HomeMy WebLinkAboutIII.Tab.4 Economic Impact Analysis.TAB 4
Economic Impact Analysis
Submitted to:
City of Miami
Prepared For:
THE RELATED GROUP
Prepared by:
SHARPTON, BRUNSON & COMPANY, P.A.
One Southeast Third Avenue
Suite 2100
Miami, Florida 33131
(305) 374-1574
SHARPTON, BRUNSON & COMPANY, P.A.
Certified Public Accountants & Business Consultants
LOFT 111
TABLE OF CONTENTS
PAGE(S)
The Project Overview 1
Executive Summary
Introduction
Summary of Benefits
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
Discussion 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 Overview
Loft III is located at 201 NE 2nd
Avenue in the City of Miami, Florida
(the Project). The Project consists
of 495 condominium units and
14,038 square feet of ground level
retail; 500 parking spaces will be
provided in the City of Miami garage
#3 across the street. The gross lot
area is 43,750 square feet (1.07
acre) and the net lot area is 30,000
square feet (.69 acre).
Geared to the workforce housing
needs in our community, Loft III will
meet and exceed any expectations
one might have for an in -town living
development at an affordable price.
Located in the heart of Downtown
Central Business District, the
Project is within one block walking
distance to Miami -Dade Community
College, two blocks away from
Bayside and the American Airlines
Arena, and within 600 feet of public
transportation.
Designed by an award wining
architectural firm, Loft III is designed
in a contemporary flavor offering
urban living with state-of-the-art
amenities while delivering an
affordable price. This 32 story mix -
use Project will offer retail on the
ground level, and 495 units revealing
breath -taking views of the downtown
skyline and Biscayne bay. Stunning
two story entrance lobby, elegant
multi -function club room equipped
with state-of-the-art entertainment
center, flat screen TV, bar, pool
table, card table, lap pool, and wet
bar are some of the amenities
offered. For the fit, the Project will
provide a fitness center on the 28th
floor containing the newest strength
and cardiovascular equipment, along
with soothing his and hers sauna
and steam rooms. Loft III offers all
this and more at a price that will get
you moving.
-1-
Introduction
This document represents an in-depth economic and tax benefits analysis of the
development and operation of a first class condominium building and retail
facilities.
The Project currently contemplated is comprised of the following components:
❑ 495 units of high -quality residential.
❑ 14,038 square feet of retail.
This analysis encompasses the entire Project and estimates the economic and
tax benefits for both its developmental and operational phases.
-2-
Summary 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 342 employees
and the Project management is
expected to employ 6 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 $ 52,899,480
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 $3,255,064.
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 $ 191,819,966
Annual $ 563,760 Annual $ 4,519,476
-3-
Summary Of Benefits
Significant Community Benefits:
➢ Jobs
➢ Wages
➢ Taxes
➢ Economic Activity
Residents', Office Workers' and Retail/Restaurant Employees' Spending
Impacting Local Businesses:
➢ Food
➢ Recreation/Entertainment
➢ Transportation
➢ Retail
The following table and charts summarize the economic impact of the Loft III project.
CONSTRUCTION ANNUAL
PERIOD IMPACT RECURRING
Economic Activity Stimulated
Output $ 191,819,966 $ 4,519,476
Wages 52,899,480 563,760
Taxes 3,255,064
$ 244,719,446 $ 8,338,300
Jobs Created 342 6
-4-
Objectives And Definitions
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 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 their 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).
-s-
Objectives And Definitions
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:
➢ 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-
Discussion Of The Results
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
$ 102,075,333
89,744,633
$ 191,819,966
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 $129.4
million. Such activity will create
approximately 342 new full time
equivalent jobs and employ a
maximum of 412 workers during peak
periods. The workers will earn
approximately $28.1 million in direct
wages.
