Why was commission blindsided on Marlins garage cost?
By Michael Lewis
When Miami commissioners held their noses, if not tempers, and voted last week to permit $120 million bonding for Marlins stadium garages that were supposed to cost $94 million, most were shocked.
After all, when they'd approved the parking in March, City Manager Pete Hernandez had agreed to a $94 million cap and said he'd scale down construction to fewer spaces if garage costs were higher.
Yet there his finance chief stood at the outset of Thursday's meeting asking for $135 million — $41 million above the manager's own ceiling.
But why were commissioners surprised?
After all, before their vote resident Robert Fournier stood at the podium and waved a copy of Miami Today, reminding them that a year ago we'd cited a $150 million estimate to build the garages — an estimate Mr. Hernandez had pooh-poohed even though the figure came from a study by the city's own parking authority and a study the city commissioned by a national realty firm came in at $156 million.
Yet there was Mr. Hernandez, unwavering in confidence month after month that he'd do it for $94 million.
Of course, he hadn't brought those studies to the commission before the March vote, any more than he'd spelled out the sleeper in the deal — soft costs tucked in like an afterthought when the commission voted in March.
Turns out those soft costs Mr. Hernandez had never spelled out added $41 million last week. Some afterthought on a $94 million project!
But, of course, he had a defense to commissioners:
"Sometimes terms are used in a way that people who are not familiar with this lingo get lost in."
Count the five commissioners in that group. The question was, were they ever meant to fully grasp the facts before they approved the garages?
He had one more defense: "This is still a hell of a good deal for the city" because the garages "are being paid by somebody else" using the city's convention development taxes, which commissioners noted could otherwise be used for multiple vital projects.
After debating several hours, commissioners cut garage bonding to $120 million, with the caveat that the manager can return for more if he needs it — which he no doubt will, even in these days of sharply lower construction costs and hunger by contractors for any sort of work.
No aspersions on Boston's Suffolk Construction, top among 12 bidders to build, but Mr. Hernandez and company got commission promises of an open checkbook. And managers with a blank check and a project on the fire can spend and spend.
As it was, Commissioner Marc Sarnoff pointed at gaping holes in the city's spending plan, such as double-counting of $2 million in insurance funds and charging $150,000 for office expenses, of all things, to build.
At first, Mr. Sarnoff said he didn't want to embarrass people. Minutes later, looking at the numbers, he noted "This $10 million is not an authentic number... We're talking millions like it's a couple bucks."
Clearly, the administration built in enough fat that it didn't argue a bit about the first $10 million commissioners slashed, and even a $15 million cut seemed feasible. If they'd kept on, commissioners said, the administration would have yielded another $10 million — especially since that blank check awaits.
The key question, though, is whether the administration is leveling with commissioners or just leading them around by their noses like cattle. What they aren't being told can be more important than what they are.
For example, nobody during those two hours mentioned that deep in Exhibit 3 of paperwork attached to the bond request were two pages commissioners needed to understand.
The first, a debt service schedule, was blank. There aren't even estimates of how much the city would have to pay year by year to retire bonds to finance stadium parking.
The second page, city revenues pledged for debt service, showed that to issue the planned $135 million in bonds, the city would pledge $319.5 million over the next 30 years — a number far larger than commissioners heard throughout their meeting.
And in a cash-strapped city that has just felt layoffs, all general funds other than ad valorem revenues would be involved in the pledges, though Mr. Hernandez has repeatedly said in public that general revenues would never be tapped. If stadium parking fees and convention development taxes, which are shrinking by the minute with hotel revenues, don't yield enough, bonds would be repaid out of the fund that keeps the city running.
Pledged amounts start low: $2 million this year, because bonds would first be issued in December, and $3 million a year the next two years. But pledges would rise to $14.5 million a year in 2038 and 2039.
Like much of the county's bonding for the stadium itself, the city's stadium parking plan backloads debt and leaves most of it on the backs of generations to come.
Commissioners might have wanted to know that.
Of course the $319 million pledged is a bit above the $94 million that had been touted, but it should surprise nobody. Based on the parking studies the manager had in hand, we'd reported that total taxpayer costs over the life of the bonds would hit $340 million. So maybe $319 million is a break — or it too may be lowballed.
As Tuesday's election nears, even normally docile commissioners become restive about rising stadium-related costs and administrative candor.
"The issue is that the elected officials and the public have been misled in terms of different numbers," complained Commissioner Tomás Regalado, a mayoral candidate.
When the deal was approved, Mr. Regalado told the city manager, "Commissioner Sarnoff was specific in detailing and if you look at the minutes it will be there... $94 million and you said, "Commissioner, if we use the $94 million we stop right there construction.'
"I cannot believe that in several months $94 million has grown to $135 million."
Added Commissioner Angel Gonzalez, "How can we tell the public now that instead of $94 million it's going to be at the end of 30 years $250 million?... It's public money."
Commissioner Michelle Spence-Jones, who faces reelection Tuesday, was most articulate:
"I'm becoming very disillusioned with what's presented in front of us...." While some are saying now that "it was always very clear that the amount would rise from the $94 million... every briefing that I've been in nobody ever told me that....
"I wish I could have had the same type of presentation that you guys are presenting right now, telling us that it's going to go from $94 million and maybe possibly going to $135 million. You had to know it back then...
"And if you didn't know it back then, I've got a problem with that, Mr. Manager, because how could you sit there and allow us to vote on something for a certain amount of money and not be very clear on what the options were outside of the $94 million.... It's almost like you want to get our support to move the project so that you can surprise us with something else."
And, she concluded, more is coming: "I know for a fact that we're going to have this contract with the Marlins stadium" and "they're going to come back to us with something else."
She's absolutely right: the stadium deal that she voted for is going to keep on biting both the City of Miami and Miami-Dade County as their respective managers come back for more and more.
Even in voting for $120 million in bonds, commissioners were voting in a vacuum. Only in December will they see the frightening debt service schedules that will hamstring city officials for the next three decades.
The last thing the city can afford in its straitened circumstances is to mislead its governing body on true costs. If intentional, so much the worse.