Miami-Dade works on rescue as Frost science museum runs short of construction money

The Frost Museum of Science has run out of cash to finish construction of its new downtown Miami home just 10 months before the scheduled grand opening, sending Miami-Dade officials into a tense scramble to design a rescue plan that won’t cost taxpayers any more than the county has already agreed to lay out for the ambitious project.

The issue, according to the office of Miami-Dade Mayor Carlos Gimenez: The county has already spent virtually all the $160 million it set aside for construction, but the museum has been unable to secure a construction loan to complete the $275 million job because its private fundraising has fallen significantly short of its goals.

Though work has not been interrupted, it means that right now the museum lacks the cash to make a monthly payment of $5 million to $7 million due to its general contractor, Skanska, by the end of January, said Michael Spring, a senior advisor to the mayor who oversees parks and cultural affairs.

The Gimenez administration has devised what Spring described as a politically palatable plan that would convert a promised annual operating subsidy to the museum of $4 million, money that would be drawn from hotel and convention tax revenue, into an upfront payment of $45 million for construction. In exchange, the museum must agree not to ask for operating help for 20 years and to restructure its board of trustees to include seats for county and city of Miami administrators and elected officials. The plan would require the Miami-Dade County Commission’s approval.

The $45 million from the county, added to the $42 million in secured pledges to the Frost that are in hand so far, would be enough to finish the museum and its major exhibition galleries and components, which include a new planetarium and an aquarium, by the scheduled opening, county and museum officials said Tuesday, though exhibits and features on terraces and the building’s roof would be left undone, at least for now.

The alternative, Spring said, would be to halt construction at a point where the building is nearly three-quarters done, a step that would put the new museum’s future in jeopardy.

“The science museum is a community institution. No one wants to see it fail,” Spring said. “It would be very difficult to raise money for a building whose construction has stopped. This is a way to make sure the investment we’ve put in already does not go to naught.”

The Frost’s president and CEO, Gillian Thomas, called the county’s approach “very helpful” and said that major museum donors, including Patricia and Phillip Frost, support the idea, though details of the deal are still being worked out.

“We’re working really hard on the fundraising,” she said. “The absolute priority now is to get to opening with a lovely building and exhibits. Once the museum is open and successful it will attract more funders.”

The project would need an additional $10 million to $15 million to fully build out the high-tech, environmentally friendly museum — which has been called the most complex construction job in Miami history — as planned. The museum is now working on nailing down an additional $10 million in donations already pledged, Thomas and Spring said.

The museum was renamed after the Frosts, the principal donors, who made pledges totaling $45 million. Other major donors include the Knight Foundation, which has contributed $10 million, and the co-chairs of its board of trustees, Daniel and Trish Bell, who have pledged $7 million.

Because county officials have said it will take up to three months to get Gimenez’s plan to the commission for a final vote, major museum donors have agreed to advance their pledges to cover construction costs until then, Spring and museum officials said. The cash the museum had raised previously, around $35 million, was already spent on development costs, including design and some construction, Spring said.

Two commissioners briefed by the administration on the museum’s travails said they were surprised and none too pleased by the news.

“I had no idea this was coming,” said Commissioner Dennis Moss. “Everybody is trying to get their arms around what the issues are. … We're going to have that conversation to try and figure out what went wrong, and how do we fix this mess?”

Commissioner Bruno Barreiro questioned why the county would have to bail out a private institution.

“Everyone criticizes the county that we have problems,” he said. “But we were not part of this procurement process. This was all done by the museum's board. And here they're calling us to help them get out of a jam.”

It’s not the first jam for the museum project. In mid-2014, the museum fired its original general contractor, Suffolk Construction, amid construction delays and reported concerns over the quality of its work. Suffolk and the museum are now embroiled in litigation. And though Thomas at the time downplayed the impact of the change in contractors, Spring said it wound up costing around $25 million extra because some work had to be redone and Skanska required a higher payment because of the risk of taking over a project begun by another firm.

Spring said county administrators also were surprised to learn of the museum’s financial problems last fall. Museum officials had previously assured them that they had hired a financial advisor and were close to securing a loan to finish construction. But in October, they told the county they were having trouble, then came back and said financing had fallen apart because the banks felt the $42 million in pledges was insufficient to serve as collateral, according to Spring.

Gimenez was “angry” and sent off museum officials to solve the problem without county help, Spring said. Spring and other county officials have publicly said in the past, including at the time the museum fired Suffolk, that they would not provide the museum any construction money beyond the promised $160 million from a bond program approved by voters.

But administrators began working on the rescue plan after the museum representatives were unable to get financing and stood on the verge of stopping work on the project, he said.

“We couldn’t allow that,” Spring said.

Even if commissioners approve Gimenez’s plan, the museum would still be in a tight financial spot. All told, Spring said, the museum was supposed to raise $140 million on its own, enough not just to complete construction but also, Thomas said, for ancillary moving and transitional costs, for a total project cost of $300 million.

Raising additional money for yearly operations could complicate the job. Few museums and cultural groups fully pay their own way.

Thomas is unruffled, however. She said several potential donors approached by the museum have said they would prefer to pay for exhibitions and programs once the museum is up and running.

“Quite a number have said, ‘Come back to us when you’re open,’” she said.

The museum also is seeking donors to purchase naming rights for the aquarium, priced at $12 million, and two other big exhibits, its innovation and exploration centers, she said.

Miami Herald staff writer Douglas Hanks contributed to this story.

This story was originally published January 12, 2016 at 10:54 PM with the headline "Miami-Dade works on rescue as Frost science museum runs short of construction money."