The upscale shopping experience in the Design District neighborhood on July 15, 2022, in Miami. During the COVID-19 pandemic, Miami mainly remained open as the rest of the U.S. was shutting down, leading to thousands of people relocating to the area. (Joe Raedle / Getty Images)
With its beaches, sunshine and nightlife, Miami is a fun place to visit. Why financial companies so badly want to relocate to South Florida , however, is a bit of a puzzle to us.
Just as Chicago is nicknamed “West of Wall Street” because of its finance and trading successes, Miami is pushing to become “Wall Street South.” Billionaire Ken Griffin is the latest example of a high-roller heading to the Magic City — and, in his case, moving the Chicago headquarters of his Citadel financial empire.
While it’s only part of the story, the No. 1 reason for the wealthy to move is hardly a mystery: Taxes.
Florida has no personal income tax, low corporate taxes and far lower property taxes than Chicago or Cook County, a difference made starker by Donald Trump’s 2017 federal tax law that capped deductions for state and local tax payments. For Griffin, who spent a fortune defeating a proposed Illinois tax increase on the rich, the tax differential no doubt matters.
Other financiers have taken notice as well, and Miami finally is seeing a return on its long-running effort to attract the moneyed and their financial ventures.
After a failed try at becoming a tech hub in the 1990s, Miami set out to recruit hedge funds, private-equity firms and family offices that manage the wealth of the superrich. Between 2016 and 2019, more than 70 mostly small financial firms moved to the land of beachfront high-rises, according to a local business journal. In recent years, Blackstone Group Inc., Starwood Capital Group and other big-name firms have made significant bets on the city.
Under dynamic Republican Mayor Francis Suarez, Miami has gone all-in chasing cryptocurrency upstarts and similar trendy operators. No less an expert than Dave Barry, the Florida-based humorist, thinks this latest effort has legs: “This feels like the first time people are coming here not for purely corrupt and self-serving reasons, but to build something,” he told the Financial Times, in a snarky article describing Miami unflatteringly as “a frivolous, regulation-free, climate-doomed tax haven.”
We give Miami a lot more credit than that. People yearning for warm weather, work-life balance and beautiful vistas can indeed find them in Miami. Along with those lower taxes.
What those relocating from Chicago won’t find, though, is relief from crime (Miami is dangerous too), a lower cost of living (housing, especially, is pricier), public transit (not even close), arts and culture (also not close), elite higher education (Chicago has two of the top three business schools) or a truly global airport (for those who don’t travel by private jet).
Another big issue is climate change. Miami is ground zero for some of the most severe, potentially catastrophic effects.
Everyone knows about Miami and its hurricanes, and this year’s Atlantic season is just getting underway. Storm surges from a direct hit could overwhelm sea walls and put billions of dollars of Miami real estate under water.
The city also experiences “king tide flooding,” when Earth, moon and sun align, and sea waters rise menacingly from the porous subsoil. And don’t forget the underrated threat of intense heat and the epic downpours that overwhelm drainage systems.
Still, Miami, Miami Beach and the rest of Miami-Dade County keep building along the coast, on the spongy soil where the risk is greatest. This is not just some accident waiting to happen: A mega-disaster could be brewing.
To their credit, Suarez and the community he leads have taken some action, including a “Miami Forever” bond that will put $400 million into drainage and other mitigating construction projects. Suarez wants Miami to be a model in adapting to the rising sea levels, severe storms and life-threatening hurricanes that global warming will bring about.
But the investment in adaptation is overshadowed by the investment in new, vulnerable real estate. To a disturbing extent, much of Miami is a house of straw, and everyone knows what happens when the big, bad wolf comes to the door.
Chicago is threatened by climate change as well and can’t afford to be complacent. A heat wave could strike at any moment, and the Great Lakes are uniquely vulnerable. Still, anyone considering a large-scale investment in Miami needs to take into account the high risk of catastrophe.
The competition from Miami holds lessons for Chicago. It’s refreshing to see Suarez prioritize the care and feeding of his business leaders in a way Chicago hasn’t seen in years.
To thrive, Chicago needs an active, diverse, dedicated business community, and the administration of Mayor Lori Lightfoot needs to make a bigger effort to engage its corporate partners and respond to their concerns.
With that, the city should be able to put its Sunshine State competition in the shade.
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Copyright © 2022, Chicago Tribune
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