LTC 519-2017 UPDATE - Ocean Drive 2 a.m. Economic Impact StudyMIAMI BEACH
OFFICE OF THE CITY MANAGER
NO. LTC# 519-2017 LEITER TO COMMISSION
TO: Mayor Philip Levine and Members of he City Co
FROM: Jimmy L. Morales, City Manager
DATE: October 27, 2017
SUBJECT: UPDATE-Ocean Drive 2 a.m. Economic Impact Study
The purpose of this letter is to provide the Mayor and the City Commission with the latest
information developed by the FIU Metropolitan Center, regarding the impact of reducing
the hours of liquor sales on Ocean Drive.
The Executive Summary highlights several critical conclusions:
1. The Entertainment District's share of the City's overall hotel, food and alcohol sales
is small (8.4% in 2015-16) and declining.
2. The proposed ordinance only impacts eight establishments, which generated total
alcohol sales of $43,313,519 in 2015-16, representing less than 10% of all alcohol
sales in the City.
3. There is no correlation between declining Entertainment District Alcohol sales and
Hotel Room nights sold. Since the City ended alcohol sales at sidewalk cafes
Citywide at 2 a.m. in 2015, the total number of hotel room-night sales has actually
increased over the entire Miami Beach market.
4. GMCVB surveys show that tourists visit Miami Beach for a variety of reasons, with
the beaches being the most important factor (75%). They are looking for an iconic
South Beach experience, and not coming for a specific restaurant or bar.
5. Miami-Dade county residents are actually more likely to visit Ocean Drive if the
ordinance were enacted (23% of those surveyed), as opposed to only 7% who said
they were less likely.
6. Patrons of the eight impacted establishments who wish to continue drinking after
2 a.m. still have 68 establishments that serve alcohol until 5 a.m. within walking
distance (either on Ocean, Collins or Washington).
7. The assumption that early closure of outdoor sales of alcohol will drive customers
to Miami or elsewhere is not substantiated by empirical evidence. Since the City
ended alcohol sales at sidewalk cafes Citywide at 2 a.m. in 2015, while alcohol
sales did decrease in the Entertainment district, alcohol sales actually increased
in the rest of Miami Beach, resulting in an overall 0.6% increase across the City.
8. The tax impact on the City will be minimal at worst, and is likely to be neutral in
light of the fact that patrons will simply consume alcohol at other establishments
on Miami Beach.
A complete report will be presented at the October 31st City Commission Meeting.
For additional information please contact Amy Mehu, Redevelopment Specialist, at (305)
673-7010 or amymehu@miamibeachfl.gov.
JLM/SMT/AM
Executive Summary
Economic Impact
of Reduced Hours of Alcohol Sales
on Ocean Drive
City of Miami Beach
Flu I Metropolitan
· · Center
October 27, 2017
DRAFT
Introduction
Background
The Florida International University (FIU) Metropolitan Center was retained by the City of Miami Beach
to prepare an "Economic Analysis" of the potential short-and long-term impact of reducing hours
available for liquor sales on a section of Ocean Drive. The City of Miami Beach is considering a ballot
item on restricting alcohol sales to 2 a.m. The rollback to 2 a.m. is intended specifically for open-air
establishments on Ocean Drive between 5th and 15th Streets and does not affect businesses located on
nearby streets. One of the main arguments in favor of the restriction is the projected crime reduction.
A second point supporting the restriction is the potential decrease of Miami Beach expenditures for
policing the area. While the City has information on the alcohol sales which occur at the affected
establishments for the hours between 2 a.m. and 5 a.m. and expenditures for police and fire to address
issues that occur in said time frame, the City currently lacks a comprehensive study of the impacts of the
proposed restriction on the City's image and broader economy. The FIU Metropolitan Center's study
will determine the extent of such impacts utilizing a layering of applied research methods.
