Miami-Dade Legislative Item
File Number: 121462
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File Number: 121462 File Type: Resolution Status: Add-on
Version: 0 Reference: Control: County Commission
File Name: ALLOCATE FUNDS FOR THE ADRIENNE ARSHT CENTER Introduced: 7/11/2012
Requester: Department of Cultural Affairs Cost: Final Action:
Agenda Date: 7/17/2012 Agenda Item Number: 8C1SUBSTITUTE
Notes: substitute to 121366 Title: RESOLUTION AUTHORIZING THE COUNTY MAYOR OR COUNTY MAYOR’S DESIGNEE TO EXPEND FUNDS UP TO $5,000,000 TO REIMBURSE THE PERFORMING ARTS CENTER TRUST, INC., A FLORIDA NON PROFIT CORPORATION, FOR REPAIRS TO THE ADRIENNE ARSHT CENTER, SUBJECT TO SATISFACTION OF CERTAIN CONDITIONS; DELEGATING TO THE COUNTY MAYOR OR COUNTY MAYOR’S DESIGNEE THE AUTHORITY TO DETERMINE THE VALUE OF ALTERNATIVE FORM OF SECURITY IN LIEU OF BOND TO BE PROVIDED TO THE COUNTY BY THE PERFORMING ARTS CENTER TRUST, INC., AND, IF NECESSARY, ANY CONTRACTOR PERFORMING WORK, SUBJECT TO CERTAIN PARAMETERS SET FORTH IN THIS RESOLUTION; AND DIRECTING COUNTY MAYOR OR COUNTY MAYOR’S DESIGNEE TO PREPARE AN APPROPRIATE AMENDMENT TO THE FISCAL YEAR 2011-12 COUNTY BUDGET TO EFFECTUATE THE FOREGOING [SEE ORIGINAL ITEM UNDER FILE NO. 121366]
Indexes: ADRIENNE ARSHT CENTER
Sponsors: Audrey M. Edmonson, Prime Sponsor
Sunset Provision: No Effective Date: Expiration Date:
Registered Lobbyist: None Listed


