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Home My WebLink AboutM-88-085014 •� Cesar Odio City Manager •RoM 1 victor a —. De Yurre Commissioner CIT'f OF MIAMI. R�ORIOA iNTtR-0FFiCt MEMORANOUM OArt: M a y 1 1, 1988 suuccT Dinner Key Boatyard RtrtRttrccs: tNCLOSURCS; cussion Please include on the henstatus9of the Commission DinnerKeeL3oatyardsproposal. item in reference to t . VDYr se cc; Honorable Mayor and City Commission Aurelio Perez-Lugones, Legislative administrator • iP�.. 8 `� n� t yy� ft�*, Dinner MAVIGEMENT COMPANY, INC --MEDIA COPY- - Mayor Xavier Suarez City of Miami 3500 Pan American Dr. Dear Xavier erd Sept. 27, 1988 We assume it will not be feasible for the city to create and operate the sort of boatyard the public wants at Dinner Rey. If so, the question is how fast can a new RFP process move and must a new RFP be written? Our position is that the prior RFP was adequate. A few problems cropped up in the lease, but the city's basic terms were reasonable. The RFP required a minimum investment of $1.5 million, with extensions for larger investment. Given the yard's condition, clearly no bid of less than $1.5 million is worth considering. As for lowering the $350,000 minimum rental, that can only encourage proposers to avoid investment needed for profits, in turn assuring the city it won't get a reasonable rental. The whole process will be moot if the Department of Development, which has lost some key people and is heavily over -burdened needs a year to debate and create a new document, and another year to select the operator. The yard may be inoperable by then. The boatlift is unsafe, the seawall is eroding fast, and the main structures have no fire protection whatsoever. Time is running out on the boatyard. Since April the prime rate has risen from 8 58 to 10%. Our suppliers are concerned about holding to their prices. Congress is considering a higher minimum wage. Economists are forecasting a recesssion in '89. We have to factor these costs, but the city's RFP is flexible enough to permit that. Our concerns are practical, such as the city permitting the marina in a timely fashion. Xavier, the last RFP was debated for more than a year. The individuals who now claim the city's terms are too stiff never objected once! Their transparent goal is to get the yard for a song, or fail-l—ng- that, to derail the process. I trust that a desire to avoid making the city a fair deal will not carry any weight in the commission's deliberations. Sincerely yours, Marvin Duna '! tee MERRILL-STEVENS DAY DOCK CO. DINNER KEY DIVISION 1p� ^ ^ PO 901 SSMAS . P040 gOUTM PAYSMDIIE DRIVE • MIAMI PLOPIDA 31131 PMONE ISM) SSS-5911 • CAKE ADDRESS "ME,1,1111C0 • YEIER SI-ESM Vie c-oty-1w-inns of oi)r analysis are .-is follow4: l ) Tho p? 4,i') -,al Is c-iili t al not lay projoct ions ,-ire th')th incomplete in t rl ln`i of t 0 10l rr,•n-•trt 3 310 /jro.-it ly unA,-rstat(?d In tl!t trLs of cost ; 2) The Is opoi A ing revenue In oject ions are overly optimistic errs/ur erroneous, and c1ix'rating cxix nsc's are 1,111143�rstated in several areas. 3) Most importantly, the proposal does not serve the best interests of the South F)orida boating coTrunity or the people of the City of Miami. Capital Expenditures First, a listing of those expenditures listed in the City's proposal with which we differ. 1) Dry storage racks - Common sense would indicate a second hyater should be leased to help operation and be available as a backup. This increases equipment lease expense by $12,000 per year. 2) Hangar A demolition - Cost allocation of $35,000 seems much too low; our estimates indicate a price of at least twice as much - between $75,000 and $100,000. Difference --at least $40,000. 3) Seawall repair - City estimates 187.5 linear feet @ $400/foot or $75,0010; we estimate 400 linear feet @ $875/foot or $350,000. Even if we are off by 50$, that is still $137,500 more than the City's estimate. 4) Hangar repair - The City has allowed $50,000 with no details as to what this includes; our estimates of building roof repairs and exterior painting alone come to $200,000. Interior renovations for the existing brokerage area, repair offices, shops, and restrooms could easily run an additional $250,000. Again, even allowir I for 50% error, our estimate is $175,000 more than the City's project ons. 5) Fire line to Eiers and water main extension - The proposal allo- cates $6 ,000, and this figure does not seem to include a sprinkler system in the hangar building; our estimates which include the hangar sprinkler system, total$.130,000. Thus, a further difference with the City's figures of at least $70,000. 6) Landsca i - The City has allowed $10,000 for this; we feel any kind of adequate job would run at the very least five times that, or $50,000 - and could easily be more. Difference--$40,000. 7) Fuel storage tanks - DERM has mandated that all underground storage tanks be replaced with fiberglass tanks by the end of 1989. Since the one& at the Merrill -Stevens site are within 500 feet of navigable waters• double wall tanks with overflow protection and monitoring wells will be "SEINING FLORIDA'$ MARINE NEEDS SINCE !Nf" I 19P reg,rired. It is also mandated that the existing galvanized piping from the storage tanks to the pumps he replaced with double wall fiherylas pipes. This lar.3er-si7e pipe will entail a huge labor cost to redrill the present holes in the (locks to accopt the larger pipes. Orrr estimates of the new fuel tanks and lines total $120,000. New purrq-)s which will IKe nr-ce„ary in the near future will run an aMitional $75, 000. Since n w stor.j le t.vukg and lines that rTk rt UF:i2M requirements are a e.;irii_k.w nt by the oo(i of 1989, the only other option is to elimin,Ite the ..ate of j,inoline. DiffArence--$120,000 to 145,000. 