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HomeMy WebLinkAboutTAB D.2 Development Impact StudyD.2 DEVELOPMENT IMPACT STUDY Miami Economic Associates, Inc. April 19, 2011 Ms. Megan Kelly Swire Properties 501 Brickell Key Drive #600 Miami, Florida Re: Fiscal and Economic Impact Analysis for Brickell Citicentre Dear Ms. Kelly: Miami Economic Associates, Inc. (MEAT) has performed an analysis to estimate the fiscal and economic benefits that the mixed -use project proposed for development at 701 South Miami Avenue, to be known as Brickell Citicentre, will provide to the City of Miami and the other jurisdictions in which it will be located, including the Miami Downtown Development Authority, Miami -Dade County, the Miami -Dade Public School District and the Children's Trust. This letter, which is organized as shown below, provides the findings of our analysis and their bases: Section Page Project Description 2 Summary of Findings 2 Fiscal Benefits 3 Economic Benefits 4 Bases of Estimates 5 Closing 9 The proposed Brickell Citicentre project will be developed in phases over a period of years. During the development period, the rates associated with ad valorem taxes are likely to be adjusted annually and other fee schedules may also be adjusted. Changes in the economic environment could also result in construction costs, sales prices, rent levels and hotel room rates that differ from those assumed below. These differences could result in fiscal and economic benefits actually being generated that vary significantly from the estimates set forth in this report. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (3051 669-0229 Fax: (8661 496-6107 Email: meainkAbellsouth.net Ms. Megan Kelly Swire Properties April 19, 2011 Page 2 Project Description The proposed Brickell Citicentre project will consist of a total of 2,221,260 square feet of saleable and leaseable space including residential units of varying kinds, a hotel, retail and entertainment space, general office space and medical office space that includes a wellness center. Somewhat more than half of the saleable and leaseable space, 1,197,487 square feet, will be located on two blocks that are separated by S. Miami Avenue and bounded by S.W. 7th and 8th Street on the north and south, respectively, and S.E. 1st and S.W. 1st Avenue on the east and west, respectively. A portion of the project, consisting of 576,463 saleable and rentable square feet will be located north of S.E. 7th Street on a site bounded by that artery on the south, S. Miami Avenue on the west, S.E. 6th Street on the north and S.E. 1st Avenue on the east. The remaining 447,310 square feet of saleable and leaseable square feet will be located at 799 Brickell Plaza on the site of the existing Eastern National Bank building. By virtue of the location of the latter parcel, the proposed project will have a Metromover station incorporated within it. The residential units proposed for development at Brickell Citicentre will include 640 condominium units averaging 1,366 square feet in size. It is anticipated that the proposed condominium units will sell at average price per square that approximates $400, producing gross sales proceeds of $35.0 million. The project will also include 80 serviced rental apartments for transient users that will average 950 square feet in size and rent for approximately $4 per square foot per month, or an average of $3,800 per month. These units are expected have particular appeal to people utilizing the wellness center, which will offer a wide range of services and treatments including out -patient surgical procedures. A total of 1,080 parking space will be provided to support the residential components of proposed project. Non-residential uses at Brickell Citicentre will include a 260-key hotel, 555,764 square feet of retail and entertainment space and 595,560 of general and medical office space, inclusive of the area occupied by the wellness center. These uses will be supported by a total of 2,875 parking spaces. The proposed hotel, which will contain 10,120 square feet of food and beverage space, 10,300 square feet of function space and 350 square feet of retail space, is expected to operate at a stabilized rate of occupancy of 75 percent at an average daily rate of $235. The office and wellness center spaces are expected to rent on average for $41 per square foot. A total of 545,424 square feet of the retail and entertainment space will be developed in a multi -story configuration and tenanted with establishments that are expected to have a regional draw, with the result that sales productivity per square foot will approximate $600. The rental rate for this element of the project is expected to average $75 per square foot. This element of the project is also expected to compliment the retail and entertainment area that has already emerged in recent years at Mary Brickell Village, south of S.W. 8th Street on South Miami Avenue. The remaining 10,340 square feet of retail space will be at the street level of the new office building that will be developed on the site of the existing Eastern National Bank building. Miami Economic Associates, loc. 6861 S.W. 89tk Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsouth.net Ms. Megan