MEMORANDUM. City Commission. Robert DiSpirito, City Manager ~~ Robert Ironsmith, CRA Director q~ September 10, 2013

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1 **BLUE SHEET* Agenda Item: Meeting Date: PH TO: TBRU FROM: DATE: MEMORANDUM City Commission Robert DiSpirito, City Manager ~~ Robert Ironsmith, CRA Director q~ September 10, 2013 SUBJECT: ATTACHMENT: BACKGROUND: Economic Analysis for Proposed Gateway Redevelopment Summary Report and Tables of Economic Impacts In conjunction with the proposed Gateway redevelopment, staff retained WTL+a, an economic consultant, to perform an economic analysis of the mixed use project. Below are some of the key findings from the report: During construction of the planned Gateway, 82 temporary construction jobs will be created. Labor income as a result of the 82 jobs is estimated at $4.08 million.,, After completion, the project is expected to create 120 permanent jobs, which are estimated to generate almost $3.1 million in permanent wages. Retail sales tax accruing to City of Dunedin is estimated at $49,900. Potential annual property tax receipts to all taxing authorities as a result of the Gateway project are expected to equal $300,800. The Dunedin CRA is expected to yield $125,500 per year in property tax revenue. Gross leverage ratio analysis for the City of Dunedin on the Gateway, which includes incentives given and revenues obtained, is expected to equal $1 to $ This ratio means for every dollar the City gives as an incentive, it returns $12.32.

2 Summary of Economic Impacts Proposed Dunedin Gateway Project Dunedin, FL WTL +a, a national real estate and economic development consulting firm based in Washington, DC, has served as a real estate and economic advisor to the City of Dunedin since In August, 2013, the City of Dunedin asked WTL +a to evaluate the economic impacts of Dunedin Gateway, a proposed $15 million, mixed-use development to be constructed on a 4.1-acre site, with frontage on Milwaukee Avenue and Skinner Boulevard, and directly across Main Street from the Mease Dunedin Hospital, in downtown Dunedin. The developer is The Pizzuti Companies of Orlando (Pizzuti Dunedin LLC). Based on a May 2013 plan, the project will comprise 152,450 sq. ft. of gross building area, and include: 124 units of market-rate, multi-family rental housing in approximately 128,000 sq. ft. of building area; Up to 24,450 sq. ft. of commercial space on the ground floor, which may include restaurants and/or general and service/community retail; and 207 surface parking spaces. Key findings from this analysis are summarized below: One-time Construction Impacts (Table 1) Assuming a construction start date of August 2014 and 16 months for buildout (December 2015), the project is expected to create 82 temporary construction jobs The project is estimated to cost $15 million ($98 per sq. ft.), which includes hard costs; surface parking; soft costs associated with land, architecture/engineering, financing fees; and approximately $1 million in tenant improvements/fitout One-time construction (labor) income is estimated at $4.08 million for the 82 jobs created by the project over the 16-month construction period, at an average annual wage of $37,205 (which is the actual average wage as of May 2012 for jobs in Construction & Extraction, and Installation & Repair sectors in the Tampa/St. Petersburg/Clearwater MSA WTL +a Real Estate & Economic Advisors 4235 South Dakota, NE Washington, DC 200~ L502.4~p

