No Miami Commission Vote Needed On City Letter Of Credit For Port Tunnels But State Still Waits
Written by Risa Polansky on October 8, 2009
By Risa Polansky
A week after a deal for twin tunnels to the Port of Miami was meant to close, the City of Miami is still the missing link in the long-planned project.
But officials have steered around an internal road block.
The $50 million letter of credit that’s holding back the deal won’t require a commission vote, City Attorney Julie O. Bru said Monday, reversing her long-held opinion otherwise.
The state is still awaiting the city’s piece of the project financing, though the local top dog says officials expect it today (10/8).
City officials did not say when they plan to send it.
The $1 billion-plus on-again, off-again tunnel deal was supposed to have been cemented by Oct. 1.
Attorney Ms. Bru for the past year has called for a commission vote on the letter of credit but changed her mind after the city last week negotiated some new terms.
"I am now of the opinion that commission approval is not needed for the LOC," Ms. Bru said via e-mail Monday.
Because of negotiations last week, the city won’t be paying the first year’s facility fee for the letter.
Officials did not respond when asked which bank would be issuing the letter and who would pay the fee the first year.
In the years following, fee payments will be "subject to budgetary appropriations," Ms. Bru said. It is up to commissioners to approve the annual budget.
Another key in her decision: Florida Department of Transportation officials have agreed that if the state draws on the letter of credit before the city is required to make tunnel payments, it will deposit the letter’s proceeds "into an interest-bearing reserve account, which will be identified as the City’s funding contribution for the Port Tunnel, until the City’s payment obligations become due," Ms. Bru said.
Despite the progress, the letter hasn’t left city hands.
"We are awaiting the letter of credit from the city," local district Florida Department of Transportation Secretary Gus Pego said late Monday.
Neither Ms. Bru, nor City Manager Pete Hernandez, nor CFO Larry Spring said when they expect to send it.
Once the Oct.1 deadline came and went, the state didn’t set a formal deadline for the city to uphold its end of the bargain, though officials expected the letter today (10/8), when the commission was to have voted.
Though the vote is now out of the picture, the state’s still hoping the city will come through today.
"It’s an expectation that it would be wrapped up around the 8th," Mr. Pego said. "The reason for that is, the sooner this is wrapped up the sooner we can finish the deal."
With the city’s letter in hand, the state can sign a contract with the consortium tapped to dig the tunnels, as well as finalize a federal loan.
"The letter of credit is a preamble to our closing with the concessionaire," Mr. Pego said.
The letter would cover the city’s $50 million contribution to the $1 billion-plus tunnel project, designed to divert cargo trucks from downtown streets via underwater tubes.
Miami-Dade County, which is putting in $402.5 million, last month secured a letter of credit from Wachovia to cover $75 million of a geotechnical contingency reserve.
The tunnels are expected to open in 2014.
This is not the first time the project has been on shaky ground.
Florida Department of Transportation Secretary Stephanie Kopelousos tried in December to shelve the project, citing equity issues.
Local leaders immediately balked, rallying here and in Tallahassee to keep the tunnel project alive and pointing out that the contract team had already found a flush equity partner.
They were on edge for months before Ms. Kopelousos acquiesced, and even then she suggested re-bidding the project entirely.
Again, local officials resisted, fearing re-opening procurement would add years to the timeline and insisting negotiations continue with the original contractor team selected in 2007.
Ms. Kopelousos relented in April, when she set the now long-gone Oct. 1 deadline for a financial close.
She also required business terms be set by June 1.
The state, county, city and contractor made that deadline.