Kelly Swire Properties April 19, 2011 Page 3 Development of Brickell Citicentre is expected to cost approximately $595.0 million in hard costs. An additional $12.0 million will be expended on furniture, fixtures and equipment (FF&E) for the proposed hotel and service apartment units while $55.0 million will be expended for soft costs inclusive architectural and engineering fees, marketing, leasing and sales commissions, project overhead, etc. Accordingly, the project will cost a total of $662.0 million to develop exclusive of land cost and developer fees. Summary of Findings The materials that follow summarize the fiscal and economic benefits that the proposed Brickell Citicentre project will generate. As discussed above, the project will be developed in phases; however, since an exact phasing plan has not yet been formulated, the estimates presented below address the project in its entirety. All monetary figures are expressed in 2011 Dollars. Fiscal Benefits The term "fiscal benefits" refers to the positive impact that the proposed project will have on the finances of the City of Miami and the other jurisdictions in which it will be located. The benefits that it will provide will be both non -recurring and recurring in nature, with the former occurring the construction period, the latter when construction is completed. The estimates shown are based on current millage and fee rates. City of Miami Non -recurring benefits • $ 1,090,192 in City building permit fees • $ 30,000 in City solid waste surcharge fees • $ 458,541 in City police impact fees • $ 541,238 in City fire impact fees • $ 274,949 in City general services impact fees • $ 2,850,480 in City park impact fees • $ 1,705,066 in Downtown DRI supplemental impact' Recurring • $ 4,761,717 annually in City General Fund ad valorem taxes • $ 601,948 annually in City Debt Service ad valorem taxes • $ 1,000,000 annually in parking surcharges revenues. 1 The actual amount paid in the future could be lower owing to the fact that $224,022 in fees were paid for a prior project proposed for the site and the payment of those fees may have assured that the fees at a least a portion of the site would be based on the fee schedule in effect in 2000 rather than the current fee schedule, which is higher. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsouth.net Ms. Megan Kelly Swire Properties April 19, 2011 Page 4 Non -Quantifiable • Trade -related fees for roofing, electrical, plumbing, mechanical, pool and elevator work performed during construction (non -recurring) • Increased City utility taxes and franchise fees (recurring) • Increased occupational license fees (recurring) • Increased revenue sharing funds (recurring) Other Jurisdictions Miami Downtown Development Authority • $ 310,250 annually in ad valorem taxes (recurring) Miami -Dade County • $ 3,367,764 annually in General Fund ad valorem taxes (recurring) • $ 276,123 annually in Debt Service Fund ad valorem taxes (recurring) • $ 176,222 annually in Library ad valorem taxes (recurring) • $ 972,000 annually in tourist taxes (recurring) • $ 4,800,000 annually in local option sales taxes (recurring) • Increased water and sewer connection fees (non -recurring) • Increased occupational license fees (recurring) • Increased revenue sharing funds (recurring) • Increased water and sewer service fees (recurring) Miami -Dade County Public Schools • $ 1,194,232 in impact fees (non -recurring) • $ 4,879,961 annually in Operating Fund ad valorem taxes (recurring) • $ 283,893 annually in Debt Service Fund ad valorem taxes (recurring) Children's Trust • $ 310,250 annually in ad valorem taxes (recurring) Economic Benefits The term "economic benefits" relates to the positive impact that the proposed Brickell Citicentre project will have on the economy of the City rather than its finances. The economic benefits it will provide will also be non -recurring and recurring in nature. Non -recurring Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink©bellsouth.net Ms. Megan Kelly Swire Properties April 19, 2011 Page 5 • At least 80 percent of the $662.0 million that will be spent on hard and soft costs as well as FF&E to develop the Brickell Citicentre will be spent within the City of Miami, producing an overall economic impact of at least $800.0 million when the multiplier effect is considered. • Project expenditures will include an estimated $268.8 million for construction labor, an amount sufficient to pay for 4,443 man-years of construction work at the average annual pay rate of a Miami -Dade County construction worker, which approximates $60,500 per year. It is further anticipated that each direct construction job will result in the creation of at least 0.75 indirect or induced jobs. Indirect jobs will be in business related to construction such building supplies or equipment rental while induced jobs will be in businesses where those occupying the direct and indirect jobs will spend their earnings such as the local supermarket or personal service establishment. A substantial portion of the jobs created by development of the proposed project are likely to be filled by City of Miami residents. Recurring • When Brickell Citicentre is completed, a total of $57.1 million will be spent