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A mile from Miami City Hall stands Mercy Hospital, a private, not-for-profit institution owned by the Catholic church and positioned on a first-rate chunk of bayfront real estate. The hospital has never paid any city taxes on the bulk of its land or buildings, but every time a fire alarm goes off, Miami paramedics and firefighters respond with eight rescue trucks.
Toward the west lies the headquarters of the Florida Grand Opera Association, with real estate and office space conservatively valued at more than $570,000 A also tax-free. Near Miami International Airport is the Carpenter's Union Local 125, which pays only $268 to the city annually on its assessed property value of $274,000. Within city boundaries, a profit-making company called Flagler Memorial Park, Inc. owns and operates three cemeteries, but paid only $177 to the city in 1994. Taken together, the 34 graveyards in Miami comprise $20 million in land that goes untaxed.
Churches, schools, and cemeteries have enjoyed remarkable tax exemptions throughout Miami's, and America's, history. So have hospitals, retirement homes, labor union halls, and many cultural and charitable institutions. Miami has more of these entities than any other Florida municipality -- constituting fully one-third of its entire tax base.
Quietly and carefully, the City of Miami is now constructing a plan to challenge the status quo and start collecting payments from some traditionally tax-exempt institutions, land and buildings that represent a pool of "lost" revenue amounting to an estimated $40 million.
"Something has got to give in this city," thunders Miami Commissioner J.L. Plummer, the leading advocate of change. "We have all the federal buildings, the state buildings, the churches, the schools and the universities. They pay no taxes, but they expect us to provide basic services like police and fire and garbage collection. It's unfair for the taxpayers in this city to have to pick up the tab. We can't afford it any more."
Plummer is quick to add that the city will not go after churches. Beyond that, he won't get specific about which institutions might be targeted. "The area that you're going to have to have some determination made is things with some religious affiliation, like some of the private schools," he notes.
Although city financial analysts and lawyers have studied the idea since 1992, they are still figuring out how, and if, a plan to squeeze money out of tax-exempt organizations can work.
There are precedents. Boston, Pittsburgh, and New York all collect "service fees" from some of the tax-exempt institutions located within their boundaries. As far back as the Sixties, Cambridge, Massachusetts, began going after large nongovernmental tax-exempt properties, including the Massachusetts Institute of Technology and Harvard University. Through a long campaign of patient diplomacy and veiled threats -- such as the possibility of discontinuing police and fire protection -- the city arrived at its present relationship with MIT, Harvard, and 18 of the 70 other tax-exempt entities that make up a whopping one-half of the city's tax base. The participants in the Cambridge program -- a biomedical research institute, a land-policy think tank, and others -- now pay sixteen cents per square foot each year for the property they own, somewhat less than the property tax paid by a typical commercial enterprise.
Cambridge doesn't solicit payments from hospitals or private secondary schools, but Boston does -- also from museums, educational TV stations, nursing homes, a federal military installation, and the Massachusetts Port Authority. The last accounted for nearly half of the $12.5 million that Boston collected last year from tax-exempt institutions. Pittsburgh took in approximately $3.6 million during the same period, including contributions from the city's Central Blood Bank, its Jewish Community Center, and the YMCA, taxing these institutions at 25 to 40 percent of their assessed land values. Pittsburgh officials took pains to challenge hospitals that claimed to be nonprofit organizations and found that many of them larded their account books with bad debt, labeling the amount as charitable contributions.
The problems facing proponents of such service fees are formidable. In New York, most tax-exempt institutions simply refuse to pay the city, and the city has no legal recourse. In Miami the complexity of the plan is heightened because the county -- not the city -- is in charge of collecting property taxes, and also of determining who gets tax-free status. To determine the latter, the county uses guidelines established by Florida statutes and case law.
On March 14 Plummer and his fellow commissioners ordered the city's lobbyist, Mikki Canton, to travel to Tallahassee and seek an amendment to Chapter 196 of the Florida Statutes, which describes what types of institutions can be considered tax-exempt. During the legislative session just ended, Canton persuaded State Rep. Bruno Barreiro to sponsor the idea, and succeeded in getting Willie Logan, chairman of the House Finance and Taxation Committee, to conduct a study of how Florida statutes might have to be altered in order for Miami's plan to proceed. The study will be performed by Logan's Oversight and Investigations Subcommittee, beginning next month.
"Even as late as we went up to the legislature, I feel we really accomplished something," Plummer says. Depending on the outcome of the study, Miami officials will seek to amend the statutes in Tallahassee next session.