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Sea Levels Rise, Streets Rise, Taxes Rise

Sea Levels Rise, Streets Rise, Taxes Rise — where does that leave the rest of us as Miami Beach policy continues to discourage new development?

By Ross Milroy  |  May 8th, 2017

Source: Miami Herald

Mayor Phillip Levine largely centered his 2013 mayoral campaign on the promise of reducing the widespread problem of street flooding and dealing with rising sea levels in Miami Beach. A promise the Miami Beach Commission undoubtedly following through on – but at what cost and is the plan even viable?

Before addressing the huge monetary costs, one should look at the major unanswered issue of the ‘Miami Beach Rising Above’ initiative. When they raise the streets, where does that leave the homes and businesses that sit along these streets? It doesn’t take an oceanographer to deduct that this leaves areas adjacent to the now raised roads in harm’s way.

To combat this, the city promised massive pumping stations – as many as 80 of them! To date, only sixteen pumping stations have been installed and nearly two-thirds of the budget already spent. The commission’s response to handle the buildings that are now absorbing water than once flooded the streets is to put in place moratoriums on demolition and further ‘preserve’ the real estate that is sitting on average 3 or 4 feet above our existing sea level. This action means that anytime a property owner wants to make a major improvement or redevelop their building, they must now adhere to the new base flood level requirements at a cost that substantially outweighs the value of the income stream at a majority of these buildings. Base flood requirement codes, as it stands now, requires buildings to be raised as much as 13 feet above sea level. The vast majority of buildings are not structurally sound enough to physically raise them to these levels, which means that entrances of new buildings will be at the same level of single-story rooftops.

Further complicating the matter is that if a property owner were to seek the ‘highest and best use’ for their property, and adapt to the sea level rise, the City and preservationists cry foul and shut them down. The City is now dictating minimum lease lengths via onerous rental ordinances, practically banning short-term rentals, reducing the income stream that investors are able to bring in. Additionally, all new developments must meet LEED environmental criteria, which raises construction costs an estimated ten percent. To ensure LEED cooperation, developers are required to deposit 5 percent of the total project costs with the city. Builders are only able to recoup this penalty, which can be millions of dollars, if the completed project receives LEED Gold certification; even general LEED certification results in developers losing half of these fees – and full forfeiture if they are unable to achieve LEED Certification.

Currently, Miami Beach is taxing the property owners to pay for bonds to cover costs of raising the streets to the tune of $400 million+. It is these same property owners paying for the Rise project that Miami Beach government is punishing and hindering their right to fair and best use of their property. In the past four years, commissioners have more than doubled the storm water management tax rates and the cost of flood insurance has spiked by more than 300 percent for many property owners. These taxes and rise in insurance rates has virtually priced out the feasibility for multifamily residences.

According to data provided by the City, Miami Beach is currently less than 25 percent permanent or “homesteaded” residents. This further supports the fact that this is a transient town that relies on travel, tourism and investors to buy properties in the city so they can rent to the very tourists and transients that Miami Beach is spending millions to attract.

Miami Beach is working against this very source of income needed to fund their coffers and complete their ‘Rise Above’ projects by tying the hands of landlords and property owners. We are literally one hurricane away from a major disaster.

In any other company or collective group who contribute to the greater good as a whole, those who pay-in are the ones who are supported so they can continue to make the revenue to pay the taxes, that pay the bonds, that raise the streets. If Miami Beach continues to push out the investors, they will essentially be cutting off their own revenue stream. Miami Beach properties are becoming uninsurable, unprofitable, and unusable. It is time for Miami Beach Government to come to terms with who is paying the bills and enact legislation that supports them.

Miami Beach has the opportunity to be to set worldwide precedent through proper planning to correct the problems and incentivize new development – not penalize it. Though preservation is important, if there is not a compromise, there could soon be nothing left to preserve.


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Copyright 2017. Ross Milroy Realty, LLC

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