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HomeMy WebLinkAboutPre-publication Submittal Dolkhart ReportMiami Economic Associates, Inc. July 31, 2023 Mr. Alex Schaprio Chief Operating Officer Miami Design District Associates, LLC 3841 NE 2nd Avenue Miami, FL 33137 Re: 2023 Economic and Fiscal Benefits Miami Design District Special Area Plan Dear Mr. Schapiro: Pursuant to your request, Miami Economic Associates ("MEAI") has performed an analysis to estimate the economic, fiscal and public benefits that the Miami Design District Special Area Plan ("SAP") has generated to date for the City of Miami and the other governmental jurisdictions in which it is located and those that it will generate in the future. The materials that follow provide the results of our analysis. The remainder of this letter is organized as shown below: Section Page Project Description 1 Key Findings 2 Economic Benefits 4 Fiscal Benefits 6 Public Benefits 10 Closing 11 Project Description Appendix 1 to this report provides a list of the properties that are currently included in the Miami Design District SAP and those that are now being proposed for inclusion. The table below accounts for all the development activity that has already occurred within SAP and most of that which is expected to occur in the future. Not included is whatever development is ultimately programmed for the Madonna and Marcy sites, which are comprised of a combined total of 37,547 square feet of land. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (3051 669-0229 Fax: (8661 496-6107 Email: meaink(c bellsouth.net Mr. Alex Schaprio Chief Operating Officer Miami Design District Associates, LLC July 31, 2023 Page 2 Table 1 Existing and Proposed Development Miami Design District Use Current (Net SF) Future (Net SF) Total (Net SF) Retail 389,435 199,345 588,780 Showroom 208,725 208,725 Office 147,193 361,801 508,994 Food & Beverage 179,622 50,585 230,207 Services 79,697 2,450 82,147 Residential (265 Units) ** 794.274 794,294 Hotel (110 Rooms) ** 87,228 87,228 Total Square Feet 1,004,672 1,495,683 2,500,355 "'` Numbers of residential units and hotel rooms are preliminary Source: Miami Design District Associates, LLC; Miami Economic Associates, Inc. With respect to development quantities shown in Table 1, all the uses in the quantities indicated are as of right as part of the SAP that governs development within the Miami Design District as delineated above except for 73,760 square feet of luxury retail space, 305,019 square of condominium space (145 units), and 87,228 square feet of hotel space (110 rooms), which is the preliminary estimated program for the land being added in the current amendment to SAP. Key Findings The key findings of the analysis performed by MEAI are as follows: Economic Benefits • According to information provided to MEAI by Miami Design District Associates, LLC ("MDDA"), approximately $1.1 billion has been spent in terms of hard construction costs and tenant build out costs with respect to the current uses in the Miami Design District SAP summarized in Table 1. MDDA further estimates that the proposed development shown in Table 1 will cost another $1.0 billion to construct in terms of hard costs. MEAT estimates that as result of the expenditures associated with constructing the proposed uses, 13,774 full- and part-time jobs will be created including 7,533 on -site construction jobs (direct jobs). The rest of the jobs created will either be in businesses that support the on -site construction activity (indirect jobs) or in businesses across the economy in which those occupying the direct and indirect jobs spend their earnings, All these workers will earn more than $716.8 million during the period in which the proposed uses shown in Table 1 are being developed. • MEAI estimates that 4,582 workers are currently employed on a full-time equivalent ("FTE') basis because of the development that has already occurred at the Miami Design District Project including 3,078 direct workers and 1,504 indirect and induced Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (866) 496-6107 Email: meaink@bellsouth.net Mr. Alex Schaprio Chief Operating Officer Miami Design District Associates, LLC July 31, 2023 Page 3 workers. These workers earn approximately $200.8 million annually. We further estimate that after the proposed uses shown in Table 1 are developed an additional 3,736 jobs on an FTE basis will be created including 2,248 direct jobs on -site. These workers will earn approximately $183.0 million annually. It should be noted that the number of people who both currently and prospectively actually work in the Miami Design District SAP is likely greater than the number of FTE's because the retail and hospitality sectors rely heavily on part-time workers as part of their workforces. It is believed that the overwhelming preponderance of the current and prospective workers reside in the City of Miami and elsewhere in Miami -Dade County. Fiscal Benefits • With respect to the development that has already occurred within the Miami Design District SAP, MDDA has already paid over $6.0 million in general building permit fees, impact fees, and water