After 13 years, Miami finally collects $250,000 from its profit-sharing deal with the Heat

If you’ve read my and Joanna Cagan’s book Field of Schemes — and if you haven’t, what’s wrong with you, there’s a great big link to it over there on the left, you can get an e-book version even! — you may remember the story of the Miami Heat arena campaign, which featured then-coach Pat Riley appearing in ads carrying a basketball and talking about how what the city of Miami really needed was a new arena to replace the one that had just opened eight years earlier. The final victory at the polls was achieved after a last-minute switcheroo in the funding scheme, where instead of the public being asked to cover a chunk of arena construction costs, the Heat would pay for the new building and taxpayers would pay the team to pay for it. Clever, no?

The result, as Deadspin sums it up:

The Heat paid the full construction costs of the $213-million building, which is owned Miami-Dade County. That’s good! In exchange, Miami-Dade gave them the $38-million plot of land, and promised $6.5 million in annual subsidies. That’s bad. The county, never great with arena math, also negotiated a share of the profits. This year, for the first time ever, there were enough profits for the Heat to cut a check.

How much of a check? Well, the arena’s concessions, suites, and club seats (the revenue streams that the city is supposed to get a cut of) turned a profit of $30 million this year. The Heat pocketed $14 million to pay off their share of construction costs — because the $6.5 million in cash they’re getting from Miami isn’t enough — plus $1.3 million to pay for “facility upgrades,” plus the next $14 million because they get to do that per their lease, plus 60% of whatever is left over. The city’s net from the arena’s most profitable year ever: $257,134.12.

Heat owner Mickey Arison, meanwhile, thinks that this deal is completely unfair — to him, and so he’s demanding more taxpayer money to help him upgrade his 13-year-old arena, by increasing the $6.5 million annual subsidy to $17 million starting in 2029, when the Heat’s lease is currently set to expire. (Arison would sign a ten-year lease extension in exchange for the added cash.) Plus he’d still get the first $29 million and change from those shared revenue streams. Of course, he’d be in a 39-year-old arena (horrors!) by the time the extended lease was up, but if the city of Miami keeps dumping money on his head, he can probably learn to live with it.

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6 comments on “After 13 years, Miami finally collects $250,000 from its profit-sharing deal with the Heat

  1. Besides being a leverage-free demand, I just don’t get it. How does a promise of an increased subsidy in 2029 help them keep the place from falling into disrepair over the next 15 years?

  2. Well Keith, I might invest $50,000 into adding a garage onto my house today if you agree to give me $200,000 in 2029 to pay for it. You interested?

    Money is money now or in the future. You just have to discount it. If the Heat get several million in 15 years they can spend more now.

  3. Still a bigger check then Seattle ever got from the Mariners’ profit sharing… where they “lost $200 million” before SafeCo was even built.

  4. “Money is money now or in the future. You just have to discount it.”

    Yeah, I get that. But…15 years out? Just seems ridiculous. And how sure are we that the Miami waterfront won’t be underwaterfront by then? ;) Or the economics of the sport won’t have changed drastically?

    We know it never seems to matter to those with the keys to the city/county/state piggybanks, but there’s really nothing to be gained by giving in to this demand.

  5. Nothing to be gained by the city. Lots to be gained by the owner. If you could make insane demands for money and might have them honored wouldn’t you make them?

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