Thursday, April 12, 2007

$100 Million Blip on Miami's Radar

The April 5th edition of the respected Miami Today weekly marks the first time in print by any publication we have seen that lists the estimated cost of the proposed Port of Miami tunnel at $1.3 billion. That's a $100 million increase without a spade of dirt being turned. Pass the mojitos, please.

UpDate (5/3): The following consortium won the right to build the $1.3 billion tunnel: Bouygues Publics Travaux (French), Babcock and Brown (Australian), Jacobs Engineering (U.S.), and Transfield Services (Australian). The 35-year concession agreement still needs to be negotiated and the state is still waiting for firm commitments from the county and the city for $450 million for their half of the construction costs.

UpDate (5/11): The Miami Herald discovers that Bouygues Pulbics Travaux has ties to Cuba, having built 11 high-end resorts with the Cuban military since 1999. Considering the flavor of local politics, this could be a deal breaker.

UpDate (6/21): A resolution pledging $50 million from an unnamed source was removed from last week's city of Miami commission agenda and deferred to July 10th. The administration is targeting community redevelopment funds. Commissioner Tomás Regalado has promised to move to deny the funds.

UpDate (7/24): 9 County commissioners pledge $402.5 million towards the tunnel. Only 3 vote against it on political reasons (Cuba): Javier Souto, a Bay of Pigs veteran, Natacha Seijas, and Rebeca Sosa. Joe Martinez was absent. Now its up to the City of Miami to pledge their share: $55 million. That vote is not expected to take place before September. Commissioners, nervous about paying their share, suggest tolling the tunnel and the existing bridge to the Port. Tolls for trucks would be as high as $7.00 per outgoing truck. Cruise lines are against tolling as it would affect employees and increase surcharges to cruise line passengers.

UpDate (12/13/08): Christmas comes early with the announcement that the tunnel project succumbs to a well-deserved death when the state and Bouygues Travaux Publics can't agree on terms. Hurray!

3 comments:

Anonymous said...

You're way off base! The Port Tunnel bids are substantially below estimate. The Port Tunnel bids include construction and 30 years of maintenance. So you have to look at the overall cost. Some proposals have greater construction cost vs. less future maintenance cost, etc. because proposers are optimizing their bids to make the project cost efficient over the entire 35-year period (i.e. using more expensive concrete now makes it cheaper to maintain in the future).

The state and county estimated that they would have to pay at least: $100M in milestone payments upon completion of certain construction elements; $350M upon opening of the tunnel for traffic; and up to $68M in CPI-adjusted annual availability payments contingent upon the quality of tunnel service provided in that year. The $450M is held constant for all bidders, so bidder are competing based on requeting less than $68M as a maximum annual avaialbility payment. As it turns out one of the bidders bid a maximum annual availability payment of $34M -- half of the expected amount and another bid $39M. The third bidder bid around $63M. Remember, these amounts only have to be paid in years in which the tunnel is open (so if constuction is delayed the state doesn't pay until the tunnel opens unless its due to force majeure) and if the service quality, availability, maintentance, or safety is poor on a given day, then the state reduces the payment accordingly.

This is very different than a traditional project -- wherein when something goes wrong the state pays more to fix it. Here, they will pay less until it is fixed.

Verticus S. Erectus said...

This whole project is way off base. No matter how hard you try to explain how it is going to get paid for, the simple fact is that truckers and shippers will be driven away to Port Everglades because of the fees and tolls that will be levied to make this boondoggle work. We still advocate using the exisiting rail system during the wee hours of the morning to get containers on and off the port.

Anonymous said...

I can't speak to the planning aspects, only the financial, but it I can't imagine restricting Port container loading and unloading to overnight hours would enhance the Port's competitiveness. The labor cost alone would probably be worse than any fee. Most traffic occurs during the day and the idea is to get the trucks out of Overtown and provide a direct highway conenction. I also know that a competitiveness study was undertaken and found that improved highway access was very important and that the Port of Miami is a bit cheaper in general than competitors for end-to-end shipping, so fee impact would not be large, but that's not my area of expertise. Peoiple involved genuinely think this will solve a problem. This is also the first project in the country which involves a major tunnel for a fixed price (subject to certain force majeure risk sharing) rather than a cost-plus type approach.