and sewer connection fees to the City of Miami and Miami -Dade County. Not included in this figure are the fees that have been paid by the contractors who performed structural, electrical, plumbing and mechanical work with respect to the construction that has already occurred. The amounts that MDDA has paid reflect the fact that it has received credits from both the City and the County for uses that were demolished to accommodate new construction. It also reflects the fact that the County has refunded portions of the fees paid because the Miami Design District SAP is in a designated Enterprise Zone. MEAI has calculated, based on the fee schedule currently in effect in City of Miami, that MDDA would be required to pay general building permit fees to the City in the approximate amount of $6,050,000 with respect to the proposed development shown Table 1. The structural, electrical, plumbing and mechanical contractors involved in constructing the proposed uses would be required to pay trade -related building permit fees; however, based on the information currently available, the amounts that the contractors would be required to pay cannot be estimated. Based on the fee schedules currently in effect, MDDA would also be required to pay impact fees to the City for police, fire, general services and parks on the proposed development in the amount of $1.41 million. Impact fees would also need to be paid to the County for roads in the amount approximating $9.38 million and to the Miami -Dade Public School District in an amount that MEAI cannot estimate based on the information currently available to us. However, the actual amounts that MDDA will pay will depend on the extent that it receives credits and/or refunds for existing structures that are demolished to accommodate the proposed new development and for the fact that the Miami Design District SAP is in a designated Enterprise Zone. • In November 2022, MDDA paid $10.4 million in ad valorem taxes to Miami -Dade taxing authorities including approximately $4.0 million to the City of Miami, $2.743 million to Miami -Dade County and $3.44 million to the Miami -Dade Public School District. The amount paid was on the development that has already occurred as part of the Miami Design District Project and the land on which the proposed uses shown in Table 1 will occur. MEAI expects the assessed value of those properties to appreciate in future years. Additionally, MEAI estimates that when the proposed Miami Economic Associates, inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (866) 496-6107 Email: meaink@bellsouth.net Mr. Alex Schaprio Chief Operating Officer Miami Design District Associates, LLC July 31, 2023 Page 4 development is completed, the assessed value of the property comprising the Miami Design Project will increase from its current amount of $512.0 million to $1.94 billion, or by nearly 3.8 times. • MDDA estimates that the retailers and food and beverage establishments currently operating at the Miami Design District Project are recording $1.1 billion of transactions that are subject to the imposition of sales tax. On that basis, the State of Florida would be rebating $5.94 million to Miami -Dade County to be divided between the County and its municipalities. Further, Miami -Dade County would be collecting $11.0 million in local option sales taxes. MEAI believes that the actual amounts of the State rebate to the County and the local option sales collections by the County are higher than these figures when the rents and parking fees paid are added to the sales numbers being recorded by the retailers and food and beverage establishment operating at the Miami Design District Project. Public Benefits • As shown in the table below the Miami Design District Project has already funded more than $119.0 million in public benefits within the SAP and is expected to fund at least $3.0 million more in the future. Public Benefits Miami Desic to Dade n District Project Public Benefit Developer Costs Total Benefit Public Right of Way Investment $ 13,765,732 $ 24,015,732 Public Art Investment $ 6,908,000 $ 6,908,000 Artistic Garage Facades $ 8,744,475 $ 8,744,475 Contribution towards ICA** $ 23,600,000 $ 75,000,000*** On -going Maintenance Costs**** $ 4,900,000 $ 4,900,000 Public Benefits Provided in DD SAP $ 57,918,207 $ 119,568,207 ** Donation of the lots underlying the Institute for Contemporary Art (ICA) ***This amount has been raised to fund the ICA for 10 years **** Estimate of the net present value of maintenance costs over 20 years Source: Miami Design District Associates (Del) LLC; Miami Economic Associates, Inc. Economic Benefits The term "economic benefits" refers to the positive impact that the Miami Design District Project has already had or will have as it continues to be developed on the economy of the City of Miami and/or Miami -Dade County in terms of jobs and labor income. Economic benefits can be both non -recurring and recurring in nature, with the former occurring during the development period and the latter on an annual basis after development has been completed. To estimate the economic benefits generated by the Miami Design District Project, MEAI utilized the Minnesota IMPLAN Input -Output Model. A description of the model may be found in Appendix 2 to this letter. