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Here’s how Miami-Dade says it will pay for all that new rail

Miami Metrorail

When Miami-Dade’s transit planning agency agreed on six new rail lines, there was a glory hallelujah moment in this traffic-choked city.

And then the skepticism set in, because the plan (known as the Strategic Miami Area Rapid Transit plan, or SMART) lacked any indication of how the city would pay for it.

We’ve been down this path before — in February, local transit advocate Elsa Roberts laid out in The New Tropic decades of financial mismanagement in Miami’s transportation agencies.  Most infamous is the half-cent tax instituted in 2002 — and locals were not willing to let commissioners forget how that ended up.

Back in 2002, voters approved a half-cent tax that was supposed to fund a BIG transit overhaul that would have added up to 88.9 new miles of Metrorail as well as many, many, many more miles of bus routes, among other things. (According to the Miami Herald, the six new rail lines approved last week were actually first proposed back then.)

They didn’t materialize. Most of the money raised with the tax ended up being used on routine maintenance for the always underfunded system. Hence the skepticism and outrage this time around.

But the Metropolitan Planning Organization (MPO) says that this time they can deliver.

City of Miami Commissioner and MPO vice-chairman Francis Suarez — who notes that he was still in law school when all that went down — waded into the Twitter debate last week.

But transit funding is pretty tough to fit into 140-character bursts, and we wanted to know what he meant when he said they had options.

Acknowledging the skepticism as “well founded” because of the half-cent debacle, he still urged some optimism this time around.

“It’s not as bleak a situation as people make it sound like,” he told us.

Here’s how Suarez, who came up with this plan, says the County can pull it off. (To be clear, this is so far merely ideas for how to pay for it — nothing has been put in motion yet.)

The sticker price

The total capital cost — that is, the cost of building all the projects outlined in the SMART plan — is $4 billion, according to Suarez. It would cost another $4 billion to cover operations and maintenance each need. So we need about $8 billion a year.

Private sector

Based on conversations with some companies that have shown interest in mass transit here, Suarez thinks the County could easily get private investment — perhaps even up to 100 percent of the costs of some of six corridor projects outlined.

Pros: Time. With a private sector partner, the construction would start much sooner and probably finish much faster.

Cons: It costs more in the long run because the County has to pay a return on that investment.

Federal money

There are a couple different federal grants the County could apply for under the FAST program (Fix America’s Surface Transportation). Suarez specifically mentioned New Starts, which is only for projects that cost more than $250 million and need at least $75 million in funds.

Pros: Up to 80 percent of a project could be funded outright, according to Suarez. It wouldn’t have to be paid back.

Cons: It will take a lot longer because the County has to do a bunch of studies first, including a NEPA (National Environmental Policy Act) study, which takes at least 24 months.

The big choice the MPO will have to make is between the private sector or federal funding route. There are some other options to help plug the gap.

That missing half-cent money

The MPO can direct future revenue from the half-cent tax back to new transit projects, as it was intended to be spent from the beginning. That would add up to about $100 million a year. Suarez says if it was used for a bond, it could net the County $1.5 billion a year. (It’s unclear how the County would cover the loss of that $100 million where it’s being spent today.)

A tax increment financing (TIF) district

The concept of a TIF district is complex, but essentially counties and cities can hold on to the additional tax revenue brought in by rising property values in a particular area to reinvest in whatever is driving up the property values in the first place — in this case, the arrival of mass transit. Suarez wants to see TIF revenue used to pay back private sector investors.

The baseline amount (whatever the local government was bringing in before the agreement is signed) stays with the government agencies for general use and anything above it goes toward transit. It could be coupled with some incentives for developers, like allowing them to build higher in the area, as well as higher taxes on that land adjacent to the eventual rail lines.

“It’s like putting a rain bucket [out] and catching the water,” Suarez said. “You could get a significant amount of money.”

Other options

  • Diverting some tourism development tax dollars to transit
  • Setting up our own transportation trust fund
  • Convincing parties that will benefit from the expansion to pitch in — for example, asking a mall that will be connected to one of the new transit lines to pay for the cost of building a station at the mall

In Suarez’s ideal world, about 40 percent of annual costs would come from the bond from the half-cent tax revenue. The other 60 percent would come from the private sector. The interest would be paid back with TIF revenue and with federal funds if the County meets the requirements.

Whether those federal dollars can be used to reimburse the county and private investors is unclear, Suarez said.

“I don’t think it’s standard practice. We’ll ask if it’s doable and make it doable if not. Those are our tax dollars anyways. It’s about government doing something that’s common sense.”