HomeMy WebLinkAboutR-79-0833RESOLUTION NO 79 - 8 33
A RESOLUTION ACKNOWLEDGING THE WAIVER OF DEED
RESTRICTIONS ON LEASING ALL OR ANY PORTION OF
WATSON ISLAND TO ANY PRIVATE PERSON, FIRM OR
CORPORATION FOR ANY PRIVATE USE. OR PURPOSE AS
CONTAINED IN THE STATE OF FLORIDA BOARD OF
TRUSTEES OF THE INTERNAL IMPROVEMENT TRUST
FUND DEED NO. 19447 TO THE CITY OF MIAMI UPON
THE EIGHT SPECIFIED CONDITIONS IMPOSED BY THE
BOARD OF TRUSTEES THROUGH MOTION OF SAID BOARD
AND AS SET FORTH HEREIN DATED NOVEMBER 20,
1979; FURTHER DIRECTING THE CITY MANAGER AND
THE CITY ATTORNEY TO FULLY COMPLY FORTHWITH
WITH THE AFORESAID CONDITIONS AND TO PROMPTLY
REPORT THEIR COMPLIANCE THEREWITH TO THE CITY
COMMISSION AND TO THE BOARD OF TRUSTEES OF THE
INTERNAL IMPROVEMENT TRUST FUND.
WHEREAS the City of Miami, Florida (CITY),is desirous of
building, maintaining and operating a theme and amusement park on
Watson Island, an island located on property conveyed to the CITY by
the Legislature of the State of Florida and subsequently reconveyed
to the CITY by the State of Florida Board of Trustees of the Internal
Improvement Trust Fund (TRUSTEES) pursuant to an agreement between
the CITY and the TRUSTEES; and
WHEREAS, Watson Island, with the consent of the TRUSTEES,
has been and currently is being used for commercial purposes; and
WHEREAS, the Circuit Court of the Eleventh Judicial Circuit,
in and for Dade County, Florida, has determined that the issuance of
bonds by the CITY for the cost of acquiring, constructing, and
equipping a theme and amusement park on Watson Island is for a public
"DOCUMENT) INDEX
purpose;
ITEM NO
WHEREAS, the City is desirous of leasing portions of the
Watson Island property in the operation of the theme and amusement
park and related facilities to be located on Watson Island; and
WHEREAS, the Board of Trustees of the Internal Improvement
Trust Fund of the State of Florida by Motion dated November
20, 1979 enacted a waiver of Reversionary Deed Restriction on leasing
all or any portion of Watson Island to any private person, firm or
corporation for any private use or purpose as contained in the Board
of Trustees of the Internal Improvement Trust Fund Deed No. 19447 to
the City of Miami;
CITY COMMISSION
MEETING OF
DEC5 1979
7 9 -
RESOLUTION t
MIAMIa..114....MOMMOOODOMMOSOM
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION.
OF THE CITY OF MIAMI, FLORIDA:
Section 1. The Waiver of Reversionary Deed Restriction on
leasing all or any portion of Watson Island to any private person,
firm or corporation for any private use or purpose as contained in
the State of Florida Board of Trustees of the Internal Improvement
Trust Fund Deed No. 19447 to the City of Miami upon the eight specific
conditions imposed, Section 2 through 9 following herewith, is
hereby acknowledged.
Section 2. The development of the theme and amusement park
on Watson Island shall be substantially as depicted in the Draft of.
Alternative 1-B of the Watson Island Environmental Impact Statement
prepared by Post, Buckley, Schuh & Jernigan, Inc., Consultants to R.
Duell and Associates, dated September, 1979, and the letter with
enclosures clarifying and revising portions thereof dated October 30,
1979; provided however, that nothing in this condition shall be
construed to be in any manner determinative concerning the issue of
whether or not Watson Island is within the Biscayne Bay Aquatic
Preserve and subject to regulation by the TRUSTEES pursuant to the
applicable provisions of Chapter 258, Florida Statutes.
Section 3. This waiver shall become effective upon execu-
tion; provided, however, that this waiver shall automatically and
without any notice of any kind terminate, cease to exist, and be
null and void ab initio if a development order favorable to the CITY
is not issued pursuant to .080.06, F.S., or such favorable order
does not result after the exhaustion of all appeals, or within three
(3) years from the date hereof, whichever is sooner.
Section 4. Annual reports of progress made by the CITY
toward completion of the park to the TRUSTEES, due by the anniversary`
date of this action each year until the park is open to the public
for use.
Section 5. This waiver shall cease to exist upon abandonment
or termination of the project should such take place prior to October
1, 2041.
