County pilots Airport City toward high-cost crash landing
Written by Michael Lewis on July 16, 2014
Airport City began as a model to help fund a $6.2 billion Miami International Airport expansion. Today it’s the poster boy for failed contracts that raise costs in other bidding countywide.
Miami-Dade’s Aviation Department has decided use of a developer at Miami International Airport for this multi-use project to fuel airport spending at no county cost should be scrapped to let the county do the developing and the spending itself.
That 180-degree change in flight plan came only after six years of dealing with developer Odebrecht that led to handshakes on a project that the Aviation Department subsequently whittled down again and again.
Our front page last week reported highlights of Odebrecht’s complaint to Mayor Carlos Gimenez with a threat to sue for $11 million costs so far, plus untold future lost profits, if the county prior to a commission vote backs out of the latest deal to which it gave oral approval.
Moreover, the county faces a potentially far greater loss. The biggest danger as the county waffles and reneges is that every potential bidder knows about the county’s propensity to string along bidders, coming within inches of signature only to start over, either throwing out all bids or setting new terms.
Seeing that pattern, companies have to ask themselves if it’s worthwhile to bid for county projects. Some good firms, maybe the lowest cost, will let someone else have the headaches.
When the Airport City concept took off, Miami was in recession. Construction was stalled and the condo boom had hit a wall. Every bidder knew county work meant piles of red tape plus paying the right lobbyists, but also that the county can pay. The private sector offered fewer jobs and less assurance of payment.
But times have changed. Private work picked up. Contractors have a wider choice of customers. Their problem is less getting jobs than getting crews.
Now, if the county jerks vendors around, changes its mind and renegotiates “final” deals, good firms won’t bid. With fewer bids, prices rise. That costs taxpayers money.
Prices rise even farther as companies that do seek county work assess delays and the possibility that after spending to reach a deal, the county will dump the project. If you bid at all, you’ll seek well above market rates.
Each time it reshaped Airport City the Aviation Department cited new circumstances. In February it whittled down the 33.5-acre site to 7.5 acres. Now the change might cut Odebrecht out entirely so the airport can develop a hotel and operate it itself – though it already has a problem hotel where it can’t hire an acceptable operator.
If you drag your feet long enough on any deal you’ll find new reasons not to sign. Some could be legitimate: think recession or economic boom, war, natural disaster, technology changes, or new facts unearthed. Others might be questionable: community political changes, appointment of a new key person, geopolitical shifts elsewhere.
No matter what, over six years some changes will make a deal look better or worse. If. for instance, you’d made a deal to sell Brickell land and managed to drag it out unclosed, you’d never want to sell today at those 6-year-old low prices. The buyer, however, certainly wouldn’t want to let the highly profitable deal escape.
In fact, no deal will be perfectly aligned at some future point. The only way to never make a deal that could have been better is to never make deals. But that’s hardly productive.
At Airport City, the real change is that Odebrecht’s parent has worked in Cuba, which some county officials abhor. Every other change that has been cited might be real, but it’s hard to take them seriously knowing what underlies county foot-dragging and its 180-degree midflight reverse.
The impact, again, is not just on Odebrecht but on future bidders, who can all ask: Could it happen to me?
Further, if Odebrecht actually does sue – and a firm frozen out of all county work has few inhibitions – it will raise a warning flag to vendors nationally.
Multinationals seldom sue governments. That’s not a good advertisement to future bidders, and the county has $12 billion in sewerage work to do.
As for Airport City, the county should take the legal threat seriously no matter how officials feel about dealing with Cuba. The courts have struck down state law to outlaw contracts with firms that have such ties, so the county has been looking for other pretexts to get out of a partnership that seems actually good for us.
More important, good or bad it’s a deal that the county has made – not signed, but a company has spent millions based on the county’s word.
Government must think beyond Odebrecht to the economic future. It’s politically advantageous to oppose the Castro regime, but it’s not smart to do it in contracts at County Hall when other bidders are watching.