Miami-Dade Legislative Item
File Number: 152615
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File Number: 152615 File Type: Resolution Status: Adopted
Version: 0 Reference: R-1079-15 Control: Board of County Commissioners
File Name: AMENDMENT NO. 1 TO PREFERENTIAL BERTHING AGREEMENT Introduced: 11/5/2015
Requester: Port of Miami Cost: Final Action: 12/1/2015
Agenda Date: 12/1/2015 Agenda Item Number: 8J1
Notes: Title: RESOLUTION APPROVING AND AUTHORIZING THE COUNTY MAYOR OR THE COUNTY MAYOR’S DESIGNEE TO EXECUTE AMENDMENT NO. 1 TO THE PREFERENTIAL BERTHING AGREEMENT BETWEEN MIAMI-DADE COUNTY AND MSC CRUISES S.A. (F/K/A MSC CROCIERE S.A.), WHICH EXTENDS THE TERM OF THE PREFERENTIAL BERTHING AGREEMENT, REQUIRES MSC CRUISES TO HOMEPORT ITS NEWEST VESSEL, THE MSC SEASIDE, AT THE PORT OF MIAMI, PROVIDES FOR A MARKETING INCENTIVE TO MSC CRUISES BASED ON PASSENGER MOVES OVER 425,000 PER YEAR WITH HIGHER INCENTIVES FOR INCREASED PASSENGER MOVES, INCREASES PASSENGER THROUGHPUT GUARANTEES BY MSC CRUISES, PROVIDES FOR POSSIBLE USE OF A UNITARY FEE IN THE FUTURE, AND OBLIGATES THE COUNTY TO SPEND A MAXIMUM OF $25,000,000.00 FOR IMPROVEMENTS TO TERMINAL F AT THE PORT OF MIAMI; AND AUTHORIZING THE COUNTY MAYOR OR COUNTY MAYOR’S DESIGNEE TO EXERCISE ANY CANCELLATION, TERMINATION, RENEWAL AND OTHER RIGHTS CONTAINED IN THE ORIGINAL AGREEMENT AS AMENDED BY AMENDMENT NO. 1
Indexes: PREFERENTIAL BERTHING AGREEMENT
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 12/1/2015 8J1 Adopted P

Trade and Tourism Committee 11/13/2015 3F Forwarded to BCC with a favorable recommendation P
REPORT: Assistant County Attorney David Murray read the foregoing proposed resolution into the record. Commissioner Sosa requested to be added as a co-sponsor. There being no questions or comments, the Committee proceeded to vote on the foregoing proposed resolution as presented.

Office of the Chairperson 11/12/2015 Additions

County Attorney 11/6/2015 Assigned Richard Seavey 11/6/2015

Office of Agenda Coordination 11/6/2015 Assigned County Attorney 12/1/2015
REPORT: revised memo

Office of Agenda Coordination 11/6/2015 Assigned County Mayor
REPORT: returned

Office of Agenda Coordination 11/6/2015 Assigned Office of Agenda Coordination 11/6/2015

County Attorney 11/5/2015 Assigned Richard Seavey

Office of Agenda Coordination 11/5/2015 Assigned County Attorney 12/1/2015
REPORT: POM - Richard Seavey - Commr. Diaz Sponsors - pending Nov. cmte - Attachment: Amendment No. 1 to Agreement

Jack Osterholt 11/5/2015 Assigned Office of Agenda Coordination

Legislative Text


TITLE
RESOLUTION APPROVING AND AUTHORIZING THE COUNTY MAYOR OR THE COUNTY MAYORíS DESIGNEE TO EXECUTE AMENDMENT NO. 1 TO THE PREFERENTIAL BERTHING AGREEMENT BETWEEN MIAMI-DADE COUNTY AND MSC CRUISES S.A. (F/K/A MSC CROCIERE S.A.), WHICH EXTENDS THE TERM OF THE PREFERENTIAL BERTHING AGREEMENT, REQUIRES MSC CRUISES TO HOMEPORT ITS NEWEST VESSEL, THE MSC SEASIDE, AT THE PORT OF MIAMI, PROVIDES FOR A MARKETING INCENTIVE TO MSC CRUISES BASED ON PASSENGER MOVES OVER 425,000 PER YEAR WITH HIGHER INCENTIVES FOR INCREASED PASSENGER MOVES, INCREASES PASSENGER THROUGHPUT GUARANTEES BY MSC CRUISES, PROVIDES FOR POSSIBLE USE OF A UNITARY FEE IN THE FUTURE, AND OBLIGATES THE COUNTY TO SPEND A MAXIMUM OF $25,000,000.00 FOR IMPROVEMENTS TO TERMINAL F AT THE PORT OF MIAMI; AND AUTHORIZING THE COUNTY MAYOR OR COUNTY MAYORíS DESIGNEE TO EXERCISE ANY CANCELLATION, TERMINATION, RENEWAL AND OTHER RIGHTS CONTAINED IN THE ORIGINAL AGREEMENT AS AMENDED BY AMENDMENT NO. 1

