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2002-24881 Reso RESOLUTION NO. 2002-24881 A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, ACCEPTING THE RECOMMENDATION OF THE FINANCE AND CITYWIDE CAPITAL PROJECTS COMMITTEE AND APPROVING THE MIAMI BEACH BUSINESS ASSISTANCE PROGRAM, AS ATTACHED AS EXHIBIT "A" TO THIS RESOLUTION, SUBJECT TO FUNDING AS PART OF THE FISCAL YEAR 2003 BUDGET PROCESS. WHEREAS, the economy of the City is driven by the tourism industry; and WHEREAS, the City has endeavored to diversify its economic base; and WHEREAS, the entertainment industry has contributed to the City's economic diversification and the development of an office market; and WHEREAS, a significant amount of new office space will be developed in Miami Beach between 2002 and 2004; and WHEREAS, due to regional and national economic conditions the City's office market has 25% vacancy; and WHEREAS, the attraction of companies and corporate headquarters provides a significant positive economic impact; and WHEREAS, in order to attract this type of company the City must compete with other locations where operating costs are lower; and WHEREAS, the City must explore methods to incentivize a company's relocation to Miami Beach; and WHEREAS, the Administration has developed a Miami Beach Business Assistance Program; and WHEREAS, the Finance and Citywide Project Committee met on March 19. 2002 and recommended changes to the proposed Miami Beach Business Assistance Program; and WHEREAS, the Finance and Citywide Project Committee met on April 8, 2002, to again discuss the proposed Miami Beach Business Assistance Program; and WHEREAS, the Finance and Citywide Project Committee met on May 20, 2002, to again discuss the proposed Miami Beach Business Assistance Program and recommended approval of the Program, attached as Exhibit "A" hereto, subject to funding in the Fiscal Year 2003 budget. NOW, THEREFORE, BE IT RESOLVED BY THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, that the Miami Beach Business Assistance Program be approved, attached as Exhibit "Au to this Resolution, subject to funding as part of the Fiscal Year 2003 budget process. PASSED and ADOPTED this 29th May ,2002. Mayor ATTEST: JlflAMo f~ City Clerk T:'AGENDA12002IMAY2902IREGULARIBAP RESO.DOC APPROVED AS 1'0 FORM & LANGUAGE & FOR EXECUTION )- '); <-/'dJ -' DIIe Exhibit 'A' lQ Miami Beach Business Assistance Program The City of Miami Beach is available to assist qualified businesses to apply for one or more of the business assistance programs listed below. The City of Miami Beach will prepare an incentive package proposal to offer eligible projects, based on the availability of City resources. A prospective company's adoption of the City of Miami Beach's living wage, domestic partnerships and human rights policies will be considered as additional criteria regarding demonstrated benefits for the relocation to Miami Beach. Purpose: Incentive Amount: Business Recruitment and Retention Maximum of $3,000 per new job Incentive Programs Available: Qualified Targeted Industry (State) Quick Response Training (State) Road Fund (State) Enterprise Zone (State/County) Historic Property Tax Abatement (County) Historic Preservation Tax Credits (Federal) Miami Beach Business Assistance Program (Local) Taraeted Industries (Local): Corporate Headquarters Business Services Music and Television Taraeted Industries (State): Corporate Headquarters Rubber and Misc, Plastics Industrial Machinery Instruments and Related Wholesale Distribution Insurance Carriers Communications Furniture and Fixtures Research and Development Security and Commodities Communications Research and Development Primary Metal Industries Electronic Equipment Manufacturing Business Services Non-Depository Credit Inst Apparel and other Textiles Paper and Allied Products Printing and Publishing Non-Depository Credit Inst Architecture/Engineering Chemicals and Allied Products Fabricated Metal Products Transportation Equipment Printing and Publishing Security and Commodities Motion Pictures (Studios) Lumber and Wood Products Stone Clay and Glass Retail activities, utilities, banking, mining and other extraction or processing businesses, and activities regulated by the Division of Hotels and Restaurants are excluded from consideration, Eligibility Criteria for Local Assistance Requirements: 1. Be in a targeted industry; 2. Commit to compliance with City of Miami Beach ordinances and State of Florida Building Codes 3. Demonstrate the ability of the project to enhance the local tax base. 4. Enter into a "First Source Hiring Agreement" with the City; 5. Have a minimum net worth of $1 million and annual sales of at least $2.5 million, or, have a minimum net worth of $1 million and have been in business for a minimum of five (5) years. 6. The business must not have executed a lease for space in Miami Beach. Eligibility for incentives will be based on the scoring criteria listed after each item below. The final recommended incentive amount will be based on the final score. 