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165-2000 LTC .. CITY OF MIAMI BEACH CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH, FLORIDA 33139 http:\\cLmiami-beach.fl.us L.T.C. NO.165-2000 LETTER TO COMMISSION August 17, 2000 SUBJECT: Mayor Neisen 0, Kasdin and Members of the City Co~irn Lawrence A. Levn ~~ CityM~\,,). BUSINESS IMPROVEMENT DISTRICT FOR SOUTH BEACH TO: FROM: The City of Miami Beach in conjunction with the Ocean Drive Association and various South Beach property owners commissioned the BRV Corporation of New York to analyze the issues relating to the establishment of a Business Improvement District for South Beach. The report also recommended respective roles and responsibilities for both the public and private sectors. The BRV Corporation is headed by Mr. Dan Biederman, who headed the highly successful Grand Central Partnership and the revitalization of Bryant Park in New York City. The report strongly endorses the establishment of a Business Improvement District for South Beach under one organization with separate district boards for Ocean Drive, Collins Avenue, Lincoln Road and Washington Avenue. According to the study, the unique nature of South Beach as a premier entertainment and tourist area mandates a more aggressive approach to community maintenance and advocacy. In order to ensure a continuation of the revitalization efforts that have transformed South Beach, a new partnership between the private sector and City needs to be established that will create a more effective way to address community issues and deploy both public and private resources. The attached study which the City provided one third of the cost ($10,000) will be reviewed by the City and community leaders to determine potential implementation of the concepts delineated in the report. The Administration in conjunction with the Ocean Drive Association and other South Beach business organizations will hold a community workshop to discuss recommendation of the study and poss~lementation strategies. LA~am F:\CMGR\$ALL\L TC-OOIBRVCORP.LTC . t: >" , . BRINGING MANAGEMENT DISTRICTS BACK TO SOUTH BEACH Prepared by BRV Corp. July, 2000 , ~ . CONTENTS Executive Summary 1 Should the City of Miami Beach Have Business Improvement Districts? 2 Which District Should Go First? 4 District Program/City Baseline 7 How Should the Districts be Organized? 15 Draft District Expense Budgets 17 How Should the Districts be Managed? 20 How Should the City be Involved in District Management? 21 How Should the BIDs' Program be Financed? 23 Appendix A - Interviews Conducted 28 , , ..' 1. Executive Summary The Ocean Drive Improvement Association, aided by Lincoln Road property owners and the City of Miami Beach, commissioned BRV Corp. to determine whether and how business improvement districts should be brought back to South Beach. In this report, the return of BIDs is recommended, led by the well-organized Ocean Drive and the elaborately designed but fragile Lincoln Road, and followed by the complex and varied length of Collins Avenue. Washington Avenue should be deferred until later, but a special program of city-financed coverage for the avenue's security needs is called for, a program that would also improve conditions on the other boulevards. The detailed program of services and some capital improvements recommended for each district is ambitious, due to the remarkably long pedestrian day in South Beach. To fund this expensive effort, BRV recommends a switch to a bulk-based assessment method, and exploitation of several innovative revenue sources made possible by the prominence of South Beach as a taste-maker and entertainment center. As to the new districts' organization, we recommend three separate boards of directors but one common staff or management company. These private entities should be free of government interference, but work with one or two city executives to coordinate service delivery. To make this possible, the City's match for its BIDs' effort would be a well-funded - increase in 24-hour security effort on Washington Avenue and at other high-traffic spots. II. Should the City of Miami Beach Have Business Improvement Districts? why: 0127miami The answer here, not surprisingly, is a resounding "yes". There are six good reasons I. Miami Beach is, with the possible exception of Las Vegas, the closest thing to l! 24-hour citv in North America. The popularity of South Beach to tourists, conventioneers, new residents, and the region's night life-seekers imposes Herculean workloads on the city's service providers. For example, litter is deposited on Washington Avenue, Lincoln Road, and Ocean Drive all day long - or at least, from 8:00 a.m. through 6 a.m., I a.m., and 3 a.m., respectively. Barring two ten-hour shifts, a deyice we've employed in New York's 34th Street but one not easily imported to an even tighter labor market than New York's, some of these streets clearly need a three-shift schedule to remain acceptably clean to the discriminating eye. This kind of coverage is obviously a far cry from the once-a-day sweeping that the city's Sanitation Department can afford to provide with its $5 mil1ion budget and 70 workers. 