Rhode Island Commerce Corporation. Rebuild Rhode Island Tax Credit Fund Loan Economic Impact Analysis

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1 Rhde Island Cmmerce Crpratin Rebuild Rhde Island Tax Credit Fund Lan Ecnmic Impact Analysis Intrductin Crnish Assciates LP Applicatin The Rhde Island Cmmerce Crpratin (the Crpratin ) may issue a Rebuild Rhde Island Tax Credit Fund Lan t Crnish Assciates LP (the Spnsr ). The lan wuld be issued in cnnectin with the Cmpany s prpsed investment in its Dwncity Redevelpment, a mixeduse prject lcated in dwntwn Prvidence. The prject includes the cnversin f three existing histric buildings int 65 units f multifamily husing and apprximately 25,800 square feet f ffice, retail and entertainment space. (Phase 2, t be undertaken at a later date and nt included in this analysis, wuld include cnstructin f a 6-stry building with 93 residential units with grund flr cmmercial space; and a parking structure). The Spnsr estimates the ttal cst f prject (excluding Phase 2) t be $29.5 millin. The Spnsr is requesting a Rebuild Rhde Island Tax Credit Fund Lan fr the prject ttaling $7,320,506 as well as an exemptin frm sales and use taxes n cnstructin materials and furnishings valued at $500,081. This analysis was prepared by Appleseed, a cnsulting firm with mre than twenty years f experience in ecnmic impact analysis. Jbs Analysis Cnstructin As shwn in Table 1, the Spnsr s estimate f ttal prject cst is apprximately $29.5 millin. Table 1: Dwncity II estimated ttal prject cst ($ millins) Cmpnent Estimated cst Land and building acquisitin $5.7 Cnstructin (hard csts) 16.8 Sft csts 7.0 Ttal $29.5 1

2 After excluding certain expenditures that d nt have a direct, current impact n Rhde Island s ecnmy (such as prperty acquisitin csts and interest expenses), spending n cnstructin (bth hard and sft csts) is estimated t ttal apprximately $22.4 millin. Appleseed estimates that direct expenditures f apprximately $22.4 millin will directly and indirectly generate: 180 persn-years 1 f wrk in Rhde Island, with $10.2 millin in earnings; Apprximately $30.9 millin in statewide ecnmic utput 2 ; and A ne-time increase f $15.8 millin in Rhde Island s GDP. These impacts are summarized belw in Table 2. The prject s direct impact is the impact f the cmpany s direct spending n design and cnstructin. Its indirect impact is the effect f spending by cntractrs fr gds and services (insurance, cnstructin materials, etc.) purchased frm ther Rhde Island businesses. Table 2: Direct, indirect and induced impact f cnstructin and related spending (emplyment in persn-years; incme, value-added and utput in millins f 2017 dllars) Emplyment Earnings Value added Output Direct Effect 112 $7.0 $10.5 $22.3 Indirect Effect 68 $3.2 $5.3 $8.6 Ttal Effect 180 $10.2 $15.8 $30.9 In additin t the impacts n emplyment, earnings, utput and state GDP cited in Table 2, direct spending f $22.4 millin wuld generate a prjected ne-time increase f apprximately $599,000 in taxes paid t the State during cnstructin, including: $383,000 in state persnal incme taxes paid by Rhde Island wrkers emplyed n the prject, r whse jbs are indirectly attributable t the prject; $167,000 in state sales taxes paid n thse wrkers taxable husehld spending; $49,000 in state business crpratin taxes Mst f the activity reflected in Table 2 will ccur during 2017 and The anticipated wage rates fr cnstructin jbs are shwn belw in Table 3. Anticipated wage rates are the median hurly wage fr these ccupatins in Rhde Island. 1 A persn-year is equivalent t the time wrked by ne persn wh is emplyed full-time fr a year. It culd fr example represent the wrk f tw peple wh are each emplyed full-time fr six mnths; r the wrk f ne persn wh is emplyed half-time fr tw years. 2 Output is a measure f the ttal sales by Rhde Island cmpanies (including the sale f labr by Rhde Island husehlds) generated by the prject. 2