Section 6. The CITY dedicates, in a form and manner to be
approved by the State of Florida Attorney General, one-third (1/3) of
all net revenues received or receivable by the CITY from the project.
to economic development projects consistent with those Urban
Development Action Grants as administered by the United States
Department of Housing and Urban Development,and further that this
dedication shall take place no later than January 31, 1980; provided
however, that is the CITY refuses or otherwise fails to make said
dedication within said time limits, or refuses or otherwise fails to
make said dedication in a form and manner acceptable to the State of
Florida Attorney General within said time limits, this waiver shall
automatically and without any notice of any kind, terminate, cease
to exist, and
be null and void ab initio.
Section 7. The CITY dedicates,
approved by the State of Florida Attorney
in a form and manner to be
General, one-third (1/3)
of all net revenues received or receivable by the CITY from the
project to the acquisition and maintenance
of parks and recreational
projects and facilities within the CITY, and further that this.
dedication shall take place no later than January 31, 1980; provided
however, that if the CITY refuses or otherwise fails to make said
dedication withLL said time limits, or refuses or otherwise fails to
make said dedica ion in a form and manner acceptable to the State of
Florida Attorney General within said time limits, this waiver shall
automatically and without any notice of any kind, terminate, cease
to exist, and be null and void ab initio.
Section 8. The CITY agrees in writing, prior to January
31, 1980, that none of the revenues dedicated in Section seven above
shall supplant any or all funds budgeted or to be budgeted for
acquisition and maintenance of parks and recreational projects
within the CITY; provided however, that should the CITY fail or
otherwise refuse to provide the document referred to in this condi-
tion by the date prescribed, this waiver shall automatically and
without any notice of any kind, terminate, cease to exist, and be
null and void ab initio.
3
Section 9. The oral agreement entered into between the
CITY and the Developer, modifying the Amended Contract to reflect
the requirement of bond issue on or before December 31, 1980, and
not as originally provided December 31, 1979, be reduced to writing;
and the CITY issue said bonds on or before December 31, 1980; provided
however, that if the CITY refuses or otherwise fails to comply with
this condition within said time limits, this waiver shall automatically.
and without any notice of any kind, terminate, cease to exist, and
be null and void ab initio.
Section 10. The City Manager and the City Attorney are
hereby authorized and directed to fully comply forthwith with the
aforesaid conditions of the Waiver of Reversionary Deed Restrictions
and to promptly report their compliance therewith to the City
Commission and to the Board of Trustees of the Internal Improvement
Trust Fund.
PASSED AND ADOPTED this 5th day of December , 1979.
ATTEST:
PREPARED AND APPROVED BY:
t eel tiL.
• az
Assistant City Attorney
4
Maurice A. Ferre
Maurice A. Ferre, May o r
►P' '
ft
NOVAE
t
uiiiiNii uiuI
D AS TO FORM AND CORRECTNESS:
Attorn
rnJoseph R. Grassie
City Manager
John E. Gilchrist/.= -
Project Director /
November 30, 1979
Board of. Trustees
Waiver of Reversionary Deed Restric-
tion on Watson Island & Conditions
Imposed
Three Resolutions & Draft of
Waiver of Deed Restriction from
D.N.R.
It is recommended that the City Commission
acknowledge a Waiver of Deed Restrictions
on leasing for the Watson Island Park Project
asgranted by the Board of Trustees of the
Internal Improvement Trust Fund of the State
of Florida and further it is recommended that
the City. Manager and the City Attorney be authorized
and directed to comply with conditions imposed by the
waiver.
The State of Florida granted waterfront riparian rights and submerged
lands in Biscayne Bay to the City of Miami by legislative act dated
June 2, 1919..
These bay bottom lands included the area now known as Watson Island-,
which subsequent to the act was formed from spoils dredged for the
port and intra-coastal waterway. In.1947-1949 these bay bottom lands
we're returned by the City to the State and then reconveyed by the Board
of Trustees of the Internal Improvement Trust Fund by deed dated
February 24,,1949 to the City. This deed -added the specific reversionary
restriction "The Grantee herein or its successors and assigns shall never
sell or convey or lease the described land or part thereof,. to. any
private person, firm or corporation for:any private use or purpose and
that further said lands be used solely for public purpose including
municipal purpose.
Since 1949, in all cases where the City has entered into lease agree
ments for portions of Watson.Island, the trustees have:granted waivers
for specific use and duration of the lease agreement (examples` being
the Goodyear Blimp site, The Miami Yacht Club, -:The Miami Outboard Club,
etc.)
In order to obtain the most favorable conditions in marketing the
Watson Island revenue bonds and as well to allow the City the
flexibility to enter into lease agreements with vendors in the opera-
tion of a theme and amusement park and as well to allow the continuation
79_833
'79-834
1 t
1
Joseph R. Grassie
November 30, 1972..
Page 2
of existing activities on Watson Island, City staff requested a waiver
of the leasing restriction for the proposed development of the Watson
Island Park project.
