Miami-Dade County just maneuvered its way into paying the Heat an extra $2m toward arena debt

Miami-Dade County has budgeted an extra $2 million in payments to the Heat for the team’s arena construction debt in 2020, to make up for the fact that the arena is currently without a naming-rights sponsor after American Airlines opted out of its deal last year. If you’re wondering why this is the county’s problem, I direct you to my post from back in October 2018 where I recapped the situation thusly:

Back in 1996, when the arena measure was going to the polls for a public vote, there was a lot of opposition to the notion of putting tax money into a private sports arena. So the Heat owners pulled a last-minute switcheroo: Instead of Miami-Dade paying for the team’s arena, the team would pay for it — but the county would pay the team $8.5 million a year to play in it, amounting to the exact same amount of subsidy at the end of the day. But the team would at least pass along its $2 million a year in naming-rights fees to the county as part of the deal.

Flash forward to today, when $2 million a year is a relative pittance in naming-rights fees. Miami-Dade County leaders clearly realized this, and figured, “Hell, if there’s more money to be had from naming rights, we should be getting it to defray our annual subsidies to the team.” And thanks to that lease clause, they could do it.

Yeah, well, it sounded like a good idea at the time. Unfortunately, the county’s naming-rights-sales consultant, the maybe-ironically named Superlative Group, failed to cut a deal in 2019, and 2020 has been godawful for the airlines and other industries that typically like to throw big money at sports naming-rights deals, so now Miami-Dade is looking at having to cover this year’s $2 million payment out of its general funds, and quite likely next year’s as well.

There’s still a chance that the county could make it all back if it signs a big-money naming-rights deal once the pandemic is over, but if everything has changed as we’re constantly being told, it’s not a certainty. I don’t especially blame county officials for rolling the dice on a naming-rights windfall to try to recoup some its arena subsidies — hell, I praised them for it less than two years ago — but digging that $6.5-million-a-year hole in the first place just looks worse and worse.

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Here’s a bunch of ways rich sports owners are looking to get pandemic bailouts

The owners of the Los Angeles Lakers have voluntarily returned $4.6 million in refundable government loans they received as part of the Payroll Protection Program—

Hold up, let’s try that again.

The owners of the Los Angeles Lakers, a sports franchise worth an estimated $4.4 billion that turns an annual $178 million profit, asked for and received $4.6 million in federal government loans as part of its Payroll Protection Program for small businesses. (The loans convert to grants if recipients keep their current employees on payroll through the end of June.) Like other prominent companies that took advantage of the PPP program — Shake Shack, Potbelly, Ruth’s Chris friggin’ Steakhouse — the Buss family that owns the Lakers chose to return the money “so that financial support would be directed to those most in need” once they realized they’d bum-rushed the subsidy line and edged out actual small businesses, and also probably realized that the PR hit from doing so would have been worth way more than a relatively piddling $4.6 million in government grants.

That a billionaire sports family got approved for small-business loans should be alarming, but not surprising: The federal government has already approved more than $2 trillion in spending to help Americans hit by the coronavirus-spawned economic crash, and it’s all but inevitable that some less-needy Americans would put in applications as well — the feds define “small businesses” based in part on how many employees they have, and sports teams don’t employ a ton of people on payroll. And it’s also inevitable that they’d also be among the first to be approved, since programs like PPP are first-come first-served and rich folks are more likely to have lawyers on staff who know how to file paperwork fast, as well as established bank connections that made them more likely to get approved.

In fact, sports team owners are working many angles to get a cut of the Covid stimulus bailout cash, just as less-deep-pocketed individuals are as they try to figure out whether to consider themselves unemployed gig workers or entrepreneurs in need of cash to keep themselves on payroll. Among the ways:

  • The Sacramento Kings owners are renting out their old empty arena in Natomas for $500,000 a month to the state of California for use as a field hospital, which is the same rent the state is paying for other temporary facilities, but maybe a tad disingenuous given that Gov. Gavin Newsom previously praised Kings owner Vivek Ranadivé as “an example of people all stepping in to meet this moment head-on” without mentioning that he’d be getting paid for his selflessness.
  • The owners of the D.C. United MLS team are part of DC2021, an advocacy group of Washington, D.C. business leaders lobbying the district for “a massive new tax relief program” to help the local restaurant, hotel, and — apparently — soccer industries survive the economic shutdown.
  • The stimulus measures approved by Congress weren’t all expanded unemployment benefits and checks with Donald Trump’s name on them; they also reestablished a tax loophole involving what are known as “pass-through entities” that will allow mostly wealthy people to save $82 billion on their tax bills this year. The biggest beneficiaries will be hedge-fund investors and owners of real estate businesses, a list that obviously includes lots of sports moguls: Just owners of hedge funds who also control sports teams include Milwaukee Bucks co-owners Marc Lasry and Wesley Edens, Los Angeles Dodgers owner Mark Walter, Tampa Bay Lightning owner Jeffrey Vinik, and a pile of others.

