On October 19, 2016, the City Commission adopted Ordinance No. 2016-4047, which prohibited package stores and package sales of alcoholic beverages by any retail store or alcoholic beverage establishment within the Mixed-use Entertainment District (the “MXE”). “Package stores” are retail uses that primarily sell alcoholic beverages and “package sales” are alcoholic beverage for take-out and off premises consumption. The MXE’s commercial uses attract a large volume of pedestrians and vehicular traffic, alcohol package sales in this area encourage patrons to walk around the MXE with open containers and consume alcohol in the public domain.

On September 25, 2017, the City Commission adopted Ordinance No. 2017-4137, creating the Art Deco / MiMo Commercial Character Overlay District (the “Overlay”), to limit commercial uses that detract from the historic character of the MXE districts in South Beach and the Ocean Terrace / Harding Townsite area in North Beach. To improve the quality of businesses within the district, the Overlay restricts nuisance uses either by prohibiting them outright or limiting the total number, depending on location within the boundaries of the Overlay. These restricted uses include check cashing stores, pawn shops, pharmacy stores, convenience stores, occult science establishments, package stores, souvenir and t-shirt shops, tattoo studios, grocery stores, and tobacco/vape dealers.

Legal Nonconforming Status
As a result of the enactment of these two ordinances, pursuant to Chapter 118, Article IX (Nonconformances) of the Land Development Regulations (“LDRs”), which regulates Nonconforming Uses, many of the aforementioned legally established uses, which existed at the time the prohibitions were enacted, are now considered legal nonconforming within the MXE and Overlay districts. Code Section 114-8 defines “nonconforming use” as a use which exists lawfully prior to the effective date of these LDRs and maintained at the time of and after the effective date of these LDRs, although the use does not conform to the restrictions provided by the LDRs.

As nuisance uses conformed to the Code at the time the uses were established, it can be challenging to diminish the presence of these uses. The City may not lawfully adopt regulations to prohibit certain uses and then immediately order those type(s) of existing uses to cease operations because of the newly enacted prohibition. Consequently, legally existing nuisance uses are grandfathered and permitted to remain active, continuing to negatively impact the surrounding vicinity. The Code provides that legal nonconforming uses may continue to operate as long as they are deemed active and are not abandoned, otherwise they are deemed discontinued. The standards for whether a nonconforming use may continue are evaluated pursuant to limited, specified criteria in the City Code, including:

1. A nonconforming use may not be enlarged, extended, intensified, or changed, except for a change to a use permitted in the zoning district in which the property is located.

2. If there is an intentional and voluntary abandonment of a nonconforming use for a period of more than 183 consecutive days, or if a nonconforming use is changed to a conforming use, said use shall lose its nonconforming status. Thereafter, subsequent occupancy and use of the land, building, and/or structure shall conform to the regulations of the districts in which the property is located and any structural alterations necessary to make the structure or building conform to the regulations of the district in which the property is located shall be required. Intentional and voluntary abandonment of the use includes, but is not limited to, vacancy of the building or structure in which the nonconforming use was conducted, or discontinuance of the activities consistent with or required for the operation of such nonconforming use.

3. In cases of abandonment of the use, the planning director shall evaluate the evidence of an intentional and voluntary abandonment of a nonconforming use and determine the status of the nonconforming use. In order for a nonconforming use to retain legal nonconforming status, the evidence, collectively, shall at a minimum demonstrate at least one of the following: (1) Continual operation of the use or (2) Continual possession of any necessary and valid state and local permits, building permits, licenses, or active/pending applications for approval related to prolonging the existence of the use.

Expansion of Overlay
Up until recently, based on the prior regulations of the Overlay district, including its geographic boundary, the potential existed for such nuisance establishments to congregate in nearby commercial areas outside of the Overlay where such regulations did not exist. The potential was particularly prevalent in South Beach along the Washington Avenue corridor and within the Collins Park neighborhood, which were on the periphery of the Overlay. As it originally existed, Collins Avenue served as the Overlay’s western boundary in South Beach, and the Overlay spanned between 5th and 16th Streets.

On December 8, 2021, at the request of Commissioner Alex Fernandez, the City Commission made a dual referral of the proposed Code amendment to the Land Use and Sustainability Committee (“LUSC”) and Planning Board. The amendment proposed to expand the Overlay to include properties along Washington Avenue and Collins Avenue, from 5th Street to 23rd Street. Although the Overlay includes the MXE district in North Beach, the proposed amendment limits the expansion of the Overlay to South Beach, where the proliferation of these nuisance establishments is reducing economic opportunities for the unique businesses that have traditionally defined the character and fabric of the historic Art Deco commercial district.

On March 4, 2022, the LUSC recommended that the Planning Board transmit the item to the City Commission with a favorable recommendation. The Planning Board held a public hearing on March 22, 2022 and transmitted the Ordinance to the City Commission with a favorable recommendation by a vote of 6-0.

On April 6, 2022, the City Commission referred a discussion item to the LUSC regarding development of a program to encourage and motivate property owners to convert nuisance uses, including package liquor stores, smoke shops, and tattoo parlors, into permitted conforming uses.

