Weak goals for incentives achieve little, distort competition
Written by Michael Lewis on January 21, 2015
Vast downtown projects are each spending $1.75 billion to create retail, residences, hotels, garages and more in multi-block swaths. But government is treating them differently as they compete in the marketplace, tilting the playing field.
In Brickell, longtime Miami developer Swire Properties has been building Brickell City Centre, with its East hotel and two office buildings to open in November, condo tower Reach to finish 390 units in December, parking and retail sites well along and far more on the horizon, including condos, Saks and an 80-story tower to front Brickell Avenue.
Meanwhile, Miami Worldcenter has six entities set to start on their own pieces of a mixed-use behemoth on the north end of downtown that’s to include Bloomingdale’s and Macy’s, residences, parking and more. A seventh corporation is to build a Marriott there that’s to include a large convention site.
The two mega-projects promise great benefits. Both will compete for retail tenants, condo buyers and hotel guests.
Already-booming Brickell and backwatered Park West differ widely, but the projects would upgrade both areas. As mobility continues to stall, downtown condos, stores and workplaces will intensify their competition for bodies and dollars.
Fair competition is good. But the key word is “fair.” What’s fair should concern governments as they deal with these projects and the future All Aboard Florida seven-block complex downtown. Government should not tilt the playing field to favor any of them.
During the recession, Brickell City Centre won approval to build without a subsidy. At its outset it was the largest private construction project in the Southeast, a beacon in days of despair.
Miami Worldcenter and All Aboard Florida, however, will rise as cranes dominate the area. The multi-use projects will be welcome in neglected areas, Miami Worldcenter in Park West and All Aboard Florida on the west end of downtown.
But a Miami redevelopment agency in late December approved handing Miami Worldcenter about $90 million in incentives that Brickell City Centre didn’t get. What All Aboard Florida might get is undetermined.
Miami Worldcenter also wants the Miami Parking Authority to build its parking. Swire created a two-level underground city of parking with no government aid. Swire is also rebuilding at its own cost the Metromover station that feeds its site.
The developer of the Marriott hotel and convention hub is likely to seek its own incentives in Miami Worldcenter. Swire is building the East hotel without incentives.
But despite vast differences in tax incentives, $90 million versus nothing, Worldcenter and City Centre both agreed to emphasize local jobs and subcontractors.
To get $90 million, Miami Worldcenter must try to hire locally, pay unskilled workers a set wage and seek local subcontractors.
Brickell City Centre, without incentives, just reported for the city and county its parallel achievements in those categories last year. They’re far higher than the targets Miami Worldcenter has been given. Yet Miami commissioners, who run the redevelopment agency, said they held Worldcenter’s feet to the fire to get it to agree to its few pledges.
νWorldcenter’s pledge: 30% of all unskilled jobs from Miami-Dade, targeting its surroundings first.
νCity Centre’s achievement: 53% of its 685 unskilled jobs from the City of Miami alone.
νWorldcenter’s pledge: 10% of its skilled jobs from Miami-Dade, starting in its neighborhood and expanding outward.
νCity Centre’s achievement: 65% of its 6,343 jobs from Miami-Dade, 40% of the total from within the City of Miami.
νWorldcenter’s pledge: 20% of its subcontractors from Miami-Dade.
νCity Centre’s achievement: 34% of 214 subcontractors handling a combined $777 million in contracts from the City of Miami, with a total of 45% from all of Miami-Dade County and 31% from Broward.
νWorldcenter’s pledge: $11.58 an hour for its unskilled workers with health insurance, $12.83 without.
νCity Centre’s achievement: $13 hourly unskilled wage.
Since not a single Miami Worldcenter pledge achieves the levels that Brickell City Centre has already hit without incentives, what exactly has the “feet-to-the-fire” deal accomplished other than to tilt the playing field? One cluster of developers gets a $90 million head start, with more requests to come for the parking and convention center.
As more calls come in for big-project incentives, it’s vital that the community gain something substantial in exchange. One government leader notes that training unskilled workers in targeted neighborhoods could increase hiring there and prepare residents for future jobs too. No such training is in the Miami Worldcenter package.
Big developments aid backwatered areas. Downtown’s west side and Park West will both be far better off if the planned projects rise.
But unless government is simply in the handout business, it must achieve far more for its tax dollars than the Miami Worldcenter agreement does. If local jobs are the goal and Worldcenter hires 683 unskilled workers as Brickell City Centre has done, incentives would equal $131,000 for each temporary unskilled construction job.
We’d sure like government to do some math before it hands out money to achieve less at one project than its competitor provides without tax incentives.
A tilted playing field can cause more problems than it solves as it makes one project far more profitable than another. Keep it level – and set far more stringent goals if incentives are paid.