Legislative History

Acting Body Date Agenda Item Action Sent To Due Date Returned Pass/Fail

Board of County Commissioners 7/17/2012 8C1 SUBSTITUTE Amended
REPORT: Commissioner Edmonson indicated that she placed this item on today’s agenda at the request of the Cultural Affairs Department staff to allow full discussion to occur regarding this matter. She noted she would vote in favor of the item, but questioned the wisdom of paying approximately $400 million on a building without securing structural warranties. In response to Commissioner Edmonson’s question as to whether the Performing Arts Center (PAC) was currently covered by any warranties, Mr. Lester Sola, Director, Internal Services Department, explained that this item was requesting authorization for staff to spend funds to rebuild the PAC’s damaged areas in time to resume operations in the fall. Additionally, he noted, this authorization also included engaging a forensics engineer to review the entire scope of the project, determine what occurred, and provide support in the event the County pursued any claims against the manufacturers and/or contractors. He confirmed that the $5 million which the Administration was requesting was the County’s deductible and the request was for “up to” $5 million, adding that insurance policies would activate during business interruptions. Commissioner Edmonson expressed concern with the County’s failure to have at least a 10-year warranty in place, commensurate with the size and cost of the building that would repair damages at no cost to the County. In response to Chairman Martinez’ inquiry as to whether a warranty was in place, Mr. Sola explained that the warranties that were in effect had expired, adding that customarily warranties lasted for one year. He noted it would be necessary to determine whether the damage was caused due to a defect in contractor workmanship or in the materials used. Chairman Martinez noted he would vote “no” on this item and asked for the name of the contractors for the PAC, to which a representative from the County Attorney’s Office advised it was a Joint Venture Contractor: Performing Arts Center Builders (PACB) comprised of Haskell Group, Ellis Don, and Odebrecht construction firms. Chairman Martinez expressed concern that once the Board adopted this resolution, the contractor would have no incentive to take any responsibility or pay for any of the damage. In response to Commissioner Jordan’s inquiry regarding the forensic review, Mr. Sola noted the forensics engineer would serve as an expert witness should this matter go into litigation. He confirmed that Commissioner Jordan was correct in her concern that pipes identical to the damaged pipe also existed in other areas of the PAC. The staff of the Internal Services Department and the County Attorney’s Office would determine whether to pursue litigation based on the forensic analysis’ findings, noted Mr. Sola. County Attorney Cuevas advised that a potential operational issue could also exist because of an agreement by which the PACB managed the building; as a result, there could be an allocation of liability between PACB and the County. In response to Commissioner Moss’ inquiry as to whether the private sector initially managed the building of the PAC, Mr. Michael Spring, Director, Cultural Affairs Department, clarified that the County managed the PAC project from its inception. He added that the private sector participated in the oversight of the project management; however, the County ultimately built and completed the project. Commissioner Moss expressed concern with the amount of the County’s insurance deductible payment. Nevertheless, he noted he would support this item so as not to interfere with the cultural services which the PAC provided to the community, nor impede the positive growth occurring at the Center. Commissioner Sosa asked that this resolution be amended directing staff to include a report detailing the forensic analysis’ findings, identifying the responsible party, if legal action was necessary, and whether the damage was covered by insurance, since the PAC was pursuing reimbursement options from the insurance coverage. County Attorney Robert Cuevas advised that the resolution need not be amended, as the Board could simply instruct or direct staff to produce this report. Commissioner Suarez explained an alternative approach to circumvent the “wind-driven rain exclusion” provision in insurance policies and agreed to provide staff with the contact information for Dr. Luis Prieto-Potar, an expert who assisted him previously in a similar situation. Commissioner Souto recalled the numerous problems the County experienced during the construction of the PAC and emphasized the importance of determining the root cause of the damage to prevent it from recurring in the future. Hearing no further questions or comments, the Board proceeded to vote on the foregoing proposed resolution, as amended. It was moved by Commissioner Sosa that the foregoing proposed resolution be adopted as amended to include language directing staff to bring back to the County Commission a report on the forensic analysis’ findings, identifying the responsible party, if legal action was necessary, and whether the water damage was covered by insurance. This motion was seconded by Commissioner Bell, and upon being put to a vote, passed by a vote of 9-2; (Chairman Martinez and Commissioner Barreiro voted “no”; Commissioners Diaz and Suarez were absent). The amended version has been assigned Resolution No. R-635-12.

Office of the Chairperson 7/12/2012 Additions 7/17/2012

County Attorney 7/11/2012 Assigned Geri Bonzon-Keenan

County Mayor 7/11/2012 Assigned County Attorney 7/17/2012
REPORT: Cultural Affairs (substitute item to 121366) - Geri Keenan assisted - Comm. Edmonson Sponsor

County Mayor 7/11/2012 Assigned Lisa Martinez 7/11/2012

Legislative Text


TITLE
RESOLUTION AUTHORIZING THE COUNTY MAYOR OR COUNTY MAYOR’S DESIGNEE TO EXPEND FUNDS UP TO $5,000,000 TO REIMBURSE THE PERFORMING ARTS CENTER TRUST, INC., A FLORIDA NON PROFIT CORPORATION, FOR REPAIRS TO THE ADRIENNE ARSHT CENTER, SUBJECT TO SATISFACTION OF CERTAIN CONDITIONS; DELEGATING TO THE COUNTY MAYOR OR COUNTY MAYOR’S DESIGNEE THE AUTHORITY TO DETERMINE THE VALUE OF ALTERNATIVE FORM OF SECURITY IN LIEU OF BOND TO BE PROVIDED TO THE COUNTY BY THE PERFORMING ARTS CENTER TRUST, INC., AND, IF NECESSARY, ANY CONTRACTOR PERFORMING WORK, SUBJECT TO CERTAIN PARAMETERS SET FORTH IN THIS RESOLUTION; AND DIRECTING COUNTY MAYOR OR COUNTY MAYOR’S DESIGNEE TO PREPARE AN APPROPRIATE AMENDMENT TO THE FISCAL YEAR 2011-12 COUNTY BUDGET TO EFFECTUATE THE FOREGOING

