CAO 01-21 Altos del Mar
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CITY OF MIAMI BEACH
OFFICE OF THE CITY ATTORNEY
MEMORANDUM
TO: Jorge M. Gonzalez
City Manager
FROM: Murray H. DUbbi'll" ... 1:1\ IV
City Attorney J 'J'l ~W'
Lawrence A. ~-r1~. .JJ..tr"&
First Assistarttorney
SUBJECT: Altos del Mar
CMO No. 2-11/01
CAO No. 01- 21
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DATE:
, January 15. 2002
QUESTIONS:
By your Memorandum of November 7, 2001, you requested our advice as
to whether General Obligation Bond proceeds could be used to design and
construct improvements on the eleven (11) lots in Altos del Mar which the
City leases from the State of Florida (the "StateW). You also inquired as to
whether, in the event additional sources of funding are required, proceeds
of the Miami-Dade County Safe Neighborhood Park Bonds or the so-called
"Quality of life" funds portion of the Resort Tax could be used for such
purpose.
The above questions may be restated, and will be dealt with in this City
Attorney's Opinion, as follows:
1. May the proceeds of the $30,000,000 G.O. Bonds obtained from the
Gulf Breeze Bond Pool, or future issues of G.O. Bonds, be used to
improve leased property?
2. If so, is there any restriction regarding the term or terms of the
lease?
3. Are there any restrictions, with regard to improvement of leased
property, on the use of:
(a) Safe Neighborhoods Park Bonds (issued by Miami-Dade
County), or
(b) . The so-called "Quality of life W portion of the third one percent
of of the Resort Tax.
ANSWERS:
1.
The Loan Agreement dated as of June 1, 2000, among the City of
Gulf Breeze, Florida, Sun Trust Bank (as Trustee), and the City of
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Miami Beach. Florida (the "Gulf Breeze Loan Agreement"),
specifically requires that the projects to be financed with proceeds
of the funds borrowed under the Gulf Breeze Loan Agreement shall
be owned and operated by the City of Miami Beach (subject only to
lease or management agreements permitted in certain tax
certificates executed by the City at the time the loan was closed).
The City may want to discuss with counsel to the Gulf Breeze Bond
Pool the possibility of amending the Gulf Breeze Loan Agreement to
allow improvements on property leased from another governmental
. unitT-he .Gity could also issue G.O. Bonds for the purposes
authorized under the existing G.O. Bond authorizations, without the
restriction that is in the.Gulf Breeze Loan Agreement.
2. The issue of whether the remaining term of the lease should be at
least as long as the payback period (Le., the final maturity) of the
G.O. Bonds allocated to such project is more a matter of sound
fiscal policy than one of law. We have found no such requirement
under Florida law, and although there are some limitations on the
term of financing under the applicable federal tax law, they are
generally not troublesome in the context of G.O. Bond financing.
3. (a) Miami-Dade County Ordinance No. 96-115, adopted July 16,
1996 provides that no Safe Neighborhoods Park Bonds funds may
be disbursed, under said Ordinance, to a recipient unless the
recipient agrees to maintain and operate in perpetuity the property
acquired, developed, improved, rehabilitated or restored with the
funds, except where leases are in effect. The Miami-Dade County
Office of the County Attorney has advised us that such funds, to the
extent available for such purpose, may be used to improve property
leased from the State of Florida, as more fully discussed below.
(b) The fact that the property to be improved with proceeds of
the so-called "Quality of Life" portion of the Resort Tax is leased
does not present a problem, however, the proceeds of the "Quality
of Life" portion of Resort Tax may be used only for "creating and
maintenance of convention and publicity bureaus, cultural and art
centers, enhancement of tourism, publicity and advertising purposes,
and for the future cost, purchase, building, designing, engineering,
planning, repairing, reconditioning, altering, expanding, maintaining,
servicing and otherwise operating auditoriums, community houses,
convention halls, convention buildings or structures, and other
related purposes, including relief from ad valorem taxes heretofore
levied for such purposes." [emphasis added] Chaoter 67-930. Laws
of Florida, as amended. Thus, the "Quality of Life" portion of Resort
Tax could only be used to improve the Altos del Mar properties if the
result would be the enhancement of tourism. This is a factual
question to be determined by the Mayor and City Commission.
