Vacillation raises cost of public-private deals to taxpayers
Fumbled municipal infrastructure deals can trigger festering invisible costs.
We’re not targeting rushed no-bid giveaways, like the City of Miami’s pending lease of the Melreese Golf Course for a massive development. The cost of those handouts is visible to all except the commissioners who give them.
We’re focusing here on hidden costs: a government-initiated deal that drags on and on as firms try to meet shifting expectations. Like building a skyscraper on a sand hill, there is no business foundation.
A classic case of vacillating on a city-initiated project with private firms took its latest twist last week when Coral Gables decided – if you call it a decision – to stall three more years on a project it started in 1998.
The aim was to turn two shoddy, inadequate and outdated downtown garages over to top developers to rebuild and expand, with the companies, not the city, paying to add parking and paying the city as well for other uses on its land.
The clear wins for taxpayers would have been more parking at no city cost plus payments to Coral Gables’ coffers and a far better-looking, more efficient and amenity-filled downtown.
The city set out that goal in 1998. Last week, it decided to do the job itself on one garage and not to touch the other for at least three years, then maybe let someone else do it.
In the interim, city staff has wasted untold hours, elected officials have debated the plan to death – Miami Today has reported on twists and turns more than 20 times – residents have waited 21 years for added parking, and the city has lost out on cash and taxes from the developers.
Add to these losses another long-lingering drain: at least five companies worked to win the right to a job that the city suddenly pulled off the table for at least the next three years while it dithers about doing the work itself.
But matching the work of developers is no easy city task. Government work costs more than in the private sector, not because government is bad but because it seldom has staff experts that companies do, and because government plays under very different rules on the job, including higher pay levels and even more red tape.
Many government projects spread business among small providers, minority suppliers and – in many communities – well-connected people. Each hiring decision eats up time and money, far more than in industry. Many city actions also require commission votes, which introduce a different dynamic, as 21 years of dithering shows.
On the other side of the table, think about what indecisiveness did to companies that over the years tried to win a game with constantly changing deadlines, always with new municipal rules and even different city goals.
As Commissioner Vince Lago said during a 2016 debate on the garages, “I like to keep my options open.” That thinking led to change after change.
A decade ago an outside developer told Miami Today that even answering a government request for proposals cost $20,000 to $50,000 win or lose, surely more today.
Our best count is that Coral Gables requested garages proposals or interest three times, and in its most recent iteration got five contenders. A first cut led to four well-known local proposers, then to two, and finally a choice of one – the W. Allen Morris Co. working with the Related Group, a stellar pair.
The city chose the team in 2016. Then negotiations began. They went on and on up to last week, when the city commission sang “Let’s call the whole thing off.”
For those negotiations, Mr. Morris said, his team changed plans 24 times – last year his count was 18, so changes must have been fast and furious.
Whatever the tally, every city twist and turn required spending by first five companies, then four, then two, and then the final team, not only for plans but to bring lawyers and lobbyists to city meetings, often to get just another deferral. That all probably cost companies multiple millions.
Be certain that every business that deals with Coral Gables will build such futile dithering costs into every future bid. They’d be crazy not to.
Coral Gables isn’t alone. This happens at county hall and in other cities, and hits you and me in higher taxes to make up for extra government payments because bidders make up for needless government-caused expenses in public-private deals.
“People have been scared off from getting involved in the city” because of perceived obstacles to development, Commissioner Lago noted during a debate on the garages as he sought another change.
Looking at the track record, can you blame any company for being wary?
A frustrated Mayor Raul Valdes-Fauli, hoping for a final vote on the garages, asked city staffers in March 2018 “What’s the hold-up? If you can’t present a project to the city commission then we will look for an alternative, but do something.”
Focusing on what vacillating meant to the developers as several commissioners sought to cut building heights and review deal terms once again with yet another two-month delay – the norm since the team seemingly won the job in 2016 – Mr. Valdes-Fauli asked in November “Have we made these people waste years and hundreds of thousands of dollars for us to come up with new criteria today?”
Last week’s non-decision answered his question: 21 years too late, the city went back to the drawing board to figure out what it wants to do. The developers’ cost of that decades-long waste will ratchet up future city bids.
The garages plan offered a great deal that earned taxpayers money and improved Coral Gables. Not doing it will surely be more costly in the years ahead.