90-100 points 75-90 points 60-75 points 0-60 points $3,000 per job $2,000 per job $1,000 per job Does not qualify 1. Pay an average wage that is at least 115% ($34,452) of the average wage of the Metropolitan Statistical Area (10 points); 2. Create a minimum of 50 new jobs in Miami Beach (35 points); 3. Show that the jobs make a significant economic contribution to the area economy (10 points); 4. Lease a minimum of 7,500 square feet (35 points); 5. Demonstrate strong commitment with at least 10 years contractually committed to the lease (or ownership) (10 points); The Miami Beach Business Assistance Program is available only to "new to market" businesses that create new jobs in Miami Beach. This program is not available for expansion and/or retention. The City of Miami Beach and the Beacon Council will work with expanding or retaining businesses through the established State of Florida programs. *Incentive amounts will be a maximum of $3,000 per new job created, and will be paid out over a period of five (5) years. The maximum amount that will be paid out in anyone-year period is $2 per square foot of leased space. Any remaining amount above $2 per square foot will be paid out during the years following the initial five-year payout period, subject to approval of the City of Miami Beach. Businesses that participate in the Miami Beach Business Assistance Program will be required to document that they meet the above criteria and submit employment and payroll reports on an annual basis to the City for verification of the number of jobs that were created and retained during that period. Any reduction in jobs will result in a proportionate' reduction in the incentive amount. Qualified Target Industry Program This program provides an incentive for target industries to locate new business in Florida. The program provides tax refunds of $3,000 ($5,000 in an enterprise zone) per new job created. For a new business, at least ten new jobs must be created (10% increase for expansion projects), and the business must pay at least 115 percent of the average wage. Significant economic impact must be demonstrated by the project. Quick Response Training Program This is a customer driven training program designed as an inducement to secure new businesses to Florida as well as provide existing businesses the necessary training for expansion. Road Fund This is an incentive tool designed to alleviate transportation problems that adversely impact a specific company's location or expansion decision. The elimination of the problem must serve as an inducement for a specific company's location, retention, or expansion project and must create or retain job opportu nities. Enterprise Zone The enterprise zone is an area targeted for economic revitalization, and offers financial incentives to businesses located in designated areas found in urban and rural communities. These incentives are offered to encourage private investment in the zones as well as employment opportunities for area residents. Incentives include: a jobs tax credit, property tax credit, sales tax refunds, and property tax abatements. Historic Property Tax Abatement (County) This program allows for the 10-year abatement of the County's ad valorem taxes on the value of improvements made to historic properties. Historic Preservation Tax Credits This federal program provides Federal Tax Credits of 10% and 20% for the renovation of historic properties, provided that they meet certain preservation guidelines. Attachment 'A' lQ Miami Beach Business Assistance Program The City of Miami Beach is available to assist qualified businesses to apply for one or more of the business assistance programs listed below. The City of Miami Beach will prepare an incentive package proposal to offer eligible projects, based on the availability of City resources. A prospective company's adoption of the City of Miami Beach's living wage, domestic partnerships and human rights policies will be considered as additional criteria regarding demonstrated benefits for the relocation to Miami Beach. Purpose: Incentive Amount: Business Recruitment and Retention Maximum of $3,000 per new job Incentive Programs Available: Qualified Targeted Industry (State) Quick Response Training (State) Road Fund (State) Enterprise Zone (State/County) Historic Property Tax Abatement (County) Historic Preservation Tax Credits (Federal) Miami Beach Business Assistance Program (Local) Taraeted Industries (Local): Corporate Headquarters Business Services Music and Television Taraeted Industries (State): Corporate Headquarters Rubber and Misc. Plastics Industrial Machinery Instruments and Related Wholesale Distribution Insurance Carriers Communications Furniture and Fixtures Research and Development Security and Commodities Communications Research and Development Primary Metal Industries Electronic Equipment Manufacturing Business Services Non-Depository Credit