| Port of Miami Tunnel: The Port of Miami is actually an island off the coast of Florida, currently connected with the city of Miami by a highway that goes through the central downtown area. The port generates a tremendous amount of cargo and passenger traffic, causing substantial congestion in downtown Miami. The state Department of Transportation has proposed a $1 billion tunnel to bypass the downtown area and allow highway traffic direct access to the port. Because it lacked experience in either designing or constructing tunnels, as well as the desire to build such expertise internally, the state transport department initially decided on a design-build partnership. Quick construction was essential because of public concern regarding the congestion, so choosing a private firm made sense. The department also decided against imposing tolls on the use of the tunnel because it wanted to encourage users of the port to use the tunnel. Instead, the state would indirectly capture user fees through container and passenger fees on docking ships. Additional funds would come from Dade County and the city of Miami in return for the congestion relief. After determining the sources of revenue, the transport agency considered a large revenue bond, but decided against it because it would be tied to a 30-year repayment schedule. The agency finally settled on a DBFO/M for the tunnel proposal, with the private financing being repaid by the agency through revenue raised on the container and passenger fees. The payments would be tied to the availability of the tunnel (meaning its being open for operation and available to users) in addition to quality measures-but not to the specific number of vehicles passing through. The payments would also rise if traffic exceeded certain threshold levels to compensate the private partner for increased maintenance costs. The private partner in this arrangement does not bear any risk for demand management: if traffic falls below projections, the private partner would still receive the same payment, assuming it met quality measures. The state agency decided to retain the demand risk because it felt it had better control of that risk. The agency was relatively confident about the continued long-term growth of both the city and the port and did not believe that demand risk would pose a significant problem. The Port of Miami project illustrates some interesting options. The use of availability payments could sidestep some of the political concerns regarding tolls. Just as important, the use of container and passenger fees in lieu of tolls could potentially streamline both traffic and collection issues. |