Public-private project developer should assume cost risks

As the county plans to redevelop more than 20 acres in the core of downtown with multiple projects, it should examine past and current developments to see what worked well – and what didn’t.

We cited last week the egregious baseball stadium example, but other county stumbles in development should also raise warning flags in massive downtown change. Learn what to beware of and don’t repeat it.
Look nearby at the public-private project that is to either replace or supplement the outdated 1920s Dade County Courthouse.

When commissioners OK’d that deal in December 2019, the county was to pay private developer Plenary Justice $810 million over 30 years for a 23-story, 600,000-square-foot courthouse in a contract that was to cost the county $49 million less than doing the work itself.

That contract only came about because five years earlier voters rejected by a 2-1 margin a $393 bond issue for the county to build the courthouse. As one letter writer to Miami Today wrote before the ballot, “Should the item pass, I predict a cost of $595 million, if we’re lucky.” 

It didn’t pass, so the $393 million wasn’t there for the county to build. Then, five years later the county signed on at $810 million with Plenary Justice to build a tower that would open in January 2024. 

Now, with the slab of the courthouse poured, taxpayers don’t know when the building will be ready or what it will ultimately cost.

A year ago, Miami Today reported that Plenary Justice said the new courthouse wouldn’t be set to occupy until Aug. 14, 2024, due to multiple unexpected circumstances. Surprisingly, covid was not among them.

No, they had found that an in-site conduit duct bank controlled by FPL had to be moved, which could only be done after the utility got City of Miami and county permits. Not only would that add $500,000 to the county cost, it would add to the time schedule. 

But in a public-private project, isn’t the developer at risk for overruns and delays? That’s one major reason to let a private partner earn profits – because the private partner also assumes the risk.

Next, the developer had to relocate an access manhole to underground utilities, at a $200,000 cost to the county. 

But in public-private partnerships, isn’t the developer supposed to study in advance where manholes and conduit duct banks and other elements are and factor the cost of a move into the original deal?

Then, the developers found other utilities, including old Crown Castle fiber lines and conduits, that needed to be moved. 

Again, that should not have surprised a developer that scoped out the project before bidding.

Also found: a water cooling line needed to be moved and a sewer line needed refurbishments – more surprises that should have been anticipated. All of that was completed by last June. 

A year ago, while costs to the county were rising and Plenary Justice fell behind as it finished building designs, the developer sought and got permits to build the below-ground base of the tower.

Fast forward exactly one year. The county and Plenary Justice are still negotiating – as they had been 12 months earlier – a completion date and final cost to the county for the company to design, build, finance, operate and maintain the new civil courthouse. All of those matters supposedly were firm in December 2019 when commissioners approved the public-private deal.

At this point, how late the courthouse will actually open is up in the air. How much more it will cost is up in the air. And as disagreements with the county are being negotiated, the building is about to rise up in the air.

County negotiators today have little leverage in dealing with a company that already is building. Price and deadline negotiations succeed when a developer hasn’t already been chosen and it’s still a question of whether the county will sign a contract. With the contract signed and work going on, the developer holds the cards.

Miami-Dade almost certainly will seek public-private partnerships as it develops 20 areas very near the new courthouse with a transit terminal, affordable housing, schools, and cultural institutions like a new historical museum and main library. It will be utter chaos if private developers who will profit from successful deals do not assume also the risks of delays from unanticipated work. 

Taxpayers shouldn’t pay extra if developers didn’t know what they were getting themselves into. If a project is late, a developer needs to either pay overtime and add workers or face county penalties. Those points should be firm in future public-private partnership documents.

The courthouse is a single project. A 20-acre redevelopment will require multiple deals. Responsibilities for prices and deadlines should be rock solid in each of them.