HomeMy WebLinkAboutM-79-0408Traffic Situation 1979..
MacArthur Causeway
Optimum (free flow) traffic on MacArthur Causeway, according '
tooFlorida DOT statistics, is 6,000 vehicles per land per day.
Or approximately 35,000 - 36,000 per day.
For the calendar year of 1977 DOT figures show a level of
'average daily flow to be 37,165. For the year 1978 the figure
ii;40,812 daily average. The most recent figures available to
date from January to March show a daily average of 45,998.
Bridge openings at the West end of MacArthur Causeway over the
ICW (Intracoastal Waterway) for 1977 show a monthly average of
428. For calendar year 1978 openings were 5,583 or monthly
average of 465. The most recent figures available thru April
1979 show an average of 522 openings, per month.
According to DOT officials variables such as scenery, bridge
openings and road conditions affect the flow of traffic. There
is not on file a complete traffic study of late, as to capacity
on the causeway.
Traffic is upon a daily average of over 8% from 1977 to 1978.'
And for the first three months of this year colpared to 1977
the figure is about 25%.
for 1978
The percentage of bridge openings versus 1977 are up 9%/on a
monthly average and approximately 25% to date in 1979.
The majority of bridge openings come on weekends and holidays
which would be the peak traffic hours generated by a Watson
Island theme park. r 7 9- •4 0 8
Mike Rappaport
Save Watson Island Inc.
CiTY OF tflAMi. t,oRiDA
INTER -OF 1C MEMORANDUM
'°` Joseph R. Grassie t,
City Manager "
FROM: R. L. Fosmoen
Assistant City Manager
:�tJfJIF.G't:
May 30, 1979
FILE:
Watson Island Development
-REFF.RENCCS,
1- NCLOSUREC:
On May 8, 1979 the City received a letter from its bond counsel, Bryant, Miller,
Olive, requesting instructions from the City as to the procedure they should follow
in attempting to reach a final determination on the tax exempt status of the proposed
revenue bonds for Watson Island. That letter was forwarded to the City Commission
on May 24, 1979,and indicated that the current agreement did not allow tax exempt
status for the Watson Island Project. The attorneys provided us a basic outline of
conditions they felt would be appropriate in order for them to issue an opinion that
the Watson Island bonds are indeed tax exempt. We have proceeded to negotiate an
amended agreement with Diplomat World Enterprises which tracks those guidelines as
provided by Bond Counsel. A copy of that revised agreement is attached for the
Commission's review and approval.
This revised agreement was negotiated in the presence of and with the participation �g A)
of the City's bond counsel, the underwriters and their counsel, and Diplomat Wori•d
Enterprises.
The basic changes of the previous agreement are as follows:
1. Services by DWE are now viewed in two stages; first DWE will function as the
City's developer for the project and will receive a developer fee in the amount
of 5/ of the construction costs of the project. Secondly, upon completion of
construction, DWE will function as .the operator of the project for the City for
a term limited to five years with the option that the contract can be cancelled
without cause at the end of each year. For this operating service, DWE will re-
ceive a fixed fee equivalent to the projected return as provided for in the ori-
ginal agreement. The fixed fee represents $12M over the term of the contract.
2. All Watson Island project employees will be employees of the City.
3. Any future agreement beyond five years must be negotiated at an arm's length
basis. There is no presumption that the terms of this agreement would carry into
additional or subsequent operating agreements.
4. The amendment provides that should IRS rules permit the original agreement
prior to the date of construction completion that we will revert to the original
agreement.
J
Also enclosed you will find an agreement between the City and the underwriters,
Prescott, Ba11, Turben and Blythe Eastman Dillon & Company, Inc. As you know,
the City has applied for a UDAG grant in the amount of $10M from the Department
of Housing and Urban Development for Watson Island. HUD requires as a precedent
to consideration and approval of this grant a commitment from the underwriters
that they will purchase and/or place $55 M in revenue bonds. The attached agree-
ment between the City and the underwriters constitutes a commitment on the part
of the underwriters to meet this UDAG requirement. It also commits the City to
use the above underwriters in the placement of $55M of revenue bonds upon approval
of the UDAG grant. Fees to the underwriters would be paid from bond proceeds
and are contingent upon sale of bonds.
Also enclosed is a resolution for Commission consideration which re -states the
intent of the City to issue $55M in revenue bonds. The Department of HUD has re-
quested that this be included in our submission package for the UDAG application.
Further, you will find a proposed agreement between the City and Economics Research
Associates that provides for an update of their economic feasibility study, the
most recent version of which is dated April, 1978, and for the preparation of a pro- (8 0)
cedures manual which will spell out in detail the responsibilities and obligations of
both the City and DWE in the developmental and operational phases. It is anticipated
that this procedures manual will be a binding agreement between the City and DWE,
and will be entered into and agreed upon prior to bond sale. It is our opinion
that such a document is necessary given the magnitude and complexity of this project.