2. The streets and parks in the area under study now have an elaborate capital plant to maintain. In the last five years, one of the world's most complex public eating areas has been added to Lincoln Road, along with exquisite and complicated horticultural and water features. Other new features - like the Washington 2 0127miami Avenue median and Ocean Drive plantings - also need careful care that is beyond the city's normal scope of work. 3. Where imoressive caoital improvements haven't been added. they are needed. and the BIDs would be the appropriate tool to create them. Areas that don't live up to the high South Beach standard are the sidewalks of Collins Avenue from 14th to 23'd Streets, the two unrenovated eastern blocks of Lincoln Road, many sections of the beachfront, Washington Avenue sidewalks, and many of the side streets throughout the area. 4. Citv administrators generallv believe the BIDs were. and could again be. helpful to them. Aside from the obvious benefit of more money to fund more services, city managers (both line and staff) seem to miss the presence of the BID managers as a constructive funnel for private sector input into city government. The private sector is now speaking with many disparate voices at City Hall. This could be good or bad, but it clearly makes more work for all parties. 5. There was no good reason to eliminate the BIDs in the first place. We have read the city's critical operational audit from 1996, viewed a tape of the key commission meeting, reviewed financial reports, and spoken to advocates on both sides. The complaints about district performance were petty. There's no doubt that the issues in dispute were purely personal and political (in the worst sense of that word). There's also little doubt that the BIDs' staff and board members were 3 ,. doing a good job. In fact, we believe that, considering the youth of the districts, those involved appeared to be unusually dedicated, with a real vision of how to- upgrade their streets and their city. 6. Most importantly, most owners contacted appear willing to oav an amount necessary to achieve measurable imorovements. While the U.S. economy and the local tourism and residential market are obviously quite healthy right now, we think the owners' support for the districts shows that they understand the link between improving the appearance of the public realm and attracting paying customers for restaurants, bars, hotels, and apartments in any economic conditions. m. Which district(s) should gO first? Which other districts may work? The clear answer is that Ocean Drive and Lincoln Road should go forward at once - simultaneously. Ocean Drive not only began the spectacular recovery of South Beach, it's well-organized to lead. The drive's district actually existed for three years, and pleased its patrons with tangible improvements. The Ocean Drive Improvement Association meets monthly, and itsmeetings offer a detailed catalogue of complaints that Business Improvement Districts are tailor-made to address. At a recent meeting, owners discussed graffiti, steam cleaning, panhandlers, thefts from - cafe tables, public urination, "boombox" cars, and pilferage of plants. 0127miami 4 .. Further, the Ocean Drive environment needs carefully and neighborhood-managed -. workers to preserve it. Many of those strolling the drive are affluent visitors from the north who have, until that moment, not yet seen the evidence of the massive turnaround in South Beach of the last decade. They need to be impressed from the first minute they leave their cars. Lincoln Road is, in our view, one ofthe most remarkable achievements of user-friendly streetscape design in North America, and is under-publicized (as odd as that sounds about anything in South Beach). Business is booming in several categories. But the physical environment that is drawing patrons is quite fragile, and could easily degrade over time without a larger, dedicated funding stream and an innovative management team in charge. While some believe that the recent billing of capital improvement assessments on Lincoln Road properties could discourage further self-taxing initiatives, we think the Lincoln Road stakeholders must put a well-funded BID in place to preserve their brilliant new business environment.' The next district ready for creation will probably be Collins A venue, from 5'h to 23rd streets. This district makes an appealing package for an interesting, and uncommon, reason. Its southern portion, from 5th to 14th Streets, consists principally oflow-rise retail and hotel building with modest assessable bulk (even though retail rents are high). But fortunately, the condition of streetscape, cleanliness, and safety of this portion of Collins Avenue is relatively good. I Among the unusually elaborate Lincoln Road features that require large dollars and focused management: water features, flowers, delicate trees and shrubs, and diverse seating options. 