On May 4, 2022, the City Commission unanimously approved Ordinance No. 2022-4489 at Second Reading, expanding the boundaries of the Overlay to include Washington Avenue and portions of the Collins Park neighborhood.

On May 13, 2022, the LUSC unanimously recommended that the City Commission approve the establishment of a Commercial Lease Subsidy Program to promote arts and culture business activity and motivate property owners to convert nuisance non-conforming establishments in the newly expanded Art Deco / MiMo Commercial Character Overlay District. The LUSC also favorably recommended the City Commission approve an appropriation of $120,000 for Fiscal Year 2023.

Miami Beach is home to several commercial hubs including two business districts recognized as landmark destinations and local economic engines, Lincoln Road and Ocean Drive. Tourists, visitors, and seasonal residents drive consumer spending in these areas, where Miami Beach residents account for a fraction of retail spending. Due to our tourist- and visitor-centric economic base, the initial impact of the COVID-19 pandemic was significant. However, the retail sector has rebounded, as has the leisure travel industry, the real estate sector, and the local economy overall.

According to Marcus & Millichap’s 2Q 2022 Retail Market Report for Miami-Dade (available at https://www.marcusmillichap.com/research/market-report/miami-dade/miami-dade-2q22-retail-market-report), “retailers have shown a willingness to pay a premium to set up shop in affluent, urban areas in metro Miami-Dade like Coconut Grove, Brickell, and Miami Beach.” This is demonstrated in Colliers International’s 2022 Q1 Retail Market Report (available at https://cloud.usa.colliers.com/sfl-2022-q1-retail-miamidade-marketreport), which reported an average asking rental rate of $86.48 for retail in Miami Beach, which is more than double the Miami-Dade County market average of $40.82 and the highest rental rate among any of the major Miami submarkets (Brickell, Downtown, Wynwood, etc.). According to real estate analytics firm CoStar, market rents for retail properties within the Overlay / MXE / Art Deco Cultural District (“ADCD”) are currently around $76.10, an 8.7% increase above $70.01 about a year ago.

Notwithstanding the post-pandemic economic rebound, the MXE / Art Deco Cultural District (“ADCD”) has faced increasing challenges associated with its commercial character well before COVID-19. In response, the City has endeavored to revitalize the historic Architectural District and highlight the City’s Art Deco cultural heritage. Arts and culture are the pillars of Miami Beach, having played a vital role in the 1990s renaissance, and continuing to reaffirm the city’s relevance today. Arts and culture attract visitors, tourists, and new residents to Miami Beach and should be nourished as a source of our identity.

The City Commission has expressed an interest in strengthening the arts and culture, tourism, and hospitality industries, while diversifying the City’s economy and its revenue sources. In addition to a citywide post-pandemic effort at economic diversification, a focus must be placed on promoting and attracting commercial activities that support the City’s cultural arts legacy. A nuanced approach to curating desirable commercial activities and reducing the prevalence of nuisance uses could help improve the retail character of the MXE / Art Deco / MiMo Commercial Character Overlay District and enrich the City’s existing tourism, hospitality, and entertainment industries.

Upon adoption of Ordinance No. 2022-4489, which expanded geographically the prohibition on nuisance establishments, Commissioner Fernandez noted that the Overlay’s regulations fall short of addressing the grandfathered businesses already in lawful existence. The Commissioner pointed to existing efforts by the Administration to incentivize targeted businesses in the MXE, which could be leveraged to accelerate the transition away from undesirable business models.

In 2020, the Economic Development Department originally developed a lease subsidy program concept in furtherance of the City Commission’s objectives for revitalizing the MXE / ADCD. One way of addressing existing retail conditions in the MXE is to attract unique retail activity that, at a minimum, eliminates legal nonconforming uses and, ideally, accentuates arts and culture. The type of activity the City desires to promote would be characterized by vibrant placemaking, promoting wholesome and family-friendly activity, and improving quality of life of residents while also enhancing the tourist/visitor experience.

Commercial Lease Subsidy Program

On September 30, 2021, the City Commission approved the Fiscal Year 2022 Budget, including a $40,000 enhancement request from the Economic Development Department to pilot a Commercial Lease Subsidy Program to encourage and promote arts and culture establishments within the MXE / ADCD.

The Administration has identified that the concept of the Commercial Lease Subsidy Program (the “Program”), as envisioned, is in close alignment with the intent of the City Commission’s referral item regarding establishing an incentive program to address nuisance nonconforming establishments. Given this similarity in objectives, the Program is now being contemplated to incorporate elements to also address nuisance uses. Based on the City’s Business Tax Receipt (“BTR”) records, there are approximately 116 nuisance establishments (not including souvenir or t-shirt shops) in the Overlay, as shown on the map (Exhibit A) and described as below:

Nuisance Uses - Art Deco/MiMo Overlay
Food Sales                              38
Liquor Sales                            33
Money Order Agency                1
Occult Science/Fortune Teller   9
Pawnbroker                               3
Pharmacy                                  4
Tattoo Establishment               28
Total Nuisance Uses              116

a. Program Purpose and Goals.

