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RESOLUTION APPROVING TERMS OF AND AUTHORIZING EXECUTION BY COUNTY MAYOR OR MAYOR�S DESIGNEE OF A SECOND AMENDMENT TO THE AMENDED AND RESTATED CRUISE TERMINAL USAGE AGREEMENT BETWEEN MIAMI-DADE COUNTY AND ROYAL CARIBBEAN CRUISES LTD.; AND AUTHORIZING COUNTY MAYOR OR MAYOR�S DESIGNEE TO EXERCISE ANY CANCELLATION AND RENEWAL PROVISIONS CONTAINED THEREIN

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

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

Section 1. The foregoing recital is incorporated in this resolution by this reference and is approved.

Section 2. This Board hereby approves the terms of and the execution by the County Mayor or the Mayor�s designee of the Second Amendment to the Amended and Restated Cruise Terminal Agreement between Miami-Dade County and Royal Caribbean Cruises Ltd. in substantially the form attached hereto as Attachment A and made a part hereof (the �Amendment�) only after the proper execution of the Amendment by a duly authorized representative of Royal Caribbean Cruises Ltd..

Section 3. This Board hereby authorizes the County Mayor or the Mayor�s designee to exercise any cancellation and renewal provisions contained therein.

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Date:

To: Honorable Chairman Joe A. Martinez
and Members, Board of County Commissioners

From: Carlos A. Gimenez
Mayor

Subject: Resolution Approving Terms of and Authorizing Execution by County Mayor or designee of a Second Amendment to the Amended and Restated Terminal Usage Agreement between Miami-Dade County and Royal Caribbean Cruises, Ltd.

STAFF RECOMMENDATION
RECOMMENDATION
It is recommended that the Board approve the accompanying resolution approving the terms of and authorizing the execution by the County Mayor or his designee of a Second Amendment to the Amended and Restated Terminal Usage Agreement (�Agreement�) between Miami-Dade County (�County�) and Royal Caribbean Cruises, Ltd., a Liberian corporation (�RCCL�).

SCOPE
The Port of Miami is located within District 5 � Commissioner Bruno A. Barreiro. The impact of this agenda item is countywide as the Port of Miami is a regional asset and generates employment for residents throughout Miami-Dade County.

FISCAL IMPACT/FUNDING SOURCE
This Amendment provides RCCL with preferential berthing rights and port incentives while providing the Port of Miami (�Port�) a guaranteed revenue stream of more than $72.5 million throughout the initial ten (10) year term.

The current Terminal Usage Agreement between the County and RCCL has a fifteen (15) year initial term with two five (5) year renewal periods upon mutual consent. This Second Amendment extends the initial term through September 30, 2021.

RCCL will continue to pay the County Minimum Annual Guarantees as committed in the current Agreement as follows: $12.5 million in Fiscal Year 2011; $13 million in Fiscal Year 2012, and $13.5 million in Fiscal Year 2013. Beginning in Fiscal Year 2014 through and including Fiscal Year 2021, the minimum annual guarantee will range from $3.8 million to $5 million based on the estimated Unitary Fees outlined in Exhibit A and a minimum of 325,000 annual passenger movements. Beginning in Fiscal Year 2014 through the term, RCCL shall have a Net Surplus mechanism which can be applied to meet their annual guarantee at a maximum of 100,000 passengers per year as further outlined in the Background section of this memorandum. Should RCCL need to exercise their offset in any given year, their revenues to the Port would decrease by approximately $1.2 - $1.4 Million depending on the year that such shortfall would occur.

The County and RCCL shall together contribute up to $6 million in improvements to Terminal G. The County shall pay the first $3.5 million and RCCL will pay the next $2.5 million. These improvements are included in the Port�s Fiscal Year 2011 through Fiscal Year 2013 operational budget, with funding for such improvements coming from Port revenues. These improvements will also benefit other ships berthing at the terminal facility.