Inst. Apparel and other Textiles Paper and Allied Products Printing and Publishing Non-Depository Credit Inst Architecture/Engineering Chemicals and Allied Products Fabricated Metal Products Transportation Equipment Printing and Publishing Security and Commodities Motion Pictures (Studios) Lumber and Wood Products Stone Clay and Glass Retail activities, utilities, banking, mining and other extraction or processing businesses, and activities regulated by the Division of Hotels and Restaurants are excluded from consideration, Eliaibilitv Criteria for Local Assistance Requirements: 1. Be in a targeted industry; 2. Commit to compliance with City of Miami Beach ordinances and State of Florida Building Codes 3. Demonstrate the ability of the project to enhance the local tax base. 4. Enter into a "First Source Hiring Agreement" with the City; 5. Have a minimum net worth of $1 million and annual sales of at least $2.5 million. or, have a minimum net worth of $1 million and have been in business for a minimum of five (5) years. 6. The business must not have executed a lease for space in Miami Beach. Eligibility for incentives will be based on the scoring criteria listed after each item below. The final recommended incentive amount will be based on the final score. 90-100 points 75-90 points 60-75 points 0-60 points $3,000 per job $2,000 per job $1,000 per job Does not qualify 1. Pay an average wage that is at least 115% ($34,452) of the average wage of the Metropolitan Statistical Area (10 points); 2. Create a minimum of 50 new jobs in Miami Beach (35 points); 3. Show that the jobs make a significant economic contribution to the area economy (10 points); 4. Lease a minimum of 7,500 square feet (35 points); 5. Demonstrate strong commitment with at least 10 years contractually committed to the lease (or ownership) (10 points); The Miami Beach Business Assistance Program is available only to "new to market" businesses that create new jobs in Miami Beach. This program is not available for expansion and/or retention. The City of Miami Beach and the Beacon Council will work with expanding or retaining businesses through the established State of Florida programs. *Incentive amounts will be a maximum of $3,000 per new job created, and will be paid out over a period of five (5) years. The maximum amount that will be paid out in anyone-year period is $2 per square foot of leased space. Any remaining amount above $2 per square foot will be paid out during the years following the initial five-year payout period, subject to approval of the City of Miami Beach. Businesses that participate in the Miami Beach Business Assistance Program will be required to document that they meet the above criteria and submit employment and payroll reports on an annual basis to the City for verification of the number of jobs that were created and retained during that period. Any reduction in jobs will result in a proportionate reduction in the incentive amount. Qualified Target Industry Program This program provides an incentive for target industries to locate new business in Florida. The program provides tax refunds of $3,000 ($5,000 in an enterprise zone) per new job created. For a new business, at least ten new jobs must be created (10% increase for expansion projects), and the business must pay at least 115 percent of the average wage. Significant economic impact must be demonstrated by the project. Quick Response Training Program This is a customer driven training program designed as an inducement to secure new businesses to Florida as well as provide existing businesses the necessary training for expansion. Road Fund This is an incentive tool designed to alleviate transportation problems that adversely impact a specific company's location or expansion decision. The elimination of the problem must serve as an inducement for a specific company's location, retention, or expansion project and must create or retain job opportunities. Enterprise Zone The enterprise zone is an area targeted for economic revitalization, and offers financial incentives to businesses located in designated areas found in urban and rural communities. These incentives are offered to encourage private investment in the zones as well as employment opportunities for area residents. Incentives include: a jobs tax credit, property tax credit, sales tax refunds, and property tax abatements. Historic Property Tax Abatement (County) This program allows for the 10-year abatement of the County's ad valorem taxes on the value of improvements made to historic properties. Historic Preservation Tax Credits This federal program provides Federal Tax Credits of 10% and 20% for the renovation of historic properties, provided that they meet certain preservation guidelines. Attachment 'B' Miami Beach Office Market The City's office market experienced significant, rapid shifts in the late 1990's. Fueled by the expansion of the entertainment and new media industry, the need for additional