Legislature lifeline for Miami stadium parking garage hits Constitutional wall

The plan by state lawmakers to cover up for their city of Miami counterparts after a $1.2 million “oopsie”  on a botched parking garage contract with the Miami Marlins just hit a major Constitutional wall.

 A new House staff analysis has found that a Legislature lifeline for Miami, filed by Rep. Jose Diaz, R-Miami, and backed by Rep. Carlos Lopez-Cantera, R-Miami, likely runs afoul of the state’s constitution.

 In November, the city of Miami was shocked to find out  that it could be liable for property taxes on parking garages that it built to support the new Miami Marlins stadium.

Miami-Dade County Property Appraiser Pedro Garcia told the city that it may have to pay property taxes on the 5,700-space parking garage it leases to the Marlins. Garcia questioned whether the parking garages constitute a public purpose, a necessary requirement for a government-owned building to receive a property tax break.

A clause in the city’s much-maligned contract with the Marlins shielded the baseball team from any liability for taxes, leaving the city with the bill, estimated to be $1.2 million per year.

 South Florida Reps. Diaz and Lopez-Cantera tried to toss the city a lifeline from the Tallahassee, slipping a quick amendment into a wide-sweeping tax bill moving through the Legislature. The bill passed unanimously out of its first committee, with no one asking about the innocently-worded amendment that would have saved Miami from the property tax bill.

Now, a new staff analysis shines a light on the constitutional weakness of the amendment. It points out a 2001 Florida Supreme Court case that found that regular, for-profit use of a government building by a private entity essentially disqualifies the building from receiving a property tax break.

The bill is up for a hearing in the Economic Affairs Committee Wednesday.

Here’s a copy of some of the staff analysis, drafted by staff from the Economic Affairs Committee. Emphasis and links added.

Miami maintains that it should not have to pay property taxes on the four parking garages. City officials argue that the garages are integral to the stadium, that the garages should be considered a benefit to the public, and that the County agreed that the parking garages should be tax-exempt when the ballpark deal initially was negotiated. The City has no written records supporting that position, and Article 5.3 of the parking agreement provides that, except as otherwise provided, the City is responsible for the payment of all expenses and taxes relating to the parking premises.

 Additionally, the City has argued that the parking garages, located in an area in East Little Havana surrounded by dilapidated public housing and little or no commercial retail, are open to the public when not being used by the Marlins.

The City and the County apparently are in the midst of debating this issue, with the tax collector having until June or July to make a decision.

It has been estimated that the taxes will amount to $1.2 million. Apparently, the City and County agree that 53,000 square feet of commercial space in the parking garages anticipated to be leased for dining, drinking and retail establishments are subject to property taxes.

Section 4 of Art. VII of the State Constitution requires a “just valuation of all property for ad valorem taxation….”  However, governmentally-owned property generally is excluded from taxation through immunity or exemption. While the state and counties are immune from taxation, municipalities are not subdivisions of the state and are subject to taxation absent an exemption. Section 3(a), Art. VII of the State Constitution provides:

All property owned by a municipality and used exclusively by it for municipal or public purposes shall be exempt from taxation. A municipality, owning property outside the municipality, may be required by general law to make payment to the taxing unit in which the property is located. Such portions of property as are used predominantly for educational, literary, scientific, religious or charitable purposes may be exempted by general law from taxation.

This standard requires that exempt property must both be owned by a municipality and used exclusively by the municipality for municipal or public purposes. The “municipal or public purposes” for which municipally-owned property must be exclusively used to qualify for an ad valorem tax exemption under the State Constitution encompass activities that are essential to the health, morals, safety, and general welfare of the people within the municipality. Florida Dept. of Revenue v. City of  Gainesville, 918 So.2d 250 (2005).

The Legislature is without authority to grant an exemption from taxes where the exemption has no constitutional basis. See, Sebring Airport Authority v. McIntyre, 783 So.2d 238 (Fla. 2001), where the Florida Supreme Court held a portion of s. 196.012(6), F.S., (Supp. 1994) unconstitutional that created an ad valorem tax exemption for governmental property leased for use in profit-making endeavors such as convention and visitor centers, sports facilities, concert halls, arenas and stadiums, parks or beaches. The exemption defined these types of activities as serving “a governmental, municipal, or public purpose or function.”