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 this Board:

Section 1. Approves the Amendment No. 1 (ďAmendment No. 1Ē) to the Preferential Berthing Agreement (ďOriginal AgreementĒ) between Miami-Dade County and MSC Cruises S.A. and authorizes the County Mayor or the County Mayorís designee to execute Amendment No. 1 on behalf of Miami-Dade County, in substantially the form attached hereto as Exhibit A and made part hereof.

Section 2. Authorizes the County Mayor or the County Mayorís designee to exercise any cancellation, termination, renewal and other rights and provisions contained in the Original Agreement as amended by Amendment No. 1.

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 Amendment No. 1 to the
Preferential Berthing Agreement between Miami-Dade County and MSC Cruises S.A.

STAFF RECOMMENDATION
RECOMMENDATION
It is recommended that the Board of County Commissioners (Board) approve the accompanying resolution approving and authorizing the execution of Amendment No. 1 (ďAmendment) to the Preferential Berthing Agreement (Agreement) between Miami-Dade County (County) and MSC Cruises S.A. (MSC) providing for extension of the original Term and other amendments to the original agreement.

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

FISCAL IMPACT/FUNDING SOURCE
This Amendment provides MSC annual incentives to homeport the new MSC Seaside year-round at the Port beginning in late 2017. This Amendment also extends the Term of the current Preferential Berthing Agreement, which would otherwise expire on October 1, 2016, for an additional 11 years to October 1, 2027 with a five-year option to renew, subject to future negotiations and Board approval (Term).

Minimum annual guarantees to the Port shall remain the same as in the current Agreement (80,000 Passenger Moves per fiscal year) through FY 2017. Despite this guarantee, expected total combined revenues to the Port for FY 2016 and 2017 are anticipated to be approximately $9.6 million. However, commencing with the arrival of the MSC Seaside in FY 2018 and every fiscal year through the remainder of the Term of the current Agreement, MSC shall guarantee a minimum of 425,000 annual Passenger Moves. In terms of revenue, MSC shall annually guarantee approximately $7 million in FY 2018 escalating to $9.8 million in FY 2027 (this represents a 3 percent increase annually to dockage and wharfage fees). Total guaranteed revenues to the Port as part of this Agreement are approximately $90 million. However, should MSC continue to call with a seasonal ship (based on terminal availability) plus the year-round MSC Seaside vessel, then anticipated revenues to the County will be approximately $150 million during the Term.

In exchange for this long-term commitment and increased guarantees, MSC shall have Preferential Berthing Rights at Terminal F on Saturdays year-round during the Term. Each year, MSC shall receive three (3) types of incentives as part of this Amendment:

* The first incentive is a share of parking revenue, which exists in the current Agreement and is consistent with other cruise line agreements. The incentive is based on each lineís respective share of PortMiamiís multi-night cruise passenger throughput. If MSC were to run a year-round vessel plus a seasonal vessel, these vessel calls would be anticipated to produce approximately $1.8 million in annual parking revenues to which MSC will be entitled.
* The second incentive is an annual marketing fee of $175,000 paid to MSC during each of the first three (3) years of this Amendment (FY 2016, 2017, and 2018) to promote MSCís year-round Miami-Dade County operations at Port Miami.
* The third incentive is an Annual Marketing Payment linked to MSC annual passenger volumes over 425,000 passenger moves. This incentive is anticipated to range from approximately $200,000 in FY 2018 to slightly over $300,000 by the end of the Term based on a year-round and seasonal vessel.

Additionally, the County commits to making capital improvements to Terminal F to accommodate the MSC Seasideís ship size and increased passenger volumes (Exhibit B). The Port is not obligated to make improvements beyond $25 million. However, the County, at its own election, may make additional improvements beyond those needed for the Seaside to accommodate an even larger class of vessels for which PortMiami will be competing. The Board will be presented with these construction contracts for Terminal F at a later date when the true costs are further defined. The funding for such improvements shall come from the Portís FY 2016 adopted capital budget.† The remainder will be included in the Portís FY 2017 capital budget, which will come from Port bonds/loans, FDOT grants, federal grants, tenant funds and/or operating funds.

