The developers of the $1.7 billion Miami Worldcenter complex are poised to receive a hefty subsidy package Monday when city commissioners convene as the board of the Southeast Overtown/Park West Community Redevelopment Agency.
The incentives — to be decided when much of Miami may be out of town for the holidays — would return more than half the property taxes paid out to the redevelopment agency by the owners of the 10-block project. The tax rebates are valued at $6.9 million a year once the $1 billion first phase is completed, and pay back more to the developer than what was previously being considered.
The rebates, beginning as early as 2018, would continue through 2030.
In return, corporations managed by Miami World Center Holdings, LLC, and shopping center developer The Forbes Company are committing to pay higher wages and ensuring their contractors and subcontractors will hire up to one-third of their unskilled workers from Overtown and then around Miami and the county. Those guarantees come with new financial penalties if the developer fails to meet its obligations.
“It doesn’t represent everything we wanted,” said CRA Executive Director Clarence Woods. “We’ve been battling and going back and forth for some time to try to get a win-win for everybody and this basically was the best agreement from both sides. It reflects some of what we wanted and it’s enough to get them what they need to get the development done.”
The incentives package is made possible because the project is being built in Park West within the boundaries of the redevelopment agency, which is funded by property taxes. The development site pays 95 percent of its taxes into the CRA.
Worldcenter estimates the project’s entire first phase will be completed by January 2021 and generate $12.1 million in property taxes based off of new development (the increasing land value is not considered). The agreement states that the redevelopment agency must return 57 percent to the developer, although the agreement is set up so that the return could be as high as 75 percent through 2022.
The tax subsidies, which are becoming increasingly common under Miami’s CRAs, decrease in value if specific phases of the Worldcenter are delayed. On a typical time frame, the tax rebate for a 765,000-square-foot shopping center and parking garage expected to open in January 2019 is penalized 10 percent if it is delayed two years, and is reduced to nothing if the phase is completed after January 2024.
Javier Fernandez, an attorney representing Worldcenter in negotiations with the CRA, said the developers probably could have built the project without subsidies, but it would have likely been heavily residential and with less retail — and correlating jobs — than currently planned.
“We’re building in an unproven market, first and foremost. It’s a redevelopment area for a reason,” he said. “We’re creating a sub-market in Park West and we think it will be a catalyst for other future development. As you know the infrastructure there isn’t very good.”
A portion of the subsidies would go toward the financing of some $57 million in public infrastructure improvements necessary to build the project, like roadways, utilities and parks. The remainder is being discussed as part of the financing of a parking garage, currently being negotiated with the Miami Parking Authority.
The neighborhood to the west of AmericanAirlines Arena has been forlorn for decades and today remains mostly surface parking lots. Some of that is due to the Worldcenter’s own struggles to develop after the collapse of the real estate market and economy in the late 2000s.
Those struggles included legal battles, and a new challenge was filed in court this month. Grand Central, a Worldcenter tenant, is challenging an amended development agreement unanimously approved by Miami commissioners in September on the grounds that the city withheld material documents before the meeting in violation of the Florida Local Government Development Agreement Act. The complaint also alleges that the city has withheld a final, signed copy of a development agreement that is laden with special incentives and hefty fee waivers and should be void.
A Worldcenter spokesman responded by saying the project remains on schedule to begin site work early next year.
That aggressive time line exists at least in part to appease Worldcenter’s publicly traded partners, Forbes and Taubman, which are leading the retail portion of the project. Woods said that’s the reason the details for the agreement were published the Tuesday before Christmas, and why Monday’s vote is falling over a time when many people will be on vacation.
“Nobody wanted to push it back this far. Everybody has to stick around and get it done,” he said. “They had deadlines they had to meet and it was important for them to get it done before the end of the year. They have a contract with Macy’s and Bloomingdale’s. We were trying to be mindful of that.”