inventory of Class "A" office space was identified by many investment interests. Unfortunately, due to factors beyond the City's control (the dot-com collapse, nationwide recession, softening of the South Florida office market), the City now faces a 25% office vacancy rate, with approximately 400,000 additional square feet that will come on line in the next two years. Back in the late 1990's, the Mayor's Economic Council, along with many other individuals and groups, identified the continued diversification of the local economy as a priority. Just as important to diversification of the overall economy is the diversification of each economic sector. The visitor industry is diverse in that it is domestic and international; European and Latin American; flags, luxury, boutique and budget properties; with nightlife, dining, and recreation activities. The retail market is diverse as well, from upscale fashion to neighborhood services and a diverse customer base that is local, regional and tourist. The office market, however, has not yet evolved to the point of stabilization through diversity. This market is primarily entertainment industry and health care, along with traditional local users such as attorneys and accountants. These industries do not appear to provide enough growth potential to absorb the existing and near-term vacancies that the City's office market is facing. In 2000, the new media sector of the Miami Beach entertainment industry reached its peak, as the local office market matured into one of the most desired office addresses in South Florida. There were 22 new media companies occupying 145,563 square feet, with 714 full-time and 162 part-time employe:es. By 2001, 16 of the 22 new media companies operating in Miami Beach in 2000 had dissolved due to market conditions. Two companies started operations in 2001, leaving an industry segment of only 8 companies, occupying 30,500 square feet, with only 209 full-time and 20 part-time employees. This downturn in the industry resulted in the loss of 115,063 square feet of the City's 1.4 million square feet office market. Additionally, the softening of the overall South Florida office market has resulted in a reported January 2002 office vacancy rate of 25% in Miami Beach. This is compared to 11 % in January 2001 and 6% in January 2000. Additionally, on March 5, 2002 the Daily Business Review reported that PSN USA, a pan-regional Latin American cable sports network, filed for Chapter 11 bankruptcy protection, The company, which had 162 employees at the beginning of 2002, is down to 22 workers, and went off the air in early March. PSN USA has leased 55,000 square feet at 420 Lincoln Road. The two reasons given for the company's troubles are the costs of broadcast rights for various sports events, and the financial crisis in Argentina. Argentina represented 49% of the company's revenues. This latest development will have additional impact on the vacancy rate in the City's office market. An additional challenge for the City of Miami Beach is the result of the significant growth and demand increase in the local office market from 1998 to 2000. There are currently 7 office-building projects under development in Miami Beach. These projects will add 371,900 additional square feet into the existing office inventory of 1.56 million square feet, for a total of 1,931,227 square feet. The current citywide vacancy rate is approximately 23%. A summary of the Miami Beach office market is detailed in Attachment 'B'. Although the late 1990's growth of the entertainment industry branded Miami Beach as a business center, the perception is still limited to entertainment and local services. Miami Beach is a world-class City with high quality of life, residential and business amenities, and services. T:\AGENDA\2002\MA Y0802\REGULAR\BAP Miami Beach Office Market.do<: CITY OF MIAMI BEACH COMMISSION ITEM SUMMARY m -- Condensed Title: Resolution approving the Miami Beach Business Assistance Program (BAP), subject to funding of the program as part of the FY 2003 budget. Issue: The development of new inventory of office space in the City has created the need for the City to develop a program to attract companies and corporate headquarters to the City, The Administration has identified potential funding sources for the Miami Beach Business Assistance Program to be considered as part of the FY 2003 budget and recommends approval of the BAP subject to City Commission approval of this program in next year's budget. Item Summary/Recommendation: Approve the Miami Beach Business Assistance Program, subject to funding ofthe program in the FY 2003 budget Advisory Board Recommendation: The Finance Committee met on March 9, 2002, April 8, 2002, and May 20, 2002 and recommended approval, subject to funding and implementation in the FY 2003 budget Financial Information: Amount to be expended: D Finance Dept Source of Funds: 51 T:\A ENDA\2002\APR1002\REGULAR\Busine s Assistance Program Summary,doc