Rising Costs Delays Cast Doubt On Port Tunnels Future
Written by Miami Today on June 5, 2008
A truck tunnel from Watson Island to the Port of Miami is imperiled by rising costs that have prevented the state and the European consortium that would dig and operate it from reaching a contract.
"Some people say it’s on life support. Some people say it’s dead," said Gus Pego, secretary of District 6 for the Florida Department of Transportation, which is quarterbacking the project. "My goal is to have an agreement signed by September. It’s not dead yet."
The tunnel is designed to lessen downtown Miami traffic by sending trucks to and from the port via Watson Island, connecting to the MacArthur Causeway and then I-395 instead of Biscayne Boulevard. It’s being funded by the state, county and City of Miami — and that funding is all approved. But with rising costs, it’s not enough to get the job done.
"Finally, the state hasn’t signed on the dotted line and neither has the concessionaire," Assistant County Manager Ysela Llort told Friday’s Greater Miami Chamber of Commerce Goals Conference session on transportation at which Mr. Pego spoke.
"I didn’t know it was in trouble," County Commissioner Carlos Gimenez, who attended the meeting, said afterwards.
The 180-degree turn in financial markets since the concessionaire, the Miami Access Tunnel Consortium, set its initial tunnel price, coupled with rising costs, have the organization and the state in on-going negotiations to re-examine the process and pricing, Mr. Pego said after the meeting. He is involved in those talks and said he could not disclose specifics on advice of state attorneys.
The concessionaire is working on its financing, he said.
The September target to end negotiations and sign a contract is vital as prices of labor and materials continue to soar, Mr. Pego said. "The longer this drags on, the worse it’s going to get."
Costs of the project were calculated based on a 2012 tunnel opening date.
In looking for a financial structure to cover the cost increase without more state, county or city funding, Mr. Pego said, the parties are trying to work with the US Department of Transportation in Washington to secure a federal Transportation Infrastructure Finance and Innovation Act (TIFIA) loan at lower interest rates than bonding future government payments would require. Lower interest would leave more money to pay the consortium for construction. Those talks also are ongoing.
The act provides federal credit assistance to nationally or regionally significant surface transportation projects "to fill market gaps and leverage substantial private co-investment by providing projects with supplemental or subordinate debt" for up to 35 years after completion, according to the act’s Web site. The secured loans, loan guarantees and lines of credit cannot exceed 33% of the project cost. The loan program is now funded at $122 million a year through 2009.
"The concessionaire will need the TIFIA loan in order to build the project," Mr. Pego said. The consortium would be responsible to repay the federal loan.
The state is now to pay $457 million toward construction, the county $402 million and the city $88 million — up from $50 million because the city intends to pay in the future rather than up front. The city also is contributing Watson Island land, estimated at $5 million.
The tunnel consortium is to receive some construction payments up front but get most of its money when the tunnel is operating. If any of the four tunnel lanes are closed for any length of time, payments to the consortium would fall. Under the proposed contract, the consortium would be responsible for all overruns in costs of constructing and operating the tunnel.
The port tunnel is part of the so-called mega-plan for downtown that includes a baseball stadium, streetcar line, funding shift for the performing arts center and funding for a future Museum Park. That plan is being challenged in court.
But the tunnel is not dependent upon that plan and "stands on its own two feet," Commissioner Gimenez said, because the county is already committed to the tunnel and the city has agreed to fund it with other ad valorem funds if planned use of Community Redevelopment Agency funds for the purpose fails.
The state funding for the tunnel comes from a pool of documentary stamp revenues that are available for strategic transportation systems that must be ready for development. The tunnel met that criterion.
The tunnel development consortium would by contract be required to put up almost all costs of the project up front, with only small stipends from government during digging. The real payments would come when the system was operational.
Once the tunnel was operating, it would most likely be tolled, as would the present Port of Miami bridge entrance off Biscayne Boulevard. Toll levels have not been set.
While several clusters of companies originally bid to develop the tunnel, a failure to reach a contract with the intended concessionaire would almost certainly doom the tunnel, a transportation spokesperson said, because a second bidder is no longer an option.
The chosen consortium includes French company Bouygues Publics Travaux for construction, Babcock & Brown for banking, Jacobs Engineering and Transfield Services for transport operations.
Chamber leaders at their goals conference reiterated support for the tunnel, as did County Manager George Burgess during a Saturday morning address to chamber members that did not indicate any problems in securing a tunnel contract.
"The Port of Miami is an enormously important economic generator for this community," Mr. Burgess said, and the tunnel would remove 18-wheel trucks from downtown streets.
Said Mr. Pego, "It’s the right thing to do for this community."