'Chere is one ether glaring oversi(lht in the City's proposal concerning capital outlays. Their plan assumes using a travelift, but makes no allo- wance whatsoever for preparing an area in which to haul boats out of the water. This area is essential for the operation of a travelift; without it, the travelift is useless. Our estimate to prepare a haul/launch area for the travelift-including permitting, dredging, pilings and caps, seawalls, special decking, and paving -is at least $50,000, and could run as much as $1001000. A review of all capital expenditures shows a total difference of almost 4650,000, with a potential difference (based on our estimate) of more than million. Operating Revenues As mentioned previously, a functioning travelift requires an area to lift boats out of the water. we estimate this "staging area" will require at least six to eight months to complete. Duting this initial period, the potential market for storage and repair boats is automatically limited to those boats which ca equipment constraint, first six months are n be hauled and launched with the hyster(a). Given this it is apparent the revenue projections for at least the significantly overstated - probably by half. Adding up all projected revenues except gasoline sales for the initial six months of operation yields a total of $320,000. A loss of half of this projected revenue equates to $160,000. Shifting the focus to gasoline sales, at some point in 1989 the tanks and lines have to be replaced. No fuel can be sold during this replacement project, and it will take one to two months. Based on projected gas sales of $30,875 per month, this comes to between $30,000 and $60,000 in lost revenue. In summary, unavoidable delays in upgrading and/or replaceing equipment will cause a minimum loss of projected revenues of $200,000. Coupled with the understated capital outlays, previously discussed, the Cit 'a�tential lose grows by almost 4850,000 - and possible as much as $1.2'5 million. .10 111110� The faulty marketing assumption has to do with the current market for boats over 28 feet. This market has changed drastically over the [lost two years, and can heat be illustrated by our existing storage boat population. An analysis was Jone Lwo years ago of the storage bOALs then stored at Merrill -Stevens Lo determine haw wany would not fit into the confines (if tick storage. Chit of 56 only 7 could r►ot 1 :toted on racks. Th i s same ana 1 y.; i s was done one week Out of 57 tx)-,it s, 29 - just over half - could not be stored on racks. According to the City's plan, by 1991 there will be 178 rack storage snares after a constant 3-year expansion of these facilities. At that same point in time, the plan call for 57 out -of -water non -rack storage spaces - the exact same number as called for in the very first month of the plan. Thus, three times the number of spaces for a steadily shrinking market as compared to the number of spaces for an expanding market. This erroneous market identification casts a large shadow of doubt on the C t 'a ass ticn of eves -increasing rack space which is constan occupied. Based on present trends, the revenues for rack storage appear to be optimistic at best. Serving the Boating Community This leads naturally to the most important point of all --City government is not nearly as well qualified to operate a boat yard as any experienced operator in the private sector. The questionable storage market assumptions just discussed are a prime example. Understated revenues and required capital outlays pointed out previously are further evidence. In addition, what the City Manager is proposing is not a full service boat yard. This proposal is for a storage facility that sells gas. Repairs will be available only through a th rd party, and a Yacht brokerage office is not even mentioned. The clincher in all this is that all of the customers we have spoken to have a negative perception of a �overnmmuent-run boat yard. The boating public wants a full -service professions ly-run facility: t doesn't believe the City Manager's plan will produce this result. eN n CONCLUSIONS or ANALYSIS: 1) The proposal's capital outlay projection.q are hoth incariplete in terms of requireirk-nts and greatly understated in terms of cost. 2) The hroi—r-il's oixratintl revenue ixojections are overly optimistic .end/or rri-onenirs, And r_�i��r�tirn3 exiK-�nr es are unr3erstated in several areas. 3) Most inq,urtantly, the proposal does not serve the txp4t interests of the South Flurida boating community or the people of the City of Miami. Difference in capital expenditures (Merrill -Stevens vs. City of Miami estimates) 1. Dry storage racks 12,000 more 2. Hangar A demolition 40,000 more* 3. Seawall repair 137,500 more* 4. Hangar repair 175,000 more* S. Fire system -hangar and docks 70,000 more 6. Landscaping 40,000 more 7. Fuel storage tanks/lines 120,000 more S. Travelift staging area 50,000 more* TOTAL 644,500 Total additional capital expenditures. Difference in revenues - First year Impact of delay required to construct travelift staging area. 160,000 less Impact of stoppage of fuel sales while tanks and lines being replaces. 40,000 less 200,000 Less revenue Changing storage market (based on Merrill -Stevens storage boats) Two (2) years ago - out of 56 boats, only 7 would not fit into constraints of rack storage. Last week - out of 57 boats, 29 - over 50% - would not fit into constraints of rack storage. 11t � v" it Tt ' Q k' *zatiostes are very conservative --could run considerably not 12669K 114 S= or rim= Cumn cram I flgSSItY CEMAI I that an this day, before in, an OffidW ftlY 8WJMUW IA the State afavesiod and in tlu Omity atmemalA to telm Ad-10 Ldgeseetits0 PWNM%LLY apputm jjgplm PFAJAKX- as atum-my in -fact, for A. 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