Miami-Dade Legislative Item
File Number: 152072
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File Number: 152072 File Type: Resolution Status: Adopted
Version: 0 Reference: R-771-15 Control: County Commission
File Name: MOU BETWEEN MIAMI-DADE COUNTY AND ROYAL CARRIBBEAN CRUISES Introduced: 9/8/2015
Requester: Port of Miami Cost: Final Action: 9/16/2015
Agenda Date: 9/16/2015 Agenda Item Number: 8J2
Notes: waiver request to 9/16/2015 Title: RESOLUTION AUTHORIZING THE COUNTY MAYOR OR COUNTY MAYOR’S DESIGNEE TO EXECUTE A NON BINDING MEMORANDUM OF UNDERSTANDING WITH ROYAL CARIBBEAN CRUISES, LTD. FOR THE LEASE OF LAND FOR, AND THE DESIGN, CONSTRUCTION, FINANCE, AND OPERATION OF, A CRUISE TERMINAL AND RELATED IMPROVEMENTS; DIRECTING THAT THE COUNTY MAYOR OR COUNTY MAYOR’S DESIGNEE NEGOTIATE ANY AND ALL CONTRACTS NECESSARY TO GIVE EFFECT TO THE INTENT OF THE MEMORANDUM OF UNDERSTANDING AND TO PRESENT THEM TO THE BOARD FOR APPROVAL WITHIN 120 DAYS; AUTHORIZING THE COUNTY MAYOR OR COUNTY MAYOR’S DESIGNEE TO EXTEND TIME PERIODS IF REASONABLY NECESSARY TO FINALIZE NEGOTIATIONS UPON WRITTEN REPORT TO THE BOARD
Indexes: MEMORANDUM OF UNDERSTANDING
Sponsors: Jose "Pepe" Diaz, Prime Sponsor
  Rebeca Sosa, Co-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 9/16/2015 8J2 Adopted P
REPORT: The following persons appeared before the Board to speak in support of the foregoing proposed resolution and urge the Board to approve it: 1. Mr. Ellis Canty, Union Business Agent and Recording Secretary for the International Longshoremen’s Association Local 1416, at the Port of Miami 2. Mr. Ernest Brookins, member of the International Longshoremen’s Association Local 1416, at the Port of Miami Commissioner Moss thanked Mr. Canty and his group for being extremely instrumental in helping to supply the communities with the needed supplies, and this County would never forget the support they provided. He noted he was very happy that a Memorandum of Understanding (MOU) had been negotiated to have Royal Caribbean bring back its ship to the Port of Miami. Commissioner Diaz stated he was proud to have sponsored this legislation together with Commissioner Sosa and the results of the negotiations. Commissioner Sosa commended the Port Director for helping bring Royal Caribbean back to the Port of Miami. Port Director Juan Kuryla, Port of Miami, thanked his Senior Management Team, County Attorney Robert Cuevas and First Assistant County Attorney Abigail Price-Williams, and Assistant County Attorneys Hugo Benitez and Steve Bass, for their assistance and collaboration in helping negotiate the MOU so quickly in order to be able to have the terminal completed by November 2018. He also thanked the members of the Mayor’s Office and this Board for their support and assistance. Mr. Adam Goldstein, President and Chief Operating Officer, Royal Caribbean Cruises Limited, thanked the Board for their support. He also thanked Commissioner Diaz for his kind words to Royal Caribbean, and he thanked the members of labor unions for showing their support at today’s (09/16) meeting. He noted that the benefits of Royal Caribbean’s economic activities brought an economic boost to this community and the County’s economy, and it will continue to help to boost this community’s economy. He stated that, even though his firm cared for all of South Florida communities, Royal Caribbean’s main stream of business will be relocated to the Port of Miami; but they will continue to provide the Port of Fort Lauderdale with business opportunities. He ensured the members of this Board that, based on past successful business experiences, this would be a well-managed operation that would bring the economic benefits expected. Commissioner Souto thanked Mr. Goldstein for working with our Port Director to develop the MOU. He also congratulated him for being a user and supporter of the County’s parks, and the County needed more benefactors like Mr. Goldstein. Commissioner Jordan stated that Royal Caribbean will profit tremendously by being a part of Miami-Dade County, and she thanked Mr. Goldstein for returning their business to Miami-Dade County. Commissioner Suarez advised he would be unable to support the foregoing proposed MOU due to the terms of the contract. He objected to providing Royal Caribbean with sole discretion regarding whether to extend the contract for up to 4 additional terms of 10 years and committing the County to a 60 year contract with them. NOTE: On handwritten page 3 of the Mayor’s memorandum, under “Background, the third line of the fourth paragraph, the date should read December 2011 instead of December 2010. In addition, on handwritten page 4 of the Mayor’s memorandum, second full paragraph, add the word “not” at the end of the parenthetical so that the sentence reads as follows in its entirety: “These revenues (with the exception of the approximately $1.2 million described above) were not factored at the time the Port presented its financial projections to the rating agencies when it issued debt over the last two (2) years.”

