Tourist taxes add-on a creative way to finance vital transit
Written by Michael Lewis on March 25, 2015
If Miami-Dade commissioners succeed in a creative drive to increase two of our three tourism taxes by one percentage point each, they can amass more than $60 million a year to build mass transit.
Anyone who tries to get around this county knows how vital this is, because bonding this guaranteed revenue could provide several billion dollars to start building transit immediately.
If you missed this paper last week, here’s what happened: commissioners unanimously asked the legislature for an OK to raise our Tourist Development and Convention Development taxes by one percentage point apiece to build transit.
Esteban Bovo Jr.’s measure notes that visitors, like all of us, face near gridlock at times and driving difficulties at all times in a county where more and more cars jam the roads but capacity doesn’t grow and mass transit is skimpy.
If the legislature allows it – which Mr. Bovo said will be a “very prolonged dance” and a long-shot – the added tax could then be requested of voters, who would get the final yes-or-no say.
While voters are usually a stumbling block in adding a tax, they shouldn’t be if Tallahassee lets them have a say-so. First, voters should realize that the transit we all need hangs in the balance. Second, visitors, not local residents, would pay most of the tax.
Those collections are hefty. Had the transit taxes been in place in February, the percentage point addition to the Convention Development Tax would have netted transit $2.75 million that month and the addition to the Tourist Development Tax would have netted $2.5 million. Without factoring in seasonal fluctuations, that would amass $63 million a year for transit.
The Convention Development Tax in February was 7% higher than February 2014 and the Tourist Development Tax was up nearly 11%, according to the tax collector’s office, and Convention Development Tax receipts rose 57% in five years as tourism has shot higher. So you can forecast rising funds ahead to repay transit bonds.
Tourist taxes could be a perfect road to vital transportation. But potential pitfalls lurk.
One is the visitor industry, which relies on those taxes and is very protective of them. In general, we agree with that protection of our number-one industry. We’d never want funds drained off to the wrong uses.
But today very little is more important to our economic development – and we include the visitor industry in that development – than the ability to get around.
Moreover, the proposal wouldn’t divert a penny from current tourist and convention development tax collections. They would continue to go just where they go now, and would in fact rise at the same rate as would an add-on tax targeted to transit.
The only negative – and it is real – is that visitors’ hotel and restaurant bills would rise. If 1% or 2% added tax gave competitive advantages to other destinations, we could lose some visitors.
On the other hand, we’re already more expensive in many ways than most competitors and have lost the lower end of the market by now. Real losses are likely to be minimal.
Another pitfall: commissioners could do what they did with our transit sales tax a dozen years ago – hijack taxes intended to build transit or other money that could help build transit and use the funds elsewhere. The current tax for new transit was diverted that way.
Indeed, Commissioner Daniella Levine Cava tried last week to amend the measure to permit tourism taxes to go for system operation. Commissioners Juan Zapata and Rebeca Sosa warned that state legislators would be unlikely to buy that, but Chairman Jean Monestime told the commission that if Tallahassee approves the measure, the commission will get another shot at adding operating costs as a permitted use of the new tax.
That should never happen, because it would undermine the aim to maximize system size if funds were watered down to also run the system. It would also make it hard or impossible to bond a revenue stream if commissioners could tap that stream at will for operating funds.
The question to voters should guarantee that an independent trust would dole out new transit tax receipts and would bar commissioners from committing a penny without prior trust approval. We were guaranteed such a firewall in 2002 but commissioners – some of whom remain in office – grabbed the money before the trust was created, and it was never independent.
One concern is that establishments in Surfside and Bal Harbour don’t pay either tax and that those in Miami Beach don’t fund the Tourist Development Tax because that city has its own tourist tax. Funding transit without everyone paying a share is inequitable, particularly since a key aim is to run transit from the mainland up the beach. Some payment from these communities for beneficial transit upgrades is logical.
Commissioners last week added the new taxes for transit to their Tallahassee priority list and asked their lobbyists to make it real.
The objective is admirable. It would allow the county to craft legislation to guarantee new transit while also guaranteeing that whatever money remains from our current transportation tax adds to the infrastructure pot rather than going to operations.
It would also give the county a chance to allow three communities shielded from tourist taxes to pay too and not be free riders.
This fund use would clearly benefit visitors and all of us, helping everyone get around Greater Miami with less pain.
By building in the proper safeguards, this tax plan could be a big winner – once the legislature gives us a green light to speed up travels in Miami-Dade.