BODY
WHEREAS, this Board previously adopted Resolution No. R-141-08 which, among other things, ratified execution of Amendment Number Six to the Amended and Restated Operating Management Agreement (the “Amended Agreement”) between the County and the Performing Arts Center Trust, Inc. (the “PACT”) for the operation of the Adrienne Arsht Center for the Performing Arts of Miami-Dade County (the “Arsht Center”); and
WHEREAS, in accordance with the Amended Agreement, the PACT has the authority and the responsibility over the day to day operations of the Arsht Center, including the procurement of all necessary contractors for the maintenance and repairs of the Arsht Center; and
WHEREAS, the PACT has procured and is in the process of procuring contractors for the repair of considerable water damage to the Arsht Center; and
WHEREAS, at this time the Board wishes to authorize the funding of such repair so as to not impede the continued operation of the Arsht Center in its fall season and yet reserving the County’s rights under the Amended Agreement; and
WHEREAS, this Board desires to accomplish the purposes outlined in the accompanying memorandum from the County Manager, 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 recitals are incorporated in this resolution and are approved.
Section 2. This Board hereby authorizes the County Mayor or the County Mayor’s designee to expend up to $5 million from the amount allocated to the PACT in Fiscal Year 2011-12 for operational support of the facility, excess Convention Development Tax funds and/or the Convention Development Tax Shortfall Reserve, if necessary, to reimburse the Performing Arts Center Trust, Inc. for any required assessment, demolition, repair and/or reconstruction of the Arsht Center, subject to satisfaction of all of the following prior to the disbursement of funds: (a) for each contract subject to the requirements of Section 255.05 receipt by the County from the PACT of an alternative form of security in lieu of bond as required by Section 255.05,
Florida Statutes, and in a form and value determined by the County Mayor or the County Mayor’s designee as set forth in Section 3 below; (b) for each contract subject to the requirements of Section 255.05 receipt by the County of documents evidencing that, prior to the commencement of work or purchase of supplies, the contractor(s) hired to perform the repair and restoration work has executed, delivered and recorded in the public records, a statutory payment and performance bond as required by Section 255.05 of the Florida Statutes in the full amount of the contract price naming the County and the PACT as dual obligees >>or an alternative form of security in lieu of bond as required by Section 255.05, Florida Statutes, and in a form and value determined by the County Mayor or the County Mayor’s designee as set forth in Section 3 below<< ; (c) receipt by the County of releases of liens and claims from all contractors and subcontractors performing any work; and (d) receipt by the County of a written acknowledgment by an authorized representative of the PACT that the County’s agreement to fund the repairs is not a waiver of its rights under the Amended Agreement.
Section 3. The County Mayor or the County Mayor’s designee is hereby delegated the authority to determine the value of the alternative form of security in lieu of bond to be provided by the PACT >>and, if necessary, contractor(s) performing work,<< for each contract subject to the requirements of Section 255.05, subject to the parameters set forth in the accompanying Mayor’s memorandum.
Section 4. The County Mayor or the County Mayor’s designee is hereby directed to prepare the appropriate budget amendment to the County’s Fiscal Year 2011-12 budget to effectuate the foregoing and to bring such amendment back to the Board for its approval as part of the end-of-year budget amendment process.

HEADER
Date:

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

From: Carlos A. Gimenez
Mayor

Subject: Request for Authorization to Allocate Funds for Continued Assessment and Required Repairs to the Adrienne Arsht Center (Arsht Center) for the Performing Arts of Miami-Dade County
The substitute differs from the original item in that it delegates to the Mayor or the Mayor’s designee the authority to determine the value of an alternative form of security in lieu of bond to be provided to the County by any contractors performing work at the Adrienne Arsht Center.