0127miami 5 " By contrast, the porti9ns ofCoJlins between 15th and 23rd Streets, with high-rise hotels, condominiums, and new timeshares on the oceanfront side, have greater assessable bulk,.with_ more conditions to be remedied. Briefly, the east sidewalk is dull and sometimes unattractive - the west side is often tawdry. Putting these two portions ofCoJlins Avenue together makes a district with adequate funding and a supportable workload. There is also real enthusiasm among many hotel managers for bringing back the aborted Oceanfront Hotel District, which barely had a chance to get established during the 1995-96 fiscal year. Most problematic for quick advancement is the Washington Avenue district. Most properties are low-rise, and pedestrian traffic is heavy 20-22 hours per day. There's a real question of how to pay for needed services. Yet a clear need exists on Washington. The median project is attractive but fragile: the delicate plantings will need careful care, and the nicely-done uplighting must also be maintained. Clearly, the litter, graffiti, and low level disorder that is a byproduct of the club scene on Washington imposes heavy demands on any urban street manager, whether municipal, public/private, or voluntary. In the section below on district program/city baseline, we'll discuss an arrangement under which the City of Miami Beach might contribute the full and enhanced security program that is necessary on Washington (and sometimes on the other boulevards) for Ol27miami 6 . . the health of all of South Beach, in return for private funding of all the other South Beach amenities that might best be provided and maintained by a BID. At this point, we'd guess that Washington Avenue will be added to the group of Miami Beach BIDs, but later. Some vocal opponents to the concept on the street, when combined with possible opposition on the Commission and the challenge of matching the required service program to available funding, make this street a tougher battle than Ocean Drive, Lincoln Road, or Collins Avenue. IV. District Program/City Baseline For a number of reasons, the service and capital program of the Miami Beach districts must be extraordinarily ambitious: 1. The longest pedestrian day in North America, possibly excluding Las Vegas. 2. 365 days a year of outdoor activity, a condition present only in the very few Southern California and south Texas BIDs. 3. A high standard of attention to visual detail on the part of owners, tenants, and visitors - due partly to the worship of design and preservation standards in this magnificent art deco area. To make matters more difficult, Miami Beach markets for construction and labor are suoerheated, giving very little advantage over such markets in expensive cities like New York, 0127miami 7 Philadelphia, Washington, or Chicago. Providing the services and capital plants these districts need will be relatively expensive. The baseline of services that the city provides in the wake of the 1996 dissolution of its BIDs is inadequate. Examples: one daily hand-collection of litter on Ocean Drive, too few workers on the nighttime litter collection shift on Lincoln Road (and coverage ends too early), and only sporadic sidewalk washing throughout the South Beach area. There are four potential pots of money for meeting the service and capital needs of these districts: city tax levy funds, resort tax revenues, BID revenues from assessments, and more innovative sources. The proper method for matching needs to resources is to start with a service and capital program that will clearly upgrade the South Beach districts to meet the high standards of their leaders. Then, we'll attempt to devise an aggressive revenue budget to support those upgrades. Probably 90% of the BIDs in major American cities were designed in exactly the reverse manner. We'll begin with our findings on neighborhood conditions on each of these boulevards. OCEAN DRIVE The streetscape is the best of the North-South avenues in South Beach, but could still be improved a lot. Targets include newspaper boxes, traffic regulatory signs, plantings, lighting, -and the appearance and functioning of many portions of the fringe of Lurnrnus Park that abuts Ol27miami 8 the drive. The pole-hanging trashcans also need to be replaced with more attractiye units that may have to sit on the ground. Litter is not an enonnous problem despite the long hours of heavy pedestrian use (though a supplementary cleaning effort is still needed). Clearly, owners and tenants on the west side of the street are heavily supplementing the City's efforts. But additional steam-cleaning of sidewalks would be welcomed by ODlA members. Plantings are