Similar to Cruise Terminal Agreements with other cruise lines, this proposed Amendment sets caps on Net Port Fees, allows for a share of parking revenues, and Most Favored Nation clauses. Such terms are further described in the Background section of this memorandum.

TRACK RECORD/MONITOR
The Seaport Department staff members responsible for monitoring the Amendment and Agreement are Juan Kuryla, Deputy Port Director, Kevin Lynskey, Assistant Port Director, Business Initiatives, and Hydi Webb, Business Development Manager.

MANAGER'S BACKGROUND
BACKGROUND
RCCL is the world�s second largest cruise company operating five cruise brands: Royal Caribbean International, Celebrity Cruises, Azamara Club Cruises, Pullmantur (Spain), and CDF Croisieres de France (France). They currently operate a fleet of 40 vessels with another three ships scheduled for delivery by the end of 2014.

The Port of Miami and RCCL have shared a successful and prosperous business relationship for more than 41 years. RCCL homeports three (3) of its cruise brands in Miami (Royal Caribbean International, Celebrity Cruises, and Azamara Club Cruises) and has processed an average of 1.6 million passengers annually through Miami throughout the last five (5) years, generating in excess of $57 million in Port revenues.

On May 19, 1998, the Board approved Resolution R-572-98, which authorized the execution of a ten (10) year Cruise Terminal Usage Agreement (�TUA�) providing RCCL with (i) preferential berthing rights at Terminals 3, 4, and 5 (currently termed Terminals F and G); (ii) incentive rates of fifteen percent (15%) off Port Tariff rates for dockage, passenger wharfage, and harbor fees; and (iii) guaranteed net revenues to the County of $6 million per year.

Later that same year, on December 15, 1998, the Board approved Resolution R-1453-98, which authorized the execution of an Amended and Restated Terminal Usage Agreement with RCCL for the purposes of (i) extending the initial term from ten (10) years to fifteen (15) years; (ii) increasing the incentive rates for Tariff dockage and passenger wharfage rate reductions to twenty-seven percent (27%) and up to a maximum of twenty-nine percent (29%); and (iii) increasing RCCL�s minimum revenue guarantee to the County to $160 million over the new fifteen (15) year term.

These Agreements were profitable for both parties as they have provided the Port with significant guaranteed passenger volumes and revenues throughout the years and provided discount incentives for RCCL to deploy additional vessels.

Miami has traditionally served as the U.S. homeport to many of RCCL�s newest vessels including Royal Caribbean International�s Voyager and Freedom Class ships, as well as a Celebrity Cruises� Solstice class ship. It is important to note, however, that in 2007 RCCL made a significant commitment to Port Everglades (�PEV�) with the announcement to homeport Royal Caribbean International�s two new 5,400 passenger vessels year-round in PEV. These vessels - Oasis of the Seas and Allure of the Seas � are currently the largest cruise ships in the industry and began sailing from Port Everglades in fall 2009 and 2010 respectively.

RCCL�s passenger movements through Miami have been affected by this deployment to Broward County. Additionally, RCCL is implementing a deployment strategy for Royal Caribbean International to shift many of its U.S. vessels to international markets. For these reasons, RCCL will not be able to meet its Minimum Annual Guarantees for Fiscal Years 2011 through 2013 as defined in the 1998 TUA. However, RCCL has committed, as part of this Agreement, to make the County whole for these shortfalls totaling approximately $10.8 million during the three (3) year period.

In order to retain RCCL�s business and ensure that its presence stays in Miami-Dade County, we are recommending the proposed Second Amendment with RCCL, which provides for lower guarantees than its current Agreement, but entices RCCL by providing incentive opportunities for future growth.

