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HomeMy WebLinkAboutIII. Tab 4. Economic Impact AnalysisEconomic Impact analysis Submitted to: City of Miami Prepared For: MIAMI PARKING AUTHORITY Prepared by: SHARPTON, BRUNSON & COMPANY, P.A. One Southeast Third Avenue Suite 2100 Miami, Honda 33131 (305) 374-1574 PARK! G AUTHO TY (Courthouse Center Garage TABLE OF CONTENTS PAGE(S) THE PROJECT OVERVIEW EXECUTIVE SUMMARY Summary of Benefits 2 OBJECTIVES AND DEFINITIONS Objectives 4 Definition of Economic and Tax Impact 4 Direct and Indirect Effects 4 Measures of Economic Impact 5 Description of Results 6 DISCUSSION OF THE RESULTS BY ECONOMIC INDICATORS Impact Indicators 7 Results of Indicators Impact of Construction Impact of Ongoing Operations 8 Analysis by Economic Indicators 8 Employment 8 Wages 9 Output EXHIBITS Exhibit I: Summary of Economic impact 10 Projec 11 verview The Miami Parking Authority (MPA) plans to construct a 756 space parking structure centrally located in the City's "Government District" (the Project). The Project will include 32,200 square feet of office space and 4,500 square feet of on-grade/ground floor commercial retail/ restaurant lease space. The office and retail space will be owned by the Department of Off -Street Parking, The Project, which is located at 240 North Miami Avenue, will replace 556 parking spaces in an existing garage and adjacent. surface parking tot. The Project is located one block north of the Miami Dade County (MDC) Family Court and two blocks north of MDC Civil/ Criminal Courthouse. The MDC and State Administration buildings are located two blocks west of the Project. The existing Federal Court Complex is located two blocks northeast of the Project. A new Federal courthouse, the Wilkie D. Ferguson Federal Court- house, is presently under construction one block north of the Project. The MPA will lease the Project's office space to businesses that wish to be centrally located in the City's Government District. The Project will have 20,000 net sq. ft. of office space available on the roof level and 6,100 net sq. ft. on each of the 2nd and 3rd floors facing N,E. 3rd Street. The retail space will be on the ground level, facing N.E. 3rd Streets. The Project includes a pedestrian promenade on the east side of the parking structure to connect NE 2nd and and NE 3rd Streets without having to walk through the parking garage, Streetscape improvements also include the landscaping of the comer of N.E. 3rd Street and North Miami Avenue, which the MPA will land bank for future development. Summary of enefits The Miami Parking Authority, Court- house Center Garage (the Project) will bring considerable economic benefits to the city of Miami (the City). This section summarizes the impact of the project an employment, public sector revenues and other economic benefits as a result of the develop- ment. Employment Employment considerations include the direct employment resulting from the Project. Average developmental construction phase employment will be for approximately 80 employees and the Project management is expected to employ 5 people for on- going operation 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. Total direct and indirect impacts expected from wages associated with the new development approximate the follow- ing: One Time $ 13,079,232 Annual $ 299,018 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 $ 37,670,209 Annual $ 481,748 2 Sum a y o enefits Significant Community Benefits: Jobs Wages Economic Activity Employees' Spending Impacting Local Businesses: • Food • RecreationtEntertainment • Transportation The following table and charts summarize the economic impact of the Courthouse Center Garage. CONSTRUCTION PERIOD ANNUAL IMPACT RECURRING Economic Activity Stimulated Output 37,670,209 $ 481,748 Wages 13,079,232 299,018 $ 50.749.441 $ 780,766 Jobs Created 80 5 Objectives And Tf1ons 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 impacts of various projects on a designated area, The model is specifically tailored to the City of Miami (the City). Definition of The Economic impact The construction and subsequent operation of the Project will create important benefits within the City. These benefits include new income, new jobs and new economic activity impacting upon every sector of the local economy. Moreover, through the multiplier effect of respending and reinvesting, indirect economic benefits are added to the direct benefits brought about by initial construction expenditures, the expenditures from ongoing operations, 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 governmental 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 and 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 insignificant sum is left. 4 bjectives n efinitions 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 "rippleof 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. 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 proprietors 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, 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 expenditures (exclusive of wages and taxes). 5 discussion Sf The e ults 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 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 (One Time) Direct Indirect ANNUAL Operational: Direct indirect OUTPUT $ 20,045,875 17,624,334 $ 37,670,209 $ 256,358 225,390 481,748 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 are estimated at $27 million. Such activity will create approximately 80 new full time equivalent jobs and employ a maximum of 100 workers during peak periods, The workers will earn approximately $7 million in direct wages. WAGES $ 6,900,000 6 119 232 EMPLOYMENT 80 $ 13,079,232 80 159,120 139,898 299,018 5 scussion f The esu s Econoric Indicators Impact of Ongoing Operations As a result of the on -going operation and maintenance of the Project, Miami will gain approximately 5 new, permanent, full- time equivalent jobs. The wages of the workers who obtain these positions will provide an impact of approximately $299 thousand annually. The total •expenditures for the Project's operations, will provide a new permanent impact of $482 thousand annually to the City's economy. This impact consists of the direct expenditures from the mainten- ance, security and day-to-day operation of the Project, and the multiplied effects of such spending thus creating indirect benefits. 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 economic benefits to the City by identifying such benefits for each of the phases. The effects on economic indicators used to measure benefits (employ- ment, wages, output) 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 is a primary means by which develop -mental, operational and maintenance ex- penditures generate indirect economic benefits. This employ- ment is derived from on -going operations of the Project. Further employment is generated off -site by the expenditures of employees of the Project and operations conducted in the Project, at area businesses. As can be seen in Exhibit total short-term (developmental) employ- ment will average 80 employees over a twenty-four month period and a total on -going employment will average 5. The total on -going positions can be summarized as follows: Supervisor Bookkeeper Attendants > Maintenance 8 scussion f The e Economic Indicators Wages u 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 following type of expenditures: Development costs expended in the City (130%) Annual operational expenditures of management company New spending in the locality by employees of operations conducted 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 S100 spent in Miami, another S187.92 will be respent or reinvested in Miami. This multiplier was obtained from the Dade City Planning Department. s Direct output from the developmental phase of the Project is primarily a result of developer costs. These costs include land acquisition, site preparation 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 $20 million. Total indirect output created by the direct respending in Miarni is $18 million. Thus total Miami Output from the development of the Project is $38 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. The total operating expenditures incorporate all estimated expenses of the ongoing operation of the Project. To incorporate the potential respend- ing and reinvesting in •Miami, the multiplier effect was measured. By applying a multiplier of 1.8792 to the total direct output from operating expenditures, we determined total output (direct and indirect) from on- going operating expenditures. 9 Exhibit List Exhibit 1 Summary of Economic impact 410 xhi it I ary of conornic Irpact DIRECT DEVELOPMENTAL OPERATIONAL TOTAL DIRECT INDIRECT DEVELOPMENTAL OPERATIONAL TOTAL INDIRECT TOTAL BENEFITS 20,045,875 255,358 20,302,233 17,624,334 225,390 6,960,-000 159,120 7,119,120 6,119,232 139,89'8 17,649,724 6,259,130 38,151,957 13,378,250 80 85 85 TOTAL DEVELOPMENTAL 37,670.209 S 13,079,232 80 TOTAL OPERATIONAL 461,748 299,018 TOTAL BENEFITS 38,151,957 13,378,250 85 10