STAFF RECOMMENDATION
Recommendation
It is recommended that the Board of County Commissioners (Board) authorize the allocation of up to $5 million to be funded from the annual amount a portion of the annual amount allocated to the Performing Arts Center Trust, Inc. (PACT) for operational support of the Arsht Center, excess Convention Development Tax (CDT) receipts, if any, and/or the Convention Development Tax Shortfall Reserve to be used only as required for the assessment, demolition, and reconstruction of the damage to the Arsht Center as detailed in the June 20, 2012 status report to the Board (attached), subject to satisfaction of conditions precedent. A budget amendment to the County’s Fiscal Year 2011-2 budget effectuating the foregoing will be prepared and presented to the Board for approval as part of the end of year budget amendment process. In addition, it is recommended that the Board delegate to the Mayor or his designee the authority to determine the value of the alternative form of security in lieu of performance bond to be provided to the County by the PACT and, if necessary, any contractor performing work, for each contract subject to the requirements of Section 255.05, Florida Statutes.

Scope of Agenda Item
This resolution allows for funding to be allocated to repair damage to the Arsht Center. While the facility is located in District 3, it serves the entire County.

Fiscal Impact/Funding Source
Currently, the County provides a subsidy of $7.65 million from the Convention Development Tax (CDT) to support the facility on an annual basis, and additional funding ($344,000 in FY 2011-12) to support education programs, capital expenditures and an endowment, depending on the amount of funding available. It is anticipated that some portion of the $7.65 million subsidy may be available to fund some of the repair costs. In addition, adequate revenue from CDT collections to fund all or a portion of the balance may be available by the end of the fiscal year. Funding is available from the Convention Development Tax (CDT) Shortfall Reserve to cover any remaining deficiency. An appropriate amendment will be included in the end-of-year budget amendment to adjust the source of funds.

Track Record/Monitor
The Department of Cultural Affairs, the Internal Services Department, and the Office of Management and Budget will monitor the use of these funds.

