Project Overview
The Port of Miami Tunnel (POMT) will improve access to and from the Port of Miami, serving as a dedicated roadway connector linking the Port with the MacArthur Causeway and I-395. Currently the Port (located on an island in Biscayne Bay) is linked to the mainland only by the Port Bridge. The tunnel will improve access to the Port; improve traffic safety in downtown Miami by removing cargo trucks and cruise line buses from congested city streets; and facilitate ongoing and future development plans in and around downtown Miami. The project includes a tunnel under the Main Channel and related roadway work, including the widening of the MacArthur Causeway Bridge. Twin tubes, each 3,900 feet long and 41 feet in diameter, reach a depth of 120 feet below the water. The total capital cost of the project is $1.1 billion.
The Port of Miami Tunnel was developed as a public-private partnership (P3) between the Florida Department of Transportation (FDOT) and Miami Access Tunnel, LLC (MAT). Following a five-year construction period, MAT will operate the tunnel for 30 years in exchange for an annual availability payment. The POMT was the second availability payment P3 project to reach financial close in the United States.
Project History
The need for improved access to the Port of Miami has long been recognized. A Draft EIS issued in 1996 identified an immersed-tube tunnel as the preferred alternative, which raised serious concerns about potential environmental impacts to Biscayne Bay and the disruptions of operations at the Port during construction. These concerns led to the consideration of a bored tunnel alternative, which also led to the decision that the project could be cleared with an EA/FONSI; that document was issued by the Federal Highway Administration in November 2000.
Continued pre-construction activities through the early 2000’s were led by the Florida Turnpike Enterprise, based on the assumption that the new tunnel would be tolled. However, significant concerns about tolling were raised regarding its impact on the cruise ship industry and on the potential diversion of traffic onto the existing, untolled bridge to the Port, which could undermine the purpose of building the tunnel in the first place. As a result, the tolling of the tunnel as a revenue source was dropped from further consideration.
In 2003, the Florida legislature passed a bill establishing the Strategic Intermodal System (SIS). The purpose of the SIS program was to identify areas for investment in a defined network of “strategic” logistics and intermodal facilities. Funding for the SIS was provided as a dedicated share of real estate transfer fees known as “doc stamps”, an important revenue source in the state. The Port of Miami Tunnel was seen as a logical candidate to receive funding from this program.
The SIS program also required that each dollar of SIS funding would be matched at the local level on a 50-50 basis. This led to discussions among the state, Miami-Dade County (which owns the Port), and the City of Miami on how that local share could be provided, eventually securing funding commitments from all three parties.
Pre-construction analyses also identified the significant potential risk associated with the tunnel, as a bored tunnel of that size had never been constructed in the U.S. As a result, FDOT began to explore the possibility of developing the Port of Miami Tunnel as a P3 in order to mitigate the state’s risk exposure, drawing on Florida’s recently strengthened P3 enabling legislation. Discussions with potential bidders regarding this approach were also positive, leading FDOT to initiate procurement of the project as a DBFOM concession in February 2006.
The concession for the tunnel was structured under an availability payment model, under which the concessionaire would receive ongoing payments over the life of the concession covering capital and maintenance costs, as well as milestone payments paid upon the completion of construction. FDOT also established a $180 million geotechnical risk contingency fund to cover any unforeseen circumstances that might be encountered during construction.
In May 2007, FDOT announced its intent to award the concession to MAT, comprised of the Australian investment firm Babcock and Brown and the French construction firm Bouyges, a subsidiary of which would serve as the lead contractor on the project. Once funding commitments from the state, county, and city partners were finalized, a formal award was made in February 2008. However, financing for the project soon became caught up in the market turmoil of that year, which would see the failure of both Babcock and Brown and Lehman Brothers, its underwriter for the project. In late 2008, Meridiam replaced Babcock and Brown as the primary equity partner in the concession.
During this period, it was also recognized that long-term credit assistance from TIFIA would be crucial in financing the project. In order to become eligible for this assistance, however the project had to go through a process of “federalization” to ensure that all Federal requirements (such as NEPA, planning, Buy America, and Davis-Bacon) would be met, since FDOT had previously planned to finance the project using state and local revenue sources exclusively and thus had not engaged FHWA in the necessary reviews prior to that time. This process was initiated in mid-2008 and was completed shortly before the closing of the TIFIA loan for the project in October 2009.
Project Financing and Delivery
MAT’s financing sources for the project include a $341 million TIFIA loan; $341.5 million in short-term commercial bank debt (provided by a “club” of 10 banks); and $80 million in equity from the partners in the concession. The TIFIA loan is backed by the availability payments due to MAT. Under the concession agreement, FDOT was also to provide MAT a total of $100 million in milestone payments during the construction period between 2010 and 2013, and will provide a $350 million final acceptance payment upon construction completion. This will be followed by 30 years of availability payments during the operating period totaling $32.479 million annually (in 2009$), with adjustments for inflation. Deductions will be made from this amount if MAT’s operation of the facility does not meet prescribed performance standards.
Total capital and operating costs over the life of the concession through 2045 are projected to be $2.65 billion (in year-of-expenditure dollars). Funding for these lifetime expenditures is to come from $221 million in Federal-aid highway funds; $1.89 billion in State funds; and $528 million in county and city funds.