The fee for the above service to be provided by ERA is $23,000, plus reimbursable
expenses, to be paid from the Watson Island project account.
The above actions are necessary on the part of the City Commission in order to
qualify the City for consideration of the UDAG grant. The deadline for submission
of the above materials to HUD is no later than June 15, 1979. The UDAG grant is
necessary in order to meetthe inflationary costs which have accrued to the project
as a result of delays of IRS in providing the City an advanced ruling of tax exempt
status as contemplated by the original contract.
(8 B)
(8 C)
IIIIIIIII IIIIIIIIIIIIII IIIII II IIIIIIIIIUIIIII11 IIIIIIIIumIII■umiumi
C. FARRIS BRYANT
WILTON R. MILLER
W. ROBERT OLIVE, JR,
HUGH M. TAVLOR
Mr. Joseph R.
City of Miami
City Hall
3500 Pan American Drive
Miami, Florida 33133
LAW OFFICES
BRYANT, MILLER AND OLIVE
/00 BARNETT BANK BUILDING
TALLIAHASKEN, Ft.oltum 9:hot
(9041 222•86( 1
Grassie
May 18, 1979
City Manager
Re: Watson. Island Project
Dear Mr. Grassie:
Pursuant.. to the Power of Attorney vested in this " firm by the City
dated March 29, 1978, we filed with the Internal Revenue Service a
request for an advance ruling to determine if the provision of the
contract, between the City and Diplomat World Enterprises (DWE)
as manager' of the Project would affect the tax status of the
interest in the hands of the holders of bonds proposed to be
issued by the City under terms of the contract. Accordingly, we
requested and were granted an Internal Revenue Service (IRS), staff
conference at which we were advised informally that the subject of
"management contracts" is a matter recently undertaken by the
IRS staff for technical studyand that current ;'tentative
guidelines are to the effect that management contracts (i):must be
terminable annually, (ii) must be based on a flat fee as opposed
to a percentage of revenues derived under termsof such an
agreement, and (iii) must be based on arms length negotiations.
•
Since the current tentative guidelines are contrary and dLametrl-
cally opposed to the private ruling received by the Inter -American
Center Authority ("Interama") on nearly the same factual circum-
stances in the early part of 1974, we requested a conference with
the Director of the Individual Tax Division under whose .auspices
this ruling request rests. Accordingly, wemet with the Director,
to amplify and orally present the basis of the request and to
explain why the WatsonIslandproject should be distinguished from
current general guideline policies particularlyin light of the
Interaaa" ruling. The Director acknowledged the, position of the
IRS in the Interama ruling but stated the IRS had subsequently
changed its unpublished position as to the general treatment treatment of
management contracts as a.categorial subject irrespective of :the
Interama ruling.
i
Mr. Joseph R. Grassie
May 18, 1979
Page Two
Contemporaneously with our efforts, Congress enacted the* Revenue
Act of 1978 which provides, in part, that the IRS must act on
advance ruling requests made subsequent to January 1, 1979 within
six months after the filing of a request and in the event this
does not happen or the ruling is negative, the taxpayer may apply
to the Tax Court for a declaratory judgment. To come within the
purview of the Act the request must be filed on or after January
1, 1979, without provisions for grandfathering pending requests.
The IRS on December 21, 1978, announced Revenue Procedure 79-4
changing the minimal filing requirements for advance private
rulings, which published ruling requires matters not required when
we filed our request on behalf of the City. Because we could not
merely withdraw and refile our request subsequent to January
1979 under Revenue Procedure 79-41 we withdrew the ruling request
without prejudice to avoid the possibility of an adverse or
delayed ruling, without the right of judicial review provided in
the Revenue Act of 1978.
On consideration by the various law firms involved in this matter,
it is their consensus that the IRS, irrespective of the prior
ruling in the Interama financing, will not change in the near
future their current tentative guidelines as set forth above
relating to management contracts and the City's ruling request if
re -submitted under the present contractual terms would result in a
negative response.
Based on the foregoing, we respectfully advise the City that if it
desires to immediately proceed with the issuance of non-taxable
Revenue Bonds it must modify its contract with DWE to conform with
the guidelines set forth herein, which is permissible under
Section 41 of the contract which provides:
"Section 41. The parties agree to make any
reasonable modifications to this Agreement
which will not materially adversely affect •
either of them, if requested so to do by any
underwriter of the Financing, any lender,
CITY's bond approving counsel, or CITY's
independent auditor."
If this course is followed by conforming the contract to the
aforementioned general tax policies of the United States, which we
request be done pursuant to the provisions of Section 41, the
financing could conceivably be completed by the latter part of
September 1979. .•.
Mr. Joseph R. Grassie
May 18, 1979
Page Three
To facilitate an understanding of the parties as to permissible
perimeters of certain of the terms of a management agreement in
keeping with the herein stated tax policies, we offer the
following general guidelines:
1. An initial contract term, commencing on the date of
completion of the project, of five (5) years is permissible if
terminable without cause at the option of the City at .the end of
each anniversary date of the contract.
