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ENTIRE Stadium Financing Plan and History


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This is what is being presented by George Burgess, the County manager to the County Commissioners for their approval on Tuesday. It contains the entire plan and history of it:

 

TITLE

RESOLUTION APPROVING TERMS OF AND AUTHORIZING COUNTY MANAGER OR HIS DESIGNEE TO EXECUTE MEMORANDUM OF UNDERSTANDING AMONG THE COUNTY, THE CITY OF MIAMI AND THE FLORIDA MARLINS, L.P. RELATED TO A NEW BALLPARK FOR THE FLORIDA MARLINS AND TO EXERCISE ANY AND ALL OTHER RIGHTS CONFERRED THEREIN; AMENDING RESOLUTION NOS. R.-1182-03, R.-655-04 AND R.-1416-04 TO INCREASE PLEDGE OF CONVENTION DEVELOPMENT TAX PROCEEDS AND PROFESSIONAL SPORTS TAX PROCEEDS FOR THE DEVELOPMENT AND CONSTRUCTION OF A FLORIDA MARLINS BALLPARK; RETROACTIVELY APPROVING CSBE SUBCONTRACTOR GOALS ON CONSTRUCTION MANAGER SERVICES PORTION OF THE BALLPARK PROJECT CONSTRUCTION CONTRACT; AND WAIVING THE PROVISIONS OF RESOLUTION NO. R.-377-04

 

 

 

BODY

WHEREAS, this Board desires to accomplish the purposes outlined in the accompanying memorandum, a copy of which is incorporated herein by this reference,

NOW, THEREFORE, BE IT RESOLVED BY THE BOARD OF COUNTY COMMISSIONERS OF MIAMI-DADE COUNTY, FLORIDA, that:

Section 1. The matters contained in the foregoing recitals are incorporated in this resolution by reference.

Section 2. This Board hereby approves the terms of and authorizes the County Manager or his designee to execute the Memorandum of Understanding among Miami-Dade County, the City of Miami and the Florida Marlins, L.P., which Memorandum of Understanding is in substantially the form attached hereto and incorporated herein by this reference, and to exercise any and all rights conferred therein.

Section 3. This Board hereby amends Resolution Nos. R.-1182-03, R.-655-04 and R.-1416-04 to increase the County?s pledge of available Convention Development Tax proceeds from $24 million to $30 million and to increase the County?s pledge of available Professional Sports Franchise Facility Tax proceeds from $38 million to $48 million for the development and construction of a Florida Marlins ballpark.

Section 4. This Board hereby retroactively approves the CSBE subcontractor goal for the construction manager services portion of the Ballpark construction contract as set forth in the accompanying memorandum.

Section 5. This Board finds it in the best interest of Miami-Dade County to waive the provisions of Resolution No. R.-377-04.

 

 

HEADER

Date: March 1, 2005

To: Honorable Chairman, Joe A. Martinez

and Members, Board of County Commissioners

From: George M. Burgess

County Manager

Subject: Memorandum of Understanding among the County, City of Miami and the Florida Marlins L.P.

 

 

STAFF RECOMMENDATION

It is recommended that the Board of County Commissioners approve the accompanying resolution that authorizes the County Manager to execute a Memorandum of Understanding (?MOU?) among the County, City of Miami (the ?City?) and the Florida Marlins L.P (the ?Marlins?) for the development and construction of a new Ballpark; amends Resolution Nos. R-1182-03, R-655-04 and R-1416-04 to increase the pledge of Convention Development Tax (?CDT?) and Professional Sports Franchise Facilities Tax (?PST?) contributions; retroactively approves CSBE subcontractor goals on the construction manager services portion of the Ballpark Project construction contract; and waives the provisions of Resolution No. R-377-04.

