County Considers Raising Property Taxes to Expand Rail

by | August 2, 2016

By Douglas Hanks
 
In 2002, Miami-Dade voters were promised nearly 90 miles of new rail in exchange for accepting a nearly 8 percent increase in the county sales tax. Fourteen years later, that half-percent transit tax has built less than three miles of extra track.
 
Now Miami-Dade leaders may try to revive those 2002 ambitions with a new revenue source: property taxes.
 
Rates wouldn't go up, but the strategy involves creating special districts along expanded transit routes to capture some of the tax revenue paid from nearby real estate. A portion of new tax dollars -- those generated by higher property values -- would be dedicated to transit expenses within the district.
 
County legislation is being drafted to create the districts, on the heels of a Miami-Dade study earlier this year to see how much revenue they could produce. Some form of property-tax funding is emerging as a potential element in the brewing financial strategy behind the recent "SMART" plan for bringing rail or high-tech buses to six of the county's busiest traffic corridors.
 
Six corresponding transit districts stretching half a mile out could produce up to $100 million a year in property-tax revenue, according to the April county study. While legal questions remain about the districts, the recent flurry of activity around them captures the new thinking about the broken rail promises from 2002.
 
"There is a way to make this transit plan work," said Miami-Dade Commissioner Dennis Moss. "But the key is, we have to work together and not be parochial."
 
Because they would divert money from the pool of property taxes that fund police, parks and other general government services, the districts could test the level of political will to commit significantly more public money to new rail systems.
 
"The real question is what's going to happen to the general fund?" said Frank Schnidman, a Florida Atlantic University professor who specializes in special tax districts. "Will there be enough money to pay for the public works and police to service the new development?"
 
The potential flow of property taxes into new projects would just be one revenue source for the expansion, which would still tap into the 2002 transit tax. Miami-Dade leaders also plan on generating cash with development deals along the expanded routes for companies interested in building stations with shops, apartments, hotels and other profit-generating uses. Other funding sources being explored include parking fees and revenue from existing toll roads. There's also the possibility down the road of asking voters to approve making the transit sales tax a full 1 percent.
 
"What we want to do is a comprehensive approach for each corridor," said Alice Bravo, Miami-Dade's Transportation director. "What would the costs be, and what kind of land use gives you the ridership that would yield a successful project."
 
Whatever revenue sources emerge, costs promise to be daunting if elected officials try to deliver the kind of rail expansion promised in the 2002 plan. The new SMART plan corridors mostly overlap with the routes touted in the referendum campaign 14 years ago, which ended with voters agreeing to boost the county's sales tax from 6.5 percent to its current level of 7 percent.
 
In January, a county study on bringing light rail to South Dade predicted it would cost at least $1 billion to build 20 miles worth of track -- with yearly debt costs of about $80 million to finance it.
 
A half-mile-wide tax district around the proposed route would generate about $20 million a year under optimistic growth forecasts, according to an April consultant's report commissioned by the board that oversees the county's half-percent transit tax.
 
The real question is what's going to happen to the general fund?
 
Advocates see the districts as self-sustaining, with new transit projects sparking higher property taxes than what real estate would have generated without new commuting options nearby. The transit districts would likely only keep a portion of the new tax revenue they generate, with the rest heading back to Miami-Dade and any cities whose boundaries overlap with the corridors.
 
Mayor Carlos Gimenez's proposed 2017 budget includes $31 million to fund the six corridor studies needed to apply for federal transportation aid. That's the start of a research process that could stretch five years or more for some of the most complicated routes, though there's hope that some corridors could take about a year, said Aileen Bouclé, director of the Metropolitan Planning Organization.
 
Hired last year to run the Metropolitan Planning Organization, which sets funding priorities for federally backed transportation projects, Bouclé sees the SMART plans as a watershed in part for putting Miami-Dade on the path of asking for more money down the road. Federal and state programs could provide 75 cents of every dollar in construction costs, making the transit sales tax a more viable option for funding the remaining portion.
 
Boucle said she's looking to revenue from property-tax districts (known as tax-increment financing or TIF) to prove Miami-Dade can afford to subsidize the new routes once they're built.
 
"The TIF in and of itself represents something that's critical, which is the operating and maintenance funding of the six corridors," she said.
 
While the first corridor studies aren't expected until 2017, a more immediate reckoning may be looming.
 
Bouclé said the Metropolitan Planning Organization is preparing cost estimates for various transit options in each corridor, including light-rail and a far more affordable mode called bus-rapid transit. Bus-rapid transit uses express buses stopping at high-tech stations where passengers buy their tickets at kiosks and board at once the way they would a train. Those price estimates will help frame the debate that elected officials eventually must have on what sort of transit options to pursue for each corridor: light rail, bus-rapid transit or some other mode.
 
Interest in the property-tax districts coincides with a push among elected leaders and local lobbyists to pursue private financing and operation of new transit projects within the corridors.
 
Touted as "public-private partnerships" -- or "P3s -- the strategy typically involves a for-profit consortium taking over every step of a project -- including financing it upfront, building it and running it for several decades. In exchange, the company receives hefty yearly fees from the government that stretch out several decades, with penalties if certain standards (such as limiting breakdowns and maintenance levels) aren't met. In Denver, a 1 percent transit sales tax is funding about $100 million in yearly payments to a P3 developer behind an effort to bring more than 120 miles of new commuter-rail and 18 miles of bus-rapid transit service.
 
Al Maloof, a lobbyist with Genovese Joblove and Battista, said he's in talks with multiple companies waiting for Miami-Dade to start entertaining proposals on the SMART plan -- especially if development deals are included in the mix.
 
"There will be multiple proposers bidding on several of the corridors," he said. "The interest will be significant."
 
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