The Board of Trustees of the Internal .Improvement Trust Fund by
motion on November 20, 1979 granted the requested waiver with eight
conditions to be met by the City as follows:
1. The development of the theme and amusement park on Watson Island
shall be substantially as depicted in the Draft of Alternative 1-B
of the Watson Island Environmental Impact Statement prepared by
Post, Buckley, Schuh & Jernigan, Inc., Consultants to R. Duell.
and Associates, dates September, 1979, and the letter with enclosures
clarifying and revising portions thereof dated October 30, 1979
provided however, that nothing in this condition shall be construed
to be in any manner determinative concerning the issue of whether
or not Watson Island is within the Biscayne Bay Aquatic Preserve
and subject to regulation by the TRUSTEES pursuant to the applicable
provisions of Chapter 258, Florida Statutes.
2. This waiver shall become effective upon execution provided, however,
that thiswaiver shall automatically and without any notice of any
kind terminate, cease to exist, and be null and void ab initio if
a development order favorable to the CITY is not issued pursuant
to 380.06, F.S., or such favorable order does not result after
the exhaustion of all appeals, or within three (3) years from the
date hereof, whichever is sooner.
Annual reports of progress made by the CITY toward completion of
the park to the TRUSTEES, due by the anniversary date: of:this_action
each year until the park is open to the public for use.
▪ This waiver shall cease to exist upon abandonment or
termination
of the project should such take place prior to October 1, 2041.
. The CITY dedicates, in a form and manner to be approved by the State
of Florida. Attorney. General, one-third (1/3) of all net revenues
received or receivable by the CITY from the project to economic
development projects consistent with those Urban Development Action
Grants as administered by the United States Department of Housing
and Urban Development, and further that this dedication shall take
place no later than January 31, 1980; provided however, that if the
CITY refuses or otherwise fails to make said dedication within
said time limits, or refuses or otherwise fails to make -said dedica-
tion in a form and manner acceptable to the State'of Florida
Attorney General within said time limits, this waiver shall
automatically and without any notice of any kind. terminate, cease
to exist, and be null and void ab initio.
Joseph R. Grassie
November 30, 1979
Page 3
6. The CITY dedicates, in a form and manner to be approved by the
State of Florida Attorney General, one-third (1/3) of all net
revenues received or receivable by the CITY from the project to
the acquisition and maintenance of parks and recreational projects
and facilities within the CITY, and further that this dedication
shall take place no later than January 31, 1980; provided however,
that if the CITY refuses or otherwise fails to make said dedica-
tion within said time limits, or refuses or otherwise fails to
make said dedication in a form and manner acceptable to the State
of Florida Attorney General within said time limits, this waiver
shall automatically and without any notice of any kind, terminate,
cease to exist, and be null and void ab initio.
7. The CITY agrees in writing, prior to January 31, 1980, that none
of the revenues dedicated in condition six above shall supplant
any or all funds budgeted or to be budgeted for acquisition and
maintenance of parks and recreational projects within the CITY;
provided however, that should the CITY fail or otherwise refuse
to provide the document referred to in this condition by the date
prescribed, this waiver shall automatically and without any notice
of any kind, terminate, cease to exist, and be null and void ab
initio
8. The oral agreement entered into between the CITY and the Developer,
modifying the Amended Contract to reflect the requirement of bond
issue on or before December 31, 1980, and not as originally
provided December 31, 1979, be reduced to writing; and the CITY
issue said bonds on or before December 31, 1980; provided however,
that if the CITY refuses or otherwise fails to comply with this
conditions within said time limits, this waiver shall automatically.
and without any notice of any kind, terminate, cease to exist, and
be null and void ab initio.
The enclosed resolution requesting the authorization to extend the term
of the agreement between the'City of Miami and Diplomat World Enterprises,
Ltd. for developer/operator services is required in order to comply with.
Condition 8 above.
The enclosed resolution requesting authorization to extend the term of
the investment banking agreement with Prescott,. Ball and Turben jointly
with Blythe, Eastman, Dillon Co. Incorporated is also necessary to comply
with Condition 8 above.
Both agreements have incorporated a requirement to issue bonds prior to
December 31, 1979 or the agreements were voided. Both agreements also
have allowed for the amending of these deadlines by mutual agreement of
the parties. The enclosed resolutions would authorize extending the terms
through December 31, 1980 in compliance with the waiver Condition 8
requiring that bonds be issued by that date or the waiver would be
terminated.