Proposed Ordinance
On June 7, 2017, the Miami Beach City Commission approved a resolution of the Mayor and City
Commission calling for a special election on November 7, 2017, for the purpose of submitting to the
electorate of the City of Miami Beach a ballot question asking whether the City Commission shall adopt
an ordinance terminating at 2:00 a.m. (instead of 5:00 a.m.) the sale and consumption of alcoholic
beverage at alcoholic beverage establishments located on Ocean Drive between 5th and 15th Streets,
exempting indoor portions of alcoholic beverage establishments that are completely enclosed and
located entirely within hotels, and requiring a 5/7 vote of the City Commission to amend or repeal the
ordinance.
FIU Metropolitan Center -Scope of Services
The FIU Metropolitan .Center's scope services for the Economic Impact Analysis of the proposed
ordinance consisted of two main tasks. The first task included the collection of perception data from 1)
a "User-Generated Content (UGC) analysis, and 2) a "Miami-Dade County Resident Survey." The
perception data included the influence of various attributes on Miami Beach's image formation, total
expenditures per visit, the effect of alcohol sales hours on the Miami Beach image and the perception of
crime on the choice of Miami Beach as a travel destination. Per Destination analysts' 2017 The State of
the American Traveler report, 65 percent of U.S. travelers used user-generated content. To assess the
image of Miami Beach which is promoted online, the research team reviewed user-content on travel
industry sites (Trip Advisor, Yelp and others), with a specific focus on establishments located on Ocean
Drive. Additionally, the FIU Metrqpolitan Center research team collected data from Miami-Dade County
residents to estimate the potential loss or gain of visitors due to any new or shifting perceptions of
Miami Beach. This data is essential for the economic impact analysis. A comprehensive economic
impact analysis needs to include not only the loss of revenue from sales completed between 2 a.m. and
5 a.m., but also the potential gain or loss of visitors.
The second task entailed an assessment of the potential impact of the ordinance on alcohol sales and
the subsequent effects on the local economy. While the City of Miami Beach has previously estimated
the revenue of alcohol sales between 2 a.m. and 5 a.m., the FIU Metropolitan Center's economic impact
analysis also includes estimates of the indirect effects of alcohol sales. Indirect effects are produced by
the circulation of money in the economy and can be estimated in earnings, jobs and taxes.
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Findings
Utilizing the data and methods detailed below, the Center has nine (9) primary findings regarding the
impacts of the City's proposed ordinance for the reduction of alcohol sales hours.
1) Ocean Drive's position in the Miami Beach Tourism Economy
Ocean Drive revenue generation is approximately 9.0% of total sales in Miami Beach. This is significant
but shrinking as an overall driver of Miami Beach sales.
Ocean Drive, in particular the Entertainment District, is an important and iconic part of Miami
Beach's broader global Brand. To be sure, the last wave of redevelopment along Ocean Drive has
helped propel Miami Beach's larger global tourism growth. Alcohol sales in the Entertainment
District alone reached over $85.5 million in Fiscal Year 2016-2017. The sale of alcohol alone is an
important driver of economic benefit in the Miami Beach economy, supporting over 933 jobs and
generating over $146 million in total economic output.
Table 1: Current Alcohol Sales Impact of Ocean Drive Establishments
Impact Type Employment Labor Income Value Added Output
J Direct Effect 933 $32,601,968 $43,548,423 $86,590,480
I indirect Effect 196 $9,442,843 $17,008,476 $28,418,320
Induced Effect 232 $10,779,372 $18,330,436 $31,036,519
Total Effect 1,361 $52,824,183 $78,887,335 $146,045,318
According to the sales records required by the County and City of Miami Beach, the total value of all
hotel room, alcohol, and food sales for the City of Miami Beach reached over $2.9 billion in Fiscal
Year 2015-2016. Total sales for hotel rooms, food and alcohol reached over $251 million for
establishments in the Entertainment District (ED) for the same year.
