County Eyes New Contract On Airport Expansion
Written by Miami Today on October 21, 2004
By Sherri C. Ranta
An agreement for Miami-Dade County to cover up to $158 million in cost overruns at Miami International Airport and for American Airlines officials to remain in charge of the terminal expansion project could go to commissioners in the next month.
American officials are expected to ask for an additional $66 million, but they and county officials say the number could run higher because of a need for new equipment.
"There is another $92 million (needed) strictly due to the requirements imposed by the federal government," said Assistant County Manager Carlos Bonzon. "American has nothing to do with that. In our view, the feds should pay 100%."
The agreement, if approved, would be an amendment to the 1995 Lease Construction and Financing Agreement, Mr. Bonzon said, authorizing American to manage construction of the North Terminal. He said he hopes to send the draft to commissioners in 30 days.
"There is a list of 22 items that we have gone over one by one," Mr. Bonzon said. "I don’t want to be premature, but I am cautiously optimistic that we’ll be able to reach a win-win solution, move forward and finish the terminal at the lowest possible cost."
Commissioners have amended the agreement three times, most recently in
2002, when they increased spending by $211 million, bringing the total to about $1.5 billion.
American Airlines officials told the county Oct. 8 that they no longer wanted to manage construction of the North Terminal. That was the same day County Manager George Burgess replaced county aviation director Angela Gittens as manager of the airport’s $4.8 billion capital expansion project with Mr. Bonzon.
The county is not likely to let American out of the project, Mr. Bonzon said. "There’s no reason at this time to think that would ever happen."
Putting an assistant county manager over the construction of Miami International Airport’s $4.8 billion capital expansion project could find favor with American Airlines but won’t erase budget and accountability concerns expressed by Ms. Gittens.
Her criticism of American’s management of the nearly $1.5 billion North Terminal project strained relations with the airline and contributed to her removal as manager of the airport’s expansion project.
"I have wanted more accountability in the program," she said. "It is very late, overbudget, and I think a lack of accountability has contributed to it."
Ms. Gittens wants commissioners to let American, the airport’s largest carrier, complete projects already started at the North Terminal but give management of the remaining jobs to the county.
"The county gave them $211 million about 21/2 years ago. They’re a year-and-a-half behind the schedule they set two years ago," she said. "That gave rise to my concern."
Mr. Burgess relieved Ms. Gittens of her authority to manage the airport’s capital improvement project Oct. 7, the same day American officials asked the county to let them out of their North Terminal management responsibilities. Ms. Gittens will oversee day-to-day operations of the airport.
An American pullout is not likely, said Mr. Bonzon, assistant county manager and newly conferred point man on the airport expansion project. "There’s no reason at this time to think that would ever happen."
Mr. Bonzon said he is meeting with American officials to work out an agreement to address management issues and cost overruns regarding the North Terminal construction project. In 30 days, he hopes to send the agreement, a draft amendment to the 1995 Lease Construction and Financing Agreement, to Miami Dade County commissioners and its transportation committee for approval.
Airline officials are expected to ask for $66 million in cost overruns, but both they and the county say the number could run higher because of the cost of new inline baggage screening equipment mandated by new federal guidelines.
"There’s another $92 million, strictly due to the requirements imposed by the federal government," Mr. Bonzon said. "American has nothing to do with that. In our view the feds should pay 100%.
Ms. Gittens has put a $240 million price tag on the new inline baggage-screening machinery for the airport. The machinery is elaborate and would require, Mr. Bonzon said, 80 miles of conveyor belts just in the North Terminal to carry bags from check-in to various gates. The new regulations would have a $25 million impact on the South Terminal, he said.
Transportation Security Administration spokeswoman Lauren Stover said the agency has met with MIA officials who are seeking federal money for the new baggage screening equipment. A funding decision is not expected until early November, she said.
American’s contract with the county to manage construction of the North Terminal has been amended three times, most recently in 2002 when commissioners approved increased spending by $211 million bringing the total cost to about $1.496 billion.
American Airlines spokeswoman Martha Pantin said company estimates earlier this year put the North Terminal at $66 million over budget. The number is expected to increase.
"We do not have specific estimates of those cost escalations right now, but it is fair to say that the overage is now greater than the $66 million we talked about earlier this year."
Most of the project’s delay – about 18 months, pushing substantial completion to November 2007 – is due to TSA security requirements, Ms. Pantin said. For example, the agency required American to redesign the terminal’s entire baggage-screening system.
County officials continue work on the South Terminal expansion and other projects that are part of the airport’s capital improvement program. South Terminal’s completion is expected in March 2006.
Overall, Ms Gittens said, the airport expansion is going quite well, though she is concerned about the size – $4.8 billion, making it the second-largest capital program of any operating airport. The program has already been downsized due to projections citing a smaller number of passengers than originally projected.
"It’s an awfully risky investment given that Miami is in the bull’s eye of homeland security efforts and international trade and tourism," she said. "The county has to make prudent business decisions going forward. They really can’t miss a beat with this program. It’s so expensive and they’re doing it at such a challenging time in the industry."
MIA officials say funding for the expansion will come from Federal Aviation Administration grants, 5%; the state of Florida, 4%; passenger facility charges of $4.50 per ticket, 31%; and the sale of revenue bonds, 60%.
The bonds will be repaid, officials said, through per passenger charges the airlines pay to MIA. American Airlines, the airport’s largest carrier, says they will pay the majority of the fees, thereby funding a large portion of the expansion program.
MIA currently charges airlines about $15 per ticket, but projections put the fees at about $30 by 2015. If the expansion doesn’t stay within budget, Ms. Gittens said, the fees will rise.