DELEGATED AUTHORITY
In accordance with Section 28.3 of the Miami-Dade County Code related to identifying delegation of the Board authority, there are no authorities beyond those specified in the resolution, which include the authority for the Mayor or his designee to execute the Amendment No. 1 and for exercising any cancellation, termination, renewal, and other rights as contained in the Agreement as amended by Amendment No. 1.

TRACK RECORD/MONITOR
The Port staff members responsible for monitoring the Agreement are Juan Kuryla, Port Director; Kevin Lynskey, Deputy Port Director; and Hydi Webb, Assistant Director of Business Development and Marketing.

BACKGROUND
MSC is an Italian cruise line owned by Mediterranean Shipping Company S.A., a privately held shipping group based in Geneva, Switzerland, which is the second largest container shipping line in the world. MSC is registered to do business in the State of Florida through its North American sales and marketing agent, MSC Cruises (USA), Inc.
MSC was founded in 1990 and is currently the fourth largest cruise operator in the world with a 6.4 percent market share. MSCís leading market is the Mediterranean where it has year-round operations. However, it is worthy to note that MSC, for the first time, will begin year-round sailings to the Caribbean from Miami beginning winter 2015 with the MSC Divina. MSC currently owns and operates a fleet of 12 vessels. It has an aggressive newbuild program with four (4) new ships on order, plus options for an additional three (3) ships. The four (4) new ships are part of MSCís revolutionary new Seaside-class vessels (capable of carrying 5,170 passengers) and Vista-class vessels (capable of carrying 5,715 passengers), which will be the largest ships in the MSC fleet.
On January 24, 2012, via Resolution No R-38-12, the Board approved a Preferential Berthing Agreement between Miami-Dade County and MSC Crociere S.A. Under the terms of this Agreement, MSC committed to move its cruise ship operations from Port Everglades to PortMiami in FY 2014. The Agreement provided MSC with Preferential Berthing Rights to Terminal F on Saturdays during the winter season, plus a percentage of parking revenues from the Port, in exchange for a guarantee of a minimum annual passenger pledge of 80,000 and exclusive homeport rights of MSC vessels in the South Florida region.
Subsequently, the Port and MSC signed a non-binding Letter of Intent in March 2015 to collaborate on an expanded terminal with year-round berthing rights on Saturdays to accommodate the MSC Seaside. This Amendment further memorializes such Letter of Intent. The MSC Seaside will be MSCís first cruise ship to be christened in the United States and will arrive in Miami for homeport operations in December 2017.
Under the terms of this proposed Amendment, MSC will continue to have a Minimum Annual Guarantee of no less than 80,000 Passenger Movements during FY 2016 and Fiscal Year 2017. Commencing with the arrival of the MSC Seaside in FY 2018, and every fiscal year thereafter during the Term, MSC shall guarantee a minimum of 425,000 annual Passenger Movements. Additionally, commencing with the arrival of the MSC Seaside, MSC will be guaranteeing minimum annual dockage revenue to the Port. The combined increase in passenger movements and establishment of a dockage guarantee is approximately $6.2 million higher than original Agreement.

The wharfage and dockage rates chargeable by the County to MSC shall continue to increase annually at three (3) percent through the Term. MSCís wharfage rate in Fiscal Year 2016 shall be $11.32 per passenger embarkation and $11.32 per passenger debarkation. The dockage rate in FY 2016 shall be $0.35 per gross registered ton. Aside from dockage and wharfage rates, all other applicable Port fees due to the County from MSC vessels shall be billed as per the Port Tariff. Should MSC fail to meet its annual guarantee in any given year, MSC will make a shortfall payment to the County within 30 days of the end of the fiscal year in which the guarantee was not met. Shortfall payments will be based on the then applicable wharfage and dockage rate for the given fiscal year multiplied by the number of passenger moves below the minimum annual guarantee, or, if a Unitary Fee is implemented, the shortfall payments will be based on the then-applicable Unitary Fee rate.

MSC shall have an option to switch from a dockage and wharfage billing structure to a Unitary Fee model (a per passenger fee charged per embarkation and debarkation as an alternative payment mechanism to passenger wharfage and dockage fees for the purpose of streamlining the billing process) during the Term. Six (6) months prior to the start of any fiscal year, MSC shall have the right to request a Unitary Fee to commence at the beginning of the following fiscal year provided that the Port and MSC mutually agree on the Unitary Fee rate, which shall be subject to annual reconciliations. The Unitary Fee shall continue to increase three (3) percent annually.

