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HomeMy WebLinkAboutCover memoCITY OF MIAMI, FLORIDA INTER -OFFICE MEMORANDUM TO : FROM : The Honorab19.'Mayor and ;nbers oft e Gtv Comm iola anager RECOMMENDATION DATE: SUBJECT: REFERENCES: ENCLOSURES: FILE : Non -binding Memorandum of Understanding among the City, Miami - Dade County and the Florida Marlins, LP It is respectfully recommended that the City Commission (the "Commission") approve the accompanying resolution that authorizes the City Manager to execute a non -binding Memorandum of Understanding ("MOU") between the City of Miami, (the City"), Miami -Dade County (the "County") and the Florida Marlins, L.P. (the "Marlins) for the design, development, construction and operation of a new Marlins' ballpark (the "Project"). BACKGROUND On April 29`h, 2004, a Preliminary Term Sheet ("PTS"), providing a general outline of the deal structure for the Project was presented to, and approved by, the Commission. Since that time, the City, the County and the Marlins have been negotiating the general terms and conditions contained in this MOU. This non -binding MOU provides a greater level of detail than the PTS and modifies several points contained in the previous document. Project Costs The first significant change from the PTS is the increase in the Project costs from $325 million to $360 million. At the time the PTS was presented, there was a real concern that the development cost estimate and schedule were unrealistic. After further analysis by the Marlins and HOK, the Project Architect, the schedule was amended to reflect an April 2008 completion date and the Project budget was increased by $35 million. These changes address the concerns regarding cost overruns, as evidenced by the guarantees discussed below. This additional cost is funded 100% by an increase in the Team Rent contribution from the Marlins. 0 of 4©/ c'7- /27 The Guarantees The MOU reaffirms the Marlin's obligation to pay any and all Project costs for planning, designing, acquiring, constructing and equipment in excess of $360 million. As one of the definitive documents, the Marlins will execute a Development and Construction Cost Overrun Guaranty (the "Guaranty") in favor of the County and City. The collateral for the Guaranty is as follows: Contractual Guaranty — contractual agreement establishing the Marlins as the guarantor. 2. Subordinate Lien — The Marlins will provide the City and County a subordinate lien on the franchise, subordinate only to $50 million of senior debt. The City and County can foreclose and sell the franchise upon default of the Marlins to pay cost overruns. Major League Baseball ("MLB") $10 million Guaranty — The Marlins are required to secure a $10 million Guaranty from MLB to cover cost overruns. 4. Project Cost Overrun Review Process — A detailed process to monitor construction, identify cost overruns and ensure the Marlins' ability to fund cost overruns, if any. 5 Contractually Obligated Income- See discussion below. Land Acquisition A portion of the City's CDT contribution ($28 million) will fund the cost of the land and infrastructure improvement. These bonds will not be issued until all of the definitive documents are approved by all parties and executed. The definitive documents include the Lease, the Development Agreement, the Ballpark Management Agreement, the Non -Relocation Agreement, the Cost Overrun Guaranty, the Development Agreement Guaranty, the Ballpark Management Guaranty and all other necessary agreements. It is the intent of all the parties to acquire the land through negotiated purchase but the exercise of the County's eminent domain powers may be necessary. The Marlins have retained appraisers in order to expedite the process and are permitted to acquire property through negotiated purchase, including by options, at any time provided that the Marlins obtain the County's written approval of the purchase price prior to execution of a binding purchase contract or option. The Marlins will only be reimbursed for these land costs if the definitive agreements are approved and executed by all parties. The MOU reflects an increase in the land and infrastructure costs from $10 million to $28 million. The additional cost is funded by increases in the Professional Sports Franchise Facilities Tax and CDT contributions of $10 million and $8 million. Parking Facilities The MOU contemplates the development and construction of one or more parking structures on the Orange Bowl site that will provide a total of 2,800 parking spaces. This will be in addition to 2,000 existing surface parking spaces. The cost of the parking facilities is estimated at $32 million to be fully funded by parking revenues. An agreement for the construction and the operation of the parking will be negotiated between the City, the County, the Marlins and, if necessary, the Miami Parking Authority. Team Rent Bonds The County will issue $162 million of debt ( the "Team Rent Bonds") on behalf of the team which the Marlins will repay in the form of an annual rent payment. The amount of rent due by the Marlins shall be at all times equal to the annual debt service required for these bonds. The Marlins annual rent payment will be secured on a first lien basis by contractually obligated income ("COI") due to and collaterally assigned by the Marlins to the County to secure the Marlins' annual rent payments (the "Bond Rent") while the Team Rent Bonds are outstanding. The COI will consist of revenues under the Marlins' local television and radio broadcast agreements. The COI is projected to average a coverage ratio of at least 1.60x the annual Bond Rent payment and in no event will the COI pledged by the Marlins be less than 1.30x the annual Bond Rent payment in any bond year during the first thirty (30) years and 1.50x in any succeeding bond year while the Team Rent Bonds are outstanding. The Marlins shall provide substitute or additional COI in a form acceptable to the County, such as Naming Rights, so that the COI pledged by the Marlins shall at all times meet the coverage requirements. This COI, in particular the local television contract, is one of the strongest forms of local revenues the Marlins have and is relatively long-term compared to other types of revenues generated from the Project. The payment of these revenue sources is secured by contract and not based on attendance. Therefore, there is little risk of fluctuation. The COI will be held by a trustee in favor of the County and will be deposited directly to a lockbox. Deposits to the lockbox shall accumulate to ensure annual Bond Rent payments are secured in an amount required to make the corresponding debt service payments on the Team Rent Bonds forty-five (45) days prior to the date the Bond Rent payments are due. In addition, upon issuance of the Team Rent Bonds, proceeds of the bonds in an amount equal to fifty percent (50%) of the Bond Rent payment due in the first year shall be deposited into the lockbox and kept as a rental reserve (the "Rental Reserve"). Deposits to the lockbox shall ensure that on the first day of each bond year and throughout such bond year, the Rental Reserve on deposit in the lockbox is in an amount equal to fifty percent (50%) of the annual Bond Rent due in such bond year. If the Marlins elect to pledge COI of at least a 1.60x the annual Bond Rent payment, the Marlins shall thereafter only be required to provide a Rental Reserve of twenty-five percent (25%) of the Bond Rent due in each bond year. If the Marlins fail to maintain 1.60x coverage, the Rental Reserve requirement shall increase back to fifty percent (50%) and may only be reduced if the Marlins make the required payments to the lockbox on a timely basis for three consecutive years. Bond Rent payments shall be made out of the lockbox on the date on which the debt service payment with respect to the Team Rent Bonds is due. Any amounts in the lockbox in excess of the required amounts shall be distributed to the Marlins. The Rental Reserve shall be applied to the payment of the Marlins' Bond Rent to the extent there are any shortfalls in payments of the Bond Rent by the Marlins. No amounts on deposit in any debt service reserve (including amounts available under any reserve sureties) for the Team Rent Bonds shall be applied to the payment of principal and/or interest on the Team Rent Bonds unless the Bond Rent payments by the Marlins and amounts in the Rental Reserve are insufficient to satisfy any such payment. Other Provisions Name Change - Upon the request of the City and County, the Marlins shall change its name to the Miami Marlins prior to opening day of the new Project. • Non -Relocation - The City, the County, the Marlins and MLB shall negotiate a non - relocation agreement wherein the Marlins covenant not to relocate or agree to relocate or request from MLB the relocation of the Marlins. In addition, MLB shall agree, as a party to the non -relocation agreement, not to contract or relocate the Marlins while any City or County bonds used to fund the Project are outstanding. • Sales or Transfer — If the Marlins sell the franchise or the controlling interest in the Marlins, the Marlins shall pay a percentage of the net proceeds from such sale as set forth in the definitive documents. • Community Programs and affordable pricing - The Marlins shall establish to -be - determined community programs and become a proactive member of the immediate adjoining community. The Marlins shall provide certain attractive and meaningful programs designed to keep Major League Baseball affordable for families in South Florida, which may potentially include senior and children discount programs. • Capital Expenditure Reserve Fund — the City and County will each contribute $250,000 annually and the Marlins will contribute $500,000 annually to the Capex Reserve Fund. The amounts will increase each year by the increase in the Consumer Price Index or 3% whichever is less. • Termination - Any Party may terminate this MOU for any reason. Upon the termination of this MOU, no Party shall have any liability or obligation to any other Party. We have made great progress toward the realization of a Marlins Stadium in the City of Miami but much work lies ahead. Upon the approval of this MOU by the City Commission and the Board of County Commissioners, the parties will work diligently on securing the State contribution and on finalizing the definitive documents. As with all agreements of this nature, there are many details not covered in the MOU that must still be negotiated.