Miami-Dade County

The county may have found $2 billion to extend Metrorail. But there’s a catch.

Miami-Dade debuts new Metrorail train cars

Miami-Dade County rolls out its long-awaited new Metrorail cars on Nov. 30, 2017.
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Miami-Dade County rolls out its long-awaited new Metrorail cars on Nov. 30, 2017.

After years of complaints but no new money, Miami-Dade commissioners may have found a way to generate roughly $2 billion to help expand Metrorail and give commuters from Homestead, Miami Gardens and other suburbs an alternative to clogged highways.

The downside: The dollars come from property taxes that pay for police, parks, roads and other core services.

Commissioners this week created a massive new tax zone representing roughly a third of the county’s real estate market. If all goes as planned, it would divert some property tax revenue from the regular county budget to pay for transit projects.

Forecast to generate $1.8 billion over 30 years, it would mark the first major new source of dedicated transit revenue since voters approved a new half-percent sales tax in 2002 — a tax that was supposed to lead to a historic expansion of Metrorail but delivered only three miles of track after 15 years.

steve bovo
Esteban “Steve” Bovo, chairman of the Miami-Dade County Commission, sponsored legislation that establishes a new transit tax district. C.M. GUERRERO El Nuevo Herald

“What we’re doing now is we’re floundering,” said Commissioner Dennis Moss, before voting to approve the new Transportation Infrastructure Improvement District. “We need to stop that. We need to get out of our own way, and let’s get something done.”

The new district could also mean the biggest windfall yet for the county’s celebrated SMART transit plan — a 55-mile expansion blueprint for Metrorail that one consultant said could cost more than $6 billion. The district would serve as an appendage to the plan, since it extends for half a mile on either side of five of the six potential rail routes outlined in the 2016 SMART blueprint (a sixth, running parallel to State Road 836, extends a mile).

While the SMART plan was designed to explore six new rail lines west to Kendall and east to Miami Beach, Miami-Dade commissioners voted last year to start with two — corridors extending north to Miami Gardens and south to the Homestead area. A 2016 county estimate predicted that extending Metrorail at street level on those two routes would cost about $1.4 billion to build plus $22 million a year to operate.

metrorail scene
Metrorail passengers in the station that services Miami International Airport. The three miles of track that connect the station to the original Metrorail system were the lone expansion of county rail funded by a 2002 sales tax that promised a historic expansion of the system. C.M. Guerrero Miami Herald

Assuming the rail corridors actually get built and Miami-Dade’s real estate market performs as expected, the district is forecast to generate about $1.8 billion over 30 years. Using borrowing estimates, that’s probably enough to fund $670 million in project costs today.

The money wouldn’t have to go to Metrorail. Miami-Dade could use it to pay for light rail, high-tech bus systems with elevated platforms and dedicated lanes, as well as on land and other costs related to major projects. The diverted taxes also could go to flat payments to for-profit operators who would privately finance a new transit system, then get paid back by Miami-Dade while collecting fees to operate it.

Tax rates within the district would remain the same as outside the district, and the money would come from the same property taxes that this year contribute about $1.6 billion to the county’s $7.4 billion budget. Advocates see the district encouraging the kind of transit projects that would boost real estate values beyond where they’d be with Miami-Dade’s existing Metrorail options.

“I understand the challenge to the general fund,” said Alyce Robertson, director of Miami’s Downtown Development Authority, using the term for core county services. “If there’s ever a reason to have a [taxing district], it’s for this critical transportation issue. It will help people from all walks of life get in and out to their jobs.”

new metrorail train nov 2017
Passengers board the new Metrorail trains at the Miami International Airport terminal on Nov. 30, 2017. The new cars are the first of the fleet replacements expected to reduce the breakdowns and delays that have thrown the system into a crisis. C.M. GUERRERO cmguerrero@miamiherald.com

Extending Metrorail or launching some other transit initiative is not a requirement of the new legislation, so the district could start drawing funds for future projects years before anything actually gets built. A new rail line is also no guarantee that Miami-Dade will see extra property taxes — even if builders are drawn to the expanded routes.

“I think a large portion of the units that would be built along the Metrorail are residential units that would have been built anyway throughout the county,” said Frank Schnidman, a retired professor at Florida Atlantic University’s School of Urban and Regional Planning. “You’re talking about musical chairs.”

The proposed district is so large, and encompasses such valuable land along some of the county’s busiest commuting routes, that it currently accounts for 34 cents of every dollar of the more than $1 billion in property tax revenue collected countywide each year.

The transit district uses the same approach as a community redevelopment district — a portion of the taxes stay inside the boundaries rather than pay for general government expense. Since the money involved is countywide property taxes, Miami-Dade commissioners already had the authority to spend those dollars on Metrorail simply by adjusting the annual county budget.

But by creating what’s known as a “tax increment” district, the commission can put the spending on something close to budgetary autopilot. The legislation sponsored by commission chairman Esteban “Steve” Bovo lets the district “keep” property taxes generated within its boundaries when real estate values climb above 4.5 percent.

That’s roughly the growth forecast in the county budget, and the district formula was designed to largely avoid draining revenue already baked into long-range spending needs for police, parks and other large recipients of property taxes in Miami-Dade. However, existing growth rates aren’t enough to preserve current services, and Miami-Dade is already projecting deficits that start at $70 million in 2020 and get worse from there.

bus pic 2
A new transit tax district could be used to pay for high-tech bus systems with dedicated lanes and elevated platforms, but not standard buses like the ones pictured in this file photo. José A. Iglesias jiglesias@elnuevoherald.com

“It’s going to take away from police and from parks,” Commissioner Joe Martinez said of the transit district, which he still voted for. “But transit is a big issue. Let’s see what happens.”

In a memo, county Mayor Carlos Gimenez said he supports creating the district but urged commissioners not to rush into diverting money from the general county budget. Until Miami-Dade actually borrows against the district’s revenue stream — or pledges it to a for-profit operator — commissioners can vote each year to keep the money in the general budget rather than reserve it for transit projects within the district.

Gimenez noted that increases to countywide property tax rates could be needed to cover revenue gaps caused by diverting dollars to the new transit district.

“This ordinance does not call for a tax increase or an increase in other fees,” Gimenez wrote, “but adjustments may be required should resource requirements for other County services exceed what is available.” (In an interview, Gimenez said he would push cuts over tax increases if he faced a fiscal crunch from the transit district before leaving office in 2020. “We always deal with it,” he said.)

If implemented immediately, the district is expected to generate $17 million by 2023, according to a memo from Ed Marquez, the county’s chief financial officer. But that assumes a historic breakthrough in Miami-Dade’s long struggle to extend Metrorail north and south. The revenue forecasts assume those lines would open within five years — even though various financial studies show the county short hundreds of millions of dollars in construction and operational funds.

One significant advantage for the district is it includes the Brightline corridor — a for-profit express rail line slated to begin operating out of Miami later this year. Miami-Dade hopes to subsidize Tri-Rail using the tracks for local service, and the transit district could provide operating funds for that.

Eventually, as rail expands, the district is forecast to generate roughly $61 million a year in property taxes to sustain transit projects within its boundaries.

Bovo said the property values will get a significant boost once the county loosens zoning rules along the proposed corridors to allow more construction.

“If there is no growth,” he said, “then there is no money.”

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