Loading...
HomeMy WebLinkAboutItem #03 Discussion ItemJoseph R. Massie City Manager r,4; Richard L. Fosmoen Assistant City Mafiager is `T r S P 8 1978 Status of Negotiations With Biscayne Recreation Development Corporation and New World Marinas This memorandum is to bring you up to date on the progress of our negotiations with Biscayne Recreation Development. We have had three meetings with representatives of Biscayne Recreation, and the following issues are being discussed: 1. The threshold at which development of regional impact requirements take effect. We are making contact with various regulatory agencies to determine the level of reconstruction that can take place at Dinner Key before a DRI will be required. Mr. Dubbins' staff is currently researching these questions and they, of course, will have an impact on the phasing of construction. 2. Term of management agreement. Biscayne Recreation has expressed a concern that the management agreement be of an adequate length in order that they enjoy the benefit of managing a reconstructed and rebuilt marina. 3. Compensation with the change in approach from a lease to a management agreement. We are spending some time working our way through the issue of a fair compensation to Biscayne Recreation for both managing Dinner Key and constructing a new facility at Dinner Key. 4. Phasing. This issue relates to the question of DRI threshold as well as the goal of the City to provide new facilities at Dinner Key in a short period of time. We are concerned that we not confuse the issue of short-term improvements such as a 500 slip marina and 200 moorings with the proposed expansion of Dinner Key to the mole islands. We are continuing to meet with Biscayne Recreation, and expect to have a draft management agreement ready for City Commission review within the next 30 to 45 days. The negotiating committee, consisting of Humberto Cortina, Robert Jennings and Clark Merrill, will be meeting on Tuesday, September 12, with representatives of New World Marinas to begin negotiations for the proposed management of this facility. h William H.Hough & Co. • OLD PORT COVE ' 1212 U.S HIGHWAY ONE � P O BOX 1409S ' NORTH PALM BEACH, FLORIDA 3340E i (3031 626.3911 ' Mr, Joseph Grassie i City Manager II City of Miami II 3500 Pan American Drive Miami, FL 33133 ■ • mm s_ Dear Mr. Grassie: 8epteiber 113 1078 JOE B WISE RESIDENT MANAGER RAYMOND V CONDON You have asked us to evaluate the presentation made by Messrs. E.P. Iaconas and Thomas Dixon that a Public Trust be formed (such as the Trust managing Jackson Memorial Hospital for Dade County) which would enter into a manage- ment contract with the City to manage its Marinas. They did not make a formal proposal and their idea was not made within the time frame for receipt of proposals. NM Our only knowledge of their idea was through: 1. Reading the minutes of the City Council meeting of June 22, 1978. 2. The slide projection presentation at the City Council meeting of July 28, 1978. 3. A memo which you addressed to the City Commission of your impression of their plan, dated July 25, 1978. 4. A meeting with the aforementioned gentlemen arranged for us in the City Hall on the morning of August 25, 1978. ■ There are three areas we would like to discuss: 1. Formation of the Trust. 2. Expertise of the Trust membership to be formed. 3. The financial aspects as furnished to us. 1. The Trust has not been formed nor fully researched legally. The Trust proposers would have to work with their attorneys to draft a bill which would legally grant powers necessary to their carrying out the duties of a management contract. This has not even been discussed with the City in much detail, so far as we know. The City Attorney and the Bond Attorneys would have to study and agree that the contents of the Bill would adequately protect the City and the security expectations of the bondholders. We have assumed the City has come to the conclusion, as we have recommended, that the cheapest cost for the construction would be through the issuance of tax exempt Marina Revenue Bonds, issued by the City of Miami. STATE, COUNTY AND