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HomeMy WebLinkAboutIII. - Tab 4 - Economic Impact Study• • • ambert Advisory ECONOMIC IMPACT ANALYSIS For: ON THE PARK PROPERTIES at 1770 NORTH BAYSHORE DRIVE - Prepared by - Lambert Advisory, LC - Prepared for - Brickell City Center, LLC May 2006 • • • mpact Analysis — On the Park Properties Economic Impact Analysis On the Park Properties Lambert Advisory has completed an economic impact analysis for the development of On the Park Properties (herein referred to as On the Park), a condominium project (with limited retail/commercial space) located at 1770 North Bayshore Drive, in the City of Miami. The analysis estimates the tangible direct and indirect economic impacts that wilt be derived from the construction and operation of the development. This report identifies and quantifies the benefits created by the On the Park development, and can supplement the major use special permit application to be submitted to the City of Miami. The On the Park property is located in downtown Miami, and is accessible to major thoroughfares, including 1-95 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 (Le., price, absorption, timing, costs) that has been provided by On the Park, LLC ("Developer"; Lambert has not independently verified this information or data. Importantly, Lambert Advisory was not provided development cost, development timeline data, and/or revenue (sale price) assumptions; therefore, we have made certain assumptions related to construction (hard and soft) costs, timing and revenue which may be subject to change and for which Lambert Advisory does not attest to the accuracy of these estimates and as such should not be relied upon beyond the scope of this analysis. Any change development and/or performance assumptions herein may have a material impact on results. A profile of the project follows. On the Park Economic Impact Analysis Building Features & Profile Site Size (Net) Building Height (Floors) Number of Residential Units Total Parking Residential FAR Existing Commercial New Commercial (Retail) Max. Residential Floor Area Max Non -Residential Floor Area Max. Total Floor Area Source; On the Park, Lambert Advisory,200 6, 1.30 acres 47 Floors 648 units 859 spaces 817,065 sq.ft. 0 sq.ft. 9,400 sq.ft. 847,174 sq.ft. 141,169 sq.ft. 988,369 sq.ft. Economic Impact Analysis — On the Park Properties Construction of On the Park is expected to commence in November 2006, with a duration of 22 months. Occupancy is planned for mid-2008. Based upon the information provided and estimates made, construction and subsequent operations of On the Park 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: On the Park Economic Impact Analysis Development Costs Item Hard Costs Soft Costs Total Cost $163, 500, 000 $20,400,000 $183,930,000 Source/Note: Developmentco sts above represent estimates by Lambert Advisory based upon limited information from De Lambert Advisory has not verified the accuracy of this inform Estimates herein are subject to change. made veloper. ation. 3 • Economic impact Analysis -- On the Park Properties 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 ($98.0 million) of hard costs, and materials will account for 40 percent ($65,4 million), Over an estimated 22-month construction period, at an average annual construction wage of $43,7641 in Miami -Dade County, with a benefit/overhead multiplier of 1.4, there will be 873 Full Time Equivalent (I- i t) jobs created. Additionally, over $3.6 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 $2.0 million 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 $4,0 million, which will be available for public expenditures associated with the project including developmental, administrative, permitting, schools, and other costs. 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 On the Park is included in the following table. State of Florida ES-202, third quarter 2005 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 be 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 -- On the Park Properties On the Park Economic Impact Analysis Impact and Other Fees Impact Fees: City of Miami Development Impact Fee (Ord. 10426) City of Miami Development impact Admin. Fee Miami Dade County Roads Miami Dade County Schools Total $778,513 $23,355 $590,931 $1,146,642 $2, 539, 442 Other/Non-Impact Fees: City of Miami Bonus Fees $0 Miami Dade W.A.S.A. Connection Fee $909,189 City of Miami Building Permit Fee $206,394 Energy installation Fee $119,584 M.U.S.P Application Fee $45,000 Dade County Code Compliance $91,920 Radon Gas Fee $11,958 Fire Plan Review Fee $10,763 Ground Cover Fee $1,133 Land Use/Zoning, Review for Building Permit $2,000 Certificate of Occupancy $250 Application Fee $35 TOTAL OTHER FEES $ 1,398,225 TOTAL PROJECT FEES $3,937,666 Source: City of Miami Planning, Building & Zoning; Miami Dade