3 Potential Permanent Benefits (Table 2) The project is expected to generate over 120 permanent jobs at buildout and stabilized occupancies. This is likely to include: up to 41 jobs associated with the Gateway's housing units (at an industry-standard ratio of three jobs per housing unit), and up to 39 and 41 jobs generated by the project's general retail and food & beverage uses, respectively. Notably, the jobs created by the Gateway's housing component will not necessarily be located on-site. These could include jobs in the following sectors: Property & Real Estate Managers; Installation & Repair; Residential Advisors; Security Guards; Janitors & Cleaners; and Maids & Housekeeping Cleaners. At average annual salaries ranging from $21,070 to $30,472 (based on actual wages for relevant employment categories in the Tampa MSA as of May 2012), Dunedin Gateway is forecast to generate almost $3.1 million in permanent, annual wages. Assuming average annual sales ranging from $189 per sq. ft. for general retail uses to $275 per sq. ft. for the project's restaurant tenants would yield total annual retail sales of $5 million per year at stabilized occupancies. At current retail sales tax rates this would yield the following retail sales tax receipts: o o o $300,186 per year to State of Florida $73,987 per year to Pinellas County $49,863 per year to the City of Dunedin Annual retail sales tax receipts accruing to the City of Dunedin include both the Half-Cent Sales Tax Program as well as the proportional share of revenue-sharing attributable to retail sales. The project's retail uses are estimated to generate over $424,000 in annual retail sales taxes at current tax rates and stabilized occupancies. Potential Annual Property Taxes (Table 3) At buildout, Dunedin Gateway is forecast to generate $300,800 in annual property tax revenues accruing to all current taxing authorities (i.e., the City of Dunedin, Pinellas County General Fund & Health Department, Pinellas County School District, Transit District, Emergency Medical Services, and Other Districts. This estimate assumes current mil rates WTL +a Real Es t ate & Eco nomic Adviso rs 4235 Sout h Dakot a, NE Washi ngton, DC 200~ L ~ 71 2

4 (and the proposed 2014 mil rate of $ per $1,000 of assessed value for the City of Dunedin). Since the actual jusumarket value of the project is not known at this time, the analysis assumes a value of $15 million based on current construction cost estimates. Potential Annual Property Taxes, By District (Table 4) The Dunedin CRA could be expected to yield approximately $125,500 per year in gross new property taxes at its current 95% increment, or fully 42% of the total annual taxes generated by the project at buildout and stabilized occupancies. (Please note that this amount is prior to the 25% rebate to Pizzuti as contained in the development agreement with the City of Dunedin). TIF Revenue Forecasts (Table 5) Table 5 illustrates the estimated future value of the revenues generated by ad valorem (property) taxes that could potentially be available to fund infrastructure bond(s). Key findings suggest: According to the City of Dunedin, 60% of the ad valorem taxes accruing to the CRA could be used for bond financing. The analysis applies an industry-standard debt coverage ratio (DCR) of 1.25 as well as a discount rate of 5.02%. Notably, the analysis in Table 5 also considers the 25% rebate of TIF revenues that Pizzuti Companies will receive for 12 years, as defined in the development agreement with the City of Dunedin. In summary, the net present value (discounted at 5.02%) of the future stream of tax increment revenues yields the potential for $628,400 in bonding capacity. Leverage Ratio Analysis (Table 6) Table 6 illustrates the potential leverage (or "return-on-investment" analysis) that the City of Dunedin could be expected to achieve for its investment over the life of the project (i.e., in this case, for a 19-year period through 2033, which coincides with the sunset of the City's CRA). Key findings suggest: WTL +a Rea l Estate & Economic Advisors 4235 Sout h Da k ota, NE Was hi ngton, D C

5 The City will realize potential revenues in the form of real property taxes; annual ground rent (as identified in the development agreement); and, retail sales tax receipts (from Table 2). In addition, there is the potential for revenues from tangible property as well as power franchise fees; however, since those are not known at this time, they are excluded from the analysis. Incentives to be provided by the City total $420, 175; these include: o Waived building permit fees ($37,000) o Law enforcement and fire impact fees reduced by 55% ($25,000) o Transportation impact fee credit for deeding right-of-way for Milwaukee Avenue ($134,000), and o A 25% rebate of TIF revenues for 12 years, estimated in current dollars at $359,506, with a net present value of $224,175 (discounted at 5.02%) (as estimated by the City) Therefore, gross annual revenues generated by these various sources (from project opening in 2015 through CRA sunset in 2033) are expected to total almost $5.2 million, which would yield a gross leverage ratio of $1 :$12. When considering the present value of this future revenue stream, the net leverage, or return-on-investment, is estimated at more than $2.9 million for the City's $420,175 investment, reflecting a leverage ratio (or return-on-investment) of $1:$7. A Return-on-Investment of $1 to $7 for the City's $420,175 Contribution to Dunedin Gateway WTL +a Real Estate & Economic Advisors 4235 South Dakota, NE Washington, DC 200~ L502. 4~7~ 4

