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American Shipper

Miami port tunnel hinges on city vote

Miami port tunnel hinges on city vote

The Miami City Commission this week will likely determine the fate of the proposed Port of Miami tunnel concession designed to give cargo transporters and cruise passengers a direct connection to the nearby interstate system without having to slog through congested downtown streets.

   The lawmaking body is to determine Dec. 13 whether to approve the city’s $50 million contribution to the $1 billion project, along with $5 million worth of real estate for the tunnel’s footprint on nearby Watson Island.

   Port officials view the tunnel under Biscayne Bay as a key piece of their effort to modernize infrastructure and significantly grow the cruise and container cargo businesses.

   The project is to be equally funded by the state and local governments. The state of Florida has already committed $462 million for the project. Miami-Dade County has $402.5 million on the table and the city is responsible for $50 million and the right-of-way.

   But the city has delayed action on the 1.1 mile, twin-tunnel project as commissioners have split about devoting money for the project instead of other redevelopment priorities like affordable housing. The Greater Miami Chamber of Commerce last month urged the city to help fund the tunnel, which would extend from Interstate 395 to the north side of the island port.

   The consortium picked to build and operate the tunnel extended a self-imposed deadline of Sept. 30 to give the city more time to pledge funds. Teaming on the project are Bouygues Travauz Publics, the largest construction firm in France, Australian investment and asset management fund Babcock & Brown, and Australian facilities management firm Transfield Services.

   Babcock & Brown last week announced that its infrastructure fund has agreed to acquire Jacksonville-based terminal operator ICS Logistics Inc., which has operations in the Southeast.

   The concessionaire — which is responsible for designing, building, financing, operating and maintaining the tunnel — also agreed to hold its price firm until mid-December. Construction is scheduled to begin no sooner than September 2008.

   The Port of Miami will contribute a minimum of $43.5 million to Miami-Dade County’s share of the project and has a maximum exposure of $143.5 million.

   The ultimate payment will depend on how much of the project’s $200 million reserve fund is tapped by cost overruns, according to port officials. The Florida Department of Transportation, which is managing the project, and the port are each responsible for covering half of the reserve fund.

   Construction, which will require the largest tunnel-boring machine ever used in the United States, is expected to take up to five years followed by a 30-year concession under which the consortium will receive installment payments from the public sector for operating the underwater road. That public-private model differs with many traditional road concession agreements under which government entities receive large upfront payments in exchange for granting the concessionaire tolling rights.

   The consortium will receive milestone payments during construction totaling $100 million, followed by a bullet payment of $350 million upon completion in 2013, Kevin Lynskey, the port’s business initiative manager, said. In addition to the construction reimbursement, the companies will receive annual “availability” payments — contingent on whether the tunnel is available for use at all required hours — which will begin at about $34 million in today’s dollars and escalate with inflation. The Miami Access Tunnel consortium had the lowest bid for “availability payments” among the three finalists.

   A decision on whether to toll the tunnel likely won’t happen until the total project costs are clear in about 2011, Lynskey said. A toll could be used to help the seaport contribute its portion of the costs depending on the extent of the reserve fund drawdown.

   Lynskey said the tunnel is estimated to carry about 25,000 vehicles per day, including 6,000 trucks that no longer have to wind through downtown streets to reach the lone bridge that now carries traffic to the port. The number of trucks serving the port is expected to double by 2030, according to a recent memo from the city manager. Avoiding downtown becomes even more critical for truckers as a massive high-rise condominium construction boom adds thousands of people and vehicles to the downtown mix in coming years.

   The tunnel also serves as a necessary alternative access route to the port because “if anything were to happen to the bridge you’ve got a trapped economy,” he said. ' Eric Kulisch

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