County; Brickell City Center, LLC; 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 On the Park resident base is expected to consist primarily of younger working professionals. Considering the proposed average sale price of roughly $500,000, it is assumed that the residents will be mostly middle and upper income individuals/households with incomes of at least $125,000. Therefore, with a total of 648 households in the building, total personal income for the building is estimated to be nearly $80 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 $40 million of marginal personal income will flow into Miami. We have estimated the marginal impact of $40 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 — On the Park Properties On the Park Area Expenditure Potential (from New -Residents) 2009 Type of Good 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 Estimated Marginal Expenditure Growth 2010 $913,537 $878,911 $364,303 $348,435 $332,346 $506,894 Sales per Square Feet Square Foot Demanded $227 $290 $227 $200 $250 $420 4,024 3,031 1,605 1,742 1,329 1,207 $3, 344, 426 $4,667,595 $2, 887,471 $1,500,262 $100,137 $258 $422 $375 $407 $280 12,938 11,061 7,700 3,686 358 $9,155,465 $40 22, 804 Building Materials $900,148 $115 7,827 Total $13,400,03 $308 43,570 Source: Lambert Advisory, 2006 In addition to the net new expenditures attributable to On the Park residents, the 9,400 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 On the Park retail comes from outside the City, and based upon sales per square foot of $308, approximately $580,000 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 22 FTE workers will be needed to operate the building and 8 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 $40,5563 the operation of the building 3 State of Florida ES-202, third quarter 2005 • Economic Impact Analysis — On the Park Properties will generate approximately $1.2 million 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 9,400 square feet of new retail space. Assuming the net new retail expenditure in stores totals $580,000, approximately $40,000 in additional sales tax will be collected from retail sales. Additionally, an estimated $830,000 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 On the Park 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, On the Park Economic Impact Analysis Ad Valorem Tax Breakdown Item Millage Annual Tax City of Miami Operating 8.4995 $2,383,816 City of Miami Debt 0.765 $214,556 School Operations 7.947 $2,228,859 School Debt 0.491 $137,709 Environmental Projects 0.100 $28,047 South Florida Water Management 0.597 $167,438 FIND 0.0385 $10,798 County Millage 5.835 $1,636,516 County Debt 0.285 $79,933 Chitdren's Trust 0.429 $120,320 Library 0.486 $136,306 TOTAL. 25.473 $7,144,296 Source: Miami Dade County Property Appraiser 2005; Lambert Advisory. 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 On the Park based on 85 percent of total sales proceeds (unit sale value). Accordingly, the development should generate approximately $7.1 million in real property taxes by 2009. This represents an estimated net marginal increase more than ten times that of 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 31 FTE jobs created as a result of building and retail operations are assumed to have a 1.2 multiplier impact of 37 additional jobs. This multiplier is derived from the U.S. Department of Commerce's 1999 RIMS II model, and identifies indirect secondary and • • Economic Impact Analysis — On the Park Properties tertiary impacts created throughout the region due to the "ripple effect" of the primary employment. On the Park Economic Impact Analysis Summary, Economic Impacts Impact Short Term Construction Employment & Expenditure Full Time Jobs 873 Direct Wages $70,000,000 Professional Wages (Miami -Dade County) $2,000,000 Impact Fees Toward Public Expenditure $3,900,000 Total Impact, Short Term Const.E mployment & Expenditure $76,000,000 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 31 Total Direct Wages Created $1,260,000 Sales Tax from Additional Retail Sales (2009) $23,000 Goods & Service Purchased in Miami -Dade County $830,000 Ad Valorem Taxes (2009) $7,100,000 Total Impact from On -Going Operations of the Building/Retail $9,300,000 Indirect Flow Through Benefits Full Time Jobs (Indirect) — Miami Dade County 37 Total Indirect Wages Created $1,500,000 Total Flow Through Indirect Benefits $1,600,000 Source: Lambert Advisory, 2006. Based upon the analysis set forth herein, the On the Park 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 873, with on -going annual employment of 37 FTE jobs, Accordingly, there is an estimated $76.0+ million impact from short-term construction employment and expenditures, and a stabilized $15.7+ million annual revenue stream from resident expenditures and building operations (including real property taxes).