Broward County Commission Regular Meeting
Director's Name: Glenn Wiltshire (Acting Director)
Department: Port Everglades Division: Business Development
Information
Requested Action
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(This is the first of two required public hearings. The second public hearing will be held on June 18, 2024.)
MOTION TO APPROVE Second Amendment to the Marine Terminal Lease and Operating Agreement between Broward County and Florida International Terminal, LLC (“FIT”), to exercise both Option Terms, memorialize the Final Premises Effective Date, restructure the rental rate and per container (shipmove) rate (with the related minimum guaranteed payment) into an “all in” bundled rate, increase the credit to FIT for certain improvements to be made to the Final Premises, and update miscellaneous provisions.
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Why Action is Necessary
Pursuant to Section 32.5.b. of the Broward County Administrative Code, two Public Hearings are required for amendments to marine terminal leases exceeding five years within the Restricted Use Zone.
What Action Accomplishes
Allows for the consideration of the Second Amendment to the Marine Terminal Lease and Operating Agreement between Broward County and Florida International Terminal, LLC. This is the first of two Public Hearings. The second Public Hearing will be held on June 18, 2024. No action is required on this motion.
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Previous Action Taken
None
Summary Explanation/Background
THE PORT EVERGLADES DEPARTMENT RECOMMENDS APPROVAL.
This action supports the Broward County Board of County Commissioners’ (“Board”) Value of “Building partnerships and working collaboratively with others to meet shared objectives,” and the Goal of “Ensuring economic opportunities and a sustainable economy, with an emphasis on Broward’s lower and middle class.”
Florida International Terminal, LLC (“FIT”) has operated a container terminal in the Southport area of Port Everglades since 2005 (see Exhibit 2). On December 8, 2015 (Item No. PH-2), the Board approved the most recent Marine Terminal Lease and Operating Agreement (“Agreement”) between Broward County and FIT. The Agreement has an initial term of ten years, from July 1, 2015, through June 30, 2025, and two five-year option terms, and included provisions related to the relocation of FIT’s leasehold (referred to as the Interim Premises and Final Premises) to accommodate the construction of the Southport Turning Notch Extension (“STNE”) Project.
A First Amendment to the Agreement was approved by the Board on February 26, 2019 (Item No. 33). The First Amendment modified the Interim Premises to be the same as the Final Premises (approximately 46.6 acres), modified the rental rate for the Interim Premises, modified the berthing and gantry crane assignment provisions, modified FIT’s early termination rights, and provided that rates and certain other business terms would be renegotiated once the STNE construction was completed.
On August 8, 2023, in accordance with Article 1, Section C of the Agreement, the Port Everglades Chief Executive/Port Director notified FIT that the Port Everglades STNE Project would be complete on or about December 5, 2023, and, as such, the Final Premises Effective Date would be December 5, 2023.
Sunshined negotiations meetings were held with FIT on October 2, 2023, January 3, 2024, January 9, 2024, January 16, 2024, and February 5, 2024, to discuss a Second Amendment to the Agreement. The meetings included representatives for FIT, Port Everglades staff, and the Office of the County Attorney. Since FIT asserted that its proposals or counterproposals related to the lease of the land or port facilities were confidential and exempt from release as provided for in Section 315.18 Florida Statutes, the negotiations were closed to the public. The primary business terms of the proposed Second Amendment to the Agreement are as follows:
• The Final Premises Effective Date is December 5, 2023. All adjustments to land rent, container (shipmove) rates, and minimum guaranteed payments (“MGP”) are retroactive to that date.
• FIT has exercised both Option Terms, the first of which begins on July 1, 2025, and ends June 30, 2030; and the second of which begins on July 1, 2030, and ends on June 30, 2035.
• In lieu of separate land rent and per container (shipmove) payments for the Final Premises, FIT will pay an “all in” bundled rate for each container (shipmove) as established in Article 11.
• Effective retroactive to December 5, 2023, the “all in” bundled rate is $78.74 per container (shipmove), which is allocated as $56 per container (shipmove) and $22.74 for land rent. The bundled rate includes land rent, dockage, cargo and container wharfage, certain crane rental fees, and harbormaster fees. All other fees will be billed at Tariff rates.
• The annual land rent for the Final Premises increases from $1,237,475 to $3,052,767 retroactive to December 5, 2023, reflecting a lease rate of $1.40 per square foot compared to $0.61 per square foot in the existing Agreement.
