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Guiding Metropolitan Growth through Development Economics

Guiding Metropolitan Growth through Development Economics November 2009 Dialogue Primer Session Bruce W. Landis, P.E., AICP Vice President Sprinkle Consulting, Inc. Guiding Metropolitan Growth through Development Economics. Development Decision Economics

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Guiding Metropolitan Growth through Development Economics

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  1. Guiding Metropolitan Growth through Development EconomicsNovember 2009 Dialogue Primer SessionBruce W. Landis, P.E., AICPVice PresidentSprinkle Consulting, Inc.

  2. Guiding Metropolitan Growth through Development Economics • Development Decision Economics • Influence through transportation system policy and community investment • Shape (internally) Development

  3. Regional Economic / Development “Engines”

  4. Regional Development “Engines” 50,000 students & employees 50,000 + employees 15,000 students & employees 15,000 students & employees

  5. Land Development Growth “Pioneers”

  6. Land Development Growth “Roof-top Followers”

  7. Key to Directing Growth… Graphic from K2 Urban Corp Influence the Development Economics

  8. You can affect Development Location Decisions… Graphic from K2 Urban Corp

  9. To Direct Market Forces… Supply Price Demand Quantity • Understand Their • Basis • Offer Effective • Incentives… • Educate the • Market’s Agents

  10. Land Development ProForma (50 SFDU) Revenue (Sales) $11,250,000 Costs Land Acquisition $ 1,800,000 Site Infrastructure $ 900,000 Product Cost (COGS) $ 5,000,000 Transportation $ 400,000 Interest Carry (5yrs) $ 1,200,000 Subtotal $ 9,300,000 Potential Margin / ROI $ 1,950,000 (20%) (Off-site infrastructure)

  11. Land Development ProForma Revenue (Sales) $11,250,000 Costs Land Acquisition $ 1,800,000 Site Infrastructure $ 900,000 Product Cost (COGS) $ 5,000,000 Transportation $ 400,000 Interest Carry (5yrs) $ 1,200,000 Subtotal $ 9,300,000 Potential Margin / ROI $ 1,950,000 (20%) Here is what you can influence… (Off-site infrastructure) 17%

  12. Land Development ProForma Revenue (Sales) $11,250,000 Costs Land Acquisition $ 1,800,000 Site Infrastructure $ 900,000 Product Cost (COGS) $ 5,000,000 Transportation $ 400,000 Interest Carry (5yrs) $ 1,200,000 Subtotal $ 9,300,000 Potential Margin / ROI $ 1,950,000 (20%) Reduce Interest Carry… (Off-site infrastructure)

  13. Land Development ProForma Revenue (Sales) $11,250,000 Costs Land Acquisition $ 1,800,000 Site Infrastructure $ 900,000 Product Cost (COGS) $ 5,000,000 Transportation $ 400,000 Interest Carry (4yrs) $ 900,000 Subtotal $ 9,000,000 Potential Margin / ROI $ 2,250,000 (25%) Reduce Interest Carry… (Off-site infrastructure) Build There!!!

  14. Land Development ProForma Revenue (Sales) $11,250,000 Costs Land Acquisition $ 1,800,000 Site Infrastructure $ 900,000 Product Cost (COGS) $ 5,000,000 Transportation $ 400,000 Interest Carry (5yrs) $ 1,200,000 Subtotal $ 9,300,000 Potential Margin / ROI $ 1,950,000 (20%) Here is what you can influence…. (Off-site infrastructure)

  15. Land Development ProForma Revenue (Sales) $11,250,000 Costs Land Acquisition $ 1,800,000 Site Infrastructure $ 900,000 Product Cost (COGS) $ 5,000,000 Transportation $ 40,000 Interest Carry (5yrs) $ 1,200,000 Subtotal $ 8,940,000 Potential Margin / ROI $ 2,310,000 (26%) Here is what you’ve helped…. (Off-site infrastructure) Build There!!!

  16. Land Development ProForma Revenue (Sales) $11,250,000 Costs Land Acquisition $ 1,800,000 Site Infrastructure $ 900,000 Product Cost (COGS) $ 5,000,000 Transportation $ 40,000 Interest Carry (4yrs) $ 900,000 Subtotal $ 8,640,000 Potential Margin / ROI $ 2,610,000 (30%) Direct Incentives… (Off-site infrastructure) Build There!!!

