A New Look at Incorporation

County Leaders May Rethink ‘Disincentives’ to Incorporation Efforts

 

By Randy Abraham 

Following a recent Miami-Dade County Commission subcommittee workshop on the related issues of incorporation, annexation and mitigation fees for newly formed cities, county officials may rethink current policies and procedures for unincorporated communities seeking to form new cities or join existing ones, and ease the requirements now in place.

On April 10 the full Governmental Operations and Environment Committee meets; it will report its findings to the County Commission possibly as early as May. Activists seeking to convert their unincorporated neighborhoods into cities remain optimistic about prospects for lowering the bar, but county administrators warn that any easing of financial requirements could be swamped by proposed property tax relief proposals from the state that might significantly reduce the flow of tax revenue to local governments.

Currently, there is a moratorium on incorporation and annexations while Miami-Dade officials review fiscal and other related issues that could affect the county’s ability to provide regional government services, both countywide and “City Hall” to the UMSA — the county’s Unincorporated Municipal Service Area. Procedures in place since the town of Miami Lakes incorporated several years ago require newly formed cities to pay the county an annual mitigation fee, in perpetuity, of $1 for every assessed $1,000 of taxable real estate. The city of Palmetto Bay pays at the same rate; the city of Doral pays $1.50 for every taxable assessed $1,000 in its business district and $1 per $1,000 in residential areas.

The county also has procedures that affect cities that absorb adjacent unincorporated communities: Certain forms of revenue generated in the area would remain with the county and not flow to the city annexing it. According to Miami-Dade code, the county would retain rights to all electric franchise revenues during the full term of the county franchise with Florida Power & Light. The county would also retain all utility tax and cigarette tax revenues.

Incorporation activists have argued that such policies deter them from forming local governments and punish cities that annex areas. Miami-Dade Commissioner Carlos Gimenez, a GOEC Committee member, said changes in policy could be coming. “We heard them loud and clear,” Gimenez said after the meeting. “We need to look at this; the disincentives have to go away.” The controversial mitigation fee, which county officials enacted several years ago with the stated purpose of maintaining their ability to provide government services while new cities broke away from the county’s UMSA area, created “unintended consequences” and a perception of unfairness among new cities paying the mitigation fees, Gimenez said.

“The problem with mitigation is you create two classes of cities: the long-established cities never paid mitigation fees like the new ones do,” said Gimenez. “I never agreed with that theory. It would have been better to have had a plan for incorporation.”

An argument made at the time of Miami Lakes' incorporation, said Gimenez, was that as a so-called “donor community,” the Miami Lakes area paid more in property taxes than it had received in county government services, and that the mitigation fee should be paid to offset the monies that would now flow to the newly formed city. The argument breaks down, however, with the example of the city of Miami Gardens. Miami Gardens, incorporated a few years ago, is termed a “recipient community” since its tax base generates less in property taxes than it receives in government services. However, it receives no reverse-mitigation payment or equivalent subsidy from the county, said Gimenez.

“I asked if the county gave Miami Gardens money and they said no, we didn’t,” Gimenez said. “It looks like the county is making money from those three areas,” he added, referring to the cities of Miami Lakes, Doral and Palmetto Bay, which currently pay the mitigation fee, imposed ostensibly to enable the county to continue serving poorer areas of Miami-Dade.

However, Gimenez said he would prefer that unincorporated areas annex into existing cities rather than form new municipal governments. “I don’t think the county would like to deal with 100 cities. It’s my belief that it’s better to annex into existing cities, and I would like to work with the Municipal Advisory Committees (MACs, which are formed by the county and made up of residents of local unincorporated areas seeking to research forming their own cities) and encourage them to work with adjacent cities to annex them. There are so many unknowns when you form a city; you make your best estimate when you propose a budget for a new city, but well-managed existing cities have a track record, and they already have the infrastructure and government body in place.”

Ken Friedman, a resident of the unincorporated Highland Lakes area just west of Aventura, who for years has worked actively toward either forming a city government or joining the city of Aventura, said he was disappointed the subcommittee didn’t recommend listing the county moratorium on annexations and incorporation, but said he is encouraged by their willingness to take a new look at the issues. “We’re disappointed but it’s not a total loss. I can understand that they want to continue discussions or delay the MACs that are not yet in the pipeline, but not the MACs that are already in the pipeline.” Friedman, a member of the Northeast MAC, who also serves on the Community Council District II — which has limited authority over rezoning and land-use decisions in the area bounded by the Broward/Miami-Dade County Line to the north, Interstate 95 to the west, the city of North Miami Beach to the south and the city of Aventura to the east — said that if the county does go through with changing its policy of retaining the franchise and utility fees, and discontinues the practice of levying a mitigation fee in perpetuity, the extra revenue could mean an additional $1 million a year if his area forms a city or joins an adjacent one.

In 2004, before the annexation and incorporation moratorium was imposed, the NE MAC presented a budget that was approved by the county’s Planning Advisory Board and Boundary Committee, but local residents were skeptical that the proposed budget barely covered expenses and did not account for code enforcement, capital improvements, emergencies and other needs. Friedman maintains the area has the financial means to support a viable city government, and is hopeful that the county can enhance its potential position or at least make it attractive to an adjoining city. “If they get rid of the mitigation fees, franchise fees and other poison pills, it could make the area more appealing.”

In 2004, Friedman and other area residents requested that the city of Aventura study the financial feasibility of annexing the area. Aventura City Manager Eric Soroka and staff members spent several months in preparing the report, which indicated the city could not support absorbing and servicing the area without a tax increase.

In the early 1990s Friedman and other Northeast (unincorporated) Dade residents approached North Miami Beach officials, who presented the benefits of joining NMB. But unincorporated leaders said they were hesitant to join NMB because its tax rate is higher than what they currently pay in the UMSA.

Aventura’s millage is actually lower than UMSA because it has been able to avoid a tax increase in the 12 years of its existence, as a lean-and-mean payroll and explosive growth in that high-density, upscale community have resulted in a budget reserve exceeding $10 million.

When told of the county’s apparent willingness to rethink its annexation policies, Soroka said he didn’t think it would make a difference to Aventura’s elected officials because any revenues and fees that could accrue to the city by annexing the western region could be undone by the proposed property tax reform currently being discussed in the state Legislature.

“In light of what’s going on in Tallahassee, I don’t think there would be any interest from the city (in annexing the area to its west),” Soroka said.

NMB City Manager Keven Klopp said he attended the March 29 meeting with Mayor Ray Marin because of the city’s efforts to annex the Windward Estates area, an unincorporated “donut” in the city’s center that includes the Mall at 163rd Street. City officials initiated annexation proceedings before the county-imposed moratorium. “We’re hopeful it’s a sign the moratorium will be lifted,” said Klopp, who added that based on city projections, if the area were annexed the city would need to spend $5 to 10 million in the first five years to bring sidewalks, street lighting, and other infrastructure and services up to the city’s standards. After that break-even point, NMB officials anticipate the area would deliver a net income of $1 million annually to NMB coffers.

North Miami Beach Mayor Ray Marin said he hasn’t approached the area north of his city since being rebuffed. “We have not had any recent discussions with the Skylake residents. We only went to them as a courtesy because they approached us,” Marin said. “If the financial situation as far as mitigation fees and other fees were to change and they asked us to again evaluate the cost of providing services to them, I don’t think I would shut the door on them.”

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