6 Table 1: Potential One-Time Construction Impacts I! One-Time Impacts From Construction I II Hard & Soft Costs (1) I Person-Years o1 auildout Construction Wages As% of Construction Proza.m Per Sq. Ft Total Employment (Yea.rst Jobs Base Costs Income Site Size (In Acres) Start Date Average Annual Construction Wage Housing Multi-Family Units Average Unit Size (Sq. Ft.) Subtotal: Common Area (Estimate) Subtotal -Housing (Sq. Ft.): $ / ,205 (~} ,224 31, ,000 $ 63 $ 8,000, % $ 3,200,000 Commercial General 65% i=ood & 35% Subtotal -Retail (Sq. Ft) 15,893 8,558 24,450 $ 90 $ 2,200, ,3, 18 40% $ 880,000 Other Costs Housing@ Subtotal -Other Costs: TOTAL/Weighted Average: (3) 78% $ 3,764,706 22% $ 1,035,294 $ 4,800, ,450 $ 98 $ 15,000,000 (4 (5) % $ 4,080,000 (1) Construction and other cost estimates provided by The Pizzuti Companies. (2) Based on average annual wages for Construction & Extraction and Installation & Repair jobs in the Tampa/St. Petersburg/Clearwater Metropolitan Statistical Area, May (3) Other costs include: land; other soft costs (e.g., architecture/engineering, financing fees, etc.); surface parking; and approximately $1 million in tenant improvements. Depending on negotiations with specific tenants, additional tenant improvement costs may be required. (4) Person-years of employment is defined as equivalent jobs generated over the construction period (i.e., 16 months). (5) Construction (labor) income is estimated at 40% of hard & soft construction costs (i.e., $10.2 million). This is considered an industry-standard. Source: City of Dunedin; The Pizzuti Companies; WTL +a, September 2013.

7 Table 2: Potential Annual Permanent Benefits Stabilized Occupancies {Sq. Ft.) I Retail Sales & Tax Receipts I I Jobs & Wages I Annual To State of To Pinellas To City of Total Jobs Per Total Average Ann'l Annual Sales Total Florida@ County@ Dunedin@ Annual Sq. Ft. or Uni1 Jobs Wage. Wages (Per Sq. Ft.) Sales 6.0% 1.48% $ 2.19 Sales Taxes Housing Total Units General Retail Gross Building Area (Sq. Stabilized Occupancies Subtotal-Retail: Food & Beverage Gross Building Area (Sq. Stabilized Occupancies Subtotal-Food & Beverage: , % 14,621 8, % 8, ?5 20D -'~ 1 $ ( 1) 30,472 $ 1,259,496 ~~ 39 $. 24,450 $ 953,296 (4) 4.1 $ 21,070 $ 856,456 (4} $ 189 $2,767,451 $ 166,047 $ (5} $ 275 $2,235,647 $ 134,139 $ (6) (3) 40,926 $ 32,045 $ 33,061 $ 17,818 $ 239, ,018 TOTAL: 22,751 93% 1~1 $3,069,247 $5,003,098 $ 300,186 $ 73,987 $ 49,863 $ 424,036 (1) Housing typically creates one job per every three housing units. Notably, not all of these jobs will be located on-site. See Footnote 2 for job categories. (2) Based on average annual wages for employment categories typically associated with multi-family residential development: Property & Real Estate Managers; Installation & Repair; Residential Advisors; Security Guards; Janitors & Cleaners; and, Maids & Housekeeping Cleaners. (3) According to the City of Dunedin, between fiscal years 2006 and 2013-YTD, an average of $1,987,000 was returned to the City from Pinellas County as part of the Half-Cent Sales Tax Program. An additional annual average of $725,900 was returned as part of the County's Revenue-Sharing program attributable to retail sales taxes. This equates to an average of $2. 19 per sq. ft. of occupied retail inventory citywide during this period. (4) Based on average annual wages for Retail Sales and Food Prep & Serving jobs in the Tampa/St. Petersburg/Clearwater Metropolitan Statistical Area, May (5) This represents average annual retail sales (per sq. ft.) citywide, between 2007 and 2012 (see supporting Table 7) (6) This is an estimate of the sales productivity (per sq. ft.) required by food & beverage tenants in order to meet expected commercial rents. As overall development costs for restaurants are higher (due to plumbing, HVAC, fire suppression, etc.), achieved rents must be higher. Therefore, stronger annual sales performance will be required. Source: U.S. Department of Commerce, Bureau of Labor Statistics; City of Dunedin; The Pizzuti Companies; WTL +a, September 2013.