 

 

MANAGER'S BACKGROUND

The proposed new Ballpark for the Marlins first came before the Board on November 4, 2003 at which time the Board pledged funding for the Ballpark and set forth a policy directive to work with the Marlins and other parties to move the project forward. On May 11, 2004 the Board approved a Preliminary Term Sheet that outlined a financing structure and other elements of the project as well as identified the Orange Bowl as the site for the Ballpark. After approval of the Preliminary Term Sheet, the County and City drafted a non-binding MOU and submitted it to the Team on July 30, 2004. Since that time the County, City and the Marlins have been negotiating the general terms and conditions contained in the MOU in order to set forth the business foundation for final stadium agreements. On February 9, 2005 I presented a Ballpark Project Overview and summary of the key issues contained in the MOU to the Intergovernmental, Recreation and Cultural Affairs Committee and distributed copies of the presentation to all Board members (see attached). The purpose of this rather detailed overview was to give the Committee and Board an opportunity to understand the elements of the project and proposed non-binding MOU, and to provide an opportunity for feedback in advance of the full Board?s consideration of the item at the March 1, 2005 meeting.

 

This recommendation is balanced on several different considerations. In order for the Marlins to remain in South Florida, a new Ballpark and an environment that enables the team to be a sustainable and competitive organization is needed. Given the work that has been done, the direction of the Board and the commitment the Marlins have demonstrated and professed to the County, City and public at large, I believe it is prudent to advance to the next step in the process. I also believe with a local agreement in place the State will be better able to support the project and provide the remaining funds needed to complete the financing plan. Finally, based on the circumstances surrounding this project and the respective abilities of the County, City and Marlins to provide funding and financing for the project, I believe the MOU before you is the best deal that could be reached.

 

If we want a new Ballpark at the Orange Bowl to provide our residents, visitors and fans with an exciting new addition to our ever-growing community we can have it, but we have to make decisions and weigh the potential elements of risk associated with a large and complex development project and determine the level of financial commitment we are willing to undertake. That being said, I feel with a dedicated and cooperative partnership among the County, City and Marlins in which all parties fulfill their respective commitments and responsibilities, this project can be successful.

 

The Ballpark is scheduled to open in February of 2008, which is a year later than the Marlins previously planned. The year delay has escalated the cost of the Ballpark construction from $325 million to $360 million. In addition the change of the location of the Ballpark to the East end of the Orange Bowl has increased the estimated cost of land acquisition and infrastructure improvements from $10 million to $28 million. This brings the total cost of the Ballpark project to $420 million.

 

Cost Overrun Guaranty

Throughout the course of this project I have consistently stated my concern with cost overruns and this has not changed. The Marlins have clearly stated its commitment to be responsible for and to fund all cost overruns above the $360 million estimated construction budget. During the first round of MOU negotiations, the County and City requested the Marlins provide a substantial letter of credit to back its contractual commitment to fund cost overruns. The reason for our request was in large part due to what we perceived to be an aggressive construction budget and schedule. We also wanted a guaranty that was secured with a predetermined and ready source of cash or liquidity that would be in place to fund any overruns that might occur. The Marlins defended its budget estimation and while we respect and expect the Marlins to be in a better position to hold expertise in matters relating to the sports facilities industry, the County and City certainly understand risks associated with large scale development projects and did not feel there was an adequate level of certainty with design development and the construction budget.

 

Our position at this point was to focus on securing a solid guarantee as opposed to continuing to debate the issue of budget. The Marlins were not agreeable to a letter of credit, perceived it imposed an unnecessary cost on the project and indicated they could not secure a letter of credit in the amount we requested. The Marlins further indicated that a contractual guaranty to cover cost overruns secured with collateral is almost unheard of in the industry. However, in the end the Marlins agreed to collateralize its guaranty if they maintain full control over the development and construction of the Ballpark. Based on the understanding that the Marlins will fully control the development and construction of the Ballpark, the $35 million increase in the development and construction budget and a 2008 opening, there is a greater level of comfort with respect to budget and mitigation of potential overruns.

 

Nevertheless, the cost overrun issue is still a concern and we have reached an understanding on an approach and model that provides collateral in addition to the Marlins contractual guaranty to be responsible for cost overruns. The components consist of the following:

 

1. Development and Construction Cost Overrun Guaranty ? contractual agreement establishing the Marlins as the guarantor to pay any and all cost of planning, designing, acquiring, constructing and equipping the Ballpark in excess of $360 million.

