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Although hotel tax revenues are a staple cash flow for cities around the U.S., it can usually only be used for a narrow category of projects. Miami’s accounting shift could spark new ideas for other destinations.
Miami-Dade County collects more than $90 million a year in hotel taxes, and state law mandates that the money can be spent only on culture, tourism and sports stadiums.
But County Mayor Carlos Gimenez’s administration found a way to use the restricted dollars to help keep prison guards on duty, place more shelter dogs with owners and fund pension payments for police officers.
How did they do it?
Over the course of two years, the Gimenez administration drained about $50 million in hotel-tax reserves earmarked for future debt payments on Marlins Park. It then used the hotel funds to replace property-tax money that ordinarily subsidizes Zoo Miami and other county parks, allowing Gimenez to spread the saved local dollars throughout the bureaucracy.
Among the biggest gainers this year in money generated by countywide property taxes: corrections, animal services and police.
“It allowed us to free up about $25 million [this year] of the general fund that could then support other activities,” said Jennifer Moon, Miami-Dade’s budget director.
The obscure accounting shift effectively rewrote how Miami-Dade spends hotel-tax dollars, and allowed Gimenez to ease the impact of the property-tax cut he championed after taking office in 2011. Before 2012, Miami-Dade Parks received just $1 million a year from hotel taxes to subsidize an international tennis tournament held annually on Key Biscayne. But in the last two years, Parks soared to No. 2 on the list of hotel-tax recipients.
This year’s influx of $25 million in hotel taxes put Parks well ahead of the $9 million being spent on Marlins debt in 2014, and just below the nearly $30 million spent on debt and operating expenses at the county-owned Adrienne Arsht Center for the Performing Arts, according to a county summary of where the dollars go.
Now the funding switch is getting more scrutiny since Gimenez aides say they’ve exhausted the hotel-tax surplus and can’t find more tourist-generated dollars to support the zoo and other parks. With Miami-Dade set to collect a record $100 million in hotel taxes this year, some are pointing to the parks transfer as evidence that the county can easily circumvent spending restrictions on the money when it wants to.
“They tell us that the state law limits the Convention Development Tax use. And that is true,” said former Miami Beach manager Jorge Gonzalez, referring to the largest of Miami-Dade’s three hotel taxes. “Except they are really only limited by their creativity.”
In an interview Thursday night, Gimenez said the hotel reserves offered a way to keep parks functioning amid a budget squeeze, as well as ease some pressure on the general fund. Once hotel revenues are large enough to fund the Marlins reserve and other needs, Gimenez said he’d favor using hotel taxes again in Parks and reduce the need for property taxes. “But you’ve got to have the receipts,” he said of hotel-tax dollars.
Part of the controversial 2009 financing for Marlins Park included plans to build up a $45 million reserve of hotel taxes before 2029, Moon said. Hotel-tax collections, up a stunning 50 percent since 2009, grew so quickly in recent years, Moon said, that Miami-Dade could spend reserves set aside for future Marlins stadium debt and still build up another pot of spare dollars before the money is needed.
Even after spending about $50 million in Parks, Moon said she expects Miami-Dade to hit that target by 2020. “We are still on target to make our shortfall commitment,” she said.
With $25 million in hotel-tax money, Parks was able to increase its budget by 9 percent this year, and still spin off $10 million in general fund money back to the county.
Among all county agencies, Parks saw the biggest drop in its allocation this year from the general fund — a roughly $1.5 billion pool of revenue made up mostly of property taxes, along with the county gas tax and other local fees.
While state law clearly draws a boundary around government activities eligible for hotel-tax money, the Gimenez budgets of 2013 and 2014 revealed a new collection of Miami-Dade expenses that County Hall deemed eligible for tourist dollars rather than taxes paid by residents.
Miami-Dade sent Parks $28 million in hotel taxes during 2013 and another $25 million this year, essentially wiping out reserves collected both before the national housing crash and during a surprisingly strong tourism rebound that started in 2010.
The move sets up the possibility of a repeat swap in future years, since Miami-Dade could once again ease the pressure on property taxes by diverting hotel taxes to Parks. That could make the county’s hotel-tax coffers — currently the realm of cultural institutions, sports teams and tourism promoters — a more tempting target for groups wanting more funding anywhere in the budget.
Starting with the new budget year Oct. 1, Miami-Dade plans to once again use general fund dollars to subsidize the zoo and other parks currently receiving hotel-tax money.
“To the extent that general-fund dollars are being spent on tourism-tax eligible projects, that could certainly create some competition down the road,” said Kurt Wenner, vice president of tax research for Florida TaxWatch. “As with most things in government, there is always the problem with the slippery slope. They can say, “Hey, you did it here with zoos. Why can’t you do it here for us?'”