8 Table 3: Potential Annual Property Tax Revenues, By Use IALL TAXING AUTHORITIES Housing: Multi-family (1) Combined Tax Rate Per $1,000 AV $ (2) Estimated Buildout $ 11,764,706 Estimated Buildout $ 92 Equalization Ratio 100.0% Annual Property Taxes: $ 235,987 General Retail (1) Combined Tax Rate Per $1,000 AV $ (2) Estimated Buildout $ 2,102,941 Estimated Buildout $ 132 Equalization Ratio 100.0% Annual Property Taxes: $ 42,183 Food & Beverage (1) Combined Tax Rate Per $1,000 AV $ (2) Estimated Buildout $ 1 '132,353 Estimated Buildout.$ 132 Equalization Ratio 100.0% Annual Property Taxes: :$ 22,714 TOTAL: Estimated Value@ Buildout $ 15,000,000 Annual Property Tax Revenues-All Taxing Authorities $ 300,884 (1) Based on current millage rates levied for 2013 taxes for the following taxing districts: Pinellas County General Fund & Health Department ($5.0727); Pinellas County School District ($8.3020); Transit District($. 7305); Emergency Medical Services ($.9158); and, Other Districts ($1.3034). The proposed 2014 mil rate for the City of Dunedin ($ ) was applied. This analysis excludes the Personal Tangible Property tax. (2) Estimated value at buildout includes hard/soft construction costs as well as the share of other costs based on each use's proportion of total costs, as illustrated in Table 1. Source: Pinellas County Tax Collector; City of Dunedin; WTL+a, September 2013.

9 Table 4: Potential Annual Property Tax Revenues, By Taxing District ICRA & OTHER TAXING AUTHORITIES -- Taxing District Annual Amount Estimated Buildout $ 15,000,000 City of Dunedin (1) Current Tax Rate/$1,000 $ Annual Property Tax Revenues s 56,018 95% Increment to CRA: $ 53,217 Pinellas County (Countywide) Current Tax Rate/$1,000 $ Annual Property Tax Revenues $ 76,091! 95% Increment to CRA: $ 72,286 TOTAL TO CRA (Excluding Rebate): $ 125,503. Pinellas County School District Current Tax Rate/$1,000 $ Annual Property Tax Revenues $ 124,530 Transit District Current Tax Rate/$1,000 $ Annual Property Tax Revenues $ 10,958 Emergency Medical Services Current Tax Rate/$1,000 $ Annual Property Tax Revenues $ 13,737 Other Districts Current Tax Rate/$1,000 $ Annual Property Tax Revenues $ 19,551 TOTAL: Annual Property Tax Revenues-All Taxing Authorities $ 300,884 Annual Property Tax Revenues-Dunedin CRA 125,503 As% of Total 42% (1) This is the proposed 2014 mil rate for the City of Dunedin. Source: Pinellas County Property Appraiser & Tax Collector; City of Dunedin; WTL+a, September 2013.

