,000 386
TOTAL OPERATIONAL 5,853,708 2,508,732 30 $ 5,209,241
TOTAL BENEFITS $ 316,808,884 $ 84,723,732 416 $ 5,209,241
-13-
Exhibit -11
IMPACT AND OTHER FEES:
A. Development Square Footages: Square Footage
1) Total gross building area (with parking)
2) Maximum development area (FAR)
3) Gross parking area
B. Impact Fees:
1,097,087
659,215
354,140
Amount
1) City of Miami Developmental Impact Fee $ 305,757
2) Developmental Impact Administration Fee 9,173
3) Miami -Dade County Roadway Impact Fee 448,060
Total of all impact Fees $ 762,990
C. Non -Impact Fees:
1) Miami Dade W.A.S.A. "connection fees" $ 642,551
2) Building Permit Fee 70,828
3) Installation Energy Fee 101,336
4) Major Use Special Permit Application Fee 30,000
5) Miami -Dade County Code Compliance 62,500
6) Radon Gas Fee 1,771
7) Fire Plan Review Fee 3,364
8) Ground Cover Fee 627
9) Land Use/Zoning 791
10) Zoning Review for Building Permit Fee 60
11) Certificate of Occupancy Fee 250
12) Application Fee 35
Total of all Non -Impact Fees $ 914,113
Total of all Fees for Project $ 1,677,103
Source: City of Miami Planning, Building and Zoning Department.
Miami Dade County Impact Fees
- 14 -