MUNICIPAL BONDS • William R.Hough & Co. Mt, Joseph Gtassie September 11, 1918 Page Two The 13i11, if acceptable by all patties, would have to be passed by the State Legislature. We forsec this entire process as taking one year. We have no idea what the entire process would cost, but since the Trust proposers obviously have no funds, we were told that the City would have to finance the cost. We do not know if the money would come from the General Fund, Marina revenues or bond proceeds. We have been advised that an Interim Committee would be formed to handle management of Dinner Key Marina during the time between the City's acceptance of the "Miami Waterfront Trust" idea and the formal and legal organization and appointment of Trustees in a manner suitable to the City. We do not know just what legal status an Interim Committee would have, who the people would be or what they know about running a marina, nor very importantly, whatever role they may have in the planning and construction thereof. 2. We have been given a briefing of the idea and method of selecting seven voting members of the Trust. This may or may not result in a Board having members qualified in the decision -making required in the proper and economical management of the Marina. Therefore, we are not in a position to give a point of view as to the quality of management. 3. Regarding finances, the Trust idea proposers have very sketchy figures showing how they can keep service rates at the present 5 and 10¢ rates after the rental of 500 slips (22,500 feet). Realistically, their expec- tation cannot be achieved by a very wide margin (see Exhibit of Adjustment). The proposers show gross revenues of $787,300 based on this assumption, yet we cannot quite reconcile this. They show expenses of $310,000 and debt service on an issue of $2,000,000 Bonds, leaving $309,500 before a minimum guarantee to the City of $150,000. The Trust is not in a position to guarantee funds to the City since it does not have funds of its own. These figures show a favorable total return to the City, but on the basis presented, is not attainable. The Bond Issue of $2,000,000 is unreasonable to accomplish the construction of 500 slip spaces, especially when the available construction funds are reduced by the normal reserves included and issuance cost of bonds. It is unreasonable to believe that $310,000 will cover expenses when 500 slips are in operation because more space will require greater expenditures and more service space than the 1977-78 estimated expenses used in their calculation. True, their figures were used as a comparison with other proposers, but they arc not supportive and are all we have to look at. • What'll R. Houoh & Co. Mht‘. Joseph Grassie Septeffibet 11, 1978 Page Three In an attached additional report, we deal with concepts more realistic as to plan, income, operation and maintenance expense, construction costs, site of bond issue, debt service requirements and return to the City, RVC . .„ tif616`gue., 1 • Respectfully, WILLIAM R. HOUGH & CO. Raymond V. Condon / 0 ` EXIItBfT OP. ADJDS7IMENT The following is u readjustment of the TtUst / figures when 500 slips are in place: RoVohUes at S� and 10� Rates Plus income on 200 Moorings (which Trust did not include) interest on Reserves (which Trust did not include) Total Revenues Operation and Maintenance Expense Renewal & Replacement Reserve Total 8xnooems Net 8enoouos Less Ooht Service Surplus $477,470 $4S6^1S6 -406,OOO / ~~ n ^� - _ 11.Houlh&Co, OLD PORT COVE 1212 U 5 HIGHWAY ONE P O BOX 14995 NORTH PALM BEACH, FLORIDA 3349R 1303t 626.39I1 Mr Joseph Grassie City Manager City of Miami 3500 Pan American Drive Miami, FL 33133 )OE B. WISE RESIDENT MANAGER RAYMOND V CONDON September ii, 1§74 . Dear Mr. Grassie: As per your request, William R. Hough F Co. has completed an up -dated analysis of the Marina proposals, including the proposal to create a "Miami Waterfront Trust". The 500-slip, 200-mooring Dinner Key Marina model was up -dated and used in the analysis. Certain assumptions included in the original model were revised to provide the City of Miami more flexibility