attractive, but sparse. Given the climate, brightly contrasting annuals should be added on each block. Lighting is not complete. East side poles have bright white light, but northern sections of the West Side are very dark due to incomplete developments. With the disorderly crowds that occasionally walk the drive, this dark condition brings risk and the perception of danger, especially to female visitors. While the MBPD does patrol actively at peak hours of use, the stakeholders feel they need better coverage to attack the problems constantly mentioned at meetings of the Ocean Drive Association: occasional visits by gang members, boom box cars, cigar vendors, drug use, prostitution, thefts from sidewalk cafe tables, loitering in alleys, public urination, panhandlers, vagrants, graffiti, and pilferage of ornamental plants. 0127miami 9 LINCOLN ROAD _.._'. The critical problem on Lincoln Road is far different from the issue on Ocean Drive: Lincoln Road has been revived by the construction of an exquisite and complicated streetscape that requires a high standard of maintenance that is very costly to, and stretches the capabilities of, the City of Miami Beach (and possibly would do so in any city in America). As in numerous redevelopment projects in other U.S. urban retail districts, the concept on Lincoln Road was that a blend of public and private funding would produce a new capital plant, to be maintained by the funding and focus of a private improvement district. The elimination of the improvement district by a prior city administration threatens one of the most successful urban turnarounds we've ever witnessed. In brief, the following elements need special, ongoing attention from a top-notch public space operator. We note a few elements where deterioration is already visible: · Elaborate horticulture. The variety of plants, grasses, and trees on Lincoln Road make it the urban street equivalent of a botanical garden. Nobody would normally expect an underfunded sanitation department or a thinly spread property management department to maintain such a place. There are subtle signs of deterioration after four years, like some erosion in grassy areas, and reduced level of some plantings. Ol27miami 10 . Water features. They are hard to maintain: pumps break, leaks are sprung, and litter ruins their appearance. So far, most look all right. . Lighting. Even in the first years of this street's revival, light levels are a bit low. And as bulbs burn down and burn out, isolated dark patches will threaten the road's ambience. A Disney-like lamp maintenance program2 is required, which is quite expensive. This is also the kind of expenditure often jettisoned when competing for funds with the needs of other neighborhoods in a city's expense budget. . Paving. The unusual, historic paving pattern on Lincoln Road requires careful maintenance ofwhat's underfoot. Long-term, the quality of this amenity will run down without dedicated funds and the attention of an obsessive manager. Currently, paint on the black and white stripes needs care, and there is some pitting of concrete areas. · Graphics. The current street signs are one of the few elements not quite up to par on Lincoln Road - they're inconsistent, sometimes absent, and too small. Beyond these flaws, the streetscape graphics will need to constantly be upgraded to meet 2 At Disney World, bulbs have traditionally been replaced when they reach 85% of their useful life, often before any reduction in the light level of each bulb is noticeable. 0127miami 11 the high standards set by Miami Beach retail stores, and to adapt to changes in tenants and programming on the street, and in international graphic styles..-- . Eastern blocks. Lincoln Road needs to be finished. The intersections of Lincoln road with Washington and Collins avenues are too important to be left in their current condition. A project modeled on the successful formula that fixed the street's other seven blocks should be launched immediately. We recommend that the private portion of its financing be included within one of the BID budgets detailed below. COLLINS A VENUE Two linked stretches of Collins Avenue in South Beach - from 5th Street to 15th Street, and from 15th Street to 23rd Street - create an interesting set of problems. The southern stretch is an enjoyable walk, but has problems caused by its neighboring avenues that are difficult to fix with the limited funding available from its generally low-rise buildings. The northern piece has adequate potential funding from its high-rise East Side constituents, but its problems are not easily solved due to the tightness of the East Side sidewalk configuration and indifferent west side ownership. Its sidewalks are possibly the only dull spot in South Beach, in a place where many thousands of visitors would like to stroll.J 3 Unsurprisingly, many oceanfront hotel owners would like to add a boardwalk on the beach side of their properties to accommodate those Collins A venue pedestrians. The project to do so is stalled in litigation. 