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HomeMy WebLinkAboutEconomic Impact Analysis• ambert dvisory ECONOMIC IMPACT ANALYSIS Avenue One • - Prepared by - Lambert Advisory, LC - Prepared for - Avenue One November 4, 2005 • • • • .Eco.nontic Impact Analysis — Avenue One Economic Impact Analysis Avenue One Lambert Advisory has completed an economic impact analysis for the development of Avenue One, a condominium project located in the 1900 block of NW First Avenue in the City of Miami. The analysis estimates the tangible direct and indirect economic impacts that will be derived from the construction and operation of the development. This report identifies and quantifies the benefits created by the Avenue One development, and can supplement the major use special permit application to be submitted to the City of Miami. The Avenue One property is situated just north of downtown Miami, and is adequately accessible to major thoroughfares, including 1-395 and 1-95. 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. This development will help maintain economic stability within the area and attract on -going investment during the next several years. We have completed this analysis on the basis of development and performance information (l,e., price, absorption, timing, costs) that has been provided by representatives of Avenue One. We have not independently verified this information or data. A profile of the project follows. Avenue One Economic Impact Analysis Building Features & Profile General Features Site Size (Net) Building Height Number of Residential Units Number of Parking Spaces Detailed Building Profile Gross Building Area (w/parking) Maximum Development Area (FAR) Residential FAR Gross Parking Area 2.49 acres 16 stories 373 units 695 spaces 692,860 sq.ft. 394,010 sq.ft. 385,226 sq.ft. 298,850 sq.ft. Note: Estimates are based upon data provided by Avenue One, and/or calculations made by Lambed Advisory, and may be subject to change_ Source: Avenue One, Lambert Advisory, 2005, Development of Avenue One is expected to commence in late 2006. The duration of construction is anticipated to be 18-24 months, with occupancy planned for 2008. • • • Economic Impact Analysis Avenue One Based on the information provided, construction and subsequent operations of Avenue One 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, as provided by Avenue One. Avenue One Economic Impact Analysis Develo ' ment Costs Item Cost Hard Costs $49,950,000 Soft Costs $18,050,000 Total $68,000,000 Source: Avenue One, 2005. • • • Economic Impact Analysis — Avenue One 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 ($30 million) of hard costs, and materials will account for 40 percent ($20 million). Over an estimated 21-month construction period, at an average annual construction wage of $44,5121 in Miami -Dade County, with a benefit/overhead multiplier of 1.4, there will be 275 Full Time Equivalent (FTE) jobs created. Additionally, $1.5 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% and overhead of 30%, approximately $825,000 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 $2 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 Avenue One is included in the following table. State of Florida ES-202, fourth quarter 2004 • • Economic Impact Analysis — Avenue One Avenue One 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 Other/Non-Impact Fees: Miami Dade W.A.S.A. Connection Fee City of Miami Building Permit Fee Energy Installation Fee M.U.S.P Application Fee Dade County Code Compliance Radon Gas Fee Fire Plan Review Fee Ground Cover Fee Land Use/Zoning, Review for Bidg.Permit Certicate of Occupancy Application Fee TOTAL OTHER FEES TOTAL PROJECT FEES Total $372,277 $11,168 $348,273 $581,913 $1,313,631 $524,524 $130,046 $69,286 $45,000 $37,500 $6,929 $6,236 $2,167 $2,000 $250 $35 $ 823,972 $2,137,603 Source: City of Miami Planning, Building & Zoning; Miami Dade County; Avenue One; Lambert Advisory. Fees included above may be subject to change. 2. Long -Term (On -Going) Resident Expenditure Based on demographic and housing trends in the area, the Avenue One resident base is expected to consist primarily of younger working professionals. Considering the proposed average sale price of $270,000, it is assumed that the residents will be individuals/households with incomes of at least $60,000. Therefore, with a total of 373 households in the building, total personal income for the building is estimated to be nearly $24 million. Estimating that approximately half of the owners will relocate from outside the City, approximately $12 million of new personal income will flow into Miami. We have estimated the marginal impact of $12 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 and sale of the units in 200)1 • • • Economic Impact Analysis — Avenue One Avenue One Area Expenditure Potential (from New -to -Miami Residents) 2008 Type of Good General Merchandise