annually by condominium residents in retail and food and beverage establishments, by hotel guests and occupants of the serviced rental units for a variety of items including food and beverage, transportation, entertainment and attractions and retail goods and by workers at the project for meals and other items purchased during the work day. It is anticipated that at least 85 percent of these expenditures will be within the City of Miami resulting in overall economic impact annually approximating $75.0 million. • A total of 3,788 people will be employed at the proposed project, inclusive of people involved in project operations, maintenance and parking. Based on information compiled by the Florida Agency for Workforce Innovation, it is expected that these workers will earn approximately $175.0 million. The direct jobs at Brickell Citicentre will stimulate the creation of 2,500 indirect and induced jobs. Residents of the City of Miami are likely to occupy a significant number of the direct, indirect and induced jobs that result from the development of the project. Bases of Estimates The materials that follow provide the assumptions used to estimate the fiscal and economic benefits that development of the proposed mixed -use project will provide to the City of Miami. All monetary amounts are in 2011 Dollars. Project Characteristics Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsouth.net Ms. Megan Kelly Swire Properties April 19, 2011 Page 6 • At 701 S. Miami Avenue, Brickell Citicentre will be located within the City of Miami as well as the jurisdictions of the City's Downtown Development Authority, Miami -Dade County, the Miami -Dade County Public School District and the Children's Trust. It will also be in the geographic area delineated for the Downtown Miami DRI. • The project will entail the construction of 4,609,730 gross square feet of building area. Of this amount, 1,244,812 square feet will pertain to the residential portion, inclusive of both saleable and leaseable areas as well as amenity space and circulation, "back -of -the -house" and'core areas. The remaining 3,364,918 square feet will be comprised of the space comprising the various non-residential uses and all the parking, inclusive of that supporting both the residential and non-residential uses. • Residential uses at Brickell Citicentre will include 640 condominium units averaging 1,366 square feet in size and 80 serviced rental apartments averaging 950 square feet in size. Non-residential uses will include a 260-key hotel, 555,764 square feet of retail and entertainment space and 595,680 square feet of office space. A portion of the office space, 79,355 square feet, will be medical office space inclusive of the wellness center. The remainder of the office space will be for general use including 436,970 square feet that will be constructed on the site of the existing Eastern National Bank building. That structure, which contains 197,611 square feet of leaseable space, will be demolished. • Development of Brickell Citicentre is expected to cost approximately $595.0 million in hard costs. An additional $12.0 million will be expended furniture, fixtures and equipment (FF&E) for the proposed hotel and service apartment units while $55.0 million will be expended for soft costs inclusive architectural and engineering fees, marketing, leasing and sales commissions, project overhead, etc. Accordingly, the project will cost a total of $662.0 million to develop exclusive of land cost and developer fees. • MEAI typically estimates the assessed and taxable values of proposed projects based on a review of comparable projects by utilizing data obtained from the records of the Miami -Dade County Property Appraiser. However, there are no projects comparable to the what is proposed for Brickell Citicentre within the City of Miami at this time in terms of its location, overall size and mixture of uses. Accordingly, for the purpose of this analysis, we assume that its assessed value will approximate the amount calculated by adding together the current assessed value of the land that will underlie it and its estimated hard construction cost, or $645.5 million. The taxable value would be somewhat lower, $620.5 million, owing to the fact that approximately 500 of the 640 proposed condominium units are likely to qualify for the $50,000 Homestead Exemption. • Residents of the proposed condominium units will on average require an annual income approximating $150,000 to qualify for ownership. Based on this estimate of average household income, it is projected that the people living in the proposed condominium units, assuming they were full-time residents, would spend $19.2 Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsouth.net Ms. Megan Kelly Swire Properties April 19, 2011 Page 7 million annually in retail and restaurant establishments. This projection assumes that they spend approximately 20 percent of their income for that purpose. However, recognizing that a portion of the condominium units will be used on a seasonal basis, the actual figure would likely be lower, approximating $16.0 million. • Based on data compiled by a variety of sources including the Greater Miami Convention & Visitors Bureau, it is estimated that