2. The management fee or contractual consideration for
operation of the project must be based on a fixed fee schedule as
opposed to a varying = amount based on a percentage of revenues
derived from operation of the project.
3. The contract must be negotiated at armslength without
any interlocking relationship between the managing entities,
or their off icers`or their employees.
4. Renewals of the management contract - between the .parties
are permissible if renegotiated without any predetermined
conditions or terms.
5. Except as to, executive employees of the '_manager,
employees of licensed vendors and lessees, persons employed to
operate the project should be employees of the City.
6. The parties may engage in a separate and independent
agreement for management andsupervision during the development
and construction phase of the project under any;.`. terms and
conditions mutually agreeable.
There are three other possible alternatives which are, set forth
below but which will continuethe adverse inflationary impact upon
the project and do not offer any assurance of ultimate success:
1. Refile the request with the existing contract terns, with
certain reasonable expectation that the IRS would not rule within
six months or would rule adversely, whichif pursued would lead to
protracted and uncertain litigation in the United States Tax
Courts,
2. Seek a special act of Congress providingfor the tax
exempt status of Bonds financing the Watson •Island Project. We
would anticipate IRS opposition to ,such legislation and more than
a year of effort before, passage or not could occur.
Mr. Joseph R. Grassie
May :18, 1979
Page Four
3. Seek general legislation in Congress changing Section:..103
of the Internal Revenue Code'of 1954,.asamended. Also, we would
anticipate IRS opposition to such legislation and more than a year
of effort before passage or not could occur.
We appreciate your attention to this matter and respectfully
request instruction as to.which course to follow.
Sincerely,
WRO/mjs.
cc: Mr. George F. Knox, Jr.,
City of Miami
17 East Flagler Street
Miami, Florida 33131
Mr. John Gilchrist, Project Director.
City of Miami
150 S.E. 2nd Avenue
Miami, Florida.33131
obert 0
City Attorney
Mr. Ronald L. Fine, General, Partner
Diplomat World Enterprises, Ltd.
1212 City National Bank Building
Miami, Florida 33131
Mr. Donald Chadwick,Partner
Prescott, Ball & Turben
900 National City Bank Building
Cleveland, Ohio 44114
OIN
C. FARRIS BRYANT
WILTON R. MILLER
W R03ERT OLIVE, JR,
LAUGH M. TAYLOR
LAW OFFICES
BHYANT, MILLER AND OLIVE
700 BARNETT HANK BUILDING
TALIAANA8MI.i , $LUNIDA 32301
(904) 222'80 1
May 23, 1979
Mr. Joseph R. Grassie, City Manager
City of Miami
City Hall,
3500 Pan American Drive
Miami,.Florida 33133
Re: Watson Island Project
•
Dear Mr. Grassier
In regard tothe captioned matter, we offer the following as
amplification of this firms letter of May 18, 1979 concerning
those provisions of the letter relating to management compensation
for fees during the operational phase of the Project. Management
fees may be statedinterms of annual accrued earnings payable
over a period of years without regard totermination if based on a
fixed amount.
If you have any questions concerning the letter of May 18,
1979, or this supplemental letter thereto, please contact the
undersigned.
WROjr/mjs
cc: Mr. George F. Knox, Jr., City Attorney
City of Miami
17 East Flagler Street
Miami, Florida 33131
Mr. John Gilchrist, Project Director
City of Miami
150 S.E. 2nd Avenue
Miami, Florida 33131
Mr. Ronald L. Fine, General Partner
Diplomat World Enterprises, Ltd.
1212 City National Bank Building
Miami,: Florida 33131
Mr. Donald Chadwick, Partner
Prescott, Ball & Turben
900 National City Bank Building.
Cleveland, Ohio 44114
C. rAHa1S tl4VANT ,
WILTON h ASILLt: l
W RO$H19T OLIVE, JP,
HUDN N TAYLON
LAW O%:ICES
I nvAN'r, MIL.LEIt AND OLIVE
700 B44NETT DANK BUILDING
T,\l.tl.\11.\41.EC, 14,(114 MA 32391
190/1 222 0511
Mr. Joseph R. Grassie, City Manager
City of Miami
City Hall
3500 Pan American Drive
Miami, Florida 33133
Re: Watson Island .Project
Dear. Mr. Grassie:
We have reviewed the form of the Amendment to the Agreement
dated November 11, 1977 between Diplomat World Enterprises,
Ltd. and the City of Miamisubmitted to us this date. It
is our present opinion that the Amendment to Agreement
meets the Guidelines setforth in this firm's letter of May
18, 1979 as amended and presents, a basic document, assuming
the adoption of satisfactory bond documents and upon entry
of a judgment validating the bonds, on which our opinion
may be rendered to this effect that the interest on the
bonds issued to finance the project contemplated by the
Amendment is exempt from Federal taxation under present
statutes, regulations and rulings.
M.-Robe
WRO/mm