3 Table 3: Anticipated wages during cnstructin Occupatin RI median hurly wage 3 Architect $40.76 Cnstructin manager $54.17 Carpenter $21.04 Electrician $24.86 Plumber $23.54 Painter $18.10 Labrer $18.33 Fringe benefits assciated with these jbs are expected t be in accrdance with industry nrms, with the cst f such benefits generally ranging between 22 and 28 percent f wages. Wrkers wh fill these jbs are expected t be drawn primarily frm the Prvidence-Warwick RI- MA New England City and Twn Area (NECTA). Annual peratins Based n square-feet-per wrker ratis typical f ffice-based industries, retailing, restaurants and entertainment venues, we estimate that after the prject is cmpleted, businesses ccupying the prpsed cmmercial space at Dwncity II wuld emply apprximately 104 peple (n a full-time-equivalent basis). 4 We further estimate that 4 peple will be emplyed in management and maintenance f the prpsed residential units. As shwn belw in Table 4, Appleseed estimates that when the prject is cmpleted and fully ccupied (which is assumed t ccur in 2019, it will directly and indirectly accunt fr: 142 full-time equivalent jbs in Rhde Island, with apprximately $7.1 millin in annual earnings (in 2018 dllars); $18.3 millin in annual statewide ecnmic utput; and An increase f $10.8 millin in Rhde Island s annual GDP. Table 4: Direct, indirect and impact f annual peratins f Dwncity II (emplyment in FTE; earnings, value-added and utput in millins f 2017 dllars) Emplyment Earnings Value added Output Direct Effect 108 $4.7 $7.4 $12.6 Indirect Effect 34 $2.4 $3.4 $5.7 Ttal Effect 142 $7.1 $10.8 $ Rhde Island Department f Labr and Training, Occupatinal Emplyment Statistics, We assume fr purpses f this analysis that in additin t the headquarters f Betaspring and the Funders League, ffice space at Dwncity II will be ccupied by a range f businesses that reflect the cntinued grwth f the State s knwledge ecnmy, including infrmatin technlgy and prfessinal service firms. 3

4 In additin t the impacts n emplyment, earnings, utput and state GDP cited in Table 4, nging peratins wuld generate a prjected grss increase f mre than $416,000 in taxes paid annually t the State (in additin t the $599,000 in state tax revenues cited abve that wuld be generated by spending n cnstructin), including: $266,000 in state persnal incme taxes paid by Rhde Island wrkers emplyed by tenant businesses r in building peratins, r whse jbs are indirectly attributable t the prject; $116,000 in state sales taxes paid n thse wrkers taxable husehld spending; $34,000 in state business crpratin taxes While detailed infrmatin n wages that will be paid t thse wrking in Dwncity II s cmmercial spaces is nt yet available, we can use the results f ur analysis cited abve t estimate these wrkers earnings. We estimate thse directly emplyed by Dwncity II tenant businesses will earn an average f $49,900 per FTE jb. Fringe benefits assciated with these jbs will vary substantially acrss, ffice, retail, restaurant and entertainment businesses, and building peratins and management. Wrkers emplyed by ffice-based businesses culd be drawn frm cmmunities thrughut the Prvidence-Warwick RI-MA NECTA, while thse emplyed at the planned music venue, in retail and restaurants and building maintenance wuld mstly be drawn frm neighbrhds within Prvidence and ther nearby cmmunities. Impact The state fiscal impact f the requested lan and sales tax exemptin is up t $7,820,587 in fregne state revenue. Direct and indirect ecnmic and fiscal benefits f the prpsed prject include an estimated increase in annual state GDP f $10.8 millin; the assciated jb creatin; and a grss increase f nearly $5.592 millin in persnal incme, sales and business crpratin tax revenues directly and indirectly generated by the prject during the cnstructin phase, and by nging peratins during the twelve years fllwing cmpletin f the prject. In additin t the ecnmic and tax revenue impacts cited abve, the prpsed prject wuld benefit Rhde Island in several ther ways. Rehabilitate and activate three vacant buildings in dwntwn Prvidence; Prvide 65 husing units and amenities (an entertainment venue and a park) that will supprt the cntinued grwth f the Dwncity area s resident ppulatin; Prvide ffice space that will supprt the cntinued grwth f Rhde Island s innvatin ecnmy; and Add t the City s tax base. 4

5 Beynd the fiscal impact nted abve, there is n anticipated financial expsure t the state. While the state bears the risk f nn-repayment f the requested lan, varius features f the prgram mitigate ther risks t the state. In particular, the cmpletin risk (i.e. the risk that the prject is nt cmpleted) is mitigated by the fact that the lan will be issued nly upn cmpletin f the develpment. The risk f prject cst verruns is mitigated by the fact that the lan is capped at the amunt set frth abve. In additin, if prject csts cme in lwer than anticipated, the value f the lan will be reduced accrdingly. 5