Office of the Chairperson 9/10/2015 Scrivener's Errors 9/16/2015
REPORT: On handwritten page 3 of the Mayor’s memorandum, under Background, the third line of the fourth paragraph, the date should read December 2011 instead of December 2010. In addition, on handwritten page 4 of the Mayor's memorandum, second full paragraph, add the word "not" at the end of the parenthetical so that the sentence reads as follows in its entirety: "These revenues (with the exception of the approximately $1.2 million described above) were not factored at the time the Port presented its financial projections to the rating agencies when it issued debt over the last two (2) years."

County Attorney 9/8/2015 Assigned Hugo Benitez 9/9/2015

Office of Agenda Coordination 9/8/2015 Assigned County Attorney 11/3/2015
REPORT: POM - Hugo Benitez - pending cmte - Comm. Diaz Sponsor - Attachment: MOU - Note: Dept. will request a waiver to the 9/16/15 BCC mtg.

Jack Osterholt 9/8/2015 Assigned Office of Agenda Coordination

Legislative Text


TITLE
RESOLUTION AUTHORIZING THE COUNTY MAYOR OR COUNTY MAYOR�S DESIGNEE TO EXECUTE A NON BINDING MEMORANDUM OF UNDERSTANDING WITH ROYAL CARIBBEAN CRUISES, LTD. FOR THE LEASE OF LAND FOR, AND THE DESIGN, CONSTRUCTION, FINANCE, AND OPERATION OF, A CRUISE TERMINAL AND RELATED IMPROVEMENTS; DIRECTING THAT THE COUNTY MAYOR OR COUNTY MAYOR�S DESIGNEE NEGOTIATE ANY AND ALL CONTRACTS NECESSARY TO GIVE EFFECT TO THE INTENT OF THE MEMORANDUM OF UNDERSTANDING AND TO PRESENT THEM TO THE BOARD FOR APPROVAL WITHIN 120 DAYS; AUTHORIZING THE COUNTY MAYOR OR COUNTY MAYOR�S DESIGNEE TO EXTEND TIME PERIODS IF REASONABLY NECESSARY TO FINALIZE NEGOTIATIONS UPON WRITTEN REPORT TO THE BOARD

BODY
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. This Board hereby authorizes the County Mayor or County Mayor�s designee to execute the non-binding Memorandum of Understanding by and between the County and Royal Caribbean Cruises, Ltd. (�RCL�), providing for RCL to lease land from the County at the Port of Miami, and to design, build, finance, construct and operate a cruise terminal and related facilities such as bulkheads, berthing facilities, a parking garage and associated structures at the Port of Miami, substantially in the form of that attached to this resolution (the �MOU�).

Section 2. This Board hereby directs the County Mayor or County Mayor�s designee to negotiate any and all contracts necessary to give effect to the MOU, and to present them to this Board for approval, within 120 days of the effective date of this resolution.