0127miami 12 .' . The reason to create a Business Improvement District on Co\1ins A venue is to upgrade the pedestrian experience there to the standards of Ocean Drive and Lincoln Road. There are - also isolated eyesores, like curbside litter at certain hours, garish and ill-maintained storefronts on the west side, inconsistent paving treatments, and the visual glare produced by a combination of streetscape design features, or the absence ofthose features. The narrow sidewalks in the "middle" section ofCo\1ins present an interesting challenge. The lush vegetation that makes the view of several hotel front porches so appealing is generally on private property. But the sidewalks themselves are lackluster, and could use some standard sidewalk amenities: · More attractive lighting fixtures with white (metal halide) bulbs. · Added width: given the widely varying age of Collins Avenue strollers, it's a bit uncomfortable to walk the narrow sidewalks. There's a need for passing room. Building it is expensive, but should be considered. WASHINGTON A VENUE Most savvy investors and entrepreneurs in South Beach feel that Washington Avenue has suffered from its displacement by Lincoln Road as the spillover retail street for Collins Avenue. Ifso, the general growth in the size of the overall "pie" caused by the increasing fame of South Beach as an attraction may eventually take care of that purely economic issue. Ol27miami 13 .' But there are plenty of "public space issues" to address on Washington: . The street is dirty most of the day. The litter is mostly made up of promo cards for clubs, cigarette butts and packages, fast food containers, and newspapers. Of all the South Beach avenues, this one presents the toughest cleanliness challenge due to its almost 24-hour pedestrian flow, and relative lack oflitter collection effort on the part of building owners and tenants. . Clubs have few windows, so their blank facades deaden street life when they're closed. · Other Washington Avenue retail uses show a catalogue of ills: garish window signs, awnings not up to South Beach's visual standards, and poor window presentation. On the positive side, a well-designed new median project, just completed, creates a lively appearance, particularly at night. But its proper maintenance will present a real challenge to city departments, who just accepted responsibility for its care in April. The plants, trees, and lighting fixtures that produce such a nice image are all fragile. A Business Improvement District is ideally suited to handle such a challenge, as well as to fix the fairly conventional problems of an urban retail strip noted above. 01 27miami 14 In short, the problems of Washington Avenue are probably the easiest ofthe four potential South Beach districts to solve conceptually. Politically, it's more difficult: opposition does exist, whether well-based or not. In addition, there are few bulky pieces of real estate to bankroll a substantial expense budget. V. How Should the Districts be Organized? Miami Beach should certainly create at least three separate boards of directors for the three or four management districts it creates. But it should certainly not hire three separate staffs. There are plenty of volunteer leaders in South Beach. Many of the investors in South Beach real estate were pioneers in the area's turnaround, or were early followers of the pioneers, and therefore truly believe in its future. They spend a remarkable amount of time at City Hall, and, thanks to its small size, know the Miami Beach government structure quite well. These activists will attend full board meetings, staff committees, interview and (later) support staff members, and capably fill voluntary board posts like Treasurer and Audit and Nominating Committee chairs. Filling out the structure of three small boards will not be a stretch. Staffing is a different matter. The day-to-day management of these districts will require an experienced professional or management company, with expertise in real estate economics, the management of service operations, small-scale construction, retail and tourism marketing, . and public space design. While the districts are linear, they're walkable (and certainly drivable) o I 27miami 15 by leaders who manage by walking around. By pooling their administrative and line operating budgets, the districts wi\l be able to hire top-of-the-line talent. Ol27miami 16 '. VI. Draft District Expense Budgets. City Baseline. and Operating Assumptions Catel!orv of Expense Ocean Drive Lincoln Road Collins Avenue City Effort Litter Collection $415,000 $500,000 $575,000 Maintenance of Capital 150,000 275,000 125,000 Plant Security 50,000 50,000 50,000 $1,750,000 Horticulture 100,000 250,000 30,000 Retail Improvement 35,000 50,000 75,000 Events Management 50,000 70,000 Park Operations 50,000 Social Services 25,000 15,000 10,000 Other Programs 30,0004 350,0005 50,0006 (type noted) GeneralJAdmin. Costs or 200,000 250,000 200,000 Management Fee Miscellaneous 20.000 30,000 25.000 TOTAL $1,125,000 $1,840,000 $1,140,000 $1,750,000 · Newsbox purchase and management (expense may decline in years 2-4). ,s Estimated, financed cost of capital improvement to easternmost two blocks, Washington to the ocean, if necessary. · Estimated debt service on capital cost of new lights and added sidewalk width (at certain points). 