Table 2: Total Sales
Area I 14-15 15-16 % Change
--· --~·-+---
$251,328,072 I -5.4% I ED $265,770,009 I
ED Share of Total ; 9.1% , 8.4% -7.6%
---·---,-
~est MB __ J_ $2,657,021_,_23_0_,_' ____ _ $2,741,181,62~ 3.2% I
I
$2,992,509,693 2.4% Total MB $2,922, 791,238 '
Table 3: Alcohol Sales
Area 14-15 15-16 % Change
ED $89,308,906 I
$86,598, 798 I -3.0%
ED Share of Total 16.2% 15.6% -3.6%
L
2
Rest MB
Total MB
$460,689,471
$549,998,377
$466,799,148
$553,397,946
2) Establishments Impacted by the Proposed Alcohol Sales Ordinance
1.3%
0.6%
The proposed ordinance impacts only eight of over sixty establishments, all in close proximity to those
covered by the ordinance.
The ordinance restricting alcohol sales to 2 a.m. affects eight (8) Ocean Drive establishments-
Amarillo, Clevelander, Fat Tuesday, Finnegan's, Mango's Tropical Cafe, News Cafe, Venue South
Beach and Wet Willies. The Clevelander is only partially affected by the ban. Twenty other
establishments located on Ocean Drive, between 5th and 15th streets are not affected by the
proposed ordinance. Additionally, there are over 40 other potential establishments within walking
distance on Collins and Washington Avenues, between 5th and 15th streets, which can sell alcohol
until 5 a.m.
3) Current Economic Impact of the Eight Impacted Establishments
The $43.3 million current alcohol sales generate 681 full-time jobs in the local economy with a total
economic value output of $73.0 million.
The eight impacted establishments include the area's two largest food and beverage businesses, by
sales -the Cleve lander Hotel and Mango's Tropical Cafe. Using sales data reported directly to the
City, total alcohol sales at the eight establishments were $43,313,519 in Fiscal Year 2015-2016, the
latest year of available data.
In order to assess the effect of the sales reduction and the difference it will produce between
current sales and reduced sa,les, the next step in the analysis calculated the effect current sales have
on the local economy. The baseline figure of alcohol sales used in the model was the total alcohol
sales reported by the eight (8) establishments affected by the reduction of alcohol sales hours:
$43,313,519. The alcohol sales figure Was supplied by the City of Miami Beach, which relies on self-
reported data from the establishments used for the purpose of tax collection. As such, those
numbers represent the only official revenue tax data, verifiable by a taxing authority.
The table below shows the alcohol sales of the eight establishments have a total output value of
over $73 million.
Table 4: Current Sales Impact
Impact Type Employment 1
Labor Income Value Added Output
Direct Effect 467 $16,306,300 $21,781,312 $43,309,359
1 Indirect Effect 98 $4,722,961 $8,507,011 $14,213,794
Induced Effect 116 $5,391,444 $9,168,207 $15,523,320
I Total Effect 681 $26,420,705 $39,456,530 $73,046,472
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4) Factors in Miami Beach Tourism Destination Choice
The decision to visit Miami Beach and area venues reflect many factors including weather, amenities,
safety, and others; nightlife options and alcohol consumption are only part of the decision calculus.
a. The Literature on Drivers of Choice: While the scholarly research agrees that tourists make two
fundamental decisions when they travel: where to go (destination) and what to do
(experience/activity), our literature review also highlights the complexity of destination
preference, with the overall conclusion that choice is based on a list of factors, rather than a
single determining characteristic. Some of these factors include demographic and economic
characteristics; proximity, access and transportation options; facilities and amenities of location;
type of setting and activity preference; well-being and safety perceptions; level of exposure
through media and marketing; recommendations and endorsements, and many others.
b. Area Research: The 2016 Greater Miami Convention and Visitors Bureau Visitor (GMCVB)
Overview Report also shows that visitors have varied preferences and options for places to visit
in the area. Some of the specific finings which point to the relevance of Ocean Drive/South
Beach and nightclubs in visitor preferences include:
• 75% visited the Beaches (increase from 72%) and 72% visited Art Deco District/South Beach
(a decrease from 77%)
• The most liked features of the Greater Miami area are: beaches (63%, up from 59%),
weather (58%), South Beach/Ocean Drive (36%, down from 40%)
• Only 22% indicated nightlife as a 11liked" feature, down from 26%
• Only 16% reported visiting nightclubs.
