Miamis Vast Project Megaplan Falling Apart At The Seams
Written by Michael Lewis on April 17, 2008
By Michael Lewis
The intricate stitches that bind together this county’s so-called Global Agreement patchwork are gradually tearing apart as piece after piece of the quilt unravels.
How long can the $3 billion crazy quilt of capital projects match its nickname before the individual elements must stand or fall on their own?
The Global Agreement, brainchild of Miami Mayor Manny Diaz with the complicity of county government, clumped together diverse projects that each lacked the financing or support to succeed. But every one boasted a handful of elected officials committed to its success.
Paying the massive debt of the performing arts center, which the county had sent hundreds of millions over budget, was a hot potato. Finding cash to prepare Bicentennial Park for two new unfunded museums would be difficult. A baseball stadium had failed over and over. Digging up money for a Port of Miami tunnel was difficult. Old debts for Jungle Island had long put the city and county at odds. And Mr. Diaz’s own pet idea, a $200 million streetcar, looked like a non-starter.
But mix all together, as Mr. Diaz did, and politicians were willing to swallow the bitter bites just to further their own tastes — particularly when the ingenious plan allowed the county to shift arts center debt to the city, raided funds meant to fight poverty and build tourism, and could be sold to the gullible as a package that would cost taxpayers almost nothing.
It was brilliant — as long as no pieces of the plan got too nettlesome for elected officials to comfortably handle.
But most of the mega-plan’s elements are just that: plans. All require added government votes to become reality.
That creates pitfalls for City of Miami and Miami-Dade County officials whose names are tied to mega-plan votes as re-elections near.
They got away with voting for a concept, saying they overlooked distasteful portions merely to save projects that would most benefit their constituents. But officials will find it trickier to vote blamelessly to enact each piece of the mega-plan.
City commissioners last week had to dance around paying the arts center’s debt from anti-blight funds.
First they berated city attorneys for failing to ensure that payments for the center — seen as a plaything of the rich — would only be made if the baseball stadium — viewed as the working man’s arts center — would in fact be built.
Then the two key commissioners, having decried the shame of it all, walked out before a crucial vote, thus permitting annual multi-million-dollar payments that they could have blocked.
Mayor Diaz had to journey to the commission chambers himself to keep those two in line. But it’s far from certain that he could do that again and again as pieces of the mega-plan come up for commission votes.
Even if Mr. Diaz could, it’s certain that county Mayor Carlos Alvarez couldn’t, even if he ever tried.
His best shot last week was a press release geared to pressure businessman Norman Braman, whose lawsuit to block the entire mega-plan is now in court. The clumsy release, contending that Mr. Braman is slowing progress by adding two months to legal information-seeking, won’t work.
But even before Mr. Braman’s pivotal action comes to trial, the mega-plan has met multiple setbacks.
The Jungle Island deal fell out early after it was found that the loan repayment mechanism was illegal.
City and county police and firefighters started squabbling over who would get cushy off-duty jobs watching baseball games or patrolling nearby at up to $30 an hour. The governments kissed and made up, but the unions are still simmering — and that costs votes on election day.
Some Miami-Dade commissioners are saying that vital contracts to build and operate the stadium might fail to pass.
And last week, Miami’s new city attorney admitted that the commission must revote on the entire Global Agreement because the original vote, engineered by the mayor, had failed to give the public required notice.
That new vote could be just a formality. Commission Chairman Joe Sanchez has been coy about whether he’ll allow a public hearing beforehand. And Mayor Diaz probably has the clout to push the deal through again, although rising public resentment may impede that.
But external issues will pressure both city and county commissioners to back off from the Global Agreement.
Most pressing is the economy. The real estate downturn is shrinking tax revenues just as voters and state lawmakers are combining to limit local tax receipts further.
Those elements will force governments to cut services. It becomes harder to con voters that government stumbled upon a $3 billion windfall to fund projects that residents see as secondary to disappearing services.
At the same time, the battered bond market has escalated the cost of interest. At present rates, borrowing $3 billion might cost $6 billion total — and the revenue streams to repay those bonds could actually shrink if the economic slump lingers.
That, in turn, could shove more and more burden from these projects onto general revenues — the same funds that fuel vital services. Most voters are feeling an economic pinch and they definitely aren’t happy.
County Commissioner Javier Souto, no mega-plan fan, hired Florida International University to poll West Dade and got results you’d expect: eyeing the economic downturn, "voters are overwhelmingly opposed to the three major public works projects (Port Tunnel, Marlins Stadium, and Museum Park)," and they’re disappointed with county leadership.
Voters are also listening to Mr. Braman’s complaint that they never got a say on the mega-plan. Commissioners unveiled the package at the last hour — in the case of the city, well past the last legal hour — and committed themselves to the full package before the public had even heard of it. Voters surely would defeat the plan today — and it’s not wise for elected officials to be on the wrong side of such a hot-button issue.
The Global Agreement, burdened by these weights, has become government’s equivalent of the Corporate Conglomerate.
The conglomerate a few years back was a Wall Street darling. Just merge all sorts of diverse businesses and synergies will suddenly appear to augment revenues. At least, that was the theory.
But when corporations became so huge and disconnected, each enterprise within them actually inherited not the best of the rest but the worst. Financial troubles in one sphere came back to bite all. In fact, only about 40% of all corporate mergers succeed, and far fewer do so as the group becomes more diverse.
As a result, massive corporate patchworks wound up being unraveled. The conglomerate, it turned out, was usually less than the sum of its parts.
The Global Agreement is taking on the same look: less, rather than more, than the sum of its parts. Political, legal and economic liabilities are spreading from one piece of the crazy quilt to another.
True, unwinding the rolled-up quilt would be painful. Without a stadium deal, taxpayers would have to pay penalties to the Marlins. The city will be stuck for years paying off costly county errors at the arts center. Without digging a port tunnel, "free" money from the state would flow elsewhere.
Even with that price to pay, it might be smarter both economically and politically to let each piece of the mega-plan rise or fall on its own merit. Certainly the taxpayers — also known as voters — would be pleased.
In such a case, some projects would live, some would be shelved. This would only happen after lively debate — and possibly even after voter approval.
Would that be such a bad thing?