in terms of rates, especially during the construction period. The original model assumed that rates would be increased prior to construction to pay the interest expense of the Revenue Bonds during construction. The revised model includes a Capitalized Interest Fund so that rates do not have to be increased prior to completion of the project. An annual contribution of $10,000 to the Renewal and Replacement Fund was included in the Operation Expense. The Bond Issue was increased to $4,525,000 to reflect the Capitalized Interest Fund. This may be reduced to the extent the City may elect to dedicate all or a portion of the funds on hand for renovation which is expected to amount to $293,390 on October 1, 1978. Our up -dated analysis included a pro -forma cash flow for the first 10 years of operation at the various rates included in the proposals (see Exhibits 3-5). A summary was prepared to show the revenue available to the City and each of the proposers at the given rates (see Exhibit 1). The cash flow projections and the revenue estimates were based on the data included in the Marina model. A review of Exhibit 1 reveals that the Waterfront Trust would yield the maximum return to the City at all of the proposed rate schedules with the exception of the 5-cent and 10-cent rate. Biscayne Development Company would provide the highest return at those rates. however, the Company would operate at an estimated $85,000 loss over the first 10 years of operation. The analysis also revealed that rates would have to be increased above their present level to provide adequate revenue coverage to prospective bondholders. We estimate that a coverage require- ment of approximately 1.50x is necessary to market the Bonds at a favorable interest rate. At a 1.50x coverage factor, revenues would have to exceed the debt service payment by 50%. STATE. COUNTY AND MUNICIPAL BONDS 'William R. Hough & Co. Mt. Joseph Grassie September 11, 1978 Page Two While we were not asked to comment on the financial feasibility of the proposals, a review of Exhibit 1 demonstrates that the before -tax return to a profit motivated firm is not very attractive at any rate combination other than the 15-cent and 18-cent schedule. (Only one of three proposals included the 15-cent and 18-cent rate.) In addition, there is no depre- ciation expense available to the corporations since the City will be providing the construction capital. While the Miami Waterfront Trust appears to provide the highest potential yield to the City at the lowest cost to the boat o►,niers, there are unresolved questions regarding the quality of management. The Trust proposes 10 members representing marine users, marine associations, civic groups, enviornmental groups and the public at large. We are told by the Trust proposers that the Trust concept can provide excellent management ability as evidenced by the Public Health Trust. However, we have not been given the specific names of any proposed members and, therefore, we are unable to comment on the quality of management proposed. There will be certain legal expenses incurred if the Waterfront Trust is accepted. Legislation will have to he passed authorizing the creation of the Trust. A management agreement must be drafted including provisions to insure complete compliance withthe proposed Bond Resolution. All of the above, including appointment of the Trustees, should be completed prior to the issuance of the Bonds. however, the City could continue to operate the Marina during an interim period when the enabling legislation would be passed and the formal Trust organized. We assume all legal expense is to be paid by the City. Any legal expenses could be offset by the potential revenue to the City. As is customary in revenue bond financing, a city -approved engineering firm would be selected to design, plan and supervise the marina construction. In addition, the firm would report at least semi-annually to the City on the Marina operations over the term of the Bonds. Additionally, William R. Hough F, Co. would review all financial audits to insure compliance with the Bond Resolution and