c. Visitor Reviews: The analysis of user-generated content from various sources, including
TripAdvisor and Yelp, confirms the literature overview findings and GMCVB report result. The
analysis of visitor reviews indicates that nightlife is 1) one of many aspects of the visitor
experience, and 2) much less frequently mentioned than the weather, beach activities and
restaurants. The visitors who mention restaurants or bars view them as a secondary benefit of
proximity or as an additional activity at night. Only a small percentage of visitors mention
specific restaurants in relation to their overall experience of being in South Beach. Additionally,
safety had mixed reviews as some tourists indicated they felt unsafe or out-of-place while
others felt the presence of police made South Beach safer. Overall, tourists are looking for an
iconic "South Beach" visit, centered around experiences and activities by the beach.
d. Miami-Dade Resident Views of South Beach: The Miami-Dade resident survey shows that only
7% of residents visit Miami Beach at least once a week, and 8% visit the area a few times a
month. The majority (85%) go to Miami Beach less often. The alcohol sales restrictions will have
no effect on the majority of Miami-Dade residents (70%). In fact, almost a quarter (23%)
reported they would visit Ocean Drive more frequently if the ban took effect. Only 8%
indicated they would go to Ocean drive less frequently. When asked to indicate their level of
satisfaction with various aspects of South Beach, the majority of respondents expressed
dissatisfaction with parking {66%) and traffic (67%). Only small percentages were dissatisfied
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with safety (15%), cleanliness (12%), variety of bars/clubs (7%), and variety of eating
establishments (6%).
5) No Relationship between Declining Entertainment District Alcohol Sales and Hotel Room Nights
Sold
Consistent with Point 4, City-Wide Hotel-Room Demand and City Wide Alcohol Sales have increased after
enactment of the 2015 Sidewalk Alcohol Sales Ordinance.
The research team found no direct evidence that the reduction of alcohol sales at the eight affected
establishments will reduce hotel room-night sales across the City of Miami Beach. The best direct
evidence of the lack of a connection between limited alcohol sales and hotel room-night sales is the
enactment of the City's ban on the sale of alcohol on all sidewalks in the Entertainment District.
Since the May 31, 2015, enactment of the sidewalk alcohol sales ban, the total number of hotel
room-night sales (demand) over the entire Miami Beach Market increased by 6.1 percent from 2014
to 2015, and another 4.1 percent from 2015 to 2016.
In addition, the results of the travel preference survey and analysis of customer comments indicates
travelers are purchasing hotel rooms for a wide variety of reasons other than the sale of alcohol at
specific establishments.
Table 5: Alcohol Sales in Miami Beach
I 14-15
I 15-16 I % Change
Remainder of City Alcohol .Sales $460,689,471 $466,799,148 1.3%
ED Alcohol Sales $89,308,906 $86,598,798 -3.0%
1
City-Wide Hotel Room-Night Sales Revenue $1,470,766,476 $1,492,115,991 1.5%
I 2014 2015 I 2016
City-Wide Hotel Room-Night Demand
I 4,844,141 5,138,990 5,349,573
% Change ! -
6.1% 4.1%
6) Direct Impact on Sales at Affected Establishments
The ordinance will reduce sales at the eight affected establishments.
The FIU Metropolitan Center employed three scenarios to calculate the effect of the alcohol sales
reduction on the eight establishments. The low-midpoint-high estimates yield projections for effects
based on 15%, 20% and 25% reduction of sales. The table below shows the amount of sales
reduction and total sales for each scenario. The sales decrease ranges from $6.S million (15%
decrease) to $10.8 million (25% decrease).