Joseph R. Grassie
November 30, 1979
Page 3
6. The CITY dedicates, in a form and manner to be approved by the
State of Florida Attorney General, one-third (1/3) of all net
revenues received or receivable by the CITY from the project to
the acquisition and maintenance of parks and recreational projects
and facilities within the CITY, and further that this dedication
shall take place no later than January 31, 1980; provided however,
that if the CITY refuses or otherwise fails to make said dedica-
tion within said time limits, or refuses or otherwise fails to
make said dedication in a form and manner acceptable to the State
of Florida Attorney General within said time limits, this waiver
shall automatically and without any notice of any kind, terminate,
cease to exist, and be null and void ab initio.
7. The CITY agrees in writing, prior to January 31, 1980, that none
of the revenues dedicated in condition six above shall supplant
any or all funds budgeted or to be budgeted for acquisition and
maintenance of parks and recreational projects within the CITY;
provided however, that should the CITY fail or otherwise refuse
to provide the document referred to in this condition by the date
prescribed, this waiver shall automatically and without any notice
of any kind, terminate, cease to exist, and be null and void ab
initio.
8. The oral agreement entered into between the CITY:and the Developer,
modifying the Amended Contract to reflect the requirement of bond
issue on or before December 31, 1980, and not as originally
provided December 31, 1979, be reduced to writing, and the CITY
issue said bonds on or, before. December 31, 1980, provided however,
that if the CITY refuses or otherwise fails to comply with this
conditions within said time limits, this waiver shall automatically
and without 'any notice of any kind, terminate, cease to exist,- and
be null and void ab initio.
The enclosed resolution. requesting the authorization to extend the term
of the agreement between the': City of Miami•and Diplomat World Enterprises,
Ltd. for developer/operator services is` required in order to comply with
Condition 8 above.
The enclosed resolution requesting authorization to extend the term of
the investment banking agreement with Prescott,`Ball and Turben jointly
with Blythe, Eastman, Dillon Co. Incorporated is also necessary to comply
with Condition 8 above.
Both agreements have incorporated a requirement to issue bonds prior to
December 31, 1979 or the agreements were voided. Both agreements also
have allowed for the amending of these deadlines by mutual agreement of
the parties. The enclosed resolutions wouldauthorize extending the terms
through December 31, 1980 in compliance with the waiver Condition 8
requiring that bonds be issued by that date or the waiver would be
terminated.
State of Florida
DEPARTMENT OF NATURAL RESOURCES
DR, ELTON 3. CISSENDANNER CROWN BUILDING / 202 HLOUNT STREET ,/ TALLAIIASSEE 32301
Etecuti.e I)irecla
November 29, 1979
W. Robert Olive, Jr., Esquire
Attorney at Law
700 Barnett Bank Building
Tallahassee, Florida 32301
Re: Watson Island
Dear Bob:
HOII GRAIIAM
Governor
GEORGE FIRESTONE
Secretary of State
JIM small
Attorney General
GERALD A, LEWIS
Comptroller
HILL GUNTER
Treasurer
DOYLE CONNER
Commissioner of AFricultUre
RALI'H D. TURLINGTON
Commissioner of Education
I am enclosing an extremely and very very rough cut
and paste job of a waiver of deed restrictions
I have taken parts of former waivers and added to that
verbatim the conditions as placed on this item by the
Trustees.
I have not sent this by any of. the Trustees for their
review, and I would assume the final draft will be the
same with a lot of polishing to make it read as a legal
instrument and still maintain the same conditions.
JWP /mw
Enclosure
tr/VISIONS /
Sincerely,
aCPL
(ck W. Pierce
General Counsel
1
li.
AI/MINISTRATION • LAW ENFORCEMENT • MARINE RESOURCES
RECREATION ANI) PARKS • RESOURCE MANACEMENI • SLUE: LANDS
•
M C tw ;Y �+ i.
t
•r
Deed No. 19447-i3 WAIVER OF DEtD RESTRICTIONS
6E1 NO
• WIIERCAS,.the Trustees of the Internal Improvement Fund
of the State of Florida conveyed to the City of Miami certain
lands commonlyreferred to as Watson Island as more particularly
described in Deed No. 19447, recorded in Deed Book 3130, page
257, of the Public Records of Dade County, Florida, Clerk's
File No. Y-29610, and
WHEREAS, the above described deed contained the following
restrictions:
PROVIDED, HIOWEVER, anything herein to the contrary;
notwithstanding, this deed is given and granted upon
the express condition subsequent that the Grantee herein
or its successors and assigns shall never sell or con-
voy or lease the above described land or any part thereof
to 'any privateperson, fire, or corporation for any
private use or purpose, it being the intention of this
restriction that the said lands shall be used solely for.
public purposes,° including municipal purposes and not
otherwise.
PROVIDED, FURTHER, anything herein to the contrary
notwithstanding, this deed is given and granted upon
the further express condition subsequent that the Grantee'
herein or its successors or assigns shall not give or
grant any license or permit to any private person, firm
or corporation to construct or make by any means, any
islands, fills, embankments, structures, buildings or
other similar things within or upon the above described
lands or any part thereof for -any private use or purpose,
as distinguished from any public or municipal use or
purpose.