Trust Indenture. A trustee acting on behalf of the bondholders would also review the Marina operation. The above independent supervision will assist the City in recognizing early changes needed to assure an operation that will serve the users of the Marina in a safe manner, while assuring the City of an efficient operation. Based upon our financial analysis, the proposal to create a "Miami Water- front Trust" offers the City the most attractive financial return at the lowest cost to the Marina users. However, there are questions regarding their management expertise to be settled. At the same time, Biscayne Recreational Development Company's proposal is the most attractive of the profit -motivated proposals up to the 10 and 13-cent rate schedule. At the 15 and I8-cent schedule, Dinner Key Marina, Inc. offers the most attractive return to the City. We might point out once again that the 10 and 13-cent rate offers little benefits to any profit -motivated proposer. MEOW- 1Ji!liam R. Houah & Co. Mt. Joseph Grassie September 11, 1978 Page Three William R. Hough & Co, recommends that the City have further discussions with the Biscayne Recreational Development Company as directed by the Commission toward the development of a management contract of relatively short periods. i m We further recommend that the City determine if it wishes to pay the cost of the legal and other expenses of the formation of a Trust and endure the mdelay which would ensue. If this is found to be satisfactory, the City II should enter into discussions with the proposers of the Trust leading toward a management contract. We realize this will be difficult since the II . Trust does not exist and there are a great many provisions which have to be dealt with. m II Since there is so little in writing of their plans, it would be helpful m for all concerned if they were requested to reduce to writing, in detail, what their plan is dealing with the legal powers they would seek as well m as realistic financial results. Only after all unresolved questions II regarding terms of the management contract have been resolved can the City make a final decision on a contract with any proposer. ME mm ME We further recommend that no major improvements be made to the Marina until completion of an engineering report. It is essential that William R. Hough & Co. and the engineering firm have representation at the negotiations with the proposer. Respectfully, WILLIAM R. HOUGH & CO. Raymond V. Condon Biscayne Dev. Dinner Key Inc. Ecclestone Mgt. Public Trust DINNlik KEY MARINA CASH PLOW PROJECTIONS MARINA OPERATORS 1979 - 1988 cents - 10 cents (1979-1981) 8 cents and 13 cents (1982-1988) Total Fee Paid to City 1979 - 1988 Total Revenue Received 10-Year Profit or Loss $1,700,000 $1,614,461 $ (85,539) 1,440,000 1,614,461 174,461 1,492,772 1,614,461 121,688 1,614,461 -0- N/A 10 cents and 13 cents Biscayne Dev. $1,785,965 $2,059,794 $ 273,829 Dinner Key Inc. 1,440,000 2,059,794 619,794 Ecclestone Mgt. 1,877,444 2,059,794 182,350 Public Trust 2,059,794 -0- N/A Biscayne Dev. Dinner Key Inc. Ecclestone Mgt. Public Trust Assumptions: 15 cents and 18 cents $2,287,224 2,510,021 2,270,595 5,493,182 $5,493,182 5,493,182 5,493,182 -0- $3,205,958 2,983,161 3,222,587 N/A 1. Marina operators would be' willing to operate:; the marina'at, the assumed rates. 2. All excess revenues would be pledged to the City's"General Fund by the Public Trust. • "...- FISCAL YEAR 1978 • EXISTING MARINA (14,565 Linear Feet) ,05 and .10 Rates EXIIIMT 2 :AiVeaaboard Slips ,- ,10 x 10,365 Linear Feet • • $t73,140 VOn4Ave-aboard Slips ,, ,05 x 4,200 Linear Feet 75,600 Sailboat Berths - $31.00 per month ., 20 Slips 7,440 Commercial Berths - $66,00 per month - 15.5 Slips 12,273 Transient Space - 20 per foot, per day , 5.0,_000, TOTAL PROJECTED REVENUE PROPOSED MARINA (22,500 Linear Feet) :05 and ,10 Rates ,Live -aboard Slips - .10 x 16,020 Von -Live -aboard Slips - .05 x 6,480 Sailboat Berths - Estimated Commercial Berths - Estimated - Transient Space - 20 per foot, per day TOTAL PROJECTED REVENUE PROPOSED MARINA (22,500 Linear Feet), .08 and .13 Rates Live -aboard