10 Table 5: TIF Revenue Forecasts, TIIXIIble Vlllue Current (2013) Year I Estimated Future Value for TIF Calculation Market Value Delivered ~22. i0'2l ~.24 2D:ro ZQ33 Annual Inflation Factor 3.0% Estimated Value $ $ 15, $ $ $ ,905 $ 16,882,632 $ 17,389,111 $ 17,910,784 $ 18,448,108 $ 19,001,551 $ 19,571,598 $ 23,369,511 $ 25,536,496 SOH Cap Homestead Less Exemptions (1). Total Taxable Value: $ 15,000, % $ 15,000,000 $ 15,450,000 $ 15,913,500 $ 16,390,905 $ 16,882,632 $ 17,389,111 $ 17,910,784 $ 18,448,108 $ 19,001,551 $ 19,571,598 $ 23,369,511 $ 25,536,496 Ad Valorem Tuas Mil Rate ToCRA City of Dunedin $ % $ 53,217 $ 54,813 $ 56,458 $ 58,151 $ 59,896 $ 61,693 $ 63,543 $ 65,450 $ 67,413 $ 69,436 $ $ 90,598 Pinellas County $ % 72,286 74,455 76,688 78,989 81,359 83,799 86, ,570 94, , ,062 ToCRA: $ 125,503 $ 129,268 $ 133,146 $ 137,140 $ 141,254 $ 145,492 $ 149,857 $ 154,352 $ 158,983 $ 163,752 $ 195,529 $ 213,660 Tax Increment A vaileble for lntniitiiii:ture Bond(s) Assumed % Available A% Annual Increment Debt Coverage Ratio c U!i ' 7S.:l02 s l'h61 s 79,887 s fl2.284 s: B4.71i~ s au_g5 s 89, 9 1 ~ s 92,611 s 95,.390 ~ 913,;!51 ~ 117,3 17 s 12 1,196 Supportable Bonded Debt Service $; 00,2U s 62,048 ~ 13J. ~ 1 0 $ S5,B27 s lr.',802 s e.9cs36 s 71,911 :s; 74.oe!l s 71l,J12. s?b.fi01 s!ll,854 S. 1(}2;5S.7 Less TIF Rebate to c:::: 2M'. Through 2027 (12 Years) $; $ 32,317 $ 33,286 $ 34,285 $ 35,314 $ 36,373 $ 37,464 $ 38,588 $ 39,746 $ 40,938 $ s TOTAL $ 60,241 $ 29,732 $ 30,624 $ 31,542 $ 32,488 $ 33,463 $ 34,467 $ 35,501 $ 36,566 $ 37,663 $ 93,854 $ 102,557 Supportable Bonded Debt Service: Net Present 5.02% $ 628,424 (1) As a mul~-famify rental property, the Save Our Homes cap and Homestead Exemptions do not apply. Source: Pinellas County Property Appraiser & Tax Collector; CitY of Dunedin; The Pizzuti COmpanies; WTL +a, September 2013.