It is covenanted and agreed that the above condi
• tions subsequent shall run with the land and any viola-
tion thereof shall render this deed null and void and
the above described lands shall, in such event, revert
to the Grantors or their successors, __- -•-�
_ , and
WHEREAS the City of Miami is desirous of developing a
theme and amusement park on Watson Island and in order to ac
complish the same, it is necessary that the above -mentioned
deed restrictions be waived by the Board of Trustees of the
Internal Improvement Trust Fund,
NOW THEREFORE, IT IS HEREBY COVENANTED AND AGREED:
THAT the deed restrictions heretofore set forth are
hereby waived by the Board of Trustees of the Internal
Improvement Trust Fund subject to:the following conditions
1.. The 41vvoloionost of On Iatc•,,!• tt>dl o mitsr,)t!tr.tit t1:trk on .'a; I1
Island '.1ta1:1 be suhst litt:i:tt i as denictcbd t.n the nt.•ciCt:
oC A1.1.et:nat i.ve 1••l; of the t.r son Island latvi.t'onn:ettt'al ttr�at 1
it•atoment prepared by Post, 1'•tiekl.ey., Schuh & Jernigan, Int.,
Consul. Cants to R. Duel l and ,Associates,' dates September,
1979, and tlte Letter with enclosures clan ifvi.ng revising
i i'
INTERIM EVALUATION
OF
WATSON ISLAND MANAGEMENT AGREEMENT
FOR
CITY OF MIAMI
Peat, Marwick, Mitchell & Co.
CERTIFIED PUBLIC ACCOUNTANTS
'1'79-823
P79 834
PEAT, MARWICK, MITCHELL 8c Co.
CERTIFIED PUBLIC ACCOUNTANTS
1000 BRICKELL AVENUE
MIAMI, FLORIDA 33131
November 12, 1979
The Honorable Maurice Ferre
Mayor
City of Miami
3500 Pan American Drive
Miami, Florida 33133
Dear Mayor Ferre:
This interim report documents our comparative evaluation of the current
management agreement dated June 29, 1979 between the City of Miami and
Diplomat World Enterprises (DWE) with the previous agreement between
the two parties dated November 11, 1977, for the development and manage-
ment of a proposed theme park on Watson Island. A subsequent final report
will be issued in several weeks to present our evaluation of the current
management agreement with comparable management agreements in the theme
park and other related industries..
EVALUATION APPROACH
This section describes our evaluation approach in terms of the scope
of the evaluation, the criteria by which the evaluation was conducted, and
the assumptions underlying the evaluation.
Scope of the Evaluation
The scope of the evaluation presented in this report includes an independent
review and assessment of the terms of the amended management agreement with
the original agreement between the City and DWE. This study does not include
The Honorable Maurice Ferre
November 12, 1979
Page 2
an evaluation of: (a) the feasibility of the Watson Island project, (b) the
study performed by Economic Research Associates dated September, 1979, or
(c) the capabilities and qualifications of the City or DWE to meet their
contractual obligations under the management agreements.
Criteria For Evaluation
The criteria under which the amended agreement was evaluated with
respect to the original agreement included:
o Assessing the City's potential financial risk and return
under each agreement;
o Defining the services to be provided by DWE under each
agreement; and
o Identifying the operating options available to the City under
each agreement.
Our findings, with respect to each of these areas, are discussed in detail
in subsequent sections of this report.
Evaluation Assumptions
In this evaluation, the assumptions underlying previous studies are an
inherent part of this project and are material to the results. Our evaluation
is based on the results of the study conducted by Economic Research Associates
(ERA) dated September, 1979, and entitled "Economic Feasibility of the Develop-
ment Concept Proposed for Miami's. Watson Island" _ and the assumptions under-
lying the study We have made no attempt to verify the reasonableness of the
results of the ERA study or its assumptions. With respect to the ERA study
the following specific assumptions are germane to our analysis:
The Honorable Maurice Ferre
November 12, 1979
Page 3
1. Total construction costs (on which DWE's development fees are
based) are $48,719,000;
2. Fixed operating costs for the theme park remain constant
at $8, 200, 000 over the revenue range used in our study;
3. Variable operating costs for the theme park vary in direct
proportion to revenues;
4. Operating costs include the salaries, employee benefits, and
pension costs of City employees working at the Watson Island
attraction;
5. Debt service requirements are as defined in the study.
6. Replacement reserves equal five percent of gross
year.
In addition to the specific assumptions mentioned above, our analysis also
assumes;
revenues per.
1. Average annual inflation for the period 1982-1987 will be in
the range of seven percent;
2. The theme park will not experience any construction delays, cost
overruns, or natural disasters.