Prior to negotiating this proposed Amendment, it was important for the parties to show �good faith� to each other by settling particular business issues that arose throughout the years and set the structure for a new billing and service delivery model. On December 2, 2008, the Board approved Resolution R-1345-08 executing a Business Settlement Agreement relating to Outstanding Business issues, and execution of Amendment No. 1 to the Amended and Restated TUA. The Business Settlement Agreement commits the County to implement a new service and billing model in three stages as follows: (Phase 1) combine Port of Miami Terminal Tariff No. 010 charges into a Unitary Fee (dockage, passenger wharfage, harbor fees, and water); (Phase 2) provide terminal security as an optional service and bill as part of the Unitary Fee; and (Phase 3) establish a pool of permitted stevedoring companies as an optional component of the Unitary Fee. The implementation of such new service delivery model and Unitary Fee were integral to the Port and RCCL negotiating this proposed new Amendment.

Under the proposed terms, RCCL commits the following to the County:

* The Minimal Annual Guarantees RCCL committed to in the 1998 Amended and Restated TUA will remain during Fiscal Years 2011 through 2013 as follows: $12.5 million in Fiscal Year 2011; $13 million in Fiscal Year 2012; and $13.5 million in FY 2013. Thus, RCCL will pay their anticipated shortfall which was an important business term for the Port during negotiations.

* Beginning in Fiscal Year 2014 through the remainder of the term, RCCL shall generate guaranteed revenues equal to a minimum of 325,000 passenger movements multiplied by the then applicable Unitary Fee as outlined in Exhibit A. Such minimum revenues range from $3.8 million in the earlier years to nearly $5 million in the later years.

* If in any Fiscal Year RCCL fails to generate the appropriate Net Port Fees for a specified year, RCCL shall pay the appropriate shortfall amount to the County within forty-five (45) days following the close of such Fiscal Year. However, a Net Port Fee Surplus mechanism shall exist as follows:

* During Fiscal Years 2011 through 2013, RCCL shall accrue a Net Port Fee Surplus which may be used to offset future Net Port Fee shortfalls
beginning in Fiscal Year 2014. The maximum Net Fee Surplus applied in any one Fiscal Year cannot exceed the amount equal to 100,000 passenger movements multiplied by the then current Net Port Fees.

* Net Port Fee Surpluses for the period beginning October 1, 2011 through Fiscal Year 2013 shall be calculated by subtracting 650,000 passenger movements (which represents two (2) years of the new minimum passenger movements) from the number of actual RCCL passenger movements for the two (2) year period. For example, if RCCL has 1,650,000 passenger movements for Fiscal Years 2012 through 2013, it will accrue a surplus of 1,000,000 passenger movements that can be used to offset shortfalls in future fiscal years of the term (up to 100,000 passenger movements in any given year at the then current Net Port Fee). Should RCCL need to exercise their offset on any given year, their revenues to the Port would decrease by approximately $1.2 Million - $1.4 Million depending on the year that such shortfall would occur.

* Beginning Fiscal Year 2014 and through the term, RCCL�s maximum surplus that can be applied in any fiscal year is limited to 100,000 passenger movements multiplied by the then current Net Port Fees.

In exchange for the above pledges, RCCL will receive:

* Berthing Rights: RCCL shall maintain preferential berthing rights at Cruise Terminal G throughout the term of the Agreement. However, due to its lower passenger commitment than previous years, RCCL will release its preferential berthing rights at Cruise Terminal F with the exception of those confirmed calls provided for in Exhibit B � Terminal F Berth Schedule attached to the Second Amendment. The County shall have the right to use Terminal F to berth vessels from other cruise lines with the exception of those dates specified in the Terminal F Berth Schedule.

* Volume Incentive Reduction: RCCL shall be entitled to a reduction in Port Fees during any fiscal year in which they process 375,000 or more passenger movements. RCCL shall receive a one-half percent (.5%) discount for every additional 50,000 passenger movements up to a cap of fifteen percent (15%) per fiscal year which equates to approximately 1.5 million passengers. This discount is consistent with discounts offered to other cruise lines at the Port.

* The County may increase the Port Fees chargeable to RCCL by no more than three percent (3%) each fiscal year.

* If the County grants another cruise line a greater Volume Incentive Reduction on a comparable basis than the Volume Incentive Reduction shall automatically increase for RCCL.