0127miami 17 . Roul!h Staffinl!/ODeratinl! AssumDtions Cate20rv of Expense Ocean Drive Lincoln Road Collins Avenue City Effort Litter Collection 3 Shifts 2 Shifts 2 Shifts @ 2 workers @ 4 workers! @ 4/5 workers @ 7 days shift @ 7 days + I working @ 7 days + I working supervisor per + I working supervisor/shift shift + supplies supervisor/shift + supplies and equipment + supplies and equipment Maintenance of Capital Plant Principally Bid lighting, Principally steam-cleaning, steam-cleaning, steam-cleaning lighting, road fountain, and graffiti signs, wall hardscape removal, to be maintenance, to maintenance bid. be bid with jobs, as well as other districts - painting and amount graffiti removal charged to contracts, with O.D. to be other districts. allocated Estimated amount. Security Allocated cost $1,750,000, to be of supervising spent on entire monitor and South Beach area .. special ~ (including consulting on Washington) for specific dedicated extra security manpower, problems especially for peak club and bar hours. Horticulture Allocation of Large share of Allocation of mgr. salary, horticultural mgr, salary, tree lawn and tree manager's care, and one or care in salary and 3 two annuals Lummus Park, full-time plantings in added plantings gardeners (or selected spots there and on equivalent (beds or Ocean Drive, contract) + tree planters) one full-time pruning on gardener or contract + equivalent annuals and contract replacement perennials + other supplies 0127miami 18 Catel!Orv of Expense Retail Improvement Events Management Park Operations Social Services o I 27miami Ocean Drive Lincoln Road Collins Avenue City Effort Three-person staff to design retail fayade upgrades, control illegal uses and features, promote retail leasing (working through brokers and owners)- allocated by rough effort required per district, as shown Ocean DrivelLincoln Road staff (two) to sift and manage commercial event proposals, and create fully-sponsored cultural events Dedicated beach manager Experienced (but innovative) social service program manager, allocated across districts, to aggressively seek placement of troubled individuals frequenting the districts' public spaces. 19 Coordination by City's events staff. . . . vn. How Should the Districts Be Managed? We always counsel our clients to learn first from advisers, evidence, or models that are close at hand. There are an abundance of such sources of experience for South Beach: . The previous experience on Ocean Drive from 1993 through 1996. · A number of nearby public or private space managers: the Rouse Company (at Bayside), some of the oceanfront hotel operators in Miami Beach, and even the National Park Service (in the Everglades). . Disney - which deserves its own bullet point - at Disney W orldlEpcot and in the "traditional neighborhood development" at Celebration, FL. . Somewhat immodestly, we'd suggest our New York City operations (well known to many of South Beach's major stakeholders) as another model. Following careful review of these models, the districts need to orchestrate a limited competition for the right to manage their operations. This competition should be open to both companies and individuals, and (needless to say) should not be decided based on pricing alone. More important factors will be prior operating experience, enthusiasm for the task, and the quality and originality of ideas in proposal documents and presentation. o 127miami 20 .' Often the person or firm hired to set up a district is not qualified to operate it. Few entities perform both functions. For this reason, we'd advocate holding off on the hiring.ofthe operating manager until the first district is established.7 vm. How Should the City be Involved in District Management? The government of Miami Beach can do something truly revolutionary: acknowledge that the funds it collects for its BIDs through assessment are private contributions to the city's improvement. Oddly enough, almost every city government in America with a BID within its borders has claimed the opposite. Even though BID assessments lodge only momentarily in City trust accounts, process-loving city attorneys have often insisted that some of the apparatus of the clumsy government contracting process be applied to the actions of the small BID administrative staffs. This had led to wasted motion, angry conflicts, inefficiency, and public confusion.s So we lead to a general principle: the City should exercise oversight only over funds that are truly its own. The melding of BID assessments and resort taxes previously practiced in Miami Beach is ill-advised, even though the resort tax reyenues were a critical component of the districts' budgets. 