County should ditch the Airport City deal with Odebrecht
08/23/2014 7:00 PM
08/23/2014 10:15 PM
Many major metropolitan areas are in a bind. Their infrastructure is badly in need of repair or replacement, and the resources to fund these projects are scarce.
Miami-Dade County is no exception. Estimates suggest billions of dollars are needed to modernize county infrastructure and facilities if Miami-Dade is to remain competitive in attracting lucrative businesses, entrepreneurs and visitors.
The last few budget debates brought out the glaring facts that local governments can’t afford to modernize and taxpayers can’t afford or accept tax increases to meet the need. Alternative approaches to funding government projects, such as public-private partnerships (PPP), if properly structured, can be a win-win for both the public and private sectors, though they sometimes don’t work.
Airport City seems to be one such example. It is a proposal under consideration by county officials to enhance and expand parts of Miami International Airport with Odebrecht USA. The partnership has led Miami-Dade Aviation Department officials to conclude that the county would be best served by financing airport projects themselves than by going through with the Odebrecht deal.
First proposed in 2007, Airport City is envisioned as a lucrative solution to financing the $6.4-billion debt after disastrous cost overruns in the airport capital-improvement program. The idea included a grandiose project to develop 33 acres surrounding the airport that would have generated non-aviation business for MDAD that included a new hotel and an office/business park to be developed with private-sector funding. It was thought that the Odebrecht deal would generate almost $500 million for the county’s coffers over 50 years.
Aviation Director Emilio Gonzalez wanted to look at the deal from a different perspective: What would the numbers look like if the county financed the deal itself? The surprising answer is that Miami-Dade is best off developing the property without Odebrecht.
In a three-page memo to Miami-Dade Mayor Carlos Gimenez, Gonzalez cites unprecedented growth in business at the airport, with more than 40 million passengers and annual air cargo in the range of almost 3 million tons. Those numbers are expected to increase. The ability to self-finance would increase as well.
More important, Gonzalez says that the county actually loses money on the deal. “Projected returns on the self-financing model vs. the PPIP (Public-Private Investor Partnership) model show that the county actually loses money on the hotel with the PPIP option during the life of the agreement after subtracting the MDAD contribution of parking revenues,” he writes in a county memo, adding that in more than 50 years, the return on investment for the county self-financing the deal is $1 billion versus $298.5 million with Odebrecht.
The advantage toward the developer is lopsided in comparison to the benefit for taxpayers. Then this: The Odebrecht deal requires a 55-year noncompete clause that forbids MDAD from building a new hotel on public property even if it’s needed. This is bad policy for the county’s economic linchpin.
Thrown into this debate within the community are international political concerns regarding business between Odebrecht’s Brazilian parent company and Cuba. That’s a different argument to be played out in a different arena. This isn’t about ideology, this is about responsible financing.
Mayor Gimenez is a numbers man. Based on Gonzalez’s analysis, the numbers on the Odebrecht’s deal don’t add up to being in the best interest of the community. Instead, what’s good for Odebrecht is only good for Odebrecht. Miami-Dade should take advantage of the airport’s solid footing and foot the bill on its own.