Aces High!

SOUTH BEACH ACE SELECTED AS THE DEVELOPER FOR THE MIAMI BEACH CONVENTION CENTER.

The suspense grew on Wednesday with each hour that passed from the time-certain stamp originally given to the choosing of the convention center developer. For three and a half hours news station camera crews sulked by their equipment, the developer’s team played musical chairs when seats opened up in the packed chambers, and protestors went from holding their “no to corporate welfare” signs high to sitting high above the proceedings in the balcony seats.

When the agenda finally reached the Miami Beach Convention Center, attendees were treated to a courtroom like presentation from Commissioner Ed Tobin. The former prosecutor employed several posters to make a passionate case against South Beach ACE. He picked out choice quotes from recordings of the team’s negotiations with the city to characterize them as “aggressive” and “litigious.” He felt the city would have to be on their toes when dealing with this surly entity if they were chosen as a partner.

And that’s just what they did. In a voice vote that only recorded two against, the Commission choose to go with South Beach ACE as the developer of the MBCC. Commissioners Jonah Wolfson and Tobin were the two dissenting votes.

The selection was a hotly contested battle between ACE and their competitor Portman CMC, and begins the second phase of a process that is expected to upgrade the MBCC for the first time in a quarter decade.

By picking ACE the city chose to go with a time frame of 4 years and 2 months that will re-imagine the convention center by rotating the the alignment of the exhibition halls, and have a 800-room hotel built on the southern face. That time frame is significantly higher than the Portman’s 2 years 6 months, but also incorporates two significant work stoppages by ACE in order to accommodate certain shows.

The commission went against the recommendations of their City Manager Jimmy Morales, who recommended Portman CMC stating their lower building costs, and their faster building phasing.

Morales’ recommendation came after some prodding from Commissioner Tobin, and Mayor Matti Bower. Up to that point, Morales had not given a recommendation, and had stated that he wouldn’t unless asked for. At Wednesday’s meeting the city manager made clear why he hadn’t made a recommendation, it had to do with the controversy that had the principals of South Beach ACE calling foul on the city’s convention consultant Jeff Sachs.

Sachs noticed that Portman CMC had not properly understood the city’s requests for revised LOIs, and called them with a clarification. As a result, Portman updated their numbers past a July 5 deadline. That provoked Dan Tishman, the principal lead of ACE, to pen a scathing letter to the city calling into question Sachs intergrity. As a result Morales kept his recommendation from record to keep pouring more gas into the fire. Tishman, was not at the meeting because of a dinner gala that he could not get out of, according to his team.

Part of Tobin’s presentation was a defense of the city consultant’s integrity, and part was the numbers that were thrown out when a revised LOI came in – which the city did not take into consideration. The new numbers matched Portman to their rivals in rent payment per square foot.

The city’s Chief Deputy City Attorney Raul Aguila said he advised tossing out the information to make sure both teams were on equal footing. He also stated that this issue was such a small component to the massive amounts of transparent work the staff has done with regards to the MBCC.

According to the city’s calculations of those numbers ACE would bring in about $101 million more in rent over the course of the 99 year lease.

The current estimated cost to the public is $686.7. The difference between the two proposed plans was $52.8 million dollars. Portman CMC had the lower cost, but they also invested double the private money to the public component than South Beach ACE: $23.2 to $10.5. The public component includes the convention center upgrade, the public amenities, the center parking, and various costs from debt services and issuance.

The city’s funding plan is also pending on a few details that have yet to be ironed out with the county. For sure Miami Beach will use the ever-shrinking $53.6 million it has had piggy banked for some time now. The city has dipped into it to pay for consultants and incidentals related to the project.

Resort taxes will also add a significant cash flow. Last year voters approved a 1% tax increase to the city’s Resort Tax. Current figures have it at $254.8 and the administration have stated that collection should start in January. That 1% can only be used for the construction of the MBCC and after it’s complete, it goes to maintenance.

There are also parking bonds that should raise an additional $60.8 million.

Then there is the RDA (Redevelopment Area) agreement that expires in 2022, that needs to be renegotiated. The county had refused to meet with the city until a developer was chosen. The revenues from this vein are city and county property taxes on incremental property values generated in the city’s RDA. Essentially the difference in value goes to the city. Until 2022, Miami Beach’s deal with the county is deemed a 95% deal. The city keeps 95% , while the county gets back 5%. That rate has significantly changed since Miami Beach struck the deal in the early ’90s. Nowadays an RDA comes with a 50% agreement. It’s possible the city can still get a 95% deal, but that has to be negotiated. With that in mind, the city has a table that spans from 10 to 30 years for both a 50% or 95% RDA that it will use to determine what they need to finish financing the project.