3. For purposes of our study, marina operations as projected by ERA,
are included in the theme park evaluation
4. Operation of park under amended agreement includes first four
months of 1987.
ASSESSMENT OF FINANCIAL RISK AND RETURN
To assess the financial risk and return, we analyzed the income stream
that the City and DINE would realize under each agreement from development
of the theme park through 1986.
The analysis was performed at three levels of operation in order to evaluate
the City's financial risks. These levels are:
P M, M, & CO.
The Honorable Maurice Ferre
November 12, 1979
Page 4
o At the revenue and expense levels projected in the ERA
study (defined as Best Case for purposes of our study) ;
o At 90 percent of the revenue and expense levels projected
in the ERA study (defined as Expected Case for purposes
of our study) ; and
o percent , revenue
in for purposes
in the ERA study (defined as the Worst Case
of our study) .
Terms of. Old Agreement
Under the terms of the Old Agreement the City and DWE were to share
operating profits from the Watson Island attractions after debt service and
replacement reserves had been covered (profits available for distribution) .
The formula for the distribution of these profits was as follows (in the order
listed)
the
1. The City would received a share of the profits available for
distribution equal to two percent of the gross revenues (should
these profits be less than the two percent, the City would
receive all the profits) .
2, DWE would then receive a share of the profits available for
distribution equal to two percent of the gross revenues
(should these profits be less than four percent of gross
revenues, DWE would receive all the profits after the City
had been allocated their portion as defined in Step 1) .
3. The City would then receive a share of the profits available, for
distribution equal to two percent of the gross revenues (should
these profits be less than six percent of the gross revenues,
the City would receive all the profits after the allocations in
Steps 1 and 2) .
4. DWE would then receive a share of the profits available for
distribution equal to two percent of the gross revenues (should
these profits be less than eight percent of the gross revenues,
DWE would receive all the profits after the allocations in Steps 1,
2, and 3)
P. M. M, & CO.
The Honorable Maurice Ferre
November 12, 1979
Page 5
5. DWE would then receive a share of the profits available for
r
distribution equal to the following percentages of gross
revenues -
Three percent if gross revenues are $20,000,000 or
less,
Four percent if gross revenues are greater than
$20,000,000 and equal to or less than $30,000,000,
- Five percent if gross revenues are greater than
$30,000,000 and equal to or less than $40, 000, 000,
Six percent if gross revenues are greater than
$40, 000, 000 and equal to or less than $50,000,000,
Seven percent if gross revenues are greater than
$50,000,000 and equal to or less than $60,000,000,
and
Eight percent if gross revenues are greater than
$60,000,000.
6. Finally, all remaining profits available for distribution accrue
to the City.
Additionally, there was an incentive clause in the Old Agreement by
'which the percentage DWE was to receive in Step 5 was either increased or
decreased depending upon the cost performance of the attractions. Based ori-
a standard ratio of operating expenses (less taxes and governmental charges
or fees) to gross revenues of 67 percent, DWE's percentage in Step 5 was to
change according to the following:
o For each percentage point that the ratio exceeded 67 percent
up to a maximum of 71 percent, DWE's percentage in Step 5
was to be decreased by one half of one percentage point; and
o For each four percentage points that the ratio was less than
67 percent, DWE's percentage in Step 5 was to be increased
by one half of one percentage point.
CITY OF MIAMI
Projected Income Distributionslto the City and DWE
Tinder the Old Agreement and the New Agreement
For Best, Fxpected, and Worst Case for the First
Five Years of Operation.
(In Thousands of Dollars)
INCOME DISTRIBUTION
ORIGINAL AMENDED
AGREEMENT AGREEMENT
DWE CITY DWE CITY
I. Best Case (ERA Projected Levels) 2,436
Development Fee 706 972 533 1,145
1982 (8 mos. of operation) 1,654 1,582 1,333 1,903
1983 4,910 3,991 2,134 6,768
19846,016 5,418 2,933 8,501
19865 6,439 6,136 3,733 8,842
1986 1987 (4 mos. of operation) 2,546 2,120 1,334 3,332
Total 22,271 20,219 14,436 30,491
II. Expected Case (90% Projected Levels) 3G
47
Development Fee 437. 2,4533 (49)
1982 (8 mos. of operation) 74437 1,333 .48
1983 4,420 2,178 2,134 4,464
1984 4,921 3,890 2,933 5,878
1985 5,793 3,975 3,733 6,035
1986 1987 (4 mos. of operation) 2,101 1,557 T,334 2,324
Total 17,993 12,887 14,436 18,880
III. Worst Case (80% Projected Levels)
Development. Fee
1982 (8 mos. of operation)
1983
1984
1985
1986
1987 (4 mos. of operation)
Total 13,236 6,039 14,436 7,275
2,436.