Apparel and Accessories Furniture and Home Equipment Electronic and Appliance Stores Sporting Goods, Books, Music Stores Miscellaneous Shoppers Goods Shoppers Goods - Sub -Total Food Stores Eating & Drinking Establishments Health & Personal Care Stores Liquor Convenience Goods - Sub -Total Building Materials Total Source: Lambert Advisory, 2005 Estimated Marginal Expenditure Growth 2008 $265,027 $254,982 $105,688 $101,085 $96,417 $147,056 Sales per Square Foot $227 $290 $227 $200 $250 $420 Square Feet Demanded 1,168 879 466 505 386 350 $970,255 $1,354,121 $837,687 $435,243 $29,051 $258 3,754 $422 $375 $407 $280 3,209 2,234 1,069 104 $2,656,102 $401 6,616 $261,143 $115 2,271 $3,887,500 $308 12,640 In addition to the net new expenditures attributable to Avenue One residents, the 8,784 square feet of ground -level 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 Avenue One retail comes from outside the City, and based on sales per square foot of $308, over $500,000 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; • Property tax revenue to the City of Miami and Miami -Dade County; and • Purchase of goods and services. We estimate that twelve FTE workers will be needed to operate the building and nine 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 • • • Economic Impact Analysis —Avenue One filled, At an average Miami -Dade County wage of $42,6922 the operation of the building will generate approximately $900,000 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 8,784 square feet of new retail space. Assuming the net new retail expenditure in stores totals $500,000, approximately $38,000 in additional sales tax will be collected from retail sales. Additionally, an estimated $300,000 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 Avenue One 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 (2004) millage rate of 26.23895 (per thousand dollars of value), broken down as follows. Avenue One Economic Impact Analysis Ad Valorem Tax Breakdown Annual Item Millage Tax, City of Miami Operating 8.7163 $740,236 City of Miami Debt 0.950 $80,680 School Operations 8.09 $687,051 School Debt 0.597 $50,701 Environmental Projects 0.100 $8,493 S. Florida Water Management 0.597 $50,701 FIND 0.0385 $3,270 County Millage 5.935 $504,036 County Debt 0.285 $24,204 Children's Trust 0.444 $37,724 Library 0.486 841,274 TOTAL 26.23895 $2,228,368 Source: Miami Dade County Property Appraiser, Lambert Advisory, 2005. 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 Avenue One based on a market value of $85 million, or 85 percent of the estimated value of the residential use. Accordingly, the development should generate approximately $2.2 million in real property taxes by 2008. This represents an estimated net marginal increase of roughly $2 million over the ad valorem tax collection the City would receive if the property were valued at current use. 2 State of Florida ES-202, fourth quarter 2004 • • • Economic Impact Analysis — Avenue One 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 21 FTE jobs created as a result of building operations are assumed to have a 1.2 multiplier impact of 25 additional jobs. This multiplier is derived from the U.S. Department of Commerce's 1999 RIMS II model, and identifies indirect secondary and tertiary impacts created throughout the region due to the "ripple effect" of the primary employment. • • • Economic Impact Analysis - Avenue One Avenue One Economic Impact Analysis Summary, Economic Impacts Short Term Construction Employment & Expenditure Full Time Jobs Direct Wages Professional Wages (Miami -Dade County) Impact Fees Toward Public Expenditure Total Impact, Short Term Const. Employment & Expenditure Long -Term (On -Going) Resident Expenditure Marginal Expenditure Growth — Residents (2008) Marginal Expenditure — Avenue One Shoppers (2008) Marginal impact from On -Going Resident Expenditure Long -Term (On -Going) Building Employment and Operating Expenditure Full Time Jobs Total Direct Wages Created Sales Tax from Additional Retail Sales (2008) Goods & Service Purchased in Miami -Dade County Ad Valorem Taxes (2008) Total Impact from On -Going Operations of the BuildinglRetail Indirect Flow Through Benefits Full Time Jobs (Indirect) — Miami Dade County Total Indirect Wages Created Total Flow Through Indirect Benefits Source: Lambert Advisory, 2005. Impact 275 $21,400,000 $800,000 $2,100,000 $24,400,000 $3,900,000 $500,000 $4,400,000 21 $900,000 $38,000 $300,000 $2,200,000 $3,500,000 25 $1,100,000 $1,100,000 Based upon the analysis set forth herein, the Avenue One 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 275, with on -going annual employment of 46 FTE jobs. Accordingly, there is an estimated $24 million impact from short-term construction employment and expenditures, and a stabilized $8 million annual revenue stream from resident expenditures and building operations (including real property taxes).