guests at the proposed hotel and people residing in the serviced rental apartment units will spend an average of $300 per occupied room/apartment night for food and beverage, transportation including rental cars, entertainment and attractions and shopping. Assuming the that the 260 rooms in the proposed hotel and the 80 serviced rental apartments operate at a stabilized level of occupancy of 75 percent, a total of 93,075 occupied room/apartment nights would be recorded, resulting in expenditures totaling $27.9 million. • Assuming the proposed 260-key hotel achieves a stabilized rate of occupancy of 75 percent at an average daily rate of $235, it would record room sales totaling $16.7 million. If it is also assumed that the 80 serviced rental apartment units are leased 75 percent of the time at an average monthly rate of $3,800, they would record rental revenue totaling $2.74 million. Accordingly, transient residents of the project would pay a total of $19.44 million annually for occupancy. • Brickell Citicentre will generate total parking revenues of $5.1 million that will be subjected to a parking surcharge of 20 percent. • Based on industry standards, it is anticipated that the proposed office and retail space will be occupied by 3,493 workers while the proposed hotel and serviced rental apartment units will employ approximately 170 workers. These estimates assumes 4 workers per 1,000 square feet in the office space, 2.0 workers per 1,000 square feet in the retail and entertainment space and 0.5 workers per hotel and serviced rental apartment unit. When project operations, maintenance and parking personnel are accounted for, the total number employed at the proposed project will be 3,788 people. It is anticipated that they will spend an average of $12 per day for food and other items while working, resulting in total expenditures of $13.2 million. • As discussed previously, the proposed retail and entertainment space is projected to achieve sales productivity per square foot approximating $600, resulting in a total sales volume of $333.5 million. As also previously discussed, the rental rate for the proposed retail and entertainment space will average $75 per square foot while that for the office space, inclusive of the wellness center, would average $41 per square foot. The total rental roll for the retail, entertainment and office space would total $62.8 million, assuming stabilized rate of occupancy of 95 percent. • The State of Florida charges a 6 percent sales tax on all retail sales of non-exempt goods as well as all hotel revenues generated from the sale of rooms, all rents paid on rental apartment units, office, retail and entertainment space, rental car and parking charges and food and beverage sales in eating and drinking establishments. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsouth.net Ms. Megan Kelly Swire Properties April 19, 2011 Page 8 Miami -Dade County charges an additional 1 percent on a local option basis, the proceeds of which are evenly split between the County's Health Trust and Transit. Based on the estimates contained in the preceding paragraphs, development of Brickell Citicentre will result in potentially taxable transactions totaling $477.9 million each year. Non -recurring Fiscal Impacts • The City of Miami charges building permit fees at a rate of $0.20 per gross square foot of multi -family residential construction and $0.25 per gross square foot of commercial construction. In calculating fees, the square footage associated with parking garage space was charged for at the commercial rate. Based on the distribution of space by use previously discussed, building permit fees totaling $1,090,192 will be paid. A solid waste surcharge fee in the amount of $30,000 will be applied, assuming that the project is developed in 3 phases and that in each phase the maximum amount of $10,000 is charged. • The various trades involved in completing the new project including the roofing, electrical, plumbing, mechanical, elevator and swimming pool contractors will be required to pay fees on their work. Calculation of the fees that they will pay requires that the project's final engineering drawings be completed, which has not yet occurred. Accordingly, the fees that will be paid can not be quantified at this time. A solid waste surcharge is applied to these fees. • The City of Miami charges impact fees on new construction projects for police, fire - rescue and general services. Park impact fees are also paid on residential units. Based on the current rate schedule, it is estimated that impact fees totaling $4,125,208 will be paid, of which $458,541 will be for police, $541,238 for fire - rescue, $274,949 for general services and $2,850,480 for parks. This estimate assumes a credit for the office space in the existing Eastern National Bank building that will be demolished. • In addition to the impact fees discussed in the preceding paragraph that are charged to projects anywhere within the City of Miami, supplemental impact fees are charged on projects located in the area covered by the Downtown Miami DRI. The project would get a credit for the 197,611 square feet in the existing Eastern National Bank building. Based on the current fee schedule