A Passenger Surplus provision shall commence in FY 2017 through the Term, which will allow MSC to carryover surplus Passenger Movements to a future year that can be applied to a shortage during that year. Such Passenger Surplus may be applied in FY 2020 and/or later. The amount of Passenger Movements that MSC can accrue shall be capped at 150,000 passenger moves, but only 75,000 of those moves may be used to offset a shortage within a two-year consecutive period.

In exchange for this pledge, MSC will receive Preferential Berthing Rights at Terminal F year-round on Saturdays. Once the MSC Seaside arrives in December 2017, MSC intends to continue to have the MSC Divina homeport seasonally at PortMiami. This will be the first time MSC commits two (2) vessels to homeport at the Port in the same fiscal year. The attached Exhibit A sets forth the dates committed to the MSC Divina during FY 2018. After this year, if MSC seeks to have another Miami vessel in additional to the MSC Seaside, the Port will use its commercially reasonable efforts to schedule MSC vessels at Terminal F. The Port shall have rights to berth MSC calls at other cruise terminals provided that such use does not interfere with preferential rights of another cruise line agreement.

MSC has expressed interest for an option to secure an additional year-round berth on Sundays at PortMiami beginning FY 2019-20. However, at the time this Amendment is executed, the Port is not able to commit to such expanded berthing rights. Thus, the Port agrees to inform MSC in writing, within 18 months from the execution of this Amendment, if a year-round berth on Sundays becomes available for Fiscal Year 2019-20 and to provide MSC the right of first refusal for such berth. MSC may exercise such right within 90 days notice. Additionally, should this right become available, an Amendment shall be brought back to the Board outlining new guarantees.

In exchange for MSCís long-term commitment and increased passenger guarantees, the County shall provide three (3) incentives to MSC as described in the fiscal impact section of this memo:

1. Parking Revenues: This Amendment continues to provide MSC with the parking incentive as included in the Agreement, but adds some additional exclusions to the incentive calculation to include ferry services, cruises less than 24 hours, and non-cruise daily parking. The original formula remains the same in that the parking incentive shall be based on the proportion of MSC multi-day embarkations to the Portís total multi-day cruise embarkations. The Port shall remit parking revenues to MSC within sixty (60) days of the close of each fiscal quarter. Once the MSC Seaside arrives in FY 2018, MSC continues to have an additional seasonal vessel then the parking revenue share to which MSC shall be entitled is approximately $1.8 million annually.

2. Marketing Incentive for Year-round Operations: The County shall pay MSC a marketing incentive during Fiscal Years 2016, 2017, and 2018 in the amount of $175,000 each fiscal year. Such funds will be used by MSC to promote their year-round Miami sailings.

3. Annual Marketing Incentive: MSC shall qualify for an annual marketing incentive based on passenger performance over 425,000 annual passenger moves. MSC shall receive 0.5 percent calculated on passenger wharfage and dockage (or Unitary Fee, if applicable) for every additional 75,000 passenger movements above 425,000 passenger moves up to a cap of 15 percent per fiscal year, which equates to 2.6 million passengers. This incentive, payable to MSC within 60 days of the end of said fiscal year, is anticipated to range from $200,000 in Fiscal Year 2018 to slightly over $300,000 by the end of the Term.

The Port commits to making improvements to Cruise Terminal F to accommodate the MSC Seaside and its increased passenger capacity as per the attached Exhibit B. Such improvements include an expansion of the terminal footprint, increased queuing and check-in capacity, additional seating, enlarged baggage collection, and passenger boarding bridges designed to accommodate a larger vessel such as the MSC Seaside. The Portís obligation is capped at $25 million and in no event shall the Port be responsible for any improvement cost exceeding this cap. As mentioned in the Fiscal Impact section above, the Port may elect to make additional substantial terminal improvements to better accommodate the industryís ever-increasing cruise vessel sizes homeporting at the Port.

This Amendment extends the Term of the current Agreement (which is set to expire on October 1, 2016) for 11 years to October 1, 2027. MSC shall have the option to extend for an additional five-year term conditioned upon MSC providing written notice to the County at least 27 months prior to the expiration of the then-existing term and subject to future negotiated terms subject to approval by the Board.

The Port is recognized a world-class port with a diversity of cruise brands appealing to a range of passenger budgets. The growth of MSC at the Port will strengthen Miamiís offerings of luxury cruise brands to passengers throughout the world.

The effective date of this Amendment shall be the earlier of (1) the expiration of any Mayoral veto period, or (2) approval and execution by the County Mayor of this Amendment and the filing of such approval with the Clerk of the Board.






__________________________
Jack Osterholt, Deputy Mayor



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