7 Because the path of approval through the COmmission has already been blazed. and the elected and appointed . officials of the City are already favorably inclined, the districts could be established by consultants. 8 We have frequently been asked, for example, by those who read local newspapers in New York, why the Mayor of the city has any say over the annual expense budgets of its BIDs. Good question! Lately, he's been vetoing them. 0127miami 21 .' .*" The alternative? As the combined expense budget in section VI above shows, we urge that the City's contribution to the public/private enhancement program in Miami Beach be-the- upgrading of its security effort on Ocean Drive, Lincoln Road, Collins Avenue, and Washington Avenue. Reasons: 1. The late-night crowds of young people in several South Beach locations are hard to manage perfectly over long time periods. The powers and back-up ofMBPD resources devoted to this condition can relieve the new BIDs of the riskiest assignment in their prospective portfolio. 2. Added resources committed by the City in this area (to match the BIDs' contributions to 8-10 other services) would pennit assignment of steady patrol officers who would get to know the beat better than the less knowledgeable (and possibly less dedicated) officers on overtime who are now assigned under a smaller budget line. 3. Separation of CitylBID duties in this manner will eliminate the repetition of the irresponsible 1996 operational audit of the BIDs' efforts, because the City would have far less excuse to review purely private expenditures. While the budgets of the City and BID program should therefore be entirely separate, there will be a need for close coordination with the city departments whose functions affect the BID-provided services. We believe there should be at least one (and at most two) persons - appointed by the City Manager to be the principal point of contact for the BID staff. These 0127miami 22 ". . coordinators should help minimize the (currently remarkable) amount oftime spent by South Beach entrepreneurs interacting with (and at) City Hall. Fortunately, there are several City of Miami Beach managers with useful experience as BID executives. This experience will make them better able to understand BID needs than the persons who typically fill this role in the cities of other American BIDs. As the new BIDs begin to form, the City Manager should quickly choose one or two of these managers for this important role. IX. How Should the BIDs' Program be Financed? BRV believes that incipient improvement districts should first decide what services and capital upgrades they need to thrive, then decide how to pay for every dollar of that program. This may seem obvious. But most BIDs formed in the last decade and a halfin the U.S. have instead fit a program to the funds that owners and tenants are willing to contribute. Out the door go high standards of cleanliness, safety, repair, and liveliness. Miami Beach must follow the first path. The program outlined in section VI above is expensive, at $4.1 million placing the Miami Beach complex of adjacent BIDs in the top ten such groups in the nation. We believe that South Beach can produce the funds necessary to fund the private portion - of the expensive management program its busy streets need, because: o I 27miami 23 .. 1. The frontage foot method of assessment that dominated the formulae for _.. assessments used in the previous introduction of BIDs left a lot of the ability to pay of South Beach owners untapped, and drew unnecessarily on the limited resources oflow- rise structures. 2. South Beach has not even scratched the surface of the non-assessment revenues that its unusual prominence makes achievable. We recommend that the assessments for the three new BIDs be based on gross square footage, not front footage. There is a relationship between building bulk and the workload imposed on the district's streets, sidewalks, and parks, though there certainly is a similar relationship with frontage feet in the purely retail portions of South Beach. More importantly, though, a neighborhood that needs an elaborate and expensive operation to stay competitive with top-notch competition (which South Beach has) must in the end set its assessment formula with primary reference to the financial capacity of its various and varied constituents. Assuming that South Beach real estate has generally found its highest and best use, a square footage formula will do that. We will not specify in this report the exact formula that will bring the required assessment revenues in South Beach districts up to the level necessary to fund an improvement