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HomeMy WebLinkAboutEconomic Development Impact - dated 7-17-2016 - Eastside RidgeMiami Economic Associates, Inc. July 17, 2016 Mr. Edward Martos East Ridge LLC Miami, FL Re: Economic and Fiscal Impact Analysis Eastside Ridge Dear Mr. Martos: Miami Economic Associates, Inc. (MEAI) has performed an analysis to estimate the economic and fiscal benefits that will be realized by the City of Miami as well as several other governmental jurisdictions as the result of the development of the Eastside Ridge project. Eastside Ridge is proposed for development on a site approximately 22,5 acres in size. The site is located in the City of Miami south of NW 54th Street, between N. Federal Highway on the east and NE 2nd Avenue on the west, The southern boundary of the site is the property line between it and Archbishop Curley Notre Dame High School. The other jurisdictions considered in our analysis included Miami -Dade County, the Miami -Dade County Public School District and the Children's Trust. For the purpose of our analysis, we used a site plan formulated by Kobi Karp Architecture and Interior Design (KKAID). The plan envisions the site being developed with 3,157,622 square feet of saleable/rentable building area, 100,000 square feet of space for outdoor dining and kiosks and 2,800,000 square feet of parking. The saleable/rentable area includes the following: • 2,476,767 square feet of saleable/rental residential space. which would equate to approximately 2,798 units at an average size of 885 square per unit. The plan does not specify the tenure of the units. MEAI believes, however. that if a portion of the units are sold as condominiums rather than being offered for rental. the average unit size of those units would likely be greater, thereby reducing the total number of units that will be developed. • 257,490 square feet of hotel space, which would be a sufficient quantity to house one 278- room full service hotel and one 150-room select service hotel. • 283,798 square feet of retail space. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (3051 669-0229 Fax: (8661 496-6107 Email: meainkCa%bellsouth.net Mr. Edward Martos East Ridge LLC July 17, 2016 Page 2 • 139,567 square feet of office space. The specifics of the development program outlined above may be modified based on market conditions at the time Eastside Ridge is developed, with development likely occurring in phases over a period of years. Further. the rates used in our fiscal analysis for taxes and fees are also subject to change as are the construction costs that we assumed. Accordingly, the actual fiscal and economic benefits generated by the project for the City of Miami and the other governmental jurisdictions enumerated above may vary from those estimated below and the differences may be significant. Key Findings The key findings of the analysis MEAI performed are as follows: Economic Benefits • During the period Eastside Ridge is being developed, nearly 9,083 jobs will be created, including more than 5,478 construction jobs on -site (direct jabs). The remainder of the jobs will either be in businesses that support the construction industry such as building supply and trucking companies (indirect jobs) or in establishments in which the construction workers and the indirect workers spend their earnings (induced jobs). These workers occupying these direct, indirect and induced jobs are projected to earn more than $610.5 million throughout the period in which the project is being constructed. • After the development of Eastside Ridge has been completed, it is expected that there will be at least 1,545 direct jobs on -site annually in a range of businesses including retail and food and beverage establishments, hotels and firms and professional offices of varying kinds that occupy office space. An additional 736 indirect and induced workers will also be employed. The earnings of all these workers on an annual basis are expected to exceed $106.6 million. Fiscal Benefits • During the period Eastside Ridge is being developed, the City of Miami will collect more than $13.1 million in general and trade -related building permit fees and impact fees. Included in this amount will be more than $8.0 million in park impact fees. Miami -Dade County and the Miami -Dade County Public School District will also receive significant benefits, with the former collecting nearly $19.0 million in road impact fees and the latter approximately $4.0 million in school impact fees. • After the development of Eastside Ridge is fully completed, the general/operating funds of the City of Miami, Miami -Dade County and the Public School District will collect approximately $12.7 million annually in ad valorem taxes, with the City's share exceeding $4.9 million. The ad valorem taxes paid to each of the various jurisdictions when the project has been completed will be more than twenty times the amounts that they receive on the rental apartments that currently occupy the Eastside Ridge site. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@belisouth.net Mr. Edward Martos East Ridge LLC July 17, 2016 Page 3 The remainder of this letter report, which is organized as shown below, provides a complete discussion of the findings of our analysis and their bases. 