MANAGER'S BACKGROUND
Background
This recommendation and update to the previously issued June 20, 2012 status report to the Board is provided to inform the Board of the necessary actions taken to date in response to the ongoing work of the PACT, in collaboration with the County’s professional staff, to identify the causes of, and develop and implement a plan of action to address the water damage to the Arsht Center that occurred on May 20, 2012.
As noted in the June 20, 2012 status report, in accordance with the Operating and Management Agreement, the PACT has the authority and responsibility over the day to day operations of the facility, including the procurement of all necessary contractors for the maintenance and repairs of the facility. In order to ensure the necessary level of diligence and scrutiny, our County staff will continue to work closely with the PACT in the review and approval of all scopes of work and expenditures incurred to complete this work. The County will work with the PACT to ensure that we take every possible step to protect our interest, including recovery from insurance policies.
The County and the PACT continue to aggressively pursue reimbursement options from our respective insurance carriers. The PACT has a Business Income Insurance policy with Chubb Group Insurance Companies (Chubb) and the coverage for the building is provided under the County’s insurance program. While we advance this claims process, the time-sensitive nature of the work to assess and repair the damage at the Arsht Center is the central reason for recommending that the Board approve an “up to” amount to provide the resources necessary to cover project-related expenditures. The $5 million allocation requested represents the value of the County’s deductible and will be accessed only as needed and subject to a strict review of all proposed project expenditures.
To date, the following is an update on progress with this work:
1. County staff is finalizing a contract with a forensics engineering firm to determine the cause of the event.
2. The PACT has taken the necessary steps to contain the water intrusion problem in the impacted areas.
3. Phase 1 of the remedial work, which consists of the initial repairs and dehumidification, has been substantially completed. The projected cost for this phase was originally estimated at $1.3 million. As a result of our review, County and PACT staff were able to reduce this cost to $1.15 million.
4. Phase 2, which is the demolition work, has commenced and is expected to be completed by late July. The scope of work and cost estimate for this phase are being finalized at this time, taking into account the unique and complex features of this facility. A very preliminary “order of magnitude” estimate of $1.4 million was provided in the June 20, 2012 report. As in Phase 1, our continued review has resulted in a revised estimate of $1 million. The Internal Services Department and the Office of Management and Budget are closely reviewing and verifying the scope and costs for this phase before authorizing any reimbursement of project expenditures by the PACT staff.
5. As mentioned in the June 20, 2012 status report, Phase 3 is the reconstruction of the impacted area and will require time and specialized expertise to develop a reliable cost estimate. Given the extent of the water damage, additional damaged areas may be revealed during the
demolition phase and this uncertainty makes it difficult to provide a definitive cost estimate for Phase 3 at this time. In addition to hiring a forensic engineer to assist with this phase, staff will be working with the PACT staff to ensure that they solicit competitive cost proposals for the reconstruction.
Recognizing the importance of ensuring that all repairs are completed in time for the opening events of the fall season at the Arsht Center and that the cause of the water damage is remedied immediately so as to not cause further damage to the facility, County staff has been working diligently with staff of the PACT to ensure that this goal is met. This includes determining the cause of the damage, reconstructing the affected portions of this facility, as well as repair of systems that may have led to this damage. To help meet this goal, County staff has identified the immediate need to retain the services, on an emergency basis, of a forensic engineer. The forensic engineer will assist the team in determining the cause(s) of the recent water intrusion, identifying any additional potentially vulnerable areas in the Ballet Opera House as well as the Concert Hall and providing a corrective plan of action in order to prevent similar incidents from occurring in other areas of the facility. Additionally, the resulting forensic report will help refine the full scope of repairs, related cost estimates and liability for the damages.
As between the County and the PACT, the Operating and Management Agreement assigns responsibility between the parties for repairs to the Arsht Center. In an effort to move forward expeditiously and without regard to these provisions at this time, the County has agreed to provide funding for the repairs as set forth herein. Notwithstanding the County’s agreement to fund the repairs, the County has not waived any of its rights under the Operating and Management Agreement. Accordingly, as a condition of reimbursement, the PACT will include as part of each pay requisition an acknowledgement that it understands that the County’s agreement to fund the repairs is not a waiver of its or the PACT’s rights under the Operating and Management Agreement.
As noted in the June 20th memo, the PACT must provide a payment and performance bond in accordance with the provisions of Section 255.05, Florida Statutes for the each contract for repairs subject to the requirements of that statute. In lieu of a payment and performance bond, the PACT, and if necessary, contractor(s) performing work, may provide to the County cash or other acceptable form of security as an alternative form of security. It is recommended that the Board delegate to the Mayor or his designee the authority to determine the value and sufficiency of the security for each contract subject to the requirements of Section 255.05. In determining the sufficiency and value of the alternative security the Mayor will consider the nature, history and financial capabilities of the PACT or the contractor(s) providing the alternative form of security, as the case may be, the contractual obligations secured by the alternative security and the contractual safeguards in place to protect payments to persons performing the work. It has been our practice to reimburse PACT for payments made in connection with the repairs rather than to issue advance payments. The recommendation is made that we continue this policy. This will further reduce the potential liability to the County and will also be considered when determining the value and sufficiency of the alternative form of security from the PACT or the contractor(s) providing the alternative form of security. The receipt by the County of the alternative form of security from the PACT shall be a condition to reimbursement.
As an additional security and in conformance with the requirements of Section 255.05, Florida Statutes, prior to any reimbursement for the work, the PACT shall provide to the County documents
evidencing that, prior to the commencement of the work or purchase of supplies, any and all contractors hired by the PACT to perform the work has executed, delivered and recorded in the public records a statutory payment and performance bond in the full amount of those contracts naming the PACT and the County as dual obligees or an alternative form of security in lieu of bond as required by Section 255.05, Florida Statutes, and in a form and value determined by the County Mayor or the County Mayor’s designee. Lastly, the PACT shall also provide to the County releases of liens and claims on bonds from all contractors, subcontractors and suppliers performing any work or supplying any materials. Receipt of such releases shall also be a condition to reimbursement.
While both the County and the PACT continue to aggressively pursue reimbursement options from our respective insurance carriers, an allocation from the Board is necessary to allow for project-related expenditures to continue without delay. The County, the owner of the Arsht Center, and the PACT, the facility’s operator, continue to address all aspects of this situation, from repairs to insurance reimbursements, in close collaboration. We share the central objective of restoring the Arsht Center to the level of building quality established for this world-class facility while carefully managing the effectiveness of the work, containing costs, and aggressively pursuing all available remedies for reimbursement of associated costs. A report will be provided to the Board every two weeks until this issue is resolved.


___________________________
Lisa M. Martinez, Senior Advisor



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