Miami Micro-Units Solve for Both Tenant Affordability and Developer Profitability

Cities across America are facing an affordability crunch and housing in Miami is no different.  The short supply of affordable housing is even scarcer in proximity to Miami’s central employment districts with no single solution available.  Efforts to promote inclusionary zoning (mandatory affordable unit requirements) have populist appeal, but limited success and actually reduce land values for property owners.  Micro-units though, have the opportunity to create both affordable housing and also increase developer profitability.  In accomplishing both affordability and profitability, micro-units hit the perfect spot that incentivizes the private sector to build affordable housing because it is more profitable.  As a result, several municipalities in South Florida are exploring codifying micro-units.

Micro-units provide affordability for the simple reason that the units are smaller and cost less to build, while yielding a greater return for developers and landlords. Thus, they provide the unique dual benefit of affordability and profitability.  Reduction of minimum unit size increases unit density with the same building envelope.  Moreover, smaller units always rent for more per square foot than their larger counterparts.  Thus, the same building envelope can now contain more units and these units can rent at a higher price per square foot.  The units remain relatively inexpensive to rent simply due to their size.  In Manhattan’s Kips Bay neighborhood, micro-units ranging from 260 to 360 square feet were developed to test the viability of micro-units.  The Kips Bay units are fully leased, proving out the micro-unit model. Continue Reading

New Funding Source for Mass Transit under the SMART Plan

We have previously written about the need for new funding solutions for public transportation, including mechanisms that capture the added value of mass transit on adjacent properties.  Last week, consistent with our recommendation, Miami-Dade County adopted an ordinance that creates a “Transportation Infrastructure Improvement District” in order to capture the added value of new community assets (in this case, new mass-transit corridors) and invest those funds back into the assets.  Districts such as the Transportation Infrastructure Improvement District, remain innovative and appropriate ways of funding existing or new community assets without raising taxes.

The new ordinance is a form of tax-increment financing (TIF), which works by calculating the amount of new taxes attributable to a new development, and then earmarking that amount for a particular purpose. A TIF does not impose new taxes–there is no new millage. Nor does a TIF require the government to divert any pre-existing taxes for the new project–it utilizes only the taxes that would not exist, but for the new community asset, and is therefore a revenue-neutral financing mechanism.  In brief, the TIF operates by drawing an imaginary line around the new community asset and calculating the current real-estate taxes generated by property in the designated area–that amount is considered the base amount.  Going forward, the base amount is subtracted from taxes collected in the designated area, which will increase based on the positive impact of the new asset on property values.  The difference, or the “tax increment,” is attributed to the new community asset and is used to either fund operations or new capital improvements. Continue Reading

Bid Protests for Small Businesses

A bid protest is a method for a bidder for a government contract to formally challenge the government’s selection process or decision.  Bid-protest procedures vary from jurisdiction to jurisdiction, but there is generally an opportunity to submit a written petition that explains why the protestor believes the government made an unfair or unlawful decision, following by a hearing before an official authorized to decide the dispute (sometimes a judge or equivalent and sometimes an administrator).  In some situations, a bid protest resembles a civil trial and can take weeks or months to resolve, and in other situations it is far less formal and can be resolved rapidly.  The expense of a bid protest often increases with the formality and length of the proceedings.

Earlier this month, the RAND Corporation made public its comprehensive report commissioned by Congress on the federal bid-protest system.  Although the report overall concluded that bid protests were serving their intended function to find and correct errors in the procurement process (approximately 40% of federal protests yielded a change in the outcome), RAND did conclude that the system was too costly for small contracts and small businesses.  RAND recommended an alternative, expedited process for small contracts, as well as changes to make the system easier for small businesses.  Because the federal system requires essentially the same time and expense, regardless of the size of the contract or the resources of the protestor, protests can in some cases be too burdensome on both the governments and the protestor.  Continue Reading

South Florida Real Estate Industry Update

Begin the new year with essential guidance that will help prepare your real estate company or clients for a productive and profitable 2018.  The South Florida real estate community will come together on Thursday, January 18, to hear industry leaders discuss some of the most significant tax, accounting, and legal planning opportunities affecting their businesses today.

Bilzin Sumberg attorney Josh Kaplan joins professionals from Marks Paneth, Ward Damon, and Engineered Tax Services to discuss topics including:

•  The impact of tax reform on §1031 exchanges
•  Strategies for Joint Venture structuring
•  The tax benefits of cost segregation studies
•  The value of Real Estate Investment Trusts (REITs) Continue Reading

Miami-Dade County Adopts New P3 Legislation

We previously wrote about Miami-Dade County’s proposed new P3 legislation, both when it was initially proposed, and prior to it being considered by the subcommittee of jurisdiction, the Government Operations Committee.  Last week, the Board of County Commissioners unanimously approved the new ordinance, which will help the County implement a variety of planned and potential P3 projects in the near future, including the planned Civil Courthouse P3.

The ordinance generally tracks and implements the State of Florida’s procedures for procurement of P3 projects, but with some notable additions.  An unsolicited P3 proposal to the County under the new ordinance requires significantly more detail than under the State of Florida’s process, including information on how the project will utilize community-based subcontractors and otherwise benefit the community.  The new ordinance also provides deadlines for the administration to take action on an unsolicited proposal, which helps address the concern of many proposers that their proposal will remain in limbo for an indefinite period of time, and a number of other provisions designed to help move P3 projects forward.