Section 3. If reasonably necessary to finalize negotiation of the contracts, the County Mayor or County Mayor�s designee is hereby authorized to extend the period set forth in Section 2 above upon written notice to this Board. To the same effect, and upon written notice to this Board, the County Mayor or County Mayor�s designee is hereby authorized to execute any required extension to the term of the MOU in the manner provided in the MOU.

HEADER
Date:

To: Honorable Chairman Jean Monestime
and Members, Board of County Commissioners

From: Carlos A. Gimenez
Mayor

Subject: Resolution Approving and Authorizing Execution of a Memorandum of Understanding between
Miami-Dade County and Royal Caribbean Cruises, Ltd. for the Lease of Land for the Financing,
Designing, Building, Operating and Maintaining of a Cruise Terminal and Related Improvements

STAFF RECOMMENDATION
Recommendation
It is recommended the Board of County Commissioners (�Board�) approve the accompanying resolution approving and authorizing the execution of a Memorandum of Understanding (�MOU�) between Miami-Dade County (�County�) and Royal Caribbean Cruises, Ltd (�RCL�) for the lease of land for the financing, designing, building, operating, and maintaining of a cruise terminal and related infrastructure.

Scope
PortMiami is located within District 5, which is represented by Commissioner Bruno A. Barreiro. The impact of this agenda item is countywide as PortMiami is a regional asset and generates employment for residents throughout Miami-Dade County.

Fiscal Impact/Funding Source
Although this MOU is non-binding, the parties have agreed in good faith to undertake certain pre-contract activities. The County will continue to work on the planning and permitting of the bulkhead work necessary for the Terminal A cruise berth. It also agrees to undertake environmental Phase I and Phase II testing and to produce plans that would be used for utility connections. The County will also transmit the most recent bathymetric chart, which is being completed and certified as part of our maintenance dredge program of the main cruise channel. These commitments may require PortMiami to spend about $500,000, much of which the Port has already incurred as part of its planning efforts. These funds will initially be provided through operating costs and may be capitalized later if the project is constructed.

The binding Agreements that are intended to be presented for Board approval several months from now will contain substantial financial analysis. The Port anticipates that RCL will invest well over $100 million during the construction phase of the project and that PortMiami will invest several million. The present value of the guaranteed portion of this long-term agreement is estimated to be $250 million for PortMiami after taking the port�s up-front costs and approximately $1.2 million in annual rent if used for cargo purposes. In the Port�s financial projections provided to the bond rating agencies, the revenue from this acreage was estimated at $1.2 million annually from cargo activity. The revenues derived from this proposed deal from the same acreage is substantially higher at $9.5 million annually (rent base minimum, escalated at no less than 1.5 percent annually, subject to two (2)formula adjustments described within the MOU).


Track Record/Monitor
PortMiami staff members responsible for monitoring the MOU are Juan Kuryla, Port Director; Kevin Lynskey, Deputy Port Director; and Hydi Webb, Assistant Director, Business Development and Marketing.

Delegated Authority
The resolution authorizes the County Mayor or County Mayor�s designee to execute this Non-Binding Memorandum of Understanding on behalf of Miami-Dade County to negotiate the agreements necessary to give effect to the transaction in the manner provided in the MOU, to engage in the predevelopment activities identified in the MOU and to extend the MOU, as provided in the resolution.

Background
RCL is the world�s second largest cruise company operator. The company owns six (6) cruise brands � Royal Caribbean International, Celebrity Cruises, Azamara Club Cruises, Pullmantur (Spain), CDF Croisieres de France (France), and TUI Cruises (Germany). Combined these brands operate a total of 44 ships globally with plans to introduce eight additional ships by end of 2020.