Table 6: Scenarios
Scenario 1 Scenario 2 Scenario 3
Reduction 15% 20% 25%
Sales Reduction $6,497,028 $8,662,704 $10,828,380
I Total Sales $36,816,491 $34,650,815 $32,485,139
I
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7) Customer Choice and Total Entertainment District Alcohol Sales
The limited coverage of this ordinance (eight of over sixty establishments) and recent experience with the
sidewalk alcohol sales restriction suggest the majority of lost sales will be recaptured at neighboring
venues.
The 2 am closing affecting the eight impacted establishments will result in a loss of alcohol sales at
these establishments. However, due to the wide variety of consumer options at nearby
establishments continuing to serve alcohol after 2 a.m., the impact on the total volume of sales
within the Entertainment District and surrounding streets will be nominal.
Outside of the eight affected Ocean Drive establishments, twenty other establishments are licensed
to serve alcohol from 2 a.m. to 5 a.m. in the Ocean Drive Entertainment District. Twenty-two
establishments may serve alcohol after 2 a.m. (until 5 a.m.) on Collins Avenue between gth Street
and 17th Street. Twenty-six establishments may serve alcohol after 2 a.m. (until 5 a.m.) on
Washington Street between 5th Street and 15th Street. In total, sixty-eight establishments can
potentially serve alcohol from 2 a.m. until 5 a.m. either in, or within walking distance of the Ocean
Drive Entertainment District.
"Leakage" or the loss of customers and sales to establishments outside the Entertainment District or
the City will therefore be nominal. The impacted establishments will lose sales; nonetheless, a high
proportion of customers will simply shift to other establishments serving after 2 a.m.
Again, the best supporting evidence has been the impact of the ban on alcohol sales on sidewalks in
the Entertainment District. After implementation of the 2 a.m. sidewalk ban across the entire
Entertainment District, total alcohol sales dropped 3% within the District. However, that decline
was accompanied by a 1.3% increase in the rest of Miami Beach for an overall 0.6% increase across
the City.
Although total alcohol sales within the Entertainment District may not decline at all, the research
team has chosen to be especially conservative, and will model the economic impacts of the loss of
three, six and ten percent of total alcohol sales within the Entertainment District within its final
estimates.
8) Crime Impacts
The limited coverage of the ordinance may attenuate potential impact on crime rates.
The reduced hours for alcohol sales at the affected establishments will most likely result in a shift of
patrons (customers) to nearby venues continuing to serve alcohol after 2 a.m. By that same
reasoning, eliminating sales of alcohol at the eight will not significantly reduce the total number of
patrons remaining on, or visiting the Entertainment District from 2 a.m. to 5 a.m.
Unfortunately, according to the City's reported crime statistics, the number of crimes committed
(rather than calls for service) within the Entertainment District peaks from 2 a.m. to 5 a.m. Although
there is some evidence pointing to small reductions of violent behavior and alcohol-induced violent
crime in enclosed hotel bars, since the proposed ordinance will not lead to significant reduction in
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the number of visitors to the District after 2 a.m., a reduction in crime rates from 2 a.m. to 5 a.m.
may also be nominal at best.
Determining precise estimates of forecasted crime rates within the District as a result of the
proposed ordinance is beyond the scope of this study. The city has already documented the
incidence of crimes in the 2-5 a.m. timeframe, as shown below. Additionally, the City has already
implemented an aggressive crime reduction program using other means that has shown significant
results in just a short period.
ENTERTAINMENT DISTRICT
UCR PART I VIOLENT CRIM ES (3 HOUR INTERVALS)
APPROXIMATE
HOUR PERIOD 50
40
30
20
10
•AGGRAVATED ASSAULT 29 10
•ROBBERY 23 27 11
•RAPE
•HOMICIDE
ENTERTAINMENT DISTRICT
UCR PART I PROPERTY CRIMES (3 HOUR INTERVALS)
All CASES IN A
THREE HOUR
PERIOD
14
11
•AUTO TH EFT 6 7 7 S 4 8 6 6
LARCENY 179 294 171 114 182 29S 353 267
•BURGLARY 11 11 9 11 4 8 2
9) Overall Economic Impact of the Alcohol Sales Restriction
19
15
Assuming customer leakage of 3% to 10%, the potential losses for the local economy are projected to
range from 41to136 full-time jobs, or total output value of $4.3 million to $14.6 million.