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (866) 496-6107 Email: meaink©bellsouth.net Mr. Alex Schaprio Chief Operating Officer Miami Design District Associates, LLC July 31, 2023 Page 5 Non -recurring Benefits According to information provided to MEAI by MDDA, approximately $1.1 billion has been spent in terms of hard costs to construct the existing uses in the Miami Design District SAP summarized in Table 1. Included in that figure are the amounts spent on demolition, site preparation and infrastructure, vertical construction of leasable space and parking, and tenant improvements. MDDA further estimates that the proposed development shown in Table 1 will cost another $1.0 billion to construct in terms of hard costs. Included in that figure is approximately $433.2 million that is projected to be spent on the uses identified above that have not yet been approved by the City of Miami for inclusion in the SAP. Table 2 provides MEAI's estimates of the non -recurring economic benefits in terms of full-time and part-time job creation and wages and salaries earned that will be generated by the money that will be spent on the hard costs associated with building the proposed uses shown in Table 1.1 The term "direct jobs" refers to on -site construction jobs. "Indirect jobs" are in industries that support the on -site construction activity. "Induced jobs" are in economic sectors across the economy in which the direct and indirect workers spend their earnings. Table 2 Non -recurring Economic Benefits Proposed Development Miami Design District Project (2023 Dollars) Benefits Jobs Created Direct 7,533 Indirect 3,142 Induced 3,099 Total 13,774 Labor Income (AII workers) $ 716,826,300 Source: Miami Design District Associates, LLC; IMPLAN; Miami Economic Associates. Inc. Recurring Benefits Table 3 estimates the recurring benefits in terms of job creation and wages and salaries earned for both the existing development and proposed development in the Miami Design District Project summarized in Table 1. The estimates of indirect and induced jobs as well as labor income were estimated for the existing development based on the assumption that there are 3,078 direct workers currently employed on -site on a full-time equivalent (`°FTE") basis, exclusive of those involved with maintenance, janitorial, valet 1 Since the money spent to build the existing uses in the Miami Design District was expended over a period of prior years for which the current coefficients in the IMPLAN model may not be correct, MEAI was unable to quantify the non -recurring benefits generated by the prior expenditure of $1.1 billion. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (866) 496-6107 Email: meaink@beilsouth.net Mr. Alex Schaprio Chief Operating Officer Miami Design District Associates, LLC July 31, 2023 Page 6 parking and security functions The estimates for the proposed development assume that 2,269 direct workers will be employed in the proposed development on a FTE basis The assumptions just stated were, in turn, arrived at by assuming that: 1) the retail space, the showroom space and the neighborhood service space would be staffed by 2.5 workers per 1,000 square feet on a FTE basis; 2) the office space would be staffed by 4 workers per 1,000 square feet on a FTE basis; and the restaurant and club space would be occupied by 5 workers per 1,000 square feet on a FTE basis. It was further assumed that the condominiums would employ a total of 40 workers and the hotel would employ 0,60 workers per room. With respect to Table 3, the following points should be noted: • The actual number of people employed within the Miami Design District SAP may exceed the number of FTE's because the retail and hospitality sectors employee substantial numbers of part-time workers. • Workers shown in Table 3 may not live in the City of Miami; it is, however, believed that the preponderance of them are/will be Miami -Dade County residents. • Approximately 236 of the direct workers shown in the Proposed Development column will be employed in future buildings that have not yet been included in the SAP by the City of Miami. Table 3 Recurring Economic Benefits Existing and Proposed Development Miami Design District Project (2023 Dollars) Benefits Existing Development Proposed Development Total Development Jobs Created Direct 3,073 2,248 5,326 Indirect 681 693 1,374 Induced 823 795 1,618 Total 4,582 3,736 8,318 Labor Income (All workers) $ 200,837,900 $ 183,036,600 383,774,500 Source: Miami Design District Associates, LLC; IMPLAN; Miami Economic Associates, Inc. Fiscal Benefits The term "fiscal benefits" refers to the positive impact that the Miami Design District Project has on the finances of the City of Miami as well as Miami -Dade County, the Miami -Dade County Public School District and Children's Trust of Miami -Dade County. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (866) 496-6107 Email: meaink@bellsouth.net Mr. Alex Schaprio Chief Operating Officer Miami Design District Associates, LLC July 31, 2023 Page 7 On a non -recurring basis when development activity is occurring, the City, the County and the School District collect impact fees and the City of Miami also collects building permit fees. On an annual recurring basis, the major source of revenue for all the taxing authorities enumerated above is ad valorem taxes. Small portions of the ad valorem taxes that the Miami Design District SAP pays also fund several multi -county entities including the South Florida Water Management District, the Florida Inland Navigation District, the Everglades Restoration Project and Okeechobee Basin Management Action Plan. The City of Miami also collects a significant amount of revenue each year in the form of utility taxes and franchise fees; however, MEAI does not have sufficient information available to it to estimate the amount of these revenues collected on an annual basis. The Miami Design District SAP generates significant amounts of revenue in the form of sales taxes. Non -recurring Fiscal Benefits According to information provided to MEAI by MDDA, the Miami Design District SAP has paid approximately $1,045,582 to the City of Miami in form of general building permit fees for the development within the Miami Design District SAP that has already occurred. It should be noted that the contractors who have done the structural, electrical, plumbing and mechanical work associated with the construction that has occurred to date have paid the City trade -related building permit fees, however, information on the amounts they have paid was not available to MEAI for this analysis. MDDA has also paid $2,307,844 to the City in the form of impact fees for police, fire and general services. Payments to the County historically have included $2,021,393 for road impact fees and $667,156 for water and sewer connection fees. Accordingly, the impact fees and connection fees paid to date to the City and the County together have totaled $4,996,393. It should be noted that this amount reflects the fact that MDDA received credits for existing uses that were demolished to accommodate the development within the Miami Design District SAP that has already occurred. Also, significant portions of the impact fees paid to the County for road have been refunded because the Miami Design Center Project is located within a designated Enterprise Zone. MEAI has calculated, based on the fee schedule currently in effect in City of Miami, that MDDA would be required to pay general building permit fees to the City in the approximate amount of $6,050,000 with respect to proposed development shown Table 1. The structural, electrical, plumbing and mechanical contractors involved in constructing the proposed uses would be required to pay trade -related building permit fees; however, based on the information currently available, the amounts that the contractors would be required to pay cannot be estimated. Based on the fee schedules currently in effect, MDDA would also be required to pay impact fees to the City for police, fire, general services and parks on the proposed development in the amount of $1.41 million. Impact fees would also need to be paid to the County for roads in the amount approximating $9.38 million and to the Miami -Dade Public School District in an amount that MEAI cannot estimate based on the information currently available to us. However, the actual amounts that MDDA will pay will depend on the extent that it receives credits and/or refunds for existing structures that are demolished to accommodate the proposed Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (866) 496-6107 Email: meaink@bellsouth.net Mr. Alex Schaprio Chief Operating Officer Miami Design District Associates, LLC July 31, 2023 Page 8 new development and for the fact that the Miami Design District Project is in a designated Enterprise Zone. It should be noted that the estimates of building permit fees and impact fee presented above assume that the City of Miami approves for inclusion in the SAP the 51,525 square feet of retail space, the 110 condominium units and 145 hotel rooms not already included. Recurring Fiscal Benefits The materials that follow discuss two of the major sources of recurring fiscal benefits, ad valorem taxes and sales taxes. Ad valorem Taxes As previously discussed, the major fiscal benefit generated by the Miami Design District Project on annual basis is the ad valorem taxes it pays to the City of Miami, Miami -Dade County, the Miami -Dade Dade County Public School District, and the Children's Trust of Miami -Dade County as well as the multi -county taxing authorities previously enumerated. Table 4, on the next page, shows the amount of taxes paid to the entities within Miami -Dee County for the Fiscal Year 2022 -- 2023 in November 2022 when a discount of 4 percent was applied. The taxes paid at that point in time were on the existing development within the project as well as the sites of the proposed development shown in Table 1. (Space intentionally vacant) Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (866) 496-6107 Email: meaink©bellsouth.net Mr. Alex Schaprio Chief Operating Officer Miami Design District Associates, LLC July 31, 2023 