2. Subordinate Lien - on the Marlins? franchise, subordinate only to $50 million of senior creditor debt. County and City can foreclose and sell franchise upon default of Marlins to pay cost overruns.

3. Major League Baseball (MLB) $10 million Guaranty ? Marlins to request MLB to provide guaranty, which is a condition that must be met before the County or City issues debt (other than the City?s issuance of debt to fund land and infrastructure in an amount equal to $28 million).

4. Ballpark Cost Overrun Review Process ? detailed process to monitor construction, identify cost overruns and ensure the Marlins? ability to fund cost overruns if any as condition precedent to County?s issuance of Team Rent Bonds.

 

While the collateral securing the cost overrun guaranty is not exactly what the County and City had requested, the cost overrun guaranty does entail substantive security beyond a contractual obligation. In order to move this project forward the cost overrun guaranty was one of the major issues we had to reach agreement on.

 

Team Rent Bonds

Another major issue that took some time to resolve during the course of the negotiations is the Team Rent Bonds. Once the Ballpark site settled at the Orange Bowl, the Marlins indicated they would not be able to secure the level of financing required to meet its contribution. At this time, the Marlins and the County discussed the possibility of the County issuing debt on behalf of the team, which the Marlins would repay in the form of an annual rent payment. In order to generate the maximum amount of bond proceeds, the County would need to issue debt independent of the Marlins secured by the County?s covenant to budget and appropriate non-ad valorem revenues. I want to be clear that the Team Rent Bonds for $162 million is County debt. The team is not in anyway tied to the bond issuance. The amount of rent due by the Marlins to the County shall be at all times equal to the annual debt service required for these bonds. To the extent the Marlins fail to pay annual rent, the Marlins become bankrupt or the sport of MLB would in some way disappear, the County?s general fund would have to cover the annual debt service payments. Clearly, these are extremely unlikely scenarios. However, we have structured this financing in a way that significantly mitigates any exposure.

 

The manner in which the Marlins annual rent payments are structured to repay the County?s debt service on the Team Rent Bonds is strong and well crafted. The Marlins annual rent payment will be secured on a first lien basis of Contractually Obligated Income (COI) due to and collaterally assigned by the Marlins to the County to secure the Marlins? annual rent payments (the ?Bond Rent?) while the Team Rent Bonds are outstanding. The COI will consist of revenues under the Marlins? local television and radio broadcast agreements. The COI is projected to average a coverage ratio of at least 1.60x the annual Bond Rent payment and in no event will the COI pledged by the Marlins be less than 1.30x the annual Bond Rent payment in any bond year during the first thirty (30) years and 1.50x in any succeeding bond year while the Team Rent Bonds are outstanding. The Marlins shall provide substitute or additional COI in a form acceptable to the County, such as naming rights or other new stadium contracts, so that the COI pledged by the Marlins shall at all times meet the coverage requirements. This COI, in particular the local television contract, is one of the strongest forms of local revenues the Marlins have and is relatively long-term compared to other types of revenues generated from the Ballpark. The payment of these revenue sources is secured by contract and is not directly generated based on attendance, therefore, there is little risk of fluctuation. Since the term of the Team Rent Bonds is longer than the Marlins COI contract terms, the Marlins shall reassign its COI as they renew their agreements to secure its rent payments for the duration of the Team Rent Bonds.

