THE PORT EVERGLADES DEPARTMENT RECOMMENDS APPROVAL OF THE ABOVE MOTION.
This agenda item supports the Broward County Board of County Commissioners (Board) goal of sustaining the viability of Port Everglades.
Mediterranean Shipping Company, S.A. (MSC) operates a leased 39.18 acre marine terminal in Port Everglades under a Marine Terminal Lease and Operating Agreement (Agreement) approved by the Board on June 22, 2004 (Item No. PH-14) with subsequent amendments approved by the Board on December 11, 2007 (Item No. PH-9), February 9, 2010 (Item No. PH-1), and January 10, 2012 (Item No. PH-5).
On October 22, 2013, MSC advised the Port Everglades Chief Executive/Port Director of their intent to exercise their option to negotiate the terms for the next five or ten year option period as provided for in the original Agreement. As required by the Agreement, two appraisals of the value of the leasehold were conducted at the Port's direction and presented to MSC. MSC conducted their own appraisal and presented it to the Port Director on November 27, 2013. Since the separate appraisals resulted in different land values, a Dispute Appraisal was conducted and presented to all parties on January 10, 2014. The appraisal was used to adjust the land rent component of the lease retroactive to January 1, 2014.
Sunshined negotiations meetings were conducted with MSC on January 7, 2014, February 10, 2014, and April 4, 2014 to discuss the terms and conditions that would apply to the option period, and resulted in the Fourth Amendment to the Marine Terminal Lease and Operating Agreement (Exhibit 2). The Amendment has been signed by an authorized representative of the shipping line. The primary business points of the Fourth Amendment are as follows:
- The option term will be for ten years effective November 1, 2014 through October 31, 2024 with both five-year options exercised, and the current ten-year term extended for nine days through the end of October 2014.
- The minimum container shipmoves that are the basis of the Minimum Guaranteed Payment (MGP) will increase from the current 70,000 shipmoves to 75,000 shipmoves during the option term.
- The MGP for the option term will be based on an "all in" bundled rate (the Bundled Rate) that includes a component for land rent and a component for the shipmove rate. The current Agreement has separate rates for each component.
- The Bundled Rate for the first two years of the option term is $62.50 per container shipmove. In years three through ten of the option term, the Bundled Rate will increase annually by the greater of the percentage change in the CPI-U or 3%. The initial MGP is $4,687,500 based on the initial Bundled Rate times 75,000 container shipmoves. The $62.50 Bundled Rate and 75,000 container shipmoves will also be applied retroactively to January 1, 2014 for the remaining term of the current Agreement.
- MSC will receive a discount of $10.00 off the Bundled Rate on the first 10,000 shipmoves that exceed the 75,000 minimum guaranteed, and a $20.00 discount off shipmoves in excess of 85,000.
- MSC will be provided a capital improvement credit of up to $600,000 for documented expenditures associated with the the installation of permanent reefer plug improvements on the leasehold completed in the first three years of the option term, subject to review and approval by the Director of the Seaport Engineering and Construction Division and Port Everglades Chief Executive/Port Director.
MSC has completed nine years and seven months of operation in Port Everglades and has been fiscally responsible and remains current with all financial obligations. MSC is the second largest container cargo ocean carrier in the world, and are on track to exceed their previous high of 84,800 container shipmoves for the last contract year of the current Agreement. MSC recently formed a service alliance with Maersk and CMA-CGM, representing the three largest container carriers in the world, which is projected to improve economies of scale and customer service and reduce costs for its members. This new service agreement which includes MSC creates additional opportunities for growth of the Port's containerized cargo business.
The economic impact of MSC’s minimum 75,000 container shipmoves (equaling approximately 132,750 Twenty-foot Equivalent Units (TEUs) for ocean containers) in annual container cargo throughput at Port Everglades is estimated to support 1,056 direct, induced, and indirect jobs for area residents. Personal income associated with all supported jobs totals $71.6 million; local businesses will receive $80 million of business service revenue from providing services for the ocean carrier activities; and the cargo activity will generate an estimated $6.7 million of state and local sales tax revenue annually. This economic impact is estimated based on an economic model developed by Martin Associates specifically for Port Everglades cargo activity (see Exhibit 3).
The Amendment has been reviewed by the Risk Management Division and approved as to form by the Office of the County Attorney.
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The minimum guaranteed revenue generated in the first option year of the Agreement will be $4,687,500, and the estimated value of this Amendment is $59,101,500 over the ten-year option period at guaranteed activity levels. Total estimated revenues at the guaranteed activity levels over the ten-year option period will result in a 43% increase over such revenues from the initial ten-year agreement term. |