(356) (356) 533 (1,245)
(57) (57) 1,333 (1,447)
2,725 1,572 2,134 2,163
4,375. 1,816 2,933 3,258
4,681 2,282 3,733 3,230
1,868 782 1,334 1,316
Based on Study Conducted By Economic Research Associates Dated1
September, 1979.
2 Assumes Park Operates 8 Months in 1982 and 4 Months in 1987.
P, M. M.&CO.
The Honorable Maurice Ferre
November 12, 1971
Page 6
Terms of the New Agreement
Under the terms of the New Agreement, DWE is to be paid specified fees
for developing and operating the Watson Island attraction as follows:
o A development fee equal to five percent of the construction
costs of the attraction;
o A management fee of $4, 000, 000 for the first year of operation,
payable at the rate of $200,000 per quarter over the five
years of the agreement;
o A management fee of $3, 200, 000 for the second year of
operation, payable at the rate of $200,000 per quarter over
the four remaining years of the agreement;
o A management fee of $2, 400, 000 for the third year of operation,
payable at the rate of $200,000 per quarter over the three
remaining years of the agreement;
o A management fee of $1,600,000 for the fourth year of operation,
payable at the rate of $200,000 per quarter over the remaining.
two years of the agreement; and
o A management fee of $800,000 for the fifth year of operation,
payable at the rate of $200,000 per quarter over the first year
of the agreement.
All profits after debt service and reserve requirements accrue to the
City.
Analysis of Profit/Management Fee
Distributions Under Both Agreements
The table on the facing page shows the projected distribution to the City
and DWE for the best, expected, and worst cases as previously defined
for the period 1980-1986. From this analysis the following conclusions can
be drawn
1. The City will receive more income for the entire period
under the new agreement than would be realized under
The Honorable Maurice Ferre
November 12, 1979
Page 7
the old agreement. However, in the worst case under the
agreement the City does experience a more severe negative cash
flow over the first two years.
2. DWE will receive less income for the entire period under the new
agreement for all but the worst case. Under the worst case,
DWE receives more income under the new agreement because
of the development fee paid out of bond proceeds.
3. Under the old agreement, DWE would receive substantially
more income than the City in all three cases. Under the new
agreement, the City will receive substantially more income than.
DWE in all but the worst case.
Based on these conclusions, we believe the new agreement is preferable
to the original agreement for the City with respect to the financial return
and risk. Under the new agreement. the City's income will be $10, 272, 000
more than the old agreement in the best case for the entire period; $5, 993, 000
more in the expected case; and $1, 236, 000 more in the worst case. The only
significant risk relative to the two agreements is the negative cash flow
in the first two years under the worst case. However, should this deficit
be due to the manner in which DWE is operating the attractions, this con-
stitutes a "cause" under the new agreement by which DWE's services could
be terminated and a new operator engaged. In the event the City chooses
to terminate DWE for "cause"; the total payment to DWE would be the $2, 400, 000
paid by the City for the first two years and the City would be under no obliga-
tion for further payments.
SERVICES PROVIDED BY DWE
Both agreements state that the City has contracted with DWE "to do or cause
to be done the Planning, Developing and Operating" of the Watson Island attrac-•
tion and, "in connection therewith, to use its best efforts" in obtaining financing.
P. M, M. & CD.
The Honorable Maurice Ferre
November 12, 1979
Page 8
Planning Services
Under both agreements the "Planning" consists of
1. "The obtaining from recognized professionals in design,
architectual, engineering, construction and economics informa-
tion relevant to preparing an overall design concept and
budget for the" attraction;
2. "The obtaining of preliminary drawings and financial.
reports" (note - the original agreement specifies these
must be acceptable to the underwriter) ;
3. "All other activities necessary to determine the type, character
and dimension of the improvements to be placed upon" Watson
Island; and
4. "All other activities relating to plans for developing"
Watson Island.
The new agreement acknowledges that Steps 1 and 2 above have been
completed and approved by the City.
Financing Assistance
In terms of the "Financing" assistance, the new agreement is more
• specific in that it reflects the activities that had accrued during the time
interval between the two agreements. The most significant change between
the two agreements is in a shift in roles.
Under the old agreement, DWE was "to use its best efforts to cause
the financing." This implies that DIVE is primarily responsible for obtaining
the financing subject to the review and approval of the City.
Under the new agreement, DWE is "to use its best efforts to assist
in the financing." This implies that the City is now primarily responsible
for obtaining the financing and DIVE is obligated to assist in this activity.
1
The Honorable Maurice Ferre
November 12, 1979
Page 9
Developing Services
There is no change in the services DWE is to provide during the develop-
ment phase of Watson Island. The only change in the agreement relates to
payment of a development fee of five percent of construction costs in the new
agreement. However, in the original agreement, DWE was to be reimbursed
for their overhead expense "attributable to" the development activity.