 

The COI will be held by a trustee in favor of the County and will be deposited directly to a lockbox. Deposits to the lockbox shall accumulate to ensure annual Bond Rent payments are secured in an amount required to make the corresponding debt service payments on the Team Rent Bonds forty-five (45) days prior to the date the Bond Rent payments are due. In addition, upon issuance of the Team Rent Bonds, proceeds of the bonds in an amount equal to fifty percent (50%) of the Bond Rent payment due in the first year shall be deposited into the lockbox and kept as a rental reserve (the ?Rental Reserve?). Deposits to the lockbox shall ensure that on the first day of each bond year and throughout such bond year, the Rental Reserve on deposit in the lockbox is in an amount equal to fifty percent (50%) of the annual Bond Rent due in such bond year. If the Marlins elect to pledge COI of at least a 1.60x the annual Bond Rent payment, the Marlins shall thereafter only be required to provide a Rental Reserve of twenty-five percent (25%) of the Bond Rent due in each bond year. If the Marlins fail to maintain 1.60x coverage, the Rental Reserve requirement shall increase back to fifty percent (50%) and may only be reduced if the Marlins make the required payments to the lockbox on a timely basis for three consecutive years.

 

 

Bond Rent payments shall be made out of the lockbox on the date on which the debt service payment with respect to the Team Rent Bonds is due. Any amounts in the lockbox in excess of the required amounts shall be distributed to the Marlins. The Rental Reserve shall be applied to the payment of the Marlins? Bond Rent to the extent there are any shortfalls in payments of the Bond Rent by the Marlins. No amounts on deposit in any debt service reserve (including amounts available under any reserve sureties) for the Team Rent Bonds shall be applied to the payment of principal and/or interest on the Team Rent Bonds unless the Bond Rent payments by the Marlins and amounts in the Rental Reserve are insufficient to satisfy any such payment.

 

Increase of County Contribution

When it was apparent that the project was delayed a year, the Marlins requested the assistance of the County to help fund the increased cost. Aside from the Marlins increase of $35 million in rent payments the project needed another $16 million to close the gap. This MOU increases the County?s contribution $16 million to close the gap with a $6 million increase of CDT and a $10 million increase of PST. These increases would bring the total CDT contribution to $30 million (in addition to the $60 million of CDT allocated to the City per the December 14, 2004 Interlocal Agreement) and the total PST contribution to $48 million.

 

The increase in these County bed tax revenues can be achieved by maintaining our original growth projections for both CDT and PST as described in my November 4, 2003 Supplemental Memo to the Board. The ability to generate the additional amounts is based on the strong FY 2004 performance. The higher than projected revenues in FY 2004, and what thus far is turning out to be another strong tourist season for FY 2005, increases the base amount of revenue from which the CDT and PST bonding capacity is determined. I am comfortable with the additional contribution to the project and if approved, the County once again is showing its high level of commitment to this project.

 

Financing Structure

The County and City have structured the financing of the project in a manner that sets forth certain conditions precedent that must be satisfied prior to the issuance of debt. No debt will be issued until this Board, the City Commission, the Marlins and MLB have approved all the stadium agreements, which includes the Marlins development and construction cost overrun guaranty. After the stadium agreements have been executed, the City will issue its CDT bonds and deposit $28 million in a land and infrastructure sub account in the construction fund. Prior to the issuance of the County and City special obligations bonds, other conditions must be met including MLB?s $10 million guaranty, all parcels of land required for the Ballpark must be acquired and legal title and possession vested in the County, and the necessary development approvals to accomplish the project shall also have been obtained by the Marlins.

 

Only after the conditions precedent have been satisfied, the County and City shall issue their respective Special Obligation Bonds. After all conditions precedent required for such debt issuances have been satisfied, but before the bonds have been issued, the Marlins? project developer may reasonably determine that monies are needed to be deposited to the construction fund. In such event, the County and City will advance the necessary monies to the construction fund at such times and in amounts based upon the construction schedule and draw down schedule. Any such advances to the construction fund shall be reimbursed from the construction fund no later than five (5) business days after the deposit of bond proceeds.

 

Land Acquisition

While the County is not bearing risk, another area of relative concern in regards to the project is the acquisition of land required for the Ballpark. There are approximately fifty (50) parcels (one parcel is a condo with twelve units) that must be acquired to secure the site. A portion ($28 million) of the City?s CDT bonds will go towards the cost of land acquisition and infrastructure improvements. The County Attorney?s Office will handle the land acquisition process and while we hope to obtain most of the parcels through negotiated purchase price, the exercise of the County?s eminent domain powers may be necessary. The City shall not be required to fund the acquisition of any land and infrastructure costs prior to satisfaction of certain conditions, which include final execution of the stadium agreements. The County will not be required to acquire any land prior to receipt of sufficient funds for the land acquisition.