AGENDA ITEM ;;;7 J DATE S-.,t 9-0J... CITY OF MIAMI BEACH CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH. FLORIDA 33139 http:\\ci,miami-beach,fl,us COMMISSION MEMORANDUM To: Mayor David Dermer and Members of the City Commission Date: May 29, 2002 From: Jorge M, Gonzalez City Manager o~ A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, APPROVING THE MIAMI BEACH BUSINESS ASSISTANCE PROGRAM, SUBJECT TO FUNDING OF THE PROGRAM IN THE FISCAL YEAR 2002/2003 BUDGET. ADMINISTRATION RECOMMENDATION Subject: Adopt the resolution. ANALYSIS On February 20, 2002 the Mayor and City Commission referred a discussion relative to LNR Property Corporation's relocation to City of Miami Beach to the Finance and Citywide Projects Committee. During the meeting, the Commission specifically requested that the Administration evaluate developing a business assistance program with emphasis on the local office market. On April 8, 2002, the Finance and Citywide Projects Committee recommended that the Administration negotiate an incentive package for LNR Property Corporation (LNR), subject to the approval and funding of the Miami Beach Business Assistance Program (BAP). On May 20, 2002, the Finance and Citywide Projects Committee discussed modifications to the Miami Beach Business Assistance Program. Changes include an increase in mandatory requirements and modifications to the point system, that the program not be available for expansion and retention and will only be available to "new to market" companies that create new jobs in Miami Beach. The Finance and Citywide Project Committee unanimously recommended approval of the BAP subject to funding in the FY03 budget. Additional information on the Miami Beach Office Market is attached for review. Based on current revenue and expenditure projections, funding for the BAP is not expected to be available in the current fiscal year. The Administration is considering two funding sources for this program for the FY03 budget. One potential source is a portion of the ground rent that will be paid to the City by the two public/private office projects (Lincoln Place and The Lincoln), and the Administration is exploring whether or not Redevelopment Agency funds may be used for this program. Miami Beach Business Assistance And Potential Incentive ProQrams The City of Miami Beach Economic Development Division provides assistance to businesses and investors interested in establishing operations or expanding in Miami Beach, with emphasis on small business, retail, hotels and the entertainment industry. Services include extensive real estate and market information, resident and visitor demographics, spending habits, and enterprise creation. Additionally, the Division works closely with programs offered by the Small Business Administration, the Small Business Development Centers and the South Florida Regional Planning Council. During the past few years, end-user industries such as hotels, restaurants and retail stores have not approached the City seeking local incentives, due to the strength of the City's consumer markets. Additionally, the South Beach brand was essential to the majority of the entertainment industry tenants that have occupied office space in the City. The main incentive program used throughout the State is the Qualified Target Industry Program (QTI), which provides businesses with tax refunds of $3,000 per new job ($6,000) in an Enterprise Zone. Corporate headquarters are a targeted industry, and to be eligible, a business must apply to the program before a final relocation decision is made. Any new jobs that result from an expansion of Miami Beach operations will be eligible for this program. Some South Beach office buildings are located in the Miami Beach Enterprise Zone, and businesses leasing space in them are eligible to apply for Enterprise Zone benefits as well. However, the majority of these incentives are triggered by how many employees live in an Enterprise Zone, and it appears that very few of the targeted industries will meet that criteria. The majority of these office buildings are also located in Community Redevelopment Areas, and are therefore not eligible to apply to the County for the abatement of Ad Valorem taxes, but may apply for the abatement of personal property taxes. The Administration is also in development of a joint marketing program to promote the local real estate market to potential investors and tenants, with strong focus on the office market. This will be a joint program between the City, the Beacon Council, Enterprise Florida, local property owners and developers. MIAMI BEACH BUSINESS ASSISTANCE PROGRAM (BAP) The proposed Miami Beach Business Assistance Program (BAP), as detailed in Attachment "A', was developed as an additional incentive program that will enhance the City's ability to attract companies and corporations to Miami Beach, creating new jobs and generating substantial economic impact. Included in this program is a list of the