Much of this is still up in the air, but the City Manager’s office isn’t sweating it- confident that the county sees this convention center as a top priority. The administration have mentioned several anecdotal conversations with county leaders that have told them as much.

On the other hand Stu Blumberg, Chairman of the Miami Beach Convention Center Advisory Board, has long lamented the fact that at the moment the county “has no skin in the game.”

With this the city comes to the negotiating table with the chosen developer. The commission left open residential units when they met last week at their land use meeting. This kind of enterprise is less valuable to the developers than an increase in retail, but the leases bring in a small revenue source to be applied towards the construction. Now that a developer has been chosen, the Jackie Gleason Theater could in the future have that potential. The Portman deal sought to have retail on the sides of the theater, Morales put a hold to any theater upgrades until a new deal could be reached with the venue’s management Live Nation. That time was thought to be after a developer was chosen. That could prove a tiny carrot in a phase where the city’s leverage is not as strong as in the selection process. That’s not taking in account the nuclear option of not going forward with the project.

Curious enough, it was suggested to Commissioner Jerry Libbin that any radical change to the project could be discussed at the negotiating table.

Former City Manager Jorge Gonzalez opposed passing the 1% resort tax ahead of this phase, so the city could have a “chip” to play in the game. The longtime and powerful city manager did not see this part of the process. He along with others have become causalities of this project. With Gonzalez it was political, but with the former Procurement Director, Gus Lopez, it was criminal.

It was the office of the former City Manager that first flew red flags on the former procurement director in early 2012. Lopez was allegedly caught attempting to form a team to compete for the convention center district from his city email account. Gonzalez forced him to resign in March. He was arrested in October 2012, and has been incarcerated for nine months on $780,000 bond for dozens and dozens of charges – the top of which is racketeering.

Of that amazing list of charges, as of now, none of them involve the convention center. However the investigation is still open. Morale’s office seems to have assurances from the Miami State Attorney’s Office that while the case is still open and being investigated, that no such charges would materialize.

This came by way of an email to the city from Tim VanderGisen of the Miami State Attorney’s Office:

“The investigation into the Convention Center, while still open, should be concluded in the next few months. As you probably know, there is extensive document review and analysis that often times takes longer than expected. However, based on the extensive investigation that has taken place so far, I can say that it is not likely that criminal charges will be filed at the conclusion of the investigation.”

It concluded with: “As I am sure that you are already aware, for criminal charges to get filed, we have to have sufficient evidence to prove the case beyond a reasonable doubt.” The process could have Lopez and associate’s finger prints, but not enough to win a case.

Walter Garcia, an associate of Lopez, and a main recipient of the funky emails was shown to have had a consulting deal with Ugo Colombo regarding the MBCC. Colombo is one of the principals in Portman CMC, one of the finalists. It was generally known that he was cleared of any wrong doing by the SAO. But when the SunPost brought this deal up to Colombo at the developer’s first pitch, he reacted badly, refusing to talk about it except to say he was cleared and it was “ancient history.”

It was under that cloud that some in the community have called for the process to start over, saying that the wave of corruption would engulf the whole project. The main opposition comes from Commissioner Jonah Wolfson and his PAC that has been pushing a petition to change the charter to say that any public land that would be leased out would require a 60% approval by the public. He has been heavily subsidized with funds by The Fountainebleau Hotel. The Miami Beach icon had put in a bid to renovate the MBCC, but did not make the cut. Since then they have come out against public money going to the planned hotel and have even publicly quit the local hotel association in May.

Volunteers wearing pro-petition shirts littered the chambers during the decision. Mostly on the second floor. They also passed out free shirts before the meeting: a red 60% in the front, and the phrase “let us decide” on the back. One member questioned by the SunPost said he wasn’t paid, and was just there to help, he couldn’t say if others had been.

The petition had enough signatures to be presented to the commission. If passed by referendum, it is highly unlikely that it would be enacted retroactively to include the construction of the MBCC. If it is, the city better prepare for a big fight with it’s newly minted partner as that stipulation was not part of the original RFQ.

Tobin categorized litigation with the new developer: “It’s going to be tough as nails.”

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