1 Section Page Economic Benefits 3 Fiscal Benefits 4 Bases of Fiscal Estimates 6 Closing 9 Economic Benefits The term "economic benefits" relates to the positive impact that the Eastside Ridge project, when developed, will have on the economy of the City and County. The economic benefits that the project will provide will be both non -recurring and recurring in nature, with the former occurring during the construction period, the latter on an annual basis each year after the project has been fully completed. Table 1 below summarizes the economic benefits that Eastside Ridge will generate. Table 1 Economic Benefits Eastside Ridge (2016 Constant Dollars) Benefits Non -recurring Recurring Jobs Created Direct 5,478 1,545 Indirect 1,526 335 Induced 2,079 401 Total 9,083 2,281 Labor Income (All workers) $ 480,375,000 $106,657,300 Gross Domestic Product (Value-added) $ 610,522,200 $ 201,183,700 Source: East Ridge LLC; IMPLAN; GAI Consultants Inc.; Miami Economic Associates, Inc. With respect to Table 1, the following points are noted: • The estimates of job creation, labor income and gross domestic product (or value-added) were formulated using the IMPLAN Input -Output Model developed at the University of Minnesota over 35 years ago and which has been updated on a continuing basis in the ensuing years. A description of the model may be found in the appendix to this report on page 10. • The term "direct jobs" refers to jobs on -site. "Indirect jobs" are jobs in industries related to the on -site economic activity while "induced jobs" are jobs in economic sectors across the entirety of the economy in which the direct and indirect workers spend their earnings. Illustratively, during the construction period, the direct jobs would be filled by the on -site construction workers. The indirect workers would include people employed by building Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsouth.net Mr. Edward Martos East Ridge LLC July 17, 2016 Page 4 supply and trucking firms, among others, that provide goods and services that support the on -site construction activity. The Induced workers would include people working in supermarkets and doctors' offices, among other venues, that the direct and indirect workers patronize. • The estimates of non -recurring benefits are based on the project's estimated cost of hard construction, which is expected to approximate $631.5 million or $200 per saleable/rentable square foot. The benefits shown would be generated throughout the entirety of the development period and are stated 2016 Constant Dollars. • The estimates of recurring benefits are annual amounts expressed in 2016 Constant Dollars for each year after development of the entire project has been completed. The indirect and induced jobs as well as labor income and gross domestic product were estimated based on the number of direct employees by industry sector who will be employed at Eastside Ridge. The number of direct employees by industry sectors was. in turn, estimated by applying industry standards to uses proposed for development at Eastside Ridge, as follows: o Office space: 139.567 square feet with 4 workers per 1,000 square feet of rentable space o Retail space: 233,798 square feet at 2 workers per 1,000 square feet o Restaurant space, 50,000 square feet at 5 workers per 1,000 square feet o Full service hotel: 278 rooms at 0.75 employees per room o Select service hotel: 150 rooms at 0.4 employees per room • Table 1 understates the recurring benefits because it does not take into account the workers who will be employed on -site to market, lease, operate and maintain the project itself inclusive of those involved with the parking facilities. The number of such workers will ultimately be a function of the actual mix of units by tenure that is developed and the extent to which certain functions are handled by personnel employed by the project or by outside contractors. Fiscal Benefits The term "fiscal benefits" refers to the positive impact that Eastside Ridge will have on the finances of the City of Miami and the other jurisdictions in which it will be located. These include Miami -Dade County, the Miami -Dade County Public School District and the Children's Trust. Table 2, on the next page, summarizes the fiscal benefits that the project will generate on both a non -recurring and annual recurring basis. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink©bellsouth.net Mr. Edward Martos East Ridge LLC July 17, 2016 Page 5 Table 2 Summary of Fiscal Benefits Eastside Ridge (2016 Constant Dollars) Jurisdiction Non -recurring Recurring City of Miami Master Building Permit Fees $ 3,007,500 Trade -related Building Permit Fees ** Impact Fees Police $ 455,988 Fire _ $ 1,063,411 General Services $ 599,702 Parks $ 8,006,306 Ad valorem Taxes General Fund $ 4,917,464 Debt Service Fund $ 442,839 Utility Taxes and Franchise Fees _ ** Occupational License Fees ** Parking Surcharge ** Miami -Dade County Road Impact Fees $ 18,956,333 Ad Valorem Taxes General Fund $ 3,001,283 Debt Service Fund $ 289,395 Library Fund $ 182,640 Hotel Occupancy Taxes Water & Sewer Service Charges ** Occupational License Fees ** Local Option Sales Taxes ** Miami -Dade Public School District School Impact Fees $ 3,986,048 Ad valorem Taxes Operating Fund $ 4,767,300 Debt Service Fund $ 127,977 Children's Trust (Ad valorem taxes) $ 321,550 " Amount cannot be estimated based on the information currently available. Source: East Ridge LLC; Relevant sections of the City of Miami Code; Miami -Dade County; Miami -Dade County Property Appraiser; Miami Economic Associates, Inc. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink©bellsouth.net Mr. Edward Martos East Ridge LLC July 17, 2016 Page 6 With respect to the table, the following points are noted: • The amounts of ad valorem taxes that Eastside Ridge will generate for the City of Miami and the other jurisdictions shown in Table 2 when it is fully developed will be more than twenty times the amounts each is currently collecting on the rental apartments that currently occupy the project's site. • The estimate of ad valorem taxes shown are understated since there are based solely on the estimated value of the real property that will exist at Eastside Ridge when it is fully developed. Ad valorem taxes will also need to be paid on the personal property in the proposed hotels and retail and office space. • Certain benefits identified in the table cannot be estimated at this time because insufficient information is available to do so; however, the payment of these benefits will represent a significant increase in revenue for the City of Miami and Miami -Dade County. The manner in which the amounts shown in the table were calculated is provided below. Bases of Estimates of Fiscal Benefits The materials that follow explain how the estimates of fiscal benefits presented in Table 2 were calculated. All monetary amounts are in 2016 Constant Dollars. Non -recurring Fiscal Impacts • The amount the City of Miami collects for general building permits for a multi -family residential and/or commercial project is based on the amount that will be spent to build it in terms of hard costs. The rate charged is 1.0 percent for all costs up to $30.0 million and 0.5 percent on all costs above that figure. Based on estimated hard construction costs approximating $631.5 million, general building permit fees in the amount of $3,007,500 will be paid to construct Eastside Ridge. • The various trades involved in constructing a new project including the roofing, electrical, plumbing, mechanical, elevator and swimming pool contractors will also be required to pay permit fees on their work at a rate of 1.0 percent of the dollar value of their work. Calculation of the fees that the trades will pay requires that the project's final engineering drawings be completed, which has not yet occurred. Accordingly, the trade fees that will be paid cannot be quantified at this time. • The City of Miami charges impact fees on all new construction projects for police, fire -rescue and general services. Park impact fees are also paid on residential units. For the purpose of calculating these fees, it is assumed that the residential component of Eastside Ridge would be comprised of 2.798 rental units. It is also assumed that the 50.000 square feet of food and beverage space would be classified as retail space. Finally, it is assumed that credits would be applied for the garden apartments units currently on -site that will be demolished to accommodate the development of Eastside Ridge. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsouth.net Mr. Edward Martos East Ridge LLC July 17, 2016 Page 7 Based on the quantities of development proposed and the City's current impact fee rate schedule, it is estimated that impact fees totaling $10,125,407 will be paid to the City of Miami with respect to Eastside Ridge. Of this amount, $455.988 will be for police, $1,063,411 for fire -rescue, $599,702 for general services and $8,006,306 for parks. • A new construction project located in the City of Miami needs to pay impact fees to Miami - Dade County for roads. When the project includes residential units, it also needs to pay impact fees to the Miami -Dade County Public School District for schools. Based on the assumptions stated in the preceding paragraph and the County's current impact fee schedule, road impact fees will total $18,956,333 and school impact fees, $3,986,048. • The Miami -Dade Water & Sewer Department requires that connection fees be paid to activate water and sewer service for a new 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. When the fees are calculated, credits will likely be given for the garden apartment units currently on -site that will be demolished to accommodate the development of Eastside Ridge. Recurring Fiscal Impacts • The millage rates currently being levied for ad valorem tax purposes by the governmental entities referenced on Table 2 are shown in the table below. The ad valorem tax revenues projected were calculated by applying these millage rates to proposed project's estimated taxable value, which was assumed to be $643.1 million. That figure approximates the amount derived by adding the current value of the land on which Eastside Ridge would be developed to the hard cost of constructing it. It also assumes that all of the residential units are rental apartments, hence not eligible for the homestead exemption. Entity Rate/$1000 Taxable Value Taxes City of Miami General Fund 7.6465 $ 4,917,464 Debt Service Fund 0.6886 $ 442,839 Miami -Dade County General Fund 4.6669 $ 3,001,283 Debt Service Fund 0.4500 $ 289,395 Library 0.2840 $ 182,640 Miami -Dade County Public Schools Operating 7.4130 $ 4,767,300 Debt Service 0.1990 $ 127,977 Children's Trust 0.5000 $ 321,550 Source: East Ridge LLC; Miami -Dade County Property Appraiser; Miami Economic Associates, Inc. • According to projections provided to MEAI by East Ridge LLC, the proposed 278-room full service hotel will achieve a stabilized occupancy rate of 72 percent at an average rate of $225 per night. It is further projected that the 150-room select service hotel will achieve a Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink©bellsouth.net Mr. Edward Martos East Ridge LLC July 17, 2016 Page 8 stabilized occupancy rate of 78 percent at average rate of $180 per night. Miami -Dade County will levy a hotel occupancy tax on the $24125,040 that two hotels collect from room sales in the amount of 6 percent, which will yield hotel occupancy tax revenue in the amount of $1,447,502 annually. • 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 Eastside Ridge will be dependent on the amount of these services used by the project's residents and commercial tenant(s); therefore, it cannot be quantified at this time. • The Miami -Dade Water & Sewer Department will provide water and sewer services to the Eastside Ridge project. The service fees that will be generated will be a determined by usage and the number and the size of the meters through which service is provided. Since the engineering parameters of the proposed project are not yet known, an estimate of the service fees earned cannot be formulated at this time. • Both the City of Miami and Miami -Dade County will collect occupational license fees from the occupants of the proposed commercial space. The amounts collected cannot be estimated at this time since they will be dependent on the nature of the businesses housed in the office and retail space. • The City of Miami levies a surcharge of 20 percent on all charges at parking facilities open to public within the City of Miami. To calculate the amount the City would collect from the Eastside Ridge would require that assumptions be made regarding the number of cars that would utilize the facility on an annual basis and the length of stay for each vehicle. It is not within MEAI's competence to formulate such assumptions. Miami -Dade County will collect a 1-cent County option sales tax on all rents paid at the project as well as on all revenues collected by the two proposed hotels and the overwhelming preponderance of the sales receipts of the project's etailers and food and beverage establishments. This tax would also be levied on the parking revenues collected. To estimate a total amount would require knowing the sales volumes of the retail and food and beverage establishment and the percentage of those volumes that are taxable. It will also require knowing the amount of parking revenues that would be collected annually. Accordingly, no total estimate of this source of revenue was developed. Closing The analysis performed by MEAI demonstrates that development of Eastside Ridge would be highly beneficial fiscally to the City of Miami and the other jurisdiction in which it will be located. It will also provide employment opportunities for residents of the City of Miami andfor Miami - Dade County both while it is being built and after construction has been completed. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink@bellsouth.net Mr. Edward Martos East Ridge LLC July 17, 2016 Page 9 MEAL is prepared to respond to any questions you may have regarding the contents of this letter report. 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: (305) 669-8534 Email: meaink©bellsouth.net Mr. Edward Martos East Ridge LLC July 17, 2016 Page 10 Appendix Minnesota IMPLAN Input -Output Model The Minnesota IMPLAN Input -Output Model relies on multiplier analysis which quantifies the cumulative effect of dollars inserted into the regional economy. As a dollar moves through the region, it creates additional revenue for linked businesses and/or their employees who also spend that money. More simply, expenditures dispersed by one entity become revenue to another, continuing an economic cycle which ultimately dissipates, bleeding into other regions or areas. Although a number of economic models are available, they work in fundamentally similar ways and center on the same indicators. The Minnesota IMPLAN model was initially created over 35 years ago at the University of Minnesota and has been upgraded on a continuing basis in the ensuing years. The multiplier impacts calculated by the Minnesota IMPLAN model are based on input-output methodology, which explicitly considers the inter -industry linkages that exist within an economy. Each industry needs labor and inputs from other industries in order to produce economic output. Whenever an industry experiences an increase in the demand for its output, many other industries within that economy indirectly experience an increase in demand as well because of these inter -industry linkages. This increase in demand that results from the need for material inputs is called the indirect effects. In addition, an increase in production within a region also leads to an increase in household income through the hiring of workers, which in turn generates further demands for goods and services within the region Firms also need to expand their base of physical capital to meet higher levels of demand, and this too stimulates regional economic growth. The latter effects are referred to as induced effects. The inter -industry linkages and the induced effects on consumer and capital spending lead to successive rounds of production, and this process results in an increase in output that exceeds the initial change in demand, or a multiplier effect. Similarly, the increase in household income will exceed the initial payroll increase encountered in the industry that experienced the original increase in demand. The total change in employment in the regional economy is a multiple of the direct change in employment. In addition to estimating employment. MEAT also used the Minnesota IMPLAN model to quantify the total earnings or labor income of the direct, indirect and induced workers as well as the total gross domestic product, or value added, that would result from the efforts of the direct, indirect and induced employees. Labor income consists of all forms of employment income including wages and salaries and proprietor income. Gross domestic product (GDP), also known as value-added, is the increased value of a product or service as the result of the economic inputs (labor and capital) expended at a given stage, GDP is the sum of wages and salaries, proprietor income, interest and indirect business taxes. Miami Economic Associates, Inc. 6861 S.W. 89th Terrace Miami, Florida 33156 Tel: (305) 669-0229 Fax: (305) 669-8534 Email: meaink©bellsouth.net