industries that are targeted by the State of Florida, as well as a list of proposed industries to target through the BAP. This includes industries such as corporate headquarters, business services, security and commodities, architecture and engineering, communications, credit institutions, motion pictures, and research and development. In order to qualify, a business must meet the criterion that is proposed for the Program. Applying businesses will be rated on a point system for each of five criteria. The final number of points will determine whether the business qualifies for assistance, as well as the level of assistance (between $1,000 and $3,000 per new job) that will be provided. In order to qualify, a prospective business must create a minimum of 50 new jobs and lease a minimum of 7,500 square feet. A complete list of the proposed criteria can be found in Attachment 'A'. Based on the scoring criteria, incentive amounts will be a maximum of $3,000 per new job created and will be paid out over a period of five (5) years, with a maximum per-year amount of $2 per square foot of leased space. The incentive amount is capped at $2 per square foot in order to preserve the integrity of the assistance fund for additional businesses that apply to the program throughout the year. Any remaining amount will be paid out during the years following the initial five-year payout period, at the City's sole discretion. The Administration is exploring the use of a portion of the ground rent from the two public/private office projects (Lincoln Place and The Lincoln) as one potential funding source for the BAP, beginning with the FY 2003 budget. The Administration is also exploring whether or not Redevelopment Agency funds may be used for this purpose. During the 2002 Florida Legislative Session, the City was successful in getting legislation amended to include the City of Miami Beach. This legislation would return to the City 50% of the sales taxes generated by the Convention Center, specifically for the recruitment and retention of high-tech, research, development and tourism industries. Unfortunately, given the current fiscal situation in Tallahassee, this effort was unsuccessful this year. The City will aggressively pursue this concept during the 2003 Legislative Session, and depending on final definitions, this legislation could provide the City with an annual recurring appropriation for business recruitment of between $250,000 and $840,000. Business Expansion - State of Florida ProQrams On April 24 City staff met with representatives of the Beacon Council to discuss other incentives that may be available to assist the relocation of corporations to Miami Beach. Depending on location and average annual wages, the State of Florida's Qualified Target Industry Tax refund program can provide up to $8,000 per expanded job, provided that the business create at least 80% of their projected jobs in three years and the project meets certain economic impact criteria. A 20% local match is required for this program, which has historically been funded by Miami-Dade County, not the municipality. Additionally, the City has the opportunity to apply for up to $2 million from the State of Florida "Road Fund". This fund is set up to provide assistance to local governments for transportation improvements needed to serve new development. The City will evaluate prospective business relocations applicability and submit applications to this program for infrastructure projects that may qualify, depending upon the location of the proposed business. The Beacon Council will assist the City in aggressively pursuing both the QTI and Road Fund applications. Miami-Dade County is developing an additional incentive for other areas ofthe County that will provide up to $1 ,750 per new job in those areas. Although projects in Miami Beach are not eligible for this program, it is similar to the City's BAP proposal in that it recognizes the need to enhance the competitiveness of the location. Miami-Dade County's annual line-item in the budget for the QTI match as well as the additional incentive is in excess of $1 million. Any application for QTI in the future would be funded 80% by the State and 20% by the County. The County will view the City's BAP as a favorable inducement for their participation in the State match requirement. CONCLUSION Consideration of a BAP or some other expanded economic development efforts should be considered in the context of the FY03 Budget considerations. Options for funding for the BAP in the FY03 budget have been looked at and will be considered during the budget discussion over the summer. Subject to approval and funding of the BAP, the Administration recommends that the Mayor and City Commission approve the Miami Beach Business Assistance Program. JMG/CMC/kc Attachment A - Miami Beach Business Assistance Program Attachment B - Miami Beach Office Market T:'AGENDA12002IMAYOe02\REGULARlBusiness Assistance Program Memo and Reso.doc