program that can maintain high standards of cleanliness, visual amenity, and retail health. But it .is our belief that the substantial amounts required ($2.9 million in year 1) are supportable by o I 27miami 24 South Beach's real estate owners and tenants, who are the prime beneficiaries (and part- producers) of the improved South Beach environment that is producing more than $600 million annually in room, food, and alcqhol revenue. But the BID assessment must be supplemented. One of the more surprising findings in our study was that the City of Miami Beach is spending a lot of time and thought managing photo and film shoots, festivals, and commercial events, but not reaping any significant revenues from them. While typical of most U.S. municipal govemments, this is a mistake. Lincoln Road and, to a lesser extent, Ocean Drive, could generate up to one-third of their operating budget from commercial events, adoption of program elements, and performing arts sponsorships in even the early years of their existence. Concession revenues, dedicated after collection to street and park services, could also defray a large part of the assessment otherwise required of South Beach real estate owners. The process of carefully nurturing special events and concessions programs so that they can produce real dollars for improvement programs begins with the following commitments by the city government: · The revenues must be left for the use of the neighborhoods where they are earned- which is, after all, where the impact (good and bad) of the crowds drawn by the events and concessions is felt. 0127miami 25 . The revenues earned this way must go directly to and remain in the private accounts of the BIDS, and not be treated as subventions under a "contract" with the City,. These revenues are, remember, a replacement for the City's former match of BID assessments with some of its resort tax revenues, which now could be used for citywide services. While a step-by-step program for building up Ocean Drive and Lincoln Road event/concession revenues will require a detailed discussion with all those districts' stakeholders, we can at this point recommend that the districts: . Attempt to draw commercial events and design concessions that occupy space at off- peak hours and underutilized areas. This is not as hard as it sounds, due to the media- based needs of product introductions and announcements (e.g. 1 I a.m. is a prime time) and the distinction between peak "snack" times for kiosk concessions and peak dinner/club hours. . Charge market prices. This step requires the hiring - by contract or selective search for in-house talent--of individuals with expertise in negotiation with media and consumer products companies. o 127miami 26 . .' . . MIAMI BEACH IMPROVEMENT DISTRICTS ROUGH PRELIMINARY REVENUE BUDGET (000,000) SOURCES Operatinl! Year AMT. NEEDED FOR PROGRAM Comml. Events/Concessions Approx. Assessments Q.Q LR CA OD !J! CA 2001-21 $2.9 $.6 1.2 .25 .5 2002-3 $4.2 $.7 1.2 1.2 .35 .7 2003-4 $4.3 $.8 1.2 1.2 .45 .8 2004-5 $4.4 $.8 1.2 1.3 .5 .85 2005-6 $4.5 $.8 1.2 1.3 .55 .9 1Assumes start-up at 7/1/2001. 0127miami 27 Total Revenues $2.55 $4.15 $4.45 $4.65 $4.75 , . .' Appendix A - Interviews Conducted Jeffrey Abbaticchio, Director of Public Relations, Loews Miami Beach Hotel Raul Aguila, First Assistant City Attorney, City of Miami Beach JeffBechdel, Administrator, Miami Beach Chamber of Commerce Lynn Bernstein, Service Delivery Manager, City of Miami Beach Matti Bower, Commissioner, City of Miami Beach Christine Burdick, Special Projects Coordinator, Adshel Michael Comras, President, The Comras Company Marlo Courtney, Goldman Properties, and Secretary, ODIA Kevin Crowder, Economic Development Specialist, City of Miami Beach Roberto Datorre, President, Miami Beach Development Corp. Donald De Lucca, Assistant Chief, Miami Beach Police David Dermer, Vice Mayor, City of Miami Beach Al Feola, Ocean Drive Property-Owner and Ocean Drive Improvement Assn. Neil Fritz, Consultant Tony Goldman, Chairman, Goldman Properties Saul Gross, President, Streamline Properties Wendy Hart, Island Outpost, LLC Ian Hendrie, Manager, The Clevelander Brad Judd, Director of Property Management, City of Miami Beach David Kelsey, President, South Beach Hotel and Restaurant Assn. Lawrence Levy, City Manager, City of Miami Beach Nancy Liebman, Commissioner, City of Miami Beach 0127miami 28 ~ , I" ,- ) . " . James Quinlen, Director, Arts, Culture and Entertainment Office, City of Miami Beach Alan Rose, Consultant, Loews Hotels Mel Schlesser, Jamac Properties Matthew Schwartz, Assistant City Manager, City of Miami Beach Ronnie Singer, Executive Asst. to the City Manager, City of Miami Beach Robert Thomas, Director of Sanitation, City of Miami Beach Robert Todack, General Manager, The Delano Hotel Patricia Walker, Finance Director, City of Miami Beach Stuart Weintraub, Director of Sales, Shelburne Beach Resort 0127miami 29