Slips = .13 x 16,020 Non -Live -aboard Slips - .08 x 6,480 Sailboat Berths - Estimated Connercial Berths - Estimated Transient Space - 20 per foot, per day TOTAL PROJECTED REVENUE PROPOSED MARINA (22,500 Linear Feet) .10 and .13 Rates Live -aboard Slips - .13 x 16,020 Non -Live -aboard Slips - .10 x 6,480 Sailboat Berths - Estimated Commercial Berths - Estimated Transient Space -.20 per foot, per day TOTAL PROJECTED REVEYUE PROPOSED MARINA (22,500 Linear Feet) .15 and .18 Rates Live -aboard Slips - .16 x 16,020 Non -Live -aboard Slips - .15 x 6,460 Sailboat Berths - Estimated Commercial Berths - Estimated Transient Space -.20 per foot, per day TOTAL PROJECTED REVENUE - , • • • • ' - .,2A-77k':. • • 8518,456 $584,130 116,640 11,629 19,187 , 78,149, $81°0335 749,736 186,624 11,629 19,187 78,149 $1,045,325 749,736 233,280 11,629 19,187 78,149 $1,091,981 $1,038,096 349,920 11,629 19,187 78,149 $1,496,981 Assumntions: 1. The ratio of live -aboard versus non -live -aboard would remain constant. 2. Revenues attributable to sailboat and commercial berths and tran•. sient space would be maintained In the same proportion to gross revenues in the new marina as they were in the existing marina. M=1111 milnirow•e7.7 1 MEW • Marina RCVS. Mooring Revs, Int. on Reserve(i) TOTAL Revenues Operating Exp. Replace. Reserve(2) TOTAL Expenses Total Revenue Total Expenses Revenue Avail. for Debt Service Debt Service Surplus Revenue Coverage DINNER XEY MARTNA PROJECTED CASH FLOW ,05 and .10 Rates(1) .10 Rates_. 1979 1980 $518,450 48,000 170.,710 $737,160 $420,000 10,000 $430,000 $737,160 (430,000) $307, 160 (236, 313) $ 70,847 1. 30x $575,055 96,000 86,267 15 1 810,335 96,000 50,325 CXliIi3tt 3 Rate s-- . 19.82 (1) i983 1J84 1J;,6 $1,045,325 96,000 50,325 $757,342 $ 956,660 $1,191,650 $44 3,100 10,000 $453,100 $757,342 (453,100) $304,242 (236,313) $ 67,929 1.29x Biscayne Dev. $150,000 $150,000 Dinner Key Inc. -0- -0- Ecclestone Mgt. 50,000 54,200 Public Trust 70,847 67,929 EXPENSES $ 467,470 10,000 $ 477,470 $ 956,660 ( 477,470) $ 479,190 (406,000) $ 73,190 1. 1Sx REVENUE TO CITY $ 175,000 180,000 111,900 73,190 $ 493,180 10,0.00 $1,045,325 96,0004 50, 32;_ $1,191,650 $ 520,305 10,000 $5,226,625 460,6,A) 251,625 $5.958,250 $3,317,0GG 50,060 $ 503,180 $ 530,305 $3,367,066 $1,191,650 ( 503,160) $ 688,470 (406,000) $ 282,470 1.70x $1,191,650 S5,958,250 ( 530,305) j3,063,570 $ 661,345 $2 , 594, 6Su (406,000) ;2,030,0G6 $ 255,345 S 864,680 1.63x • 1.43x $ 175,000 $ 175,000 $ 875,000 180,000 180,000 900,000 182,396 182,396 911,880 282,470 255,345 864,680 Assumptions: 1. Marina rates would increase to eight cents non -live -aboard and thirteen cents live -aboard in 19S2. 2. Operating expenses would increase 5.5 per cent per annum. 3. The interest portion of debt service would be paid out of capitalized interest fund (bond proceeds) during construction period (two years). 4. Marina operators would pay minimum guarantee to the City regardless of avail- able revenues. 5. For analysis purposes, we have projected revenue for the years 1984-1988, holding the rates at eight cents and thirteen cents while expenses continued to increase at an annual rate of 5.5 per cent. Notes: 1. Interest on reserves was estimated at 6.50 per cent per annum during construction and included fifty per cent (50°,) of construction fund, fifty per cent (50%) of capitalized interest, debt service reserve and replacement reserve. The interest earning was estimated at 7.125',, after construction and included only the debt service reserve and replacement reserve. 2. Replacement reserve requirement is 2.5 per cent of the annual debt service payments. EIMMIV mommisf Marina Revs, Mooring Revs. Int. on Roserve(1) TOTAL Revenues Operating Exp. Replace. Reserve(2) TOTAL Expenses Total Revenue Total Expenses Revenue Avail. for Debt Service Debt Service Surplus Revenue Coverage Biscayne Dev. Dinner Key Inc. Ecclestone Mgt. Public Trust bINNER KEY MARINA PROJECTED CASH FLOW ,10 and .13 Rates 1J 1980 $51s,450 $715,580 48,000 96,000 170,,,710 86,287 $737,160 $420,000 10.000 $430,000 $737,160 (430,000) $307,160 (236,313) $ 70,847 1.30x $897,867 $443, 100 10,000 $453,100 $896,867 (453,100) $444,767 (236,313) $208,454 1.SSx 1981 $1,091,981 96,000 50,325 $1,238,306 1982 $1,091,981 96,000 50,325 $1,238,306 i;)i it t 4 1983 $1,091,981.. 