THE PORT EVERGLADES DEPARTMENT RECOMMENDS APPROVAL.
These actions support the Broward County Board of County Commissioners Value of "Ensuring economic opportunities for all people and businesses in Broward" and Goal to "Increase the economic strength and impact of the revenue-generating County enterprises balancing economic, environmental, and community needs."
Royal Caribbean Cruises, Ltd. (RCL), has been a long time user of Port Everglades as a homeport for their Royal Caribbean International and Celebrity Cruise Line brands. On December 4, 2007 (Item No. 45), the Board approved a Passenger Cruise Terminal and Berth User Agreement with RCL for an initial term of ten years commencing January 1, 2008 and expiring December 31, 2017, with two five-year option periods. The major elements of the Agreement required RCL to guarantee a minimum number of cruise passengers each year, with a bundled Port User Charge (PUC) for each embarking and debarking passenger that was adjusted annually on the anniversary date. In addition, RCL committed to reimbursing the County for the majority of the costs associated with enlarging and modernizing Cruise Terminal No. 18 in advance of the arrival of the first Oasis-Class cruise ship late in 2009.
On October 28, 2008 (Item No. 53), the Board approved the First Amendment to the Agreement. Significant elements contained in the First Amendment included RCL assuming responsibility for reimbursement to the County of additional costs over those projected in the original Agreement for construction of Cruise Terminal No. 18. RCL also committed to increasing the number of guaranteed passengers and increasing the PUC for each passenger movement.
On December 13, 2011 (Item No. 67), the Board approved the Second Amendment to the Agreement. The significant element of the Second Amendment was a change from RCL guaranteeing a minimum number of passengers each year to guaranteeing a minimum annual revenue.
In June 2014, RCL notified Port staff of their preference to negotiate a new agreement that would be effective immediately following the expiration of the initial ten year term in lieu of exercising the first option term. A series of fact finding meetings were held between RCL and Port staff through the remainder of 2014 and into early 2015. The first Sunshined negotiation meeting was held on March 5, 2015, followed by additional Sunshined negotiations on November 13, 2015, December 21, 2015, and January 11, 2016. With negotiations not yet concluded, the senior member of the RCL negotiating team left employment with RCL. As a result, negotiations were suspended, and were followed by a series of additional fact finding meetings during the remainder of 2016.
In February 2017, RCL staff requested that negotiations resume. A Sunshined negotiation meeting was held on February 27, 2017 to discuss the framework of a new agreement between Broward County and RCL. For business reasons, it was determined that completion of a Memorandum of Understanding (MOU) with general business terms, followed by the negotiations of definitive agreements with additional detail on the terms and conditions, would be the most efficient approach to get a new agreement in place prior to the expiration of the existing agreement.
The MOU was approved by the Board on March 14, 2017 (Item No. 78). Sunshined negotiations commenced on April 18, 2017, with additional meetings held April 27, May 15, and May 16, 2017, to negotiate an agreement. Negotiations have been completed, resulting in a new Port Everglades Passenger Cruise Terminal and Berth User Agreement (Exhibit 2) and separate Agreement for Construction Agency Services for Cruise Passenger Terminal 25 Improvements at Port Everglades (Exhibit 4).
Significant elements of the Passenger Cruise Terminal and Berth User Agreement include:
- Establishes an Agreement commencement date of January 1, 2018, which coincides with the expiration date of the current Agreement on December 31, 2017. The initial term of the new Agreement expires on September 30, 2026, with RCL having the option to extend the Agreement for a four year period ending September 30, 2030, followed by a five year option that expires on September 30, 2035;
- RCL commits to homeporting their newest Celebrity Edge class of ships at Port Everglades to operate from a renovated Cruise Terminal 25;
- RCL will continue to be provided preferential berthing rights to Cruise Terminals Nos. 18 and 25 seven days per week, with the addition of preferential berthing rights at Cruise Terminal No. 29 four days per week (Friday-Monday). RCL will also have a right of first refusal to add the remaining days of the week as a preferential berth after negotiation of mutually agreeable terms if another cruise line expresses an interest in obtaining preferential rights to those days;
- RCL will pay a Port User Charge (PUC) of $14 per passenger movement during the first year of the Agreement, with an escalator each following year that is the lesser of the average percentage increase in the published Tariff rates for ship dockage and passenger wharfage, or 3.5%. The PUC covers all charges for passenger wharfage, dockage, harbormaster, line handling, potable water, water hookup, cruise terminal overtime, cruise terminal electricity, and cruise terminal security provided by sworn law enforcement. RCL is responsible for separately paying all other fees provided for in the Tariff;
- RCL will be financially liable for a Minimum Annual Guaranteed (MAG) payment based upon 1,300,000 billable passenger movements in each year of the first eight years of the initial term of the new Agreement. The MAG for the last nine months if the Agreement is based on a total of 954,360 passengers. The reduction in passenger movement guarantees from the current agreement has resulted from the dynamics of the cruise industry worldwide, and RCL's commitment to other ports. Guaranteed revenue based on the MAG over the course of the initial term of the Agreement is estimated at approximately $182,334,643;
- RCL will have the ability to adjust the PUC no more than three times per contract year either upward or downward to account for variations in passenger volumes, with a minimum PUC floor established for each contract year based on the PUC for the previous year;
- Any RCL payments that exceed the MAG in a contract year will be held in a Reconciliation Account to be available to offset shortfalls in a future year(s). The total amount of funds held in the Reconciliation Account for the first five years of the Agreement and for the remaining three years, nine months shall not exceed $3,500,000. Any surplus funds exceeding the cap are retained by the Port. RCL may defer payment of shortfall amounts that are not offset by the Reconciliation Account for up to eighteen months with a maximum amount of $3,500,000 being deferred;
- Since RCL's ship deployments already scheduled for 2018 will result in passenger movements exceeding the 1,300,000 minimum, no funds paid above the MAG will be deposited into the Reconciliation Account in the first year of the Agreement. RCL is also not responsible for any shortfall in the first year of the Agreement;
- To promote and encourage passenger movement growth above the MAG amount, a volume incentive program has been established that provides incentive payments to RCL based on achieving levels of billable passenger movements in any contract year above the MAG in tiers of 50,000 passenger movements per contract year. Since RCL's ship deployments already scheduled for 2018 will result in passenger movements exceeding the 1,300,000 minimum, no incentives will be paid for the first year of the Agreement.