RCL and several of its brands have successfully homeported in PortMiami for more than 45 years. RCL passenger volumes and vessel sizes have fluctuated substantially throughout these years. Prior to 2009, the Port averaged more than 1.6 million RCL passengers annually. Unfortunately, Miami lost a majority of RCL�s business when RCL announced that its then-largest vessels, the Oasis of the Seas and Allure of the Seas, would homeport year-round in Port Everglades. Currently, the Port welcomes approximately 730,000 RCL passengers annually, representing approximately 15 percent of the Port�s overall passenger traffic. Despite this volume, RCL�s contractual guarantee to the County is only 325,000 annual passengers for the preferential use of Cruise Terminal G.

Understanding RCL�s current deployment in South Florida, as well as the roll-out of newbuilds in the next three (3) to five (5) years, the Port has been working with RCL in developing a creative structure that will allow for RCL to grow its volume in Miami-Dade County. The proposed model differs significantly from the traditional Port model and makes Miami-Dade County more attractive in a competitive environment. A public-private partnership has been agreed upon between the Port and RCL (�the Parties�) and is respectfully recommended to the Board for approval.

At the time that PortMiami failed to secure the Oasis of the Seas and the Allure of the Seas, the Port did not have facilities capable of hosting these vessels nor did it have suitable expansion plans. In December 2010, the Board adopted the PortMiami 2035 Master Plan, which envisioned a total of eight (8) cruise berths on its north channel � six (6) existing, plus two (2) new berths. Once these two (2) new berths are allocated, there will be no other opportunities to build along the Port�s north channel. Such future berths are being named Cruise Terminal A and Cruise Terminal AA.

This proposed MOU outlines a public-private partnership, which provides for RCL to expand its cruise facilities in Miami-Dade County by allowing for RCL to finance, design, build, operate, and maintain Cruise Terminal A on the north-east quadrant of the Port. The land allocation for Cruise Terminal A is partially located in the Port�s cargo area (under the Port�s control) and is currently generating approximately $1.2 million in revenue to the County, but much less than what is expected under this MOU.


As the Board is aware, the Port has taken on several large financings over the past two years in range of $585 million. While it may have been possible to undertake Port-backed project financing for this cruise terminal, PortMiami is heavily leveraged and prefers to take on a private partner for this project. Thus, this deal structure is extremely attractive to the Port because it transfers risk from the County to a private company and is based on an attractive rent structure. RCL is an ideal partner for this model, as RCL is capable of bringing large passenger volume to Miami-Dade County, above and beyond its existing Miami throughput. Additionally, RCL has experience in the creation and management of development consortiums in domestic and international destinations, as well as development and operation of cruise ship facilities.

This MOU lays out certain pre-contract responsibilities for RCL and PortMiami, while summarizing the basic terms under which future binding documents will be developed for Board approval. Although much work remains to determine the cost ranges for various elements of this program, RCL will bear the full cost for constructing the cruise terminal, parking garage, ancillary facilities, and any bulkhead work. PortMiami will be responsible for environmental testing and remediation (if any), the provision of utilities to the development envelope, and providing suitable maintenance dredging of the channel and water depth between the channel and the berth. The Port anticipates the RCL investment entity will invest well over $100 million during the construction phase of the project and that PortMiami will invest several million. PortMiami�s estimated costs will be fully outlined in the binding contracts presented to the Board. The present value of the guaranteed portion of this long-term agreement should be approximately $250 million for PortMiami after taking into consideration its up-front costs. These revenues (with the exception of the approximately $1.2 million described above) were factored at the time the Port presented its financial projections to the rating agencies when it issued debt over the last two (2) years.

The timing of the MOU is extremely important, as the schedule to complete new Cruise Terminal A is aggressive, with the facility anticipated to become operational in 2018.

