THE PORT EVERGLADES DEPARTMENT RECOMMENDS APPROVAL.
This item supports the Broward County Board of County Commissioners' (Board) Value of "Ensuring economic opportunities for Broward’s diverse population and businesses" and Goal to "Increase the economic strength and impact of revenue-generating County enterprises balancing economic, environmental, and community needs."
Royal Caribbean Cruises, Ltd. ("RCL") has been homeporting cruise ships at Port Everglades operating under the Royal Caribbean International and Celebrity Cruises brands for many years through a series of agreements with Broward County dating back to 1999. On June 6, 2017 (Item No. 61), the Board approved a Passenger Cruise Terminal and Berth User Agreement ("User Agreement") with RCL which commenced on January 1, 2018 and runs through September 30, 2026. The User Agreement provides RCL with two additional option periods, The first option is for a four year period ending September 30, 2030. The second option is for a five year period that expires on September 30, 2035. The minimum annual guaranteed ("MAG") revenue over the course of the initial term of the Agreement is approximately $182,334,643.
On June 6, 2017 (Item No. 61), the Board also approved a Construction Agency Services Agreement for Cruise Terminal 25 for certain improvements to the terminal for the new Celebrity Edge Class vessel which RCL committed to homeporting at Port Everglades. The estimated guaranteed maximum price ("EGMP") for construction of the terminal was $89,615,312, with the overall project price approved by the Board, including contingencies, of $114,531,707. The overall project price included an optional service in the amount of $6,748,418 for design and construction modifications to the Port Everglades Midport parking garage which was not exercised.
Construction of the terminal is progressing and is on track to be completed by October 2018 in order to accommodate the arrival of the Celebrity Edge in November 2018. RCL negotiated a reconciled guaranteed maximum price ("RGMP") for the construction agreement with Moss & Associates, LLC, the Managing General Contractor ("MGC"), on April 19-20, 2018, for $98,924,869. The increase between the EGMP and RGMP, as well as cost increases in other project elements, has resulted in an increase in the total project price to $121,520,937. The new total project price and project budget is $6,989,230 more than what was approved by the Board on June 6, 2017. However, the new project price and project budget also includes the reallocation of the funds budgeted for the Port Everglades Midport parking garage improvements of $6,748,418 to the renovation of Cruise Terminal 25. The increase in project price and project budget is attributable to the final subcontractor bids to the MGC being higher than the original estimates used for the EGMP, the addition of a baggage conveyor system for the terminal, MediaMesh signage on the outside of the terminal to allow for variable displays of graphics depending on terminal use, additional costs for the passenger loading bridges, additional insurance costs, and additional funding for the estimated costs of renovations required in Building 28 at the Port to provide additional operational space needed to meet U.S. Customs and Border Protection (CBP) office and information technology requirements.
A Sunshined negotiation meeting was held on May 3, 2018 which included representatives from RCL, Port Everglades and the County Attorney’s Office to negotiate terms to address the increase in project price and project budget. Negotiations resulted in the following business terms:
- RCL agreed to share a portion of the cost increase totaling $6,501,942 by amending the Port Everglades Passenger Cruise Terminal and Berth User Agreement to include a Capital Cost Recovery Charge (CCRC) of no less than $.74 per passenger movement for RCL’s multi-day cruise passengers embarking, disembarking and in-transit at the port beginning January 1, 2020 through September 30, 2026, or until the RCL cost liability is fully paid, whichever occurs first. This CCRC is based on RCL's current Minimum Annual Guaranteed (MAG) passenger throughput of 1,300,000 passengers per contract year.
- The additional capital cost of $6,501,942 assumed by RCL to be paid to County through the CCRC includes actual costs associated with the baggage conveyor system (estimated at $1,228,092), incremental costs associated with the exterior MediaMesh (estimated at $1,238,144) over and above the $400,000 originally budgeted in the EGMP, and a 50% share of the increased costs relating to awarding of subcontractor contracts by the MGC (in an amount not to exceed $4,035,706).
- The Passenger Cruise Terminal and Berth User Agreement provides that any increases in the final costs of the baggage conveyor system or exterior MediaMesh above the estimates will be 100% the responsibility of RCL and added to the additional capital cost subject to the CCRC. Reductions in the final cost of these project elements from the estimates will be 100% deducted from the additional capital costs subject to the CCRC. Savings in other cost elements making up the RGMP, as determined through a project audit, will be deducted from the additional capital costs subject to the CCRC at 50% of the amount saved, up to a maximum of $4,035,706.
- In addition to the authority granted to the Port Everglades Chief Executive/Port Director by the Board on June 6, 2017 to approve change orders to the MGC agreement that do not increase the RGMP by a cumulative total amount of $500,000, the amendment to the Construction Agency Agreement allows increases to the overall project price and project budget for cost increases associated with the baggage conveyor system and/or exterior MediaMesh and subject to the CCRC without Board approval.
- The County's Director of Purchasing may approve any increases in the project price up to $100,000 for project costs that are not covered by the CCRC and paid by the County. Increases in the project price above $100,000 to be paid by the County and not subject to the CCRC will require Board approval.
- The County will cover 100% of the additional costs of the passenger loading bridges (estimated at $200,000), $250,000 for additional insurance costs, and an estimated $2,375,000 for work in Building 28 at the Port for additional operational space and information technology needed to meet CBP requirements.
- The RGMP also includes an allowance for furniture and fixtures to be procured and installed by the MGC. RCL has indicated that they may want to procure the furniture directly. If RCL procures the furniture, a deductive change order to cover the cost of furniture in an amount not to exceed $1,000,000 will be executed by RCL and the MGC to reduce the RGMP accordingly, and RCL will be reimbursed directly by the County for the cost of furniture.
- The Amendment to the User Agreement includes a new provision for a project audit to be performed by an auditor selected through mutual agreement between RCL and the County, with the cost of the audit shared equally by both parties. The final audited additional capital cost and CCRC will be calculated based on the results of the audit, and will be adjusted based on the final cost of the baggage conveyor system and exterior MediaMesh.
- If the final audited project price reflects that the reconciled direct construction costs, a part of the RGMP provided in the Construction Management Agreement between RCL and the MGC, was exceeded by five percent or more, then the County and RCL agree to meet to discuss in good faith a further adjustment to the additional capital cost subject to the CCRC for the allocation of payments for the amount of the increase.
- The interior and exterior of Cruise Terminal 25 will include signage for the Celebrity Cruises brand. The design team is working on a design solution that will allow for the branding to be covered when a non-RCL ship is assigned to the terminal.
Since the terms of the Amendments are still being finalized, staff recommends that the Board approve both Amendments in substantial final form, and delegate authority to the County Administrator to execute both Amendments when complete. Any substantial changes from the current form will result in the Amendments being brought back to the Board for approval. Any non-substantial changes will be subject to review and approval by the Office of the County Attorney prior to execution by the County Administrator.
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