• Strengthen and transform commercial corridors within the MXE / ADCD / Overlay Districts by encouraging the transition of legal nonconforming uses to permitted uses and attracting targeted businesses in the arts and cultural industries.
• Encourage property owners/businesses to transition to permitted uses.
• Promote arts and culture.

b. Financial Incentive.

• Property owners/businesses selected to participate in the Program are eligible to receive reimbursement of eligible expenses of up to $20,000 per year, over a three (3) year Program term.
• These funds may only be used to reimburse payments related to rent, lease-related expenses, or mortgage payments and must support an establishment’s transition from a nonconforming nuisance use to a use permitted in the Overlay.

• The participating property owner/business would also receive a waiver or reimbursement of the annual BTR fee for a three (3) year period.

c. Program Funding.

• Total Program funding:
  • $ 40,000 (FY 2022 – approved)
  • $120,000 (FY 2023 – enhancement request)
• Current funding would permit at least two (2) property owners/businesses to participate once the Program is authorized and operational. Creation and term of the Program is dependent upon City Commission authorization and annual budget appropriation.

d. Targeted Businesses.

• Priority 1 Eligibility: Existing businesses transitioning from legal nonconforming uses such as: check cashing stores, pawn shops, pharmacies, convenience stores, occult science establishments, package stores, souvenir and t-shirt shops, tattoo studios, grocery stores, and tobacco/vape dealers).

• Priority 2 Eligibility: New businesses which promote arts and culture and create an immersive and shareable experience that prioritizes customer engagement and leverages onsite activities and events, such as:

• experiential and artisanal retailers
  • e.g., technology, design, art and/or culture-driven retail and incubator-inspired artisan experiences, such as offering an opportunity for patrons to learn how to make, design or craft their own artistic, decorative, musical, beauty, wellness, gastronomic, culinary, or sensory product, and low-scale performing arts and cultural spaces.

   

• interactive and activity-based spaces
  • e.g., social media museums and artistic installations (such as ARTECHOUSE art exhibition on Collins Avenue, Van Gogh Immersive Experience on Lincoln Road, and Museum of Ice Cream in the Faena District) and activity-based and curated destinations of art, culture, design, recreation, leisure, wellness, and/or amusement.

   

e. Eligibility Criteria.

• Businesses must operate a physical location in the Overlay.
• Applications will be evaluated and recommended by the Administration on criteria approved by the City Commission, including but not limited to, whether the business’s activities:
  • transition from a nuisance to a permitted use;
  • enhance the city’s reputation as a family-friendly destination for cultural arts, leisure, and wellness;
  • provide a unique opportunity for experiential activities compatible with the City’s brand positioning; and/or
  • appeal to residents, tourists, and visitors; increase and diversify employment opportunities; attract economic investment; and enhance real property values.
• The City Commission, at its discretion, may consider any criteria at the request and recommendation of the City Manager.

• Property owners/businesses applying for the Program may be an existing nuisance use (Priority 1) or new-to-district (Priority 2). Existing Priority 2 businesses operating within the Overlay district would not be eligible.

f. Participant Subsidy Payments.

• After transition to a permitted use or establishment of an arts and culture focused business (as evidenced by a BTR and/or Certificate of Use (“CU”) and determined by the Administration) and upon verification of eligible expenses (rent, lease, or mortgage), valid payments will be reimbursed up to 50% of the monthly rent, lease, or mortgage payment in an amount not to exceed $2,500 per month.
  • Reimbursements may be adjusted at the City’s discretion if rental/lease/mortgage payments are paid for periods in excess of one (1) month.
• The total cumulative amount of the annual incentive award should not exceed $20,000 annually per participant, over a three (3) year period.
• Notwithstanding an executed agreement, the Program is contingent upon annual budgeted funding availability and appropriation, City Commission approval of a participant’s application, and compliance with all Program requirements.

g. Application Requirements.

• As an application requirement, property owners/businesses must submit:
  • Completed application form;
  • Current BTR and CU documentation for a permitted use;
  • Executed lease agreement or mortgage documentation or, for Priority 2 businesses, a Letter of Intent (LOI) summarizing lease terms and use may be accepted;
• Prior to the execution of the Program contractual agreement, Applicant must provide an executed lease agreement; and
  • Business plan with narrative detailing the current/proposed business activities.
• The Administration will evaluate and recommend potential business applications to the City Commission for consideration. Approval for participation in the Program is at the sole and absolute discretion of the City Commission.

h. Program Guidelines.

• Approved applicants enter into a written agreement with the City that sets forth the terms and conditions. For example, the leased premises must be “rent ready” prior to commencement of the leasing rental period for which the subsidy would apply and reimbursements are contingent on the business obtaining and maintaining a valid and active Certificate of Occupancy, CU, and BTR.
• Award payments will be disbursed by the City on a reimbursement basis, requiring the property owner/tenant business to first submit documentation of the payment of mortgage or rent for the rental period to be reimbursed by the City.
• The agreement will require the business to agree to repay the value of any disbursed reimbursement funds if the business violates the terms of the agreement.