The Port of Miami Tunnel project involves the creation of a new, direct-access highway connection between South Florida's Interstate highway network and the bustling Port of Miami. The objective of the project, which has been in the planning stage for more than 20 years, is to reduce truck and other traffic congestion in downtown Miami by routing such traffic onto nearby highways. The main component of the $1.4 billion project involves twin tunnels that will be bored underneath a shipping channel in downtown Miami. The project is being structured as a DBOM contract with the private sector based on "availability payments" instead of tolls.
The Florida Department of Transportation (FDOT), in conjunction with Miami-Dade County and the City of Miami, will provide the funding for the project over its 30-year life. FDOT plans to contract with a private consortium for the design, construction, and finance of the entire facility over a 5-year period and the subsequent operation and maintenance of key segments of the facility for 30 years after it opens to traffic. The concessionaire will receive availability payments from FDOT throughout the operating portion of the contract to re-pay the up-front, private-sector financing of the design and construction in addition to the costs of operating and maintaining the facility once it is operational.
FDOT elected to use a PPP for this complex and expensive project because of the ability to transfer significant portions of the project risk to the private concessionaire. Under the final agreement, the concessionaire will bear substantially all risk associated with the design, construction, finance, operation, and maintenance of the facility and all other risks not expressly assumed by FDOT. However, the unique geothermal risks associated with the tunnel project have convinced FDOT to enter into a risk sharing arrangement for unforeseen geological or other site conditions. Under this risk sharing arrangement for cost increases or schedule de-lays caused by unforeseen site conditions, the concessionaire is responsible for uninsured losses below $10 million, FDOT is responsible for such losses between $10 million and $160 million, the concessionaire is responsible for such losses between $160 million and $180 million, and FDOT bears substantially all responsibility for such losses in excess of $180 million.
FDOT elected to use an availability payment approach because it transfers to the concessionaire all the projects risks while retaining revenue risks and toll/user fee policy decisions with the public sector. FDOT structured the innovative procurement so that the private consortia bid "maximum" availability payments over prescribed time frames. In May 2007, FDOT awarded the project to the concessionaire team (led by Bouygues of France), which submitted the lowest "maximum" availability payment of $33.3 million per year, to be distributed in monthly increments by FDOT over the 30-year term of the operating contract unless contractual performance standards relating to lane availability, service quality, and safety are not met. This approach provides an incentive both for timely completion of the project (because the availability payments do not start until construction is complete) and for high operating and maintenance standards over the life of the facility (so that the concessionaire earns the full availability payment without any deductions for failure to meet the performance standards).
The contract to be finalized between FDOT and the Bouygues consortium also will include a "high traffic payment" that will compensate the concessionaire for higher maintenance costs if traffic levels greatly exceed forecasts. This provision reflects FDOT's recognition that heavier than anticipated truck and bus traffic to the Port of Miami could significantly increase anticipated maintenance costs. The private concessionaire also will receive $100 million in progress payments and a $350 million payment from FDOT upon completion of construction. These payments, combined with the $33.3 million per year in availability payments over the 30-year life of the contract, bring the projected cost of the project to approximately $1.4 billion.
Under the final contract, the private concessionaire will be responsible for obtaining all necessary federal, state, and local environmental permits. The federal environmental review process under NEPA has been completed by FHWA, which should reduce the level of risk incurred by Bouygues in assuming responsibility for permits. FDOT will be responsible for acquiring any right-of-way necessary for the core project, although any additional right-of-way will be the responsibility of the concessionaire. At the conclusion of the 30-year operating period, the concessionaire must hand over the facility to FDOT. At that time, an inspection will be performed and the concessionaire may be required to correct any deficiencies that do not meet certain performance warranties.
FDOT, Miami-Dade County, and the City of Miami will share the cost of the project. The source of the local contributions has not been identified with certainty. County voters approved $100 million in bond funding for the project in 2004, the county manager has outlined plans to dedicate over $100 million in transportation fees and $47 million in donated right-of-way, and various additional port user fees and tax increment financing arrangements have been discussed to cover the balance of the local contribution. Private activity bonds will be issued by the Miami-Dade County Industrial Development Authority to provide a bridge facility until the $350 million completion payment from FDOT is received. The private consortium is providing $50 mil-lion in equity to the project. Construction on the project is scheduled to commence in 2008 and is scheduled to be completed within 5 years.73
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72 See description, available at http://www.portofmiamitunnel.com/faq_gen.html.
73 Florida PPP enabling statutes may be found at Fla. Stat.Ann. § 334.50, http://www.leg.state.fl.us/statutes/index.cfm?mode=View%20Statutes&SubMenu=1&App_mode=Display_Statute&Search_String=334.30&URL= CH0334/Sec30.HTM and Fla. Stat. Ann. §§ 338.22-338.241, http://www.leg.state.fl.us/statutes/index.cfm?mode=ViewStatut es&SubMenu=1&App_mode=Display_Statute&Search_String=338.22&URL=CH0338/Sec22.HTM.