 

The Marlins have retained appraisers in order to expedite the process and are permitted to acquire property through negotiated purchase, including by options, at any time provided the Marlins obtain the County?s written approval of the purchase price prior to execution of a binding purchase contract or option. If the Marlins do acquire property, upon the County?s request, the Marlins shall assign the contract to the County for no more than the contract or option price.

 

It is anticipated funding for land and infrastructure costs will be adequate, however, it is unknown what the final cost will be. If the cost escalates to unreasonable amounts, the land acquisition process could place challenges on the project. Timing is also critical, as the Marlins have stated they need to have control of the site by September to begin the necessary infrastructure improvements to ready the site for construction, which according to the Marlins is slated to begin in October 2005.

 

Ballpark Construction Contract

The Marlins or its project developer shall be responsible for the design and construction of the Ballpark Project, including the competitive selection of contractors and any project/construction managers in accordance with State and local law. The Marlins have advised the County and City that the Marlins have retained HOK Sport, Inc., Walter P. Moore, Bliss & Nitray, Inc., Uni-Systems and M/E Engineers as the design team for the Ballpark. As a result, the Marlins shall pay any and all architectural and engineering cost with respect to the Ballpark Project. Even though the Marlins are paying 100% of the design costs, prior Commission policy has been to require compliance with the County?s CBE - A/E program because the development will be built on land that will be owned by the County. HOK, the prime architect of the Marlins' design team has already commenced design work and in doing so certain disciplines of the design work have been awarded. To that extent, the Marlins and its design team are working with the Department of Business Development (?DBD?) to identify elements of the design work that has not been awarded and that can be performed by qualified CBE - A/E firms. DBD will monitor the project to ensure that the Marlins cause its design team to meet CBE - A/E goals with respect to design.

 

The Marlins will hire a construction manager and will be awarding such contract services without Board approval. In the interest of time, the Marlins have advertised the solicitation for construction manager services prior to concluding negotiations of the development agreement. In doing so, the Marlins have advertised Community Small Business Enterprise (CSBE) goals as determined by the Review Committee?s recommendations. The Review Committee met on February 2, 2005 and recommended that a five percent (5%) CSBE goal be applied to the management services for the construction manager at risk contract in compliance with the requirements of Section 10.33.02 of the Code of Miami-Dade County and Administrative Order No. 3-22. Prior to commencing the construction of the Ballpark, the successful construction manager will submit the construction packages to the County for the application of CSBE and Community Workforce Program contract measures.

 

My position is always to fully inform the Board in a comprehensive and straightforward manner. In addition to this memo, I believe that the Ballpark Project Overview presented to the Intergovernmental, Recreation and Cultural Affairs Committee and distributed to all Board members on February 8, 2005 has provided the Board with a great deal of information and understanding of this project so that you may make a well-informed decision regarding the Ballpark Project. As earlier stated, this MOU does not contain all the provisions requested by the County and City, or all of those requested by the Marlins. However, I do believe this non-binding MOU represents a realistic agreement we can use to move forward to the next steps in this process.

 

The most critical elements of this project still lie ahead. Upon approval of the MOU, the parties must begin to negotiate the final ballpark agreements, which will include a Cost Overrun Guaranty Agreement, Development Agreement, Management Agreement, Lease, Development Agreement Guaranty, Management Agreement Guaranty and Non-Relocation Agreement and other agreements as required. These final agreements will be brought to the Board, City Commission and MLB for approval. In addition, State funding must be obtained during this legislative session to complete the financing plan. We must also assemble required land for the site. At this point we are faced with an opportunity to move forward to the next stages in our efforts to successfully develop a new Ballpark at the Orange Bowl, which can be a major investment that will add to the on-going development of downtown and other areas of our community.