Page 9 Table 4 Ad valorem Taxes Paid Miami -Dade County Taxing Authorities Miami Design District Project November 2022 Taxing Authority/Fund Amount City of Miami $ 3,829,121 General Fund $ 163,720 Debt Service Fund $ 3,992,841 Total Miami -Dade County General Fund $ 2,342,711 Debt Service Fund $ 245,581 Library Fund $ 142.783 Total $ 2,731,075 Miami -Dade Public School District Operating Fund $ 3,357,176 Debt Service Fund $ 84,014 Total $ 3,441,190 Children's Trust of Miami -Dade County $ 253,120 Total for All 4 Jurisdictions $ 10,418,226 Source: Miami Design District, LLC; Miami -Dade County Property Appraiser; Miami Economic Associates, Inc. If it is assumed that the millage rates used to calculate ad valorem taxes remain the same as they are in Fiscal Year 2022 - 2023, the amount of taxes that will need to be paid still increase by as much as ten percent per year due in appreciation of the market value of the properties being taxed. Additionally, the proposed new development identified in Table 1 will cause the amount of taxes to increase even further. Of particular significance in this regard will be the development and sale of the 230 proposed condominium units. MEAT estimates that when the proposed new development is added to the tax rolls, the assessed value of the Miami Design Center Project will be nearly 3.79 times the amount that it currently is, increasing from $512.38 million to $1.94 billion. Sales Taxes The State of Florida collects a 6 percent sales tax on all retail sales of non-exempt items and restaurant and hotel room charges as well as on the rents paid and parking fees collected on other than on -street parking. The State retains approximately 91 percent of the sales taxes it collects and rebates approximately 9 percent to the County in which the sales taxes were originally collected. The rebated amount is then divided between the County and the municipalities within the County. The formula for distributing the Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (866) 496-6107 Email: meaink@bellsouth.net Mr. Alex Schaprio Chief Operating Officer Miami Design District Associates, LLC July 31, 2023 Page 10 rebated amount is subject to change. Additionally, Miami -Dade County charges a 1 percent local option sales tax on the same transactions, with the proceeds from that tax being split evenly between transit and the Miami -Dade Health Trust. To place this issue in perspective, MDDA estimates that the retailers and food and beverage establishments currently operating at the Miami Design District Project are recording approximately $1.1 billion of transactions that are subject to the imposition of sales tax. On that basis, the State of Florida would be rebating $5.94 million to Miami - Dade County to be divided between the County and its municipalities. Further, Miami - Dade County would be collecting $11.0 million in local option sales taxes. MEAI believes that the actual amounts of the State rebates to the County and the local option sales collections by the County are considerably higher than these figures when the rents and parking fees paid are added to the sales numbers being recorded by the retailers and food and beverage establishment operating at the Miami Design District Project. Public Benefits The table below summarizes the public benefits that have already been provided by MDDA in the SAP. Public Benefits to Dade Miami Design District Project Public Benefit Developer Costs Total Benefit Public Right of Way Investment $ 13,765,732 $ 24,015,732 Public Art Investment $ 6,908,000 $ 6,908,000 Artistic Garage Facades $ 8,744,475 $ 8,744,475 Contribution towards ICA** $ 23,600,000 $ 75,000,000*** On -going Maintenance Costs**** $ 4,900,000 $ 4,900,000 Public Benefits Provided in SAP $ 57,918,207 $ 119,568,207 ** Donation of the lots underlying the institute for Contemporary Art (ICA) ***This amount has been raised to fund the ICA for 10 years **** Estimate of the net present value of maintenance costs over 20 years Source: Miami Design District Associates (Del) LLC; Miami Economic Associates, Inc. MDDA has already installed much of the infrastructure needed to support future development of the district. However, an additional $2 - 5 million in public infrastructure and $1 — 3 million in public art (not including building facades) spending are estimated in conjunction with the future SAP projects. Together with this future spending, the total value of the public benefits will exceed $122.0 million. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (866) 496-6107 Email: meaink©bellsouth.net Mr. Alex Schaprio Chief Operating Officer Miami Design District Associates, LLC July 31, 2023 Page 11 Closing MEAI believes that the information presented above demonstrates that the Miami Design District SAP has been highly beneficial economically and fiscally to the City of Miami as well as Miami -Dade County and the Miami -Dade Public School District. It has also provided substantial benefits in terms of public improvements. Sincerely, Miami Economic Associates, Inc. Andrew Dolkart President Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (866) 496-6107 Email: meaink@bellsouth.net