The loss of hotel-tax money for Parks in the coming year makes up a significant chunk of a roughly $200 million budget gap for next year, which Gimenez says will be closed by spending cuts rather than higher taxes. His administration has circulated plans for significant layoffs at the county’s libraries, and this week issued a memo asking county workers to accept a 10 percent cut to their base pay and a reduction in benefits.
As he weighs cuts tied to the county’s general fund, Gimenez also is juggling two requests from sports teams seeking subsidies from hotel taxes.
After failing to win an increase in hotel taxes last year for a stadium renovation, the Miami Dolphins want Miami-Dade to pay the team hotel-tax dollars for bringing Super Bowls, national and international sporting events, and major concerts to Sun Life. And on Tuesday, Miami-Dade commissioners are expected to vote on a new arena deal with the Miami Heat that would exchange a $1 million annual donation by the team to Parks for an extra five years of hotel-tax subsidies starting in 2031.
The current $6.4 million yearly subsidy to the Heat is funded out of hotel taxes, and it would increase to $8.5 million in 2031 under the proposed deal. The Heat pressed the mayor for 10 years of extended subsidies, but Gimenez said he only offered five out of concerns that future Marlins debt would strain hotel-tax revenue by 2040.
As the county’s hotel-tax surplus dwindled this year, Gimenez briefly floated the idea of asking voters to accept a new property tax to fund libraries, parks and cultural institutions. Though details were never revealed, the funding plan would have eased the pressure on hotel taxes, since cultural institutions — including museums and performance halls — account for more than a third of hotel-tax spending this year.
Gimenez said the new money would be earmarked mainly to keep children engaged after school, be it reading in a library, playing sports in a park or learning in a museum. Behind the scenes, the plan was pushed by Jorge Luis Lopez, a Gimenez confidante and member of the county’s Cultural Affairs Council who used to serve as head of Miami-Dade’s non-profit Parks Foundation.
Lopez also serves as the Heat’s top lobbyist. As the team and Gimenez neared a deal last month, Lopez had a polling firm ask residents about both the Heat agreement and recreational-tax plan.
In an interview, Lopez said his pursuit of recreational funds wasn’t tied to the Heat agreement, saying there was no talk of expanding the team’s current allocation of hotel taxes. “Timing doesn’t connect the two,” he said. “The Heat is not asking for any CDT dollars beyond what was already obligated.”
Lopez said his work exploring a potential campaign for a new tax started years ago and was most recently aimed at solving the library system’s funding problem. “It really is an ongoing conversation,” he said.
Gimenez eventually backed off the new-tax plan, and said in a statement this week: There “is simply no appetite to raise taxes at this time. Our residents and commissioners are opposed to higher taxes and as Mayor, I’m committed to holding the line on them and making our county government more efficient.”
Even with a booming tourism industry, hotel taxes could only offer limited relief to the county’s current fiscal strain. Using them also would involve a new set of difficult choices. About half of the hotel taxes collected in most years are pledged to debt payments, so those dollars can’t be spent without risking default on county bonds. Discretionary spending of hotel taxes underpins key cultural institutions that could be thrown into crisis without government help.
Hotel-tax law poses another challenge: Three different taxes contribute to the county’s 6 percent hotel tax, each with its own set of legal restrictions.
Stuart Blumberg, the retired head of a county hotel trade group, said he objects to funneling CDT to the parks department, saying state law excludes zoos from spending those dollars. “The language is what it is,” Blumberg said.
A smaller tax known as the Tourist Development Tax, or TDT, can be spent on zoos, but it generates about 70 percent less money than CDT does. The law allows CDT to be spent on “exhibition halls,” and Moon said county lawyers determined a zoo qualifies since it’s “one big animal exhibition.”
To free more general-fund dollars this year, County Hall diverted more hotel taxes than ZooMiami even needed. The 300-acre attraction in Southern Miami-Dade is budgeted to spend more than $18 million this year, but it receives $11 million in revenue from ticket sales, food sales, buggy rentals and other offerings.
The zoo relies on government dollars to fill that $7 million gap. But instead of swapping out general-fund money for $7 million in hotel taxes, the Gimenez administration sent the zoo $19 million in CDT, according to a summary provided by the Office of Management and Budget.
Another $3 million went to the Crandon Park Tennis Center on Key Biscayne, which usually is the lone recipient of hotel taxes in the parks department thanks to a regular subsidy of $1 million for the annual Sony tennis tournament, a large tourism draw. The Deering Estate received $2.7 million, and Tropical Park’s Equestrian Center received about $800,000, according to a Parks summary.
If County Hall can’t make up for the lost hotel taxes at Parks, the agency plans significant spending cuts next year. Already Kardys, the county’s Parks director, has cut back on lawn mowing for medians along county roads and is holding back on maintenance requests. He’s contemplating bigger cutbacks if the hotel taxes aren’t replaced in October.
“If there is not general-fund [money] to replace the CDT, then we certainly would look at closing parks,” said Kardys.
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