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A few points I found most interesting:

Marlins want to begin construction in October and have the park ready by February 2008.

The Marlins will be responsible for all design and construction aspects, and they will select all contractors and construction manager without Board approval.

The Marlins have already begun the process of soliciting a construction manager.

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A few points I found most interesting:

Marlins want to begin construction in October and have the park ready by February 2008.

The Marlins will be responsible for all design and construction aspects, and they will select all contractors and construction manager without Board approval.

The Marlins have already begun the process of soliciting a construction manager.

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They can select contractors without Board approval, yet must meet the 5% small business provisions by the County prior to the start of construction.

 

Also interesting that the Marlins rent payment must be guaranteed by their TV and Radio contracts.

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Someone should forward this to Fat Hank...he was spouting off his usual uniformed BS all morning. I couldn't stand listening to him so I switched over to Joe Rose. He was actually complaining about the increasing cost of bricks and mortar! The guy has no clue whatsoever...what a turd.

 

:thumbdown

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Someone should forward this to Fat Hank...he was spouting off his usual uniformed BS all morning. I couldn't stand listening to him so I switched over to Joe Rose. He was actually complaining about the increasing cost of bricks and mortar! The guy has no clue whatsoever...what a turd.

 

:thumbdown

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Sounds like he is becoming more desperate in his attempt to turn public opinion against the stadium deal. He went on and on for a year about how the Marlins didn't have the money to make this deal happen. Now there is a solid financing plan in place and momemtum building in political circles.

 

It's becoming more and more evident that all of his "insider" information is nothing more than BS.

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Sounds like he is becoming more desperate in his attempt to turn public opinion against the stadium deal. He went on and on for a year about how the Marlins didn't have the money to make this deal happen. Now there is a solid financing plan in place and momemtum building in political circles.

 

It's becoming more and more evident that all of his "insider" information is nothing more than BS.

695131[/snapback]

 

I'm sorry, but on that point Hank Goldberg is right, the Marlins don't have the money to make this deal happen. Read all the agreements and reports carefully and you'll see that the Marlins aren't putting any money up front in cash. They're merely submitting in "rent payments" as their contribution. That's not money, that's a "mortgage payment". It's not as if the Marlins are fronting $160M, they're making $160M in mortgage payments over the term of the stadium "lease." Those are two different things.

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I haven't been able to comment on the stadium deal until now but some of you above have hit on what was the THE SNAG in putting this deal together.

 

What has held this up has been the City's demand that the three parties, not the Marlins exclusively, have the right to control and have oversight of construction.

 

To their credit the Marlins refused to be put in position where Diaz and Arriola were determining which of their cronies (am I being too harsh???) got what contracts. That is what the Vegas trip was all about and why Diaz went through the roof (no pun intended).

 

Ultimately the City relented and the Marlins were able to secure full control over this all-important component of the contract.

 

Job well done. Congrats.

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Sounds like he is becoming more desperate in his attempt to turn public opinion against the stadium deal. He went on and on for a year about how the Marlins didn't have the money to make this deal happen. Now there is a solid financing plan in place and momemtum building in political circles.

 

It's becoming more and more evident that all of his "insider" information is nothing more than BS.

695131[/snapback]

 

I'm sorry, but on that point Hank Goldberg is right, the Marlins don't have the money to make this deal happen. Read all the agreements and reports carefully and you'll see that the Marlins aren't putting any money up front in cash. They're merely submitting in "rent payments" as their contribution. That's not money, that's a "mortgage payment". It's not as if the Marlins are fronting $160M, they're making $160M in mortgage payments over the term of the stadium "lease." Those are two different things.

695138[/snapback]

 

Not exactly true. The Marlins are paying for all of the engineering and design costs up front.

 

They are working with the County to bond out their future revenues. The County has received reasonable guarantees in the form of the COI that the bond payments will be satisfied by the Marlins. Plus the Marlins must deposit 50% of the annual bond payment into a reserve account up front.

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