• The “all in” bundled rate increases on the first day of each contract year by 3% (currently, increases are calculated based on the change in the CPI-U, subject to an annual cap of 3%) starting on January 1, 2025. FIT will continue to pay all applicable sales tax due on the land rent component of the “all in” bundled rate.
• The Minimum Container Shipmoves per contract year increases to 125,000 from December 5, 2023, through December 31, 2029. This is an increase from FIT’s current minimum of 75,000 container (shipmoves) per year. Beginning on January 1, 2030, the Minimum Container Shipmoves will increase 1.75% every year through the end of the contract term.
• FIT will receive a total discount of $10 per container (shipmove) upon reaching 125,000 containers (shipmoves) for each contract year for every shipmove above that amount (Tier 2 discount). The current discount, which starts after 75,000 containers (shipmoves) per year, is $3.03.
• FIT will receive a total discount of $16 per container (shipmove) upon reaching 150,000 containers (shipmoves) for each contract year for every container (shipmove) above that amount (Tier 3 discount). This is a new discount Tier in the Agreement.
• Commencing January 1, 2030 through June 30, 2035, an additional container (shipmove) Tier is added for the container (shipmove) rate once 125,000 containers (shipmoves) are met to remove the land rent component of the “all in” bundled rate until the minimum container (shipmove) throughput for the Tier 2 discount is reached.
• FIT is eligible to receive a payment credit not to exceed $3,000,000 for certain specified permanent leasehold improvements with costs incurred between December 6, 2023, and December 5, 2026, that will increase the efficiency of and reduce greenhouse gas emissions from FIT’s terminal operations. This is an increase from a $600,000 credit in the existing Agreement. To be eligible for the payment credit, the improvements must be preapproved by the Port Everglades Department and meet other criteria, with the maximum payment credit being $1,000,000 per contract year. FIT is not eligible to receive a credit in any year which FIT does not meet or exceed the MGP, however any credits accrued can be carried forward to a future contract year, but no later than the MGP period ending December 31, 2027, unless extended by the Port Everglades Department to December 31, 2028.
• A new Exhibit is added to clearly define the distribution of maintenance and repair responsibilities between the County and FIT.
• Article 25 of the Agreement is replaced in its entirety to reflect current insurance requirements.
• The amount of the payment bond or irrevocable letter of credit required from FIT is increased from $500,000 in the existing Agreement to $1,590,417.
• The Agreement has been updated to add miscellaneous terms and conditions resulting from changes in state law, County Administrative Code, and County Ordinances since the last amendment was approved.
In Fiscal Year 2023, FIT transported 283,511 TEUs (20-foot equivalent units) through the Port, handling nearly 28% of the Port's container revenue center cargo volume. This equated to $9,389,880 in revenue.
The economic impact of the proposed Agreement is estimated to generate 1,978 total jobs, of which 673 are direct jobs, 685 are indirect jobs, and 616 are induced jobs, those supported by direct jobs in the marketplace. A total of $159,411,000 in annual personal income is expected to be generated from these jobs. The annual impact on business services revenue is projected to be approximately $237,047,000. State and local taxes of $16,351,000 are expected to be generated annually. The economic impact will increase between 2030 and 2035 as the minimum container (shipmoves) per year increases (see Exhibit 3).
The Notice of Public Hearing was published twice (May 25, 2024, and June 1, 2024) (see Exhibit 4). Such notice for the second public hearing on June 18, 2024, will be published twice prior to the second public hearing (June 8, 2024, and June 15, 2024), pursuant to the applicable provisions of Chapter 94-429, Laws of Florida (see Exhibit 4).
The Second Amendment to Agreement has been reviewed and approved as to form by the Office of the County Attorney. The Amendment is still under final review by FIT, and confirmation of receipt of signature pages will be included in the Monday Night Memo.
Source of Additional Information
Jorge A. Hernández, Director of Business Development, Port Everglades Department, (954) 468-3501
Josh Miller, Property Manager, Business Development Division, Port Everglades Department, (954) 468-3518
Fiscal Impact
Fiscal Impact/Cost Summary
Total guaranteed revenue from the Final Premises Effective Date through the term of the Agreement is estimated to be $135,837,123, including land rent and Minimum Guarantee Payments for container shipmoves.