96,000 50,325 $1,238,306 1984-1988 $5,459,905 480,000 251,625 $6,191 , 530 EXPENSES $ 467,470 $ 493,180 $ 520,305 $3,317,000 10,000 10,000 10,000 50,000 477,470 $ 503,180 $ 530,305 $3,367,000 $1,238,306 ( 477,470) $ 760,836 (406,000) $ 354,836 1. S7x REVENUE TO CIT $150,000 $150,000 $ 185,745 -0- -0- 180,000 76,148 109,360 211,492 70,847 208,454 354,836 $1,238,306 ( 503,180) $ 735,126 (406,000) $ 329,126 1. 81x $ 185,745 180,000 211,492 329,126 $1,238,306 ( 530,305) $ 708,001 (406,000) $ 302,001 $ 1.74x 185,745 180,000 211,492 302,001 $6,191,530 (3,367,000) $2,824,530 (2,030,000) $ 794,530 1.39x $ 928,730 900,000 1,057,460 794,530 Assumptions: 1. Revenue in 1979 was based on existing slips, rates and one hundred moorings. Revenue in 1980 was based on fifty per cent (50%) of new slips, increased rates, and two hundred moorings. 2. Marina rates would remain constant at ten cents and thirteen cents. 3. Operating expenses would increase at an annual rate of 5.50. Notes: 1. Interest on reserves was estimated at 6.50 per cent (6.50o) per annum during construction and included fifty per cent (50%) of construction fund, fifty per cent of capitalized interest, debt service reserve and replacement reserve. The interest earning was estimated at 7.125., after construction and included only the debt service reserve and replacement reserve. 2. Replacement reserve requirement is 2.5 per cent (2.50) of the annual debt service payments. Marina RcVs. Mooring ReVs. Int. on Resei'Ve(1) TOTAL Revenues Operating Exp, Replace. Reserve(2) TOTAL Expenses Total Revenue Total Expenses Revenue Avail. for Debt Service Debt Service Surplus Revenue Coverage I971 $518,450 $ 48,000 170,710 DINNER KE MARINA PROJECTED CASii PLOW .15 and .18 Rates 1.98Q 919,438 96,000 86,287 $737,160 $1,101,705 $420,000 $ 443,103 10,000 10,000 $430,000 $ 453,100 $737,160 1,101,765 (430, 000) (453,100) $307 , 160 $ 648,605 (236,513) (256,315) $ 70,847 $ 412,292 1.30x 2.74x Biscayne Dev. $150,000 $ Dinner Key Inc. -0- EccicstOne Mgt. 76,148 Public Trust 70,847 1981 $1,496,9 1 96,(600 50,523 S1,643,506 EXPENSES $ 467,470 10,000 $ 477,470 $1,645,306 ( 477,470) $1,165,836 (406, 000) $ 75 9 , 386 2.87x 195Z $1)496,98l 96,000 5Q,,325 'REVENUE TO CITY EXHIBIT 5 1983 $1,496,98 , 96,000, 50,325 $1,643,306 $1,643,306 .165,256 $ 246,496 -0- 379,693 170,511 252,992 412,292 759,386 $ 7 , 4 , 4 , 9 u5 251,625 S8,216,550 $ 493,180 $ 520,365 $3,317,000 10,000 10,000 50 , 000 $ 503,180 $ 530,305 :'1,643,306 ( 503,180) $1, 140,126 (406,000) $ 734,126 $ 216,496 367,063 252,992 734,126 $1,643,306 ( 530,305) $1, 113,061 (406,0G0) $ 707,001 $ 2. 74x 246,41)6 353,500 252,992 707,001 $3,367,003 $8,216,530 (3,367,000) $4,849,530 (2,030,66C, $2,819,530 2.39x $1,232,480 1,409, 765 1,264,960 2,819,530 Assumptions: 1. Revenue in 1979 was based on existing slip S, rates and one hundred Moorings. Revenue in 1980 was based on fifty per cent (50o) o new slips, increased rates, and two hundred moorings. 2. Marina rates would remain constant at tell cents and thirteen cents. 3. Operating expenses would increase at an annual rate of 5.5 0. Notes: 1. Interest on reserves was estimated ac 6.50 per cent (6.50u) per annum during construction anti included nifty per cent 50') o: construction fund, fifty per cent of capitalized interest, debt service reserve and replacement reserve. .he interest earning was estimated at 7. 12Jr u after construction and included only the debt service reserve and replacement reserve. 2. Replacement reserve requirement is 2.5 per cent (2.5 0) of the annual debt service payments. r IiINNtR kV MARINA SOURCES AND USES BOND PROCEEDS SOURCES Principal Amount of Bonds Less: Underwriters Discount (2.596) TOTAL Source USES Construction Cost Debt Service Reserve Renewal and Replacement Capitalized Interest Engineer's Report Issuance Expense TOTAL Uscs $4s2s,000 (113,125) $4,411,875 $3450,000 406,000 180,000 339,375 10,000 26,500 MIMI' 6 • " ' •