To meet the commitment to homeport the new Celebrity Cruise Line Edge Class of vessels beginning in December 2018, Cruise Terminal 25 must undergo major improvements to accommodate the new class of ships and number of passengers. The Board has previously approved a deliberately phased agreement with Bermello, Ajamil and Partners on June 23, 2015 (Item No. 56), for Design and Engineering Services for the renovation of Terminal 25. A Programming Study had been completed, and on May 23, 2017 (Item No. 46), the Board approved an amendment to that agreement for design and construction support services.
The construction project will consist of the expansion and renovation of Terminal 25 located in the Midport area of Port Everglades, the demolition of existing Terminals 22/24 and Building 21a, along with modifications to Terminal 21 which will allow for the expansion of the ground transportation area north of existing Terminal 25 (see Exhibit 5). The expansion of the existing Terminal 25 to the north will add approximately 25,000 square feet to the ground floor. A portion of the roof of the existing terminal will be removed in order to add another 19,000 square feet to the existing second floor. A new US Customs and Border Protection (CBP) Federal Inspection Service facility will be provided in accordance with the current CBP Cruise Terminal Design Standards. The project will also include any required new, or upgrades to, the marine infrastructure along the berth such bollards and fendering systems. Two new FMT Mobile Elevated Gangways will be procured separately by the County through the existing County sole source/brand Board authorization. Depending upon the final needs for the ground transportation area (GTA) for Terminal 25 and the adjacent Cruise Terminal 21, the agreement also provides for optional improvements to the Midport Garage to allow for added GTA on the ground floor of the garage.
Because of the required completion date of the terminal improvements to accommodate the arrival of the Celebrity Edge in December 2018 on its inaugural U.S. voyage, staff recommends that RCL be engaged through a Construction Agency Agreement to conduct a competitive RFP process to advertise and select a qualified contractor and award a Managing General Contractor agreement for the construction of the terminal improvements, and the administration of those construction activities. This recommendation was arrived at after extensive analysis by County staff of the "best case" timeline to conduct a procurement under the provisions of the Broward County Procurement Code compared to a procurement following RCL procurement practices but including County procurement requirements. This requires a waiver of the Broward County Procurement Code.
Significant elements of the Construction Agency Agreement for Cruise Passenger Terminal 25 include:
- RCL will be the Construction Agent on behalf of the County to conduct a competitive RFP process to advertise and select a qualified contractor and award a Managing General Contractor agreement for the construction of the terminal improvements, and oversee project construction for an amount not to exceed $95,988,731, including $19,197,746 for contingency and $6,373,418 for optional services for the Midport Parking Garage GTA if that option is exercised;
- RCL will receive a lump sum fee of $1,500,000 paid in equal monthly payments over the 18 month term of the construction for outside legal counsel, owners representative, and other internal costs associated with managing the project, and a not-to-exceed amount of up to $250,000 for outside legal counsel's costs for litigation disputes related to the project or recovery under warranty claims or insurance;
- The agreement provides for a project substantial completion date of October 31, 2018, with final completion on December 31, 2018. The Managing General Contractor will be liable for liquidated damages of not less than $5,000 per day payable to the County for failing to meet the substantial completion date, and not less than $1,500 per day payable to the County for failing to meet the final completion date;
- RCL will competitively procure and contract with a Construction Manager at Risk (CMR) using an Agreement Form approved by the County. The competitive procurement process includes public advertisement of the RFP in a form approved by the County on BidSync and by RCL though an electronic bidding system; a cone of silence in effect for Broward County and RCL employees responsible for reviewing bid submittals or recommending contract award; a selection committee (SC) comprised of two representatives from Broward County and two from RCL, with the Port Everglades Chief Executive/Port Director serving as a tiebreaker if needed; a requirement that all SC meetings and negotiations with the top ranked vendor be held in a public building in Broward County with sunshined notice for public attendance; specific responsiveness and responsibility evaluation criteria; a 28% CBE goal; and compliance with the County's Prevailing Wage Ordinance and Workforce Investment Program. The agreement also requires the selected managing general contractor to competitively bid 100% of the project work.;
- Port staff will participate in the negotiation of and approve all change orders for the project;
- The County will pay the Managing General Contractor directly based on monthly Applications for Payment submitted and reviewed by RCL and County staff in accordance with the Florida Prompt Payment Act;
- The agreement authorizes the Port Director to approve change orders up to an aggregate of $500,000 above the reconciled guaranteed maximum price;
In addition to the payments to RCL for the terminal construction and project oversight, the County will incur additional costs up to $7,505,705 for the services provided by Bermello, Ajamil and Partners for the design and professional services for the project. Additional estimated costs for the project include $6,400,000 for the two new mobile elevated gangways, an Art in Public Places budget of $700,000, optional design costs of $375,000 if the Midport Garage GTA work is required, a County contingency of $1,412,271, and internal construction management staff costs of $400,000. The overall project budget will not exceed $114,531,707 without Board approval.
The agreements have been reviewed by the Port Everglades Risk Manager and approved as to form by the Office of the County Attorney.
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