Substantive MOU Terms:

Pre-Development Work: PortMiami shall determine the land boundaries that encompass Cruise Terminal A and provide a footprint for RCL to master plan the project. Such County work shall entail cut/excavation/fill design studies, environmental studies, utility plans, and bathymetric plans. The County�s pre-development work is expected to cost approximately $500,000. Funds for this work are available from existing grant/bond proceeds.
RCL shall be responsible to master plan the agreed upon development envelope for Cruise Terminal A (approximately ten (10) acres) and lay out the pier, terminal, parking garage, and affiliated areas. In addition, RCL shall be responsible for construction cost estimates and schedules for the project.
Upon completion of the pre-development work identified in the MOU, the Parties will recommend to their respective boards the following documents for consideration and approval: Development Agreement, Ground Lease, and Terminal Operating Agreement.
Development Agreement: The Development Agreement will set forth the development responsibilities of the project for the Development Company and County. Prior to this Agreement, RCL shall incorporate a new, special purpose limited liability company in a U.S. jurisdiction to develop the project. RCL shall be entitled to bring in other investors in the Development Company and shall maintain a minimum of 20 percent ownership interest upon substantial completion of the project.
The Development Agreement will, among other items, complete the final design of the Master Plan for Cruise Terminal A (which shall incorporate requirements and logistical flows for Cruise Terminal AA to ensure that Cruise Terminal A and Cruise Terminal AA are separate but compatible), detail a project time line with milestone dates, and define the development obligations of the Parties. The project is intended to be complete no later than December 31, 2018. Upon completion of construction, the Development Company will own the non-real property including the cruise terminal and parking garage.
Ground Lease: The Development Company shall lease the land from the County for an initial period of 20 years, with RCL having the option to extend for up to four (4) additional terms of ten (10) years each. The base rent shall be $9,500,000 per year and shall increase 1.5 percent compounded annually. A base rent adjustment formula will apply in the first year of each renewal period in the event that combined Port revenues for the previous term did not meet or exceed an agreed upon revenue goal. Additionally, an inflation test formula will be applied in the event the Ground Lease is renewed in either one or both of the last two (2) renewal periods. Both these formulas are further outlined in the MOU.
In additional to base rent, the County shall receive $5.50 (escalating at 3 percent compounded annually) per passenger embarkation and passenger debarkation for every RCL passenger in excess of 1.55 million passenger moves at Cruise Terminal A annually.
At the expiration or termination of the Ground Lease, all of the Development Company�s rights, title, and interest to the project shall cease and title to the project shall vest in the County at no cost to the County.
Terminal Operating Agreement: This Agreement shall govern the operation of the lease, including berthing rights at Cruise Terminal A and Port fees. The term of this Agreement shall be coterminous with the Ground Lease. The Development Company shall, at its own cost, maintain, repair, and replace leasehold improvements. Additionally, the County shall, at its own expense, maintain, repair and replace common areas outside the leased premise including maintenance dredging.
Berthing arrangements for non-RCL ships at Cruise Terminal A shall be at the County�s discretion subject to berthing availability. Dockage and wharfage charges for non-RCL ships berthing at Cruise Terminal A shall be at the then-applicable Port Tariff rate. Procedures for making these berth arrangements, along with the revenue sharing formula, shall be detailed further in the Terminal Operating Agreement.
Other items under consideration in this MOU are (i) an Amendment to the current Terminal Usage Agreement relating to RCL�s preferential berthing rights at Cruise Terminal G, (ii) extension options to the Lease Agreements for RCL�s corporate office buildings located on the Port, and (iii) a potential option for RCL to construct and possibly operate Cruise Terminal AA.

The Effective Date of this MOU shall be the date executed by the County until one of the following occurs: (a) execution of the Ground Lease, Development Agreement, and Terminal Operating Agreement, (b) mutual agreement to terminate, or (c) one hundred twenty (120) days from the Effective Date (unless the Parties agree in writing to an extension).


It is important to note that this type of structure benefits the Port significantly, as it incentivizes the cruise line to berth more vessels in Miami-Dade County. The more vessels that are processed at their facility, the higher the returns will be for both the cruise line and the Port.




_______________________________
Jack Osterholt, Deputy Mayor



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