  17. To Direct Market Forces… Supply Price Demand Quantity

  18. Raw Land Market… Supply New Raw Land Price Price Demand Quantity

  19. Land Development ProForma Revenue (Sales) $11,250,000 Costs Land Acquisition $ 1,800,000 Site Infrastructure $ 900,000 Product Cost (COGS) $ 5,000,000 Transportation $ 40,000 Interest Carry (4yrs) $ 900,000 Subtotal $ 9,300,000 Potential Margin / ROI $ 1,950,00 (20%) $2,460,000 (Off-site infrastructure) No Net Incentive

  20. “Business-as-usual”

  21. “Compact Development”

  22. Georgia Coastal Comprehensive Plan Land Consumption “Business-as-usual” “Compact Development” (111.9 – 77.94) / 111.9 = 30%

  23. Land Development ProForma Revenue (Sales) $11,250,000 Costs Land Acquisition $ 2,460,000 Site Infrastructure $ 900,000 Product Cost (COGS) $ 5,000,000 Transportation $ 40,000 Interest Carry (4yrs) $ 900,000 Subtotal $ 8,640,000 Potential Margin / ROI $ 2,610,000 (30%) $1,800,000 (Off-site infrastructure) Build There!!!

  24. Parcel Assemblage v. Simple Purchase I know there is a market need for my product, where should I buy the land?

  25. Parcel Assemblage v. Simple Purchase Lemme see, should I try to deal with 12 sellers and their attorneys, or just Farmer Brown?

  26. Education………………….. Public Safety..……………. Roads………………………. Wastewater……………….. Fire/Rescue; Water; Parks; Solid Waste.......... 40% 8% 30% 11% 11% Long-term Maintenance Commitment Public ServicePercent of Avg. Annual Cost Source: Duncan and Associates. The Search for Efficient Urban Growth Patterns: A Study of Fiscal Impacts of Florida Development. Governor’s Task Force on Urban Growth Patterns and DCA. Tallahassee FL, 1989.

  27. Long-term Maintenance Commitment Education………………….. Public Safety..……………. Roads………………………. Wastewater……………….. Fire/Rescue; Water; Parks; Solid Waste.......... 40% 8% 30% 11% 11% Public ServicePercent of Avg. Annual Cost Source: Duncan and Associates. The Search for Efficient Urban Growth Patterns: A Study of Fiscal Impacts of Florida Development. Governor’s Task Force on Urban Growth Patterns and DCA. Tallahassee FL, 1989.

  28. Form / Location Compact / Infill Contiguous / USA fringe Scattered / Linear Avg. Traffic Trip Length Duncan’89FDOT (335.067, F.S.)Weighted Avg. 6.8 mi 4.9mi 5.4mi 6.4mi 9.6mi 8.8mi 8.3mi 12.1mi 11.2mi Impacts on Traffic Activity

  29. 100 lot subdivision

  30. Traffic Generation Data Source: Institute of Transportation Engineers Trip Generation, 7th Edition.

  31. Vehicle Miles Traveled (VMT)

  32. Streets & Roadways Maintenance * Excluding I-10 Costs and Traffic Data Sources: City of Tallahassee Annual Budget, Leon County Annual Budget, Leon County CIP, FDOT Historical Work Program, and FDOT Countywide VMT Estimate

  33. Costs of Development Locations (P/A, 3%, 35)

  34. Land Development ProForma Revenue (Sales) $11,250,000 Costs Land Acquisition $ 1,800,000 Site Infrastructure $ 900,000 Product Cost (COGS) $ 5,000,000 Transportation $ 400,000 Interest Carry (5yrs) $ 1,200,000 Subtotal $ 9,300,000 Potential Margin / ROI $ 1,950,000 (20%) (Off-site infrastructure)

  35. Guiding Growth through Development Economics Regional Growth Influence Areas Proforma Category Influence / Action Revenue (Sales)……. Costs Land Acquisition…… Site Infrastructure…… Product Cost (COGS) Transportation…… Interest Carry………. Public Investment - Community Fabric; Public Transit; Active Transportation; Streetscapes; Public Education; etc. Density / Property Yield n/a n/a Incentives/Disincentives Streamline Permitting

  36. Source: TruliaTM Real Estate Search

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