Dec. 13 (Bloomberg) -- City of Miami officials today approved the last piece of funding needed for construction of a $1 billion tunnel, the largest such U.S. infrastructure project built and overseen by a single private entity.

City commissioners approved $50 million for the Port of Miami Tunnel, which will speed trucker access over two-lane thoroughfares in each direction between Watson Island and Dodge Island, where the port is located. It may be completed as soon as 2012, the state said.

The tunnel will be built and operated for 35 years by Sydney-based Babcock & Brown Limited and Paris-based Bouygues Travaux Publics SA. State officials selected the company's joint bid in May. Lehman Brothers Holdings Inc. will help arrange financing for the project.

``We have an entire part of the city that has all of the curbs broken. It's just a line up of 18-wheelers going back and forth through the city,'' Commissioner Marc Sarnoff said in an interview before the vote. Sarnoff, a Democrat, said commissioners approved the spending measure in a 3-2 vote.

Miami's contribution along with $450 million each from the state and Miami-Dade County will be paid over the 35-year term of the contract. Florida will retain ownership of the tunnel and assume control after the agreement expires. The private partnership will contribute $650 million toward construction.

All told, officials value the project at $1 billion in today's dollars, including land and easements.

The companies will receive a so-called availability payment, which will be adjusted annually for inflation. Those payments, to start at $33.2 million annually once the tunnel opens, may be cut if the operators don't meet preset performance measures. They may also receive performance-based payments totaling $450 million, mostly during construction.

Competing Bidders

Competing joint bids were submitted by New York-based Morgan Stanley and Madrid-based FCC Constuccion SA, and Coral Gables, Florida-based Odebrecht Construction Inc. and ACS Infrastructure Development.

``We welcome the city's commitment to the project and we look forward to finalizing the transaction in partnership with the Florida Department of Transportation in an expeditious manner,'' said Matt Dallas, a spokesman for Babcock & Brown.

The transaction still needs final regulatory approval and the companies must approve any resulting modifications.

Two 3,900-foot (1,189-meter) long tunnels will be built connecting Watson Island to the port, allowing east-west travel. The project also includes road connections and widening the MacArthur Causeway Bridge to four lanes from three.

About 5,500 trucks and buses enter and leave the port on weekdays. Drivers currently travel on streets through the city's downtown to access the port.

1 Million Containers

Jorge P. Rovirosa, executive vice president of Florida Steverdoring Inc., which operates out of the port, said about 1 million cargo containers will go through the facility this year.

``This port could double its capacity if we have the proper access so we don't have the backups and the slow traffic coming into the port because you have to go through downtown,'' Rovirosa said.

The port provides 81,800 jobs, $12.2 billion in economic output and $5.4 billion in wages in 2005, the Washington Economics Group Inc. said in a report for the state in September 2006.

To contact the reporter on this story: Adam L. Cataldo in New York at acataldo@bloomberg.net.

Last Updated: December 13, 2007 19:52 EST