and the quantities of development by use minus the credit just discussed, a total of $1,705,066 in DRI supplemental fees would be due. However, the amount that will need to paid could be less given that $224,022 in supplemental DRI impact fees for a proposed development on the site in 2000. Additionally, as a result of the moneys already paid, the fees charged for portions of the development may be based on the fee schedule in effect in 2000 not the current schedule. The rates in effect in 2000 were lower than the current rates. • New construction projects located in the City of Miami also need to pay impact fees to Miami -Dade County Public School District on residential units. For the purpose of Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsouth.net Ms, Megan Kelly Swire Properties April 19, 2011 Page 9 this analysis, it is assumed that such fees would be waived on the 80 serviced rental apartment units because they will be occupied on a transient basis. The base fee for the 640 condominium units is $612 per unit. An additional amount of $0.918 per square foot is then applied. Accordingly, school impact fees totaling $1,194,232 will need to be paid. • The Miami -Dade Water & Sewer Department will require that connection fees be paid to activate water and sewer service for the proposed project. The amount that will need to be paid will be dependent on the number of meters through which service is provided and the size of the meters. Since these engineering parameters have not be established, a fee estimate cannot be formulated at this time. Recurring Fiscal Impacts • The millage rates currently being levied for ad valorem tax purposes by the governmental entities referenced in the Summary of Findings are shown in the table immediately following. The ad valorem tax revenues projected in the Summary of Findings were calculated by applying the millage rates shown to proposed project's estimated taxable value of $620.5 million. Entity Rate/$1000 Taxable Value Taxes City of Miami General Fund 7.6740 $ 4,761,717 Debt Service Fund 0.9701 S 601,948 Downtown Development Authority 0.5000 $ 310,250 Miami -Dade County General Fund 5.4275 $ 3,367,764 Debt Service Fund 0.4450 $ 276,123 Library 0.2840 S 176,222 Miami -Dade County Public Schools Operating 7.8640 $ 4,879,961 Debt Service 0.3850 $ 238,893 Children's Trust 0.5000 $ 310,250 I Source: Miami -Dade County Property Appraiser; Miami Economic Associates, Inc. • The City of Miami charges a 20 percent surcharge on parking fees. Patrons of and visitors to the proposed project's office, retail space and hotel would pay this surcharge as would guests of residents of its residential units. Based on estimated surcharge -eligible parking receipts totaling $5.1 million annually, revenues approximating $1.0 million would be generated. • The City of Miami collects utility taxes and franchise fees from the providers of telephone, electric and other such services based on their revenues. The amount collected as a result of the development of the proposed project will be dependent on the amount of these services used by the project's residents and commercial tenants; hence, it can not be quantified at this time. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsouth.net O Ms. Megan Kelly Swire Properties April 19, 2011 Page 10 • Both the City of Miami and Miami -Dade County will collect occupational license fees from the occupants of the proposed office and retail space. The amount collected cannot be estimated at this time since it will be dependent on the nature of the businesses housed in the office and retail space. • The City of Miami and Miami -Dade County participate in a number of revenue sharing programs including one that relates to the rebate of a portion of the State sales tax proceeds that are collected in Miami -Dade County. The amounts of revenue sharing revenues that will accrue to the City as a result of the proposed project cannot be estimated at this time. • Miami -Dade County will collect tourist taxes at a rate of 5 percent on room sales in the proposed hotel and rents collected on the serviced rental units. Based on the estimated stabilized level of revenues of $19.44 million, taxes totaling $972,000 will be collected annually. • As discussed previously Miami -Dade County will collect local option sales tax at a rate of 1 percent all sales tax -eligible transactions, which estimated previously to potentially total $4.8 annually as a result of the development of Brickell Citicentre. The proceeds will be evenly divided between the County's Health Trust and transit. • The Miami -Dade Water & Sewer Department will serve the proposed project. The service it will generate will be a determined by the number and the size of the meters through which service is provided. Since those engineering parameters are not yet known, an estimate of the service fees earned cannot formulated at this time. Closing The analysis performed by MEAI demonstrates development of Brickell Citicentre will be highly beneficial to the City of Miami both fiscally and economically. Sincerely, Miami Economic Associates, Inc. Andrew Do!kart President Miami Economic Associates, Inc. 6861 B.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsouth.net