The final step in the analysis is the assessment of the overall effect on the local economy as a result
of the reduction in alcohol sales hours at the eight establishments. Utilizing the IMPLAN model, the
FIU Metropolitan Center estimates the direct, indirect and induced effects of changes in economic
activity.
7
While the status quo scenario is one likely outcome, the Metropolitan Center also calculated three
other potential outcomes, assuming some leakage, or net loss for Ocean Drive and Miami Dade
businesses. It should be noted that the estimated leakage assumes total loss of customers to
establishments in Miami-Dade County, not only Miami Beach. The table below shows the total
impact for each scenario, including direct, indirect and induced effects. The columns shows the
reduction in employment, labor income, value added and total output in the respective categories
based on the 3%, 6% and 10% outflow of customers. Employment in the Miami-Dade County
economy may decrease by 41to136 employees in the sectors affected by the change in economic
activity. Total output value in the economy may be reduced by approximately $4.4 million to $14.6
million. In addition to the "Food and Drinking Places" subsector that may be most impacted, the
sectors in which the negative spillover effect is anticipated include Real Estate, Employment Services
and Wholesale Trade.
Table 7: Total Effect (Loss) of Alcohol Sales Hours Reduction
Scenario Employment Labor Income Value Added Output
· Scenario 1 {3%) 41 $1,584,725 $2,366,620 $4,381,359
Scenario 2 {6%) 82 $3,169,451 $4,733,240 $8,762,719
I Scenario 3 {10%) 136 $5,282,418 $7,888,734 $14,604,531
The potential loss in alcohol sales will also produce a net loss in tax collections for the city. The
table below shows a potential decline of sales between $2.6 and $9 million. A reduction of sales
will also lead to smaller tax collections by the City with losses ranging from approximately $52,000
on the low end to $173,000 on the high end.
Table 8: Sales Impact on City Taxes
--Total Sales Taxes Collected City Resort Tax Loss
Alcohol Sales 2015-2016 $86,598, 798 $1,732,391 _____,, ---------
Scenario 1 3% $84,000,834 $1,680,017 $51,959
--------
Scenario 2 6% $81,402,870 $1,628,057 $103,919
+ ---
Scenario 3 10% $77,938,918 $1,558,778 $173,198
The IMPLAN model also estimates the impact of sales on various tax categories. First, the
Metropolitan Center calculated the tax impact of current sales at $86,598,798. The second step
included the calculation of the tax impacts of the sales in each of the three scenarios. The final step
was the calculation of the difference in taxes that would be paid in each scenario. The table below
shows the respective reductions by tax category. The most significant reductions in tax collections
may be in the following categories:
• The reduction of taxes on corporations may range from approximately $42,000 to $141,000
• Tax collections from households may be reduced by approximately $135,000 to $451,000
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• Employee compensation tax reductions may range from approximately $183,000 to
$610,000
• Loss in the collection of tax on production and important may range from approximately
$264,000 to $879,000
Table 9: Total Effect of Alcohol Sales Hours Reduction on Tax Collections
Employee Proprietor
Tax on
Description Production Households Corporations
Compensation Income and Imports
Scenario 1 I State and Local I I I so I $230,8951 ' (3%) I s1,815 I $9,904 I $5,291 I Tax I !
$4,901 I '
'
! Federal Tax
I
I ' I $181,178 : $32,863 $125,463 ! $36,961 ! I
I I
Scenario 2 State and Local i
$3,6291 so I $461,790 I I
i
I $19,8081 $10,583
i (6%) Tax I
I $362,357 I $65,726 t
i
I Federal Tax
$9,803 $250,9251 $73,922
I I
Scenario 3 I State and Local
I
!
$33,014 $17,637
(10%) I $6,048 $0 $769,650 I I Tax
I $603,928 j $16,338 $109,5431 $418,208 $123,203 I Federal Tax
I i
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