11 Table 6: Leverage Ratio ("Return-on-Investment") Analysis, EstimaiJHI Taxable Value Year Delivered 1~ ~ Annual Escalation 3.0% TEAR C:: o 1 2 :1 A $ ~ to 14;, 9 I 201" 20t>5 2ott; zo1s 2am mo M2. ~:a w ~o33 ""'""'~e<ivlli!h! (1) Real Property $ 15,000,000 $ $ 15,000,000 $ 15,450,000 $ ,500 $ 16,390,905 $ 16,882,632 $ 17,389,111 $ 17, Tangible Property ~.. Total!: $. $ 15,000,000 $ 15,450,000 $ 15,913,500 $ 16,390,905 $ 16,882,632 $ 17,389,111 $ 17,910, PofelltiiJ/ Rewoues Mil Rate (Per $1,000 AV) Real Property-City s s. :$ $ 54,813 $ $ 56,151 $ 59,896 $ 61,693 $ Real Property-County $ ,286 74, ,688 78,989 81,359 83,799 86,313 Tangible Property (2) ~et Ftaltl!hls~ Fe;;s (2) S~-o~II-Tn4!;;: s..s 125,503 $ 129,268 $ 133,146 $ 137,140 $ 141,254 $ 145,492 $ 149,857 $ 18,448,108 $ 18,448,108 $ 65,450 88,903 s 154,352 $ 19,001,551 $ 19,571,598 $ 23,369,511 s 19,001,551 s 19,571,598 $ 23,369, $ 67,413 $ ~.Qa $ 82,910 91,570 94, $ 158,983 $ 163,752 $ 195,529 $ 25,536,496 $ 25,536,496 $ 90, ,062 $ 213,64;0 Change: 2!11~3"3 $ 10, $ 10,536,496 Total $ 1,336,635 1,815,597 $ 3,152,232 An~i Go-<>1111 ~ ~. r~.s. $. s 52,500 $ 54,075 $ 55,697 $ 57,368 $ 59,089 $ 60,64;2 Retail Sales Tax Receipts (4/.. 49,863 51,359 52,900 54,487 56,122 57,805 Less 25% TIF Rebate... 32,317 33,286 U,.2.&!l 35,314 36,373 37,464 TOTAL ANNUAL REVENUES: s - $ 125,503 $ 199,314 $ 205,294 $ 211,452 $ 217,796 $ 224,330 $ 231,060 $ 62,688 59,539 38,588 $ 237,991 $ 64,568 $ 64;,505 $ 79,411 61,326 63,165 75,423 39,746 40,938 $ 245,131 $ 252,485 $ 350,363 $ 64;,n5 82,417 - $ 382,851 $ 1,229,258 1,167, ,630 $ 5,178,382 Leve(lllle Ratio:!!r: of DuMdin City Incentives f!ii s Total Annual Revenues s. -~ 125,503 $ 199,314 $ 205,294 $ 211,452 $ 217,796 $ 224,330 $ 231,060 $ 237,991 $ 245,131 $ $ 350,363 $ 382,851 $ 5,178,382 LEVERAGE RATIO (City ROI): (6) 1 Total Revenues ( ) $ 5,178,382 Gross Leverage 1! Net Prt&ernl 'lla.!l:le, (7) $ 2,925,548 Net Leverage 5.02% $ 7 (1) Value of real property is based on ali-in construction costs. Actual assessed value as determined by the Pinellas County Property Appraiser is not currently known (2) Tangible property and power franchise fees to be determined. (3) Annual ground rent as provided for in the development agreement between The Pizzuli Companies and the Cffy of Dunedin beginning in year 3. (4) Annual retail sales tax receipts accruing to the City of Dunedin from retail sales and County revenue-sharing generated by retail sales in the project's retail component (see Table 2). (5) Incentives provided by the Cffy of Dunedin include: building permff fees waived ($37.000); law enforcement and fire lmpect fees reduced by 50"/o ($25,000): rransportalion impact fee credff for deeding right.<jf-way for Milwaukee Avenue ($ ): and. a 25% rebate of TIF revenues for 12 years. estimated at $359,506 and a net present value of $ (using a 5.2% discount rate). (6) The leverage ratio compares gross revenues generated over the 19-year period against total city incentives. (7) ThiS is the net present value of the future stream of gross revenues accruing to the City of Dunedin (over 19 years) in the form of real and tangible property taxes, power franchise fees. retail sales tax receipts. etc. Source: Pinellas County Propeny Appraiser; City of Dunedin; WTL +a, September 2013.

12 Table 7: Annual Retail Sales Tax Receipts, Zip Code 34698, Taxable Occupied Average Retail Retail Space Annual Sales Retail Sales Year Sales fin sg. Fq ~Per Sg. Ft.! Taxes 2007 $ 204,408,681 1 '167,502 $ 175 $ 17,342, $ 197,309,626 1,205,653 $ 164 $ 16,850, $ 235,658,648 1,191,619 $ 198 $ 16,454, $ 229,012,548 1 '180,391 $ 194 $ 15,947, $ 243,362,643 1,211,190 $ 201 $ 16,940, $ 252,401,773 1,235,898 $ 204 $ 17,520,910 Change: 23% 6% 17% Effective County Rate Annual As%of Effective (Less State Share to Pinellas Coun!! Tax Rate Tax~6%l Pinellas Coun!X (1) ~) 14.2% 8.48% 2.48% $ 5,078, % 8.54% 2.54% $ 5,011, % 6.98% 0.98% $ 2,315, % 6.96% 0.96% $ 2,206, % 6.96% 0.96% $ 2,339, % 0.94% $ 2,376, Year Average: $ % I ( 1) As a proportion of the total Local Option Sales Tax in Pinellas County. (2) The Department of Revenue attributes the decline in tax rates to miscodinglfiling errors made in the restaurant and commercial real estate tax codes. Source: Florida Department of Revenue; City of Dunedin; WTL+a, September 2013.