In the instant case, it appears that the Legislature is creating a similar exemption, i.e., that it is statutorily providing an exemption for municipal property that is not used exclusively for municipal or public purposes, and that this exemption could be subject to constitutional challenge.    

While it appears that the city has not “leased” the parking garages, and that it retains control of the facility, the determinative factor would be the city’s use of the property, and whether that use serves a public purpose.

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A clause in the city’s much-maligned contract with the Marlins shielded the baseball team from any liability for taxes, leaving the city with the bill, estimated to be $1.2 million per year.

 South Florida Reps. Diaz and Lopez-Cantera tried to toss the city a lifeline from the Tallahassee, slipping a quick amendment into a wide-sweeping tax bill moving through the Legislature. The bill passed unanimously out of its first committee, with no one asking about the innocently-worded amendment that would have saved Miami from the property tax bill.

Now, a new staff analysis shines a light on the constitutional weakness of the amendment. It points out a 2001 Florida Supreme Court case that found that regular, for-profit use of a government building by a private entity essentially disqualifies the building from receiving a property tax break.

The bill is up for a hearing in the Economic Affairs Committee Wednesday.

Here’s a copy of some of the staff analysis, drafted by staff from the Economic Affairs Committee. Emphasis and links added.

Miami maintains that it should not have to pay property taxes on the four parking garages. City officials argue that the garages are integral to the stadium, that the garages should be considered a benefit to the public, and that the County agreed that the parking garages should be tax-exempt when the ballpark deal initially was negotiated. The City has no written records supporting that position, and Article 5.3 of the parking agreement provides that, except as otherwise provided, the City is responsible for the payment of all expenses and taxes relating to the parking premises.

 Additionally, the City has argued that the parking garages, located in an area in East Little Havana surrounded by dilapidated public housing and little or no commercial retail, are open to the public when not being used by the Marlins.

The City and the County apparently are in the midst of debating this issue, with the tax collector having until June or July to make a decision.

It has been estimated that the taxes will amount to $1.2 million. Apparently, the City and County agree that 53,000 square feet of commercial space in the parking garages anticipated to be leased for dining, drinking and retail establishments are subject to property taxes.

Section 4 of Art. VII of the State Constitution requires a “just valuation of all property for ad valorem taxation….”  However, governmentally-owned property generally is excluded from taxation through immunity or exemption. While the state and counties are immune from taxation, municipalities are not subdivisions of the state and are subject to taxation absent an exemption. Section 3(a), Art. VII of the State Constitution provides:

All property owned by a municipality and used exclusively by it for municipal or public purposes shall be exempt from taxation. A municipality, owning property outside the municipality, may be required by general law to make payment to the taxing unit in which the property is located. Such portions of property as are used predominantly for educational, literary, scientific, religious or charitable purposes may be exempted by general law from taxation.

This standard requires that exempt property must both be owned by a municipality and used exclusively by the municipality for municipal or public purposes. The “municipal or public purposes” for which municipally-owned property must be exclusively used to qualify for an ad valorem tax exemption under the State Constitution encompass activities that are essential to the health, morals, safety, and general welfare of the people within the municipality. Florida Dept. of Revenue v. City of  Gainesville, 918 So.2d 250 (2005).

The Legislature is without authority to grant an exemption from taxes where the exemption has no constitutional basis. See, Sebring Airport Authority v. McIntyre, 783 So.2d 238 (Fla. 2001), where the Florida Supreme Court held a portion of s. 196.012(6), F.S., (Supp. 1994) unconstitutional that created an ad valorem tax exemption for governmental property leased for use in profit-making endeavors such as convention and visitor centers, sports facilities, concert halls, arenas and stadiums, parks or beaches. The exemption defined these types of activities as serving “a governmental, municipal, or public purpose or function.”

In the instant case, it appears that the Legislature is creating a similar exemption, i.e., that it is statutorily providing an exemption for municipal property that is not used exclusively for municipal or public purposes, and that this exemption could be subject to constitutional challenge.    

While it appears that the city has not “leased” the parking garages, and that it retains control of the facility, the determinative factor would be the city’s use of the property, and whether that use serves a public purpose.

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