Operating Services
Both agreements state DWE "shall be primarily responsible for the day-to-day
operation of the" Watson Island theme park. However,there exists some
difference in the two agreements in how these responsibilities are to be conducted.
The original agreement states "with the prior approval of the City, as herein
defined, Diplomat may as agent for the City " Under the amended agreement,
DWE's (Diplomat's) role is defined to "negotiate and recommend to the City
agreements and documents necessary to " The implication is for a much
more active manaement role on the part of the City under the amended agreement.
Both agreements specify a list of operational activities to be performed by
DWE with the City's approval. While these lists differ somewhat, the amended
agreement states that the list is not all inclusive and the activities are "not
limited thereto."
Under the original agreement the staffing of the theme park is with non-
City employees. The amended agreement specifies City employees in the
staffing of the park. This change in the agreement was at the request of bond
counsel based on existing IRS regulations guidelines and does not affect the
The Honorable Maurice Ferre
November 12, 1979
Page lO
operational plans for the park, All new cost projections reflect this change
and DWE is still primarily responsible, subject to City approval, for the manage-
ment and supervision of park personnel irrespective of whether they are DWE
or City employees.
A more significant change in the two agreements is reflected in the
standards by which DWE is to operate the theme parks. Under the original
agreement DWE was to operate the park "in accordance with standards established
by comparable facilities in the United States." The amended agreement states
"the park is to be operated" in accordance with standards customary of
first class amusement and recreational facilities in the United States." This
change in wording thus requires DWE to operate the park as a "first class"
facility. Such a requirement, while intended, is not specifically stated in the
original agreement.
Analysis of Services
The services DWE is to provide the City in developing and operating
the Watson Island park are not materially different in the amended agreement
than in the original, The role of the City, however, is to be more active under
the amended agreement than the original, The amended agreement also
specifically states the park is to be operated in a first-class fashion. With
respect to the amended agreement, we do have two concerns:
1. Our experience indicates that potential problems arise when
employees of one organization are managed by employees of
another unless the management role is specifically defined in
terms of employment practices, promotion policies, termination
procedures and the like.
P, M. M.&CO.
The Honorable Maurice Ferre
November 12, 1979
Page 11
2. The term "first class" is subjective in nature and specific
criteria for performance should be defined as an addendum
to the agreement.
Subject to these concerns, we conclude that the City's position with
respect to the level and quality of service to be provided by DWE is improved
under the amended agreement.
OPTIONS OF THE CITY
The options available to the City are substantially improved in the amended
agreement with respect to DWE and the manner in which the park is managed.
The amended agreement defines the term of the agreement as five years
and provides for the City to be able to terminate DWE:
o Without cause on the anniversary of the commencement
date of operation provided that the City gives at least
90 days notice and pays any balance in the accrued
earnings account of DWE;
o With cause on 30 days notice provided that the date
of termination is no greater than 60 days from the date
of the notice and the City pays those amounts due DWE
• at the date of termination
Under the original agreement, the terms of the agreement were for
30 years with DWE having the option to extend this agreement an additional
10 years. There was no provision for the City to terminate the services
of DWE under this agreement.
The new agreement provides DWE the option, prior to the commencement
date of the park, "to revert back to a term of years, but no greater than
thirty (30) , and at the consideration provided in the Agreement prior to
amendment," This option is subject to the issuance of regulations or a
published ruling by the Federal Internal Revenue Service that would "permit
The Honorable Maurice Ferre
November 12, 1979
Page 12
a management contract for a term of years in excess of one year and compensation
based upon a percentage of gross revenues of the facility being managed." All
other terms of the amended contract would be in force. However, if DWE elects
to exercise this option, "all moneys received as a Development Fee shall be
applied to the moneys payable to" DWE as consideration under the original
agreement. We have no way of assessing the probability that the Internal
Revenue Service will issue such changes in their regulations or publish such
rulings.
CONCLUSIONS
In summary, we believe the amended agreement substantially improves
the City's position with respect to the original agreement as follows
o Provides the City with the potential for greater financial
returns with no real increase in risk;
o Requires DWE to provide essentially the same management
services in developing and operating the park; and
o Allows the City to terminate the relationship with. DWE for
"cause" or without "cause" which ensures the park will be
operated in compliance with the City's overall objectives, -'
However, we believe the City should address the following:
o Development of specific personnel policies with respect
to DWVE's management of City employees; and
o Definition of specific performance criteria by which the
quality of the operation (first class) is to be determined,
We appreciate the opportunity to be of assistance to the City on this phase
of our engagement and are proceeding forward with the second phase of our
evaluation,
Sincerely,
PEAT, MARWICK, MITCHELL 6 CO..
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