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DISCUSSION:
Among the projects enumerated in the original listing of projects for the City's $24,830,000
General Obligation Bonds (the "G.O. Bonds"), for improvements to parks and beaches was
$3,200,000 for North Shore Open Space Park. Included within that funding was an allocation for
expansion into Altos del Mar. The expansion plan included conversion to a passive park of eleven
contiguous lots in Altos del Mar (the "Lots"), renovation or moving historic structures, provision for
infrastructure and extension of Ocean Terrace to 76th Street. See Exhibits A and B hereto. At the
time the G.O. Bonds were approved, it was contemplated that the City would obtain fee simple
legal title to the Lots from the State of Florida. Legal title to the Lots has not yet been obtained and
the City has no absolute assurance, as of the date of this Opinion, that such legal title will be
- forthcoming in the foreseeable future. This City Attorney's Opinion discusses various funding
options with respect to the aforesaid project.
1. The Loan Agreement dated as of June 1, 2000, among the City of Gulf Breeze,
Florida, SunTrust Bank (as Trustee), and the City of Miami Beach, Florida (the "Gulf Breeze Loan
Agreement"), specifically requires that the projects to be financed with the proceeds of the funds
borrowed under the Gulf Breeze Loan Agreement shall be owned and operated by the City of
Miami Beach (subject only to lease or management agreements permitted in certain tax certificates
executed by the City at the time the loan was closed). Thus, under the current terms of the Gulf
Breeze Loan Agreement, the City cannot utilize moneys borrowed under said Loan Agreement to
fund the proposed Altos del Mar improvements because the City does not have legal title to the 11
contiguous lots. The City may want to discuss with counsel to the Gulf Breeze Bond Pool the
possibility of amending the Gulf Breeze Loan Agreement to allow improvements on property leased
from another governmental unit. The City could also issue G.O. Bonds for the purposes authorized
under the existing G.O. Bond authorizations, without the restriction that is in the Gulf Breeze Loan
Agreement.
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It should be noted that even if the City were to obtain agreement from the City of Gulf
Breeze to finance improvements on land leased from the State of Florida, or if the City were to use
the proceeds of another series of G.O. Bonds issued under the current authorization, such
financing would still be subject to the tax covenants contained in the bond documents; specifically
the restrictions on "private use" of the financed improvements. In other words, the proceeds must
be used only for "public" projects. Thus, for example, if the City included as part of the Altos del
Mar improvements restoration of one of the historic buildings on the property for lease to a private
restaurant operator, such use would be "private use" and the use of tax-exempt G.O. Bond
proceeds could be precluded. The rules governing the tax exemption with respect to such bond
proceeds also preclude management contracts with private parties unless they fit within specific
guidelines. See, 26 U.S.C.A. ~141 and Rule 1.141 of the regulations promulgated thereunder. In
the case of any such use of tax-exempt bond proceeds in any situation involving leases or
management contracts with private parties in the bond financed improvements, this Office should
be consulted in advance in order to determine whether such arrangements are violative of the bond
covenants.
As an alternative to using proceeds of the Gulf Breeze Loan for the proposed project on the
Lots, the administration may want to consider waiting until the next series of G.O. Bonds is issued,
and borrowing from a source that does not require such a restriction.
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2. With regard to the issue of whether the term of any G.O. Bonds used to improve
leased property must equal or exceed the remaining term of the lease, we have not found any
requirement for such in Florida law. However, there are some restrictions under the Federal tax
laws related to the issuance of tax-exempt bonds. These are best addressed in a specific factual
setting and are generally not troublesome, except when dealing with the financing of equipment.
The concept that a project should not be financed beyond its useful life is related more to sound
fiscal policy than to law. The concept is that future generations should not pay for improvements
from which they receive no benefit (Le., projects that have a useful life that is shorter than the
period over which they are financed). In the case o(~ project constructed on leased property, the
useful life of the projects should not exceed the remaining term of the lease, since the City, as
lessee, would not be assured dominion and control (Le., use) of the improvements in the event of
non-renewal of the lease.
3(a). The issue of whether or not the proceeds of the Safe Neighborhoods Park Bonds
may be used to improve leased property is a question for Miami-Dade County, since it is the issuer
of those bonds. On December 14, 2001, at 2:10 p.m., Lawrence Levy spoke with Gerald T.
