Stateordered Tax Cut May Foster Useful New Taxing Districts
Written by Michael Lewis on August 16, 2007
By Michael Lewis
The Florida Legislature’s move to shrink local governments by trimming their tax resources may, ironically, spur the creation of tiny yet efficient quasi-governments.
Four separate efforts were already under way to create business improvement districts in the City of Miami before the Legislature rolled back taxes, but the prospect of reduced services in these areas as a result of the tax cut validates the bids for local control.
Improvement districts voluntarily augment city services, taxing every business in their boundaries either a surcharge on property taxes, typically about 6%, or per square foot. So these districts could escape state mandates to hold down taxes and provide services at a level their own elected board would set, assessing themselves for the privilege.
And while Florida’s commercial property owners have been railing against high local property taxes, business improvement district members across the nation tax themselves willingly because the added services increase profits far more than the tax extracts.
In New York City, for example, which has 56 separate business improvement districts, all voluntarily created and revalidated by periodic votes, no district has ever shut down.
The best Miami-Dade example of a business improvement district is in downtown Coral Gables, where members just voted to keep the 10-year-old district alive. In fact, it has expanded to Giralda Avenue as well, possibly quadrupling the number of merchants served.
Why, in an era of rebellion against local tax increases and distrust of government effectiveness and efficiency (see last week’s report about the City of Miami’s inability to account for bills and payment of some twice) do businesses seem to welcome another level of taxes for a quasi-public entity?
First, the need is clear. The district’s business owners know what their impediments are and want them fixed. When they give up on local government getting the job done right, they decide to do it themselves.
Every business improvement district is unique, because needs differ. Some aim to market an area, some to clean it, some to add police patrols, some to improve streets or sidewalks, some to attract visitors and shoppers. In Coral Gables, the district consolidated valet parking on Miracle Mile.
Second, the business taxpayers control district spending and can act independently. They hire a district director, elect their own board and decide where the money goes.
Third, there’s no red tape. Business improvement districts don’t have to operate under municipal union contracts with burdensome pensions or follow civil service rules. They don’t need city commission permission to spend.
Fourth, the districts don’t have to worry about the citywide priorities that politicians set. If dirty sidewalks are their top concerns, there’s no worry that a city commission will move cleaning to the bottom of a long priority list.
Fifth, the improvement district focuses on a single area. Even the best-meaning and most efficient city commission must weigh dozens of needs simultaneously. The improvement district’s board sets just one target: find solutions to upgrade one small business environment.
If the proposed Downtown Miami, Coconut Grove, Design District and MiMo Biscayne districts are created properly, city government will formally commit to maintain the level of services it provides to each, so that the districts’ internal spending improves conditions and doesn’t just substitute businesses’ dollars for general taxpayers’ dollars.
Paradoxically, as small improvement areas focus on their business owners’ concerns, they simultaneously create better environments for residents and visitors. Thus, multiple business improvement districts could improve the livability of the entire city.
That is their ultimate promise for all Miami residents — the city improves and businesses alone pay the costs, in the process profiting mightily themselves.