Businessgovernment Weddings A Divorce Lawyers Dream
Written by Miami Today on July 10, 2008
Governments here are rushing to partner with developers in a difficult marriage of profit-making with public service.
If history is a guide, most of these hasty marriages will wind up as painful separations or nasty divorces.
The grounds: incompatibility.
The reason: to succeed, public-private development deals must be cut in a businesslike way. That, unfortunately, is not how elected officials function — and, most probably, not how they should function.
Government ideally represents all the taxpayers, making sure they get the best bang for their tax bucks. Business represents just the owners, making sure they maximize profits.
And in most current development proposals, government would work with someone who’d be setting up shop to compete with the very business owners that government represents. The conflicts are obvious.
Take four deals we’ve reported this week and last:
— The county’s Aviation Department wants to raise a half billion dollars by partnering with developers on land near Miami International Airport. Projects include a 200-room hotel, a gasoline station, a dry cleaner, a pet hotel and a conference center. All are on a county committee agenda today (7/10).
— The county commission last week advanced plans for a water theme park and hotel at the county’s Metrozoo. The development might cost $40 million.
— The foundation that serves the county’s Jackson Memorial Hospital wants to lease hospital land from the county and sublease it to a developer who would build a 350- to 500-room hotel with a spa and health club, and also a retail complex with a 40,000-square foot grocery, 25-000-square-foot drugstore, plus restaurants, drycleaner, daycare center and wellness center.
— The City of Miami wants to work with a developer to build not only a clubhouse but a 200-seat restaurant, a bar and retail stores at Melreese Golf Course — a scaled-down plan that several years ago also included a hotel. The city first demanded a four-star hotel, then three-star — and then gave up on a hotel.
That change in plan should be a guide. It’s not, after all, like Miami-Dade County has a critical shortage of hotel rooms that government must remedy in order to serve the taxpayers.
For while the county’s hotel occupancy rate is 79% — far above most of the US — that still leaves thousands of hotel rooms empty nightly. Is it really government’s business to use public land to build competition for those hoteliers?
The same could be said of restaurants — clearly one of the more fragile enterprises, with one of the highest failure rates of any form of business.
And are we really so short of drycleaners or grocery or drugstores? Or gas stations? Are these really businesses in which government should be playing a pivotal role with public lands, even if taxpayers are pledged significant payback?
Any role government has in business development would be in meeting needs that private enterprise can’t or won’t. That might include a golf clubhouse or airport conference center or theme park but doesn’t include most of the businesses that government is sticking its large fingers into using taxpayers’ resources.
It’s not like government business deals offer cinch profits to taxpayers, either. This county’s landscape is littered with public-private deals that wound up costing the public millions rather than providing any of the benefits we were promised.
Look at the advertising-and-sightseeing balloon ride in Bayfront Park. Operators couldn’t pay the rent and Miami had to involve lawyers in eviction. Now the city must pay to do whatever it can to restore the Pepper Fountain that was cannibalized to become the takeoff-and-landing platform. So much for profit in the park.
The city should have known better, because its deals for profits usually end up that way.
It leased boatyard space to operator after operator who never paid rent. It made a sweetheart deal for the land where Monty’s restaurant sits and got burned there too when the operator went to prison. It leased dock space to the developers of Fisher Island and was never paid a penny. Loans to Parrot Jungle left the public on the hook. And more.
The City of Miami isn’t alone. Coral Gables fixed up its own country club for a private operator and was stuck with unpaid rent. The county cut a deal with the Miami Heat to develop AmericanAirlines Arena and has yet to receive a penny. The county turned building of a concourse over to American Airlines, had to take it back and now is stuck for overruns in the hundreds of millions.
The track record of government development deals stinks. A couple may have served taxpayers well — but they certainly don’t come to mind.
So, with a landscape littered with failures, why on earth is government going this route again?
Some deals may be geared to score political points ("Look what I’m doing to help my district"). Some may be unloading assets to bail out a financially pinched agency. Some may be to balance budgets in the face of a downturn in property values coupled with state-mandated tax cuts. Some may be to help a campaign donor who’ll get a lucrative contract.
Whatever the reason for getting government into business, elected officials should follow several key precepts:
— Don’t get greedy. If you ask for more than market value or set unreasonable standards, the deal won’t get done. Think about that four-star golf course hotel requirement right next to a noisy airport. It wasn’t realistic.
— Get a flawless contract. Government keeps winding up on the hook when the deal falls apart. Remember Bayfront Park.
— Be sure your partner is solid. The contract’s strength makes no difference if the business you’re dealing with has few resources. Think, if you dare, about a stadium for the Florida Marlins.
— Deal with the right people. Character counts far more than deep pockets or a strong contract. Some government deals have been with guys you’d tremble to meet in a dark alley.
— Remember, the other side has a big advantage. They’re savvy business veterans. Your negotiators are government administrators. Enough said.
— Finally, be sure the deal transcends election cycles. If the next crop of officeholders is going to wish you’d never made this deal, don’t do it. Sure, you’ll be out of office and safe, but why saddle your successors with white elephants? If nothing else, think of your place in history.
If, given all this, dear commissioner, you’re still hell-bent on moving forward, one more caution:
Start looking for a good marriage counselor. You’re going to need all the help you can get.