Heffernan, Assistant County Attorney as to the interpretation of the language contained in Section
6(a)(2) of Miami-Dade County Ordinance No. 96-115, which authorized the issuance of the Safe
Neighborhoods Park Bonds. Said Section provides that:
"(a) No funds authorized under Section 3 may be distributed to any recipient
unless the recipient agrees:
2. To maintain and operate in perpetuity the property acquired,
developed, improved, rehabilitated or restored with the
funds, except where leases are in effect." [emphasis added]
Mr. Heffernan advised us that the language, "except where leases are in effect." was
included in the above-quoted portion of Miami-Dade County Ordinance No. 96-115 specifically to
cover the situation where a municipality leased property from another party for park purposes.
Further, he advised that the proceeds of the Safe Neighborhoods Park Bonds are treated as a
grant to the City. Thus, to the extent that the City has Safe Neighborhoods Park Bonds proceeds
that may be allocated to the Altos del Mar project under its grant arrangement with Miami-Dade
County, such proceeds may be used to improve property leased from the State of Florida.
3(b) The Resort Tax is levied and collected by the City under the authority of Chapter 67-
930, Laws of Florida, as amended, and Ordinance No. 1727 (codified as Section 43 1/2 of the
Miami Beach City Charter and Chapter 41, Article V of the Code, as amended). Such provisions
are presently contained within Sections 102-306 through 102-322 of the Code of the City of Miami
Beach.
With regard to the use of Resort Tax proceeds for the subject project, the use of such
funding is limited to certain purposes. Subject to the payment of Resort Tax Bonds and Tax
Increment Bonds, to which the Resort Tax has been previously pledged, the third one percent of
the Resort Tax (the "Additional One Percent"), may be used for the following purposes only:
"creating and maintenance of convention and publicity bureaus, cultural and art centers,
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enhancement of tourism, publicity and advertising purposes, and for the future cost, purchase,
building, designing, engineering, planning, repairing, reconditioning, altering, expanding,
maintaining, servicing and otherwise operating auditoriums, community houses, convention halls,
convention buildings or structures, and other related purposes, including relief from ad valorem
taxes heretofore levied for such purposes." [emphasis added] Chapter 67-930. Laws of Florida,
as amended.
Chapter 67-930, Laws of Florida, authorized the imposition of a two percent (2%) tax (the
"Resort Tax") on the rent for occupancy of certain facilities and for food and beverages sold for
consumption on certain premises. Chapter 67-930 was amended by Chapter 82-142, Laws of
Florida, to provide that a municipality could increase the amount of the Resort Tax to three percent
(3%), upon adoption of a charter amendment prior to January 1, 1983. A year later, Chapter 83-
363, Laws of Florida. removed the time limit for adoption of the charter amendment and increased
the maximum rate of the Resort Tax to four percent (4%).
In 1992, the City Commission approved the holding of a referendum (pursuant to Resolution
No. 92-20574), in which the voters approved a one percent (1%) increase in the Resort Tax by a
margin of 13jQ88 to 8,440. The Additional One Percent was to be expended as follows:
"(A) 50% for public incentives for convention center headquarters
hotel development, and upon retirement of all debt related thereto,
to be used as in (8) below;
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(B) 50% for promotion of tourism related activities and facilities, and
developing, improving and maintaining tourism related public
facilities.
The uses listed in (8), above, for one-half of the Additional One Percent were described in
Commission Memorandum No. 619-92 as "quality of life" improvements. The referendum was
implemented by Ordinance No. 93-2829. The so-called "quality of life" funds are divided into three
equal portions which are allocated for projects in South Beach, Mid Beach and North Beach.
There is no specific prohibition against using the North Beach portion of the "quality of life"
funds to improve property leased by the City from the State of Florida. The resolution authorizing
any project that is to be funded from this source, however, should contain findings demonstrating
how the project comports with the above-described purposes, and such findings should be
incorporated as legislative findings and determinations in the body of the resolution. Unless the
legislative findings and determinations can be shown to have been arbitrary and capricious, the
resolution authorizing the expenditure of the North Beach portion of the Additional One Percent of
the Resort Tax will be upheld if subjected to a judicial challenge. Miller v.' City of Indian Harbour
Beach, 453 SO.2d 107 (Fla.App. 5 Dist.. 1984); City of Miami v. Kayfetz, 92 SO.2d 798 (1957).
cc: Mayor David Dermer and
Members of the City Commission
Robert Middaugh, Assistant City Manager
Patricia D. Walker, Chief Financial Officer
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