WAGES TAXES EMPLOYMENT
$ 28,150,000
24,749,480
$ 52,899,480
$ 2,405,000 $
2,114,476
342
342
300,000 $ 3,255,064 30
263,760
$ 4,519,476 $
563,760 $ 3,255,064 30
-s-
Discussion Of The Results
By Economic Indicators
Impact of Ongoing Operations
As a result of the on -going operation
and maintenance of the Project,
Miami will gain approximately 6 new,
permanent full-time equivalent jobs.
The wages of the workers who obtain
these positions will provide an impact
of approximately $564 thousand
annually.
The total expenditures for the
Project's operations, will provide a
new, permanent impact of $4.5
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 $3.3 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 342 employees over a twenty-
one month period and the total on-
going employment will average 6.
The total on -going positions can be
summarized as follows:
• Management
• Security
• Parking
• Maintenance/Facilities
• Retail
-9-
Discussion Of The Results
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.
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 $102.1 million.
Total indirect output created by the
direct respending in Miami is $89.7
million. Thus total Miami output from
the development of the Project is
$191.8 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-
Discussion Of The Results
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.
.1.1-39031
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 $3.3 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
City Miscellaneous
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
$1,084,122
64,728
995,641
726,892
80,392
36,895
77,285
62,915
53,595
4,984
12,946
54,669
$3,255,064
Discussion Of The Results
By Economic Indicators
Local Taxes (Contd.)
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 development fees.
A summary of these fees are listed below:
➢ City of Miami Developmental Impact Fee
➢ City of Miami Developmental Admin Fee
➢ Downtown Development Supplemental 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 $3.1 million and other fees total
approximately $942 thousand. These fees are
shown in detail in Exhibit II.
- 12 -
Exhibit List
Exhibit I
Exhibit II
Summary of Economic Impact
Impact and Other Fees
Summary of Economic Impact
OUTPUT
WAGES EMPLOYMENT TAXES
DIRECT
DEVELOPMENTAL $ 102,075,333 $ 28,150,000 342
OPERATIONAL 2,405,000 300,000 6 $ 3,255,064
TOTAL DIRECT
104,480,333 28,450,000 348 3,255,064
INDIRECT
DEVELOPMENTAL 89,744,633 24,749,480
OPERATIONAL 2,114,476 263,760
TOTAL INDIRECT 91,859,109 25,013,240 -
TOTAL BENEFITS
$ 196,339,442 $ 53,463,240 348 $ 3,255,064
TOTAL DEVELOPMENTAL $ 191,819,966 $ 52,899,480 342
TOTAL OPERATIONAL 4,519,476 563,760 6 $ 3,255,064
TOTAL BENEFITS $ 196,339,442 $ 53,463,240 348 $ 3,255,064
-13-
Exhibit - II
IMPACT AND OTHER FEES:
A. Development Square Footages: Square Footage
1) Total gross building area (with parking) 469,850
2) Maximum development area (FAR) 426,119
3) Gross parking area 0
B. Impact Fees: Amount
1) City of Miami Developmental Impact Fee $ 2,327,490
2) Developmental Impact Administration Fee 69,825
3) Downtown Development Supplemental Fee 56,514
4) Miami -Dade County School Impact Fee 659,570
Total of all Impact Fees $ 3,113,399
C. Non -Impact Fees:
1) Miami Dade W.A.S.A. "connection fees" $ 741,143
2) Building Permit Fee 77,697
3) Installation Energy Fee 44,620
4) Major Use Special Permit Application Fee 30,000
5) Miami -Dade County Code Compliance 42,000
6) Radon Gas Fee 1,942
7) Fire Plan Review Fee 3,691
8) Ground Cover Fee 196
9) Land Use/Zoning 300
10) Zoning Review for Building Permit Fee 60
11) Certificate of Occupancy Fee 250
12) Application Fee 35
Total of all Non -Impact Fees $ 941,934
Total of all Fees for Project $ 4,055,333
Source: City of Miami Planning, Building and Zoning Department.
Miami Dade County Impact Fees
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