Local Government Contracts and Buying American

trainIn April 2018, President Trump issued an Executive Order calling for stricter enforcement of the federal government’s “Buy American” laws.  These laws have been on the books for several decades and generally require that the federal government purchase goods and materials manufactured in the United States, with some laws also applying to certain state and local government purchases.  Specifically, the Buy America Act applies to public-transportation purchases and requires that all iron, steel, and manufactured products must be from the United States, and 60% of the components of rolling stock (busses and rail cars) must be from the United States.  The Executive Order in part directed federal agencies to develop policies to strengthen enforcement of the Buy American laws, and based on the deadlines in the Order, those new policies should be forthcoming.

In a world of global supply chains, compliance with Buy America has become increasingly complicated.  For example, we represented AnsaldoBreda, an Italian railcar manufacturer (now Hitachi Rail), in its successful bid for the replacement fleet of Miami-Dade County’s Metrorail system. For that particular project, special approval was required (and obtained) to construct the vehicles in the United States, ship them to Italy for initial testing, and then ship them back to Miami for final testing.   Fortunately, that project has successfully moved forward, and the first new Hitachi train entered service for Miami-Dade County just last week. Continue Reading

Art in Public Places: Regulatory Burden or Opportunity?

The concept of art in public places is well-established in the United States. As early as the 1930s, the federal government created New Deal programs that paid artists to create works of art for display in municipal buildings and other public civic properties.  Similarly, Miami-Dade County has required since the 1970s that art be provided in the amount of 1.5% of total construction costs for any governmental development, including private development on public land.  The County’s program has yielded several notable works of public art, including the “Red M” by Roberto Behar and Rosario Marquardt at the Riverwalk Metromover station and “Slide Mantra” by Isamu Noguchi.  The recently installed floors in Terminal D at Miami International Airport are also a product of the County’s program.  Other local jurisdictions, including the City of Miami Beach, have more recently adopted similar programs.

Earlier this year, the City of Miami adopted a requirement that public art be installed in new public buildings, but declined at that time to extend the program to private development in the City.  However, the City is now considering a new ordinance  that would extend such requirements to all private development, not just private development on public land, which would therefore make the City’s program the most expansive in South Florida.  If adopted, the new ordinance would require public art to be provided at new privately constructed buildings that is equal to up to 1.25% of the total construction cost or, in the alternative, a payment of up to 1% of construction costs may be made to an art fund. Continue Reading

Extension of Property Tax Discount in Miami-Dade and Potentially Other Counties

On September 4, 2017, Governor Scott issued Executive Order 17-235 in response to anticipated severe damage across Florida due to Hurricane Irma. The Executive Order granted the Florida Department of Revenue authority to issue an Emergency Order to waive and extend the local taxing authorities’ compliance deadlines related to the budget process and associated setting of millages and special assessment rates.

On September 6, 2017, the Department of Revenue, pursuant to the authority granted under Executive Order 17-235, issued an Emergency Order, as amended on September 8, 2017, suspending the compliance deadlines for the budget approval process and the setting of millage and special assessment rates for ad valorem and non-ad valorem taxes.

Miami-Dade County utilized the extension through its budget adoption hearing process and is availing itself of the extended time frames to delay mailing of the tax notices, which in turn extends the statutory early payment discount until 30 days from the mailing of the tax notices. Continue Reading

P3 Legislative Update

Legislators at both the state and local level have been busy introducing and considering new legislation that could impact the government procurement process and public/private partnerships. These new provisions will fundamentally affect the way business is done with any governmental entity, from basic discussions about potential P3 projects to the final negotiation of a contract for the provision of goods or services.

Bills currently in the state legislative pipeline will, if adopted, affect the Public Records Law. For example, House Bill 459 seeks to remove the trade secret exemption from the Public Records Law for all agencies where a trade secret exemption is currently in effect, resulting in an expansion in the scope of records that must be made public. In the context of procurement, the trade secret protection has allowed a bidder to propose alternative technical concepts or other ideas that the bidder views as a competitive advantage with a granting authority. That is why, on the other hand, House Bill 461 seeks to solidify the exemption from the public records requirements for trade secrets, and provide a process by which the exemption can be enforced. The bill puts the onus on the firm holding the trade secret to defend it. If a public records request seeks documents containing the trade secrets, the firm must file an action in circuit court seeking a declaratory judgment that the record in fact does contain a trade secret to prevent disclosure. Finally, Senate Bill 192 provides a narrow exemption from the Florida Public Records Law for fact-finding exercises by a board or commission, which is consistent with existing Florida caselaw. These proposed bills are just a few among others that are being introduced this year. We are closely monitoring each bill to make sure that your business is ready for any change in the already complex government approval and procurement process. Continue Reading

Creativity in Funding Necessary for Miami-Dade Civil Courthouse P3 Success

As Miami-Dade County continues to take steps towards the launch of a proposed civil courthouse public-private partnership (P3), its representatives have stressed the need to bring the right deal to market, balancing the community’s goals of improved court capacity and accessibility with existing funding challenges.  The final project could combine an availability model DBFOM with real estate development, which would create a unique opportunity for international equity investors and construction companies to partner with real estate developers familiar with the Miami market.

The population of Miami-Dade County today is twenty-five times greater than it was when the County planned its existing courthouse facility in 1925.  To facilitate the increased judicial demand that comes with population growth, courthouse services have since been spread across the County.  The County has long recognized the need to improve its existing judicial infrastructure.  In 2014, the County sought to fund construction of a new courthouse through the issuance of general obligation bonds.  However, the bond financing was not favored by voters.  While the County continues to leave open the possibility of a different delivery model, the P3 model now appears to be the preferred approach to the courthouse project. Continue Reading

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