County Mining For Gold Rock At Airport
Written by Miami Today on June 13, 2013
The Miami-Dade Aviation Department is set to take off on a rock mining venture with the state at a former county airport site, but it’s planning to alter the flight plan that’s been on the runway since 2007.
The airport hoped to extract anywhere from $246 million to $473 million from the mining venture when county commissioners approved it more than five years ago in one of a squadron of airport fundraising plans.
Proceeds were to cover a $500 million annual increase in airport debt expected in 2015 as a result of the expansion of Miami International Airport. If the airport doesn’t find ways to raise the money, airlines will be assessed higher landing fees to make up the difference, raising the cost to passengers of trips to and from Miami.
The site of the planned rock mine is the now-defunct two-runway Opa-locka West General Aviation Airport, opened in 1970 at US 27 and Krome Avenue and, because of low activity, decommissioned in 2006.
The airport’s 422 acres are estimated to have 44.6 million to 50.4 million tons of limestone beneath their surface.
Population growth increased demand for the limestone aggregate, which is used for both homebuilding and road construction. At the time of the 2007 mining deal, county commissioners were told that its price had doubled in the prior five years.
The county had cut a deal with the Florida Department of Transportation to procure a rock-mining contractor to dig out the limestone and sell it. The state was then to flip the contract with the company back to the county but continue to manage the mining work.
Everything was smooth skies until turbulence hit in 2010 when the transportation department actually issued the required bid notice, at which point multiple potential bidders — including building industry materials bedrock CEMEX and South Florida mining leader White Rock — protested the terms.
After meeting with the mining firms, the state and county agreed to alter the agreement, the proposed changes coming this week before the county’s Transportation & Aviation Committee.
The current form of the agreement requires the transportation department to take the lowest bid for the work. But the county wants to switch that to an invitation to negotiate in order to consider factors other than price.
Another change would authorize the transportation department and the county to negotiate the price payment mechanism rather than insisting on the county keeping all revenues from rock sales after subtracting the costs of the mining company.
"After conversations with the industry, the county believes that there are significant expenses and risks associated with trying to track an extraction company’s costs," Deputy Mayor Jack Osterholt wrote in a memo to county commissioners explaining the proposed change in terms.
The current terms of the contract specify that the limestone rock cannot be sold outside of Miami-Dade, Broward and Monroe counties without the consent of the county commission.
"The industry has argued that this will severely limit its ability to generate revenues" from the site, Mr. Osterholt wrote.
The plan is now to amend the terms so that the mining company that’s chosen would have to "make reasonable efforts" to confine sales to the three counties and give priority access to the vital limestone to the county, the state transportation department and the Miami-Dade Expressway Authority.
The original deal required the mining company to sell at 14.9% off market rate to the county, the transportation department and the expressway authority.
"Volume discounts, generally ranging from 10% to 15%, are customary in the industry for large-volume buyers," a memo from then-county manager George Burgess explained to commissioners in 2007.
But proposed new terms would remove the specific discount, authorizing instead negotiation of an acceptable discount methodology.
If the county committee approves the changes, the measure would go to the full county commission for approval.
In explaining the deal to commissioners, Mr. Osterholt wrote that the mining would generate non-aeronautical revenues for the aviation department, which could then minimize costs to airlines that fly to Miami International Airport.
The Florida Department of Transportation, he explained "will, in turn, be provided with a low-cost mine from which it could source construction aggregates for its projects."
In proposing the project to commissioners in 2007, Mr. Burgess had said the aviation department "is facing a financial crisis and, between now and the year 2015, must increase the annual revenue from what is now $600 million per year to $1.1 billion." That would coincide with increased payments on capital bonds.
The mining operation wasn’t the only plan at the time to dig the county’s airports out of the financial hole.
Airport administrators also proposed to line Miami International Airport with 1,000 slot machines to generate up to $20 million a year, drill for oil at the Dade-Collier Training & Transition Airport and get a license for quarterhorse racing through a lease of an existing track.
Another plan preparing for takeoff at the time has become the Airport City development proposal encompassing retail, offices and hotels at Miami International’s doorstep that the aviation department still plans to launch.
Assessing the mix of revenue-generating ideas for commissioners four years ago, Miguel Southwell, deputy aviation director for business retention and development, who recently left for a role at Atlanta’s Hartsfield Airport, said "Some people have said we’ve gone crazy just looking at ideas."To read the entire issue of Miami Today online, subscribe to e-MIAMI TODAY, an exact digital replica of the printed edition.