* Parking Revenues: RCCL shall receive parking revenues from the County in proportion to the passenger embarkations to the Port�s overall passenger embarkations. Embarkations associated with port-of-call passengers shall not

be included in the calculations. For example, if RCCL�s embarkations are 25% of the Port�s overall embarkations, then RCCL will receive 25% of the Port�s parking revenues generated by multi-day cruise passengers. These revenues will be calculated and remitted within sixty (60) days of each fiscal quarter. For Fiscal Year 2010-2011, the Port has budgeted $10,400,000 in parking revenues based on 3,954,000 anticipated cruise passenger movements and an overnight parking rate of $20.

* Terminal G Capital Improvements: The County and RCCL shall together contribute up to $6 million in Terminal G improvements. The County shall pay the first $3.5 million and RCCL will pay the next $2.5 million. These improvements are included in the Port�s Fiscal Year 2011 through Fiscal Year 2013 capital budgets, with funding for such improvements coming from available and future bond proceeds. These improvements will also benefit other ships berthing at the terminal facility.

The Amendment also provides for the following with respect to New Port Charges:

* The County may impose any new Port Specific Charge to RCCL, but when combined with the Port Fees (dockage and passenger wharfage fees), it cannot increase the overall Port Fees by more than three percent (3%) in any given fiscal year. A Port Specific Charge is defined as fees and other costs of whatever nature imposed by the Port or County against cruise lines which are Port or Port operation specific. Any such increase must also be imposed on all cruise lines using the Port and the County must provide no less than six (6) months written notice.

* The County may add any new Government Imposed Port Charges to the Unitary Fee and not be subject to the three percent (3%) cap limitation, provided such new charges are also imposed on all cruise lines using the Port and the County provides advance written notice of any public meetings to discuss such contemplated charges. Government Imposed Port Charges are defined as fees and other costs of whatever nature imposed by federal, state or local government authorities, excluding the Port and County, against cruise lines which are Port or Port operation specific.

* Should any new law or amendment to existing law be enacted which imposes a fee, tax or other requirement, which in RCCL�s opinion, could have a material adverse effect (one million dollars ($1,000,000) or greater in any given fiscal year) on RCCL and its divisions, subsidiaries or affiliates, and the adverse effect could be avoided by the repositioning of RCCL�s Vessels, RCCL shall have the right to terminate the Agreement by giving the County one (1) year�s prior written notice.

* Fees in connection with Port Tunnel or Bridge: In the event that the County assesses RCCL�s passengers, guests, agents and service providers a fee or charge in connection with their use of the Port tunnel or Port Bridge, the County agrees to credit any payment due from RCCL under the Second Amendment by the amount of the fees and charges paid by RCCL�s passengers, guests, agents and service providers in connection with their use of the Port tunnel or Port Bridge. �The parties agree to negotiate in good faith the methodology to quantify, document and disperse this credit.

The effective date of this Amendment shall be the date the Second Amendment is last executed by the County and RCCL.

RCCL is headquartered in Miami-Dade County and currently employs approximately 5,200 full-time and 850 part-time employees worldwide (of which more than 3,300 reside in Miami-Dade County) plus approximately 52,000 shipboard employees. RCCL is a major cruise operator at the Port and has had corporate offices ties in Miami-Dade County for more than 40 years. It is estimated that RCCL has an annual economic impact which exceeds $500,000,000 in Miami-Dade County. These extraordinary contributions to the cruise industry and sizable economic impact make RCCL an extremely valuable business partner and tenant. A separate resolution to amend each of RCCL�s three (3) building lease agreements is being presented simultaneously to the Board with this item.

DELEGATED AUTHORITY
In accordance with Section 2-8.3 of the Miami-Dade County Code related to identifying delegation of Board authority, there are no authorities beyond that specified in the resolution which include the authority for the Mayor or designee to execute the Amendment and exercise any cancellation and renewal provisions.