Now, not all of this should be considered a fiasco: In the case of the PPP in particular, Pat Garofalo notes in his Boondoggle newsletter that the money is intended to keep low- and moderate-income workers from being laid off — the reimbursements top out at $100,000 per employee — and people who work for sports teams or chain restaurants are just as deserving of keeping their jobs as those who work at genuine small businesses. The main problem with PPP is that Congress massively underfunded it, then made it first-come first-served, then left it up to banks to decide who to approve — okay, there’s actually a lot here to consider a fiasco, but sports team owners deciding to fill their wallets at the same firehose of cash as everyone else is far from the worst part of it.

As for some of the other bailout proposals, though, sports owners come off looking a lot less innocent. That DC2021 plan pushed by D.C. United owner Jason Levien, for example, includes such things as tax holidays for corporate income taxes and property taxes, which Garofalo notes won’t help most small businesses that don’t turn large profits or own land.  (Levien, you will not be surprised to learn, is not just a sports mogul but also a real estate investor.) And the pass-through tax break is almost entirely a sop to millionaires and the Congresspeople who love them, which though it doesn’t single out sports team owners, certainly helps many of them given that they’re far more likely to invest in pass-through companies than you or I.

I’ve said this before, but it really is worth harping on: The recovery from the pandemic is already involving a ton of government spending, and will unavoidably involve a ton more, since the feds are pretty much the only institution that has the power to keep food in people’s mouths during this crisis. (At least until the U.S. Mint is deemed a non-essential business.) This will invariably create winners and losers, both in terms of who gets what money and in terms of who ends up paying off the government debts that are being racked up now. There’s no way to avoid this involving subsidies — pretty much the whole idea of government spending to prevent an economic crash is about creative use of subsidies — so what you want to shoot for is fairness, where you have the most money going to companies and individuals who were most hurt by coronavirus shutdowns, and the least to companies and individuals that just were able to lawyer up the fastest.

Individuals who were most hurt except, of course, for Miami Heat and Carnival Cruises owner Micky Arison, who may have lost more than a billion dollars thanks to the collapse of the cruise industry, but who also lobbied the Trump White House to let them keep sailing even after it was clear that cruise ships were perfect Covid incubators. The cruise industry was notably left out of the stimulus bills, and while that’s more about the fact that they all registered as foreign businesses in order to duck U.S. taxes than their owners being money-grubbing jerks who prioritized profits over public health, I think we can all agree: Screw those guys.

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Miami stadium sites are “future Atlantis” thanks to climate change, teams to deal with this by ditching plastic cups

As you may have noticed, I’m slightly interested in the massive human-created changes to Earth’s climate that are going to make many major cities uninhabitable soon via increased heat or sea level rise or both, so this CNBC article on sports venues at risk from climate change promised to check all of my boxes:

  • Florida International University climate professor Henry Briceno predicts that the Miami Heat arena will flood with only two feet of sea level rise (expected as soon as 2060), while the Dolphins‘ stadium will flood at a three-foot rise. As for the site of David Beckham’s new Inter Miami stadium, Briceno remarked, “I don’t know if those guys know that they are building in the future Atlantis.”
  • The San Diego Padres‘ stadium flooded in 2017, and the Quad Cities River Bandits stadium was made inaccessible thanks to flooding last year, and while both of those were because of torrential rains and not sea-level rise, more and more severe storms are expected to be a consequence of a warmed planet as well.
  • Disappointingly, the article doesn’t talk much about what will happen to sports teams once the cities they play in are largely uninhabitable as a result of climate change — Phoenix isn’t going to be underwater ever, but it could be too hot to live in as soon as 2050.

And the article then pivots to what sports teams are doing to help combat climate change — including a long set of quotes from Allen Hershkowitz, the staff environmentalist the New York Yankees hired after he helped MLB come up with programs to claim “green” status and then called commissioner Bud Selig “the most influential environmental advocate in the history of sports” — though only one specific initiative is mentioned: The Dolphins are replacing disposable plastic cups with (presumably reusable) aluminum ones. That sounds great, but while plastics are indeed a pollution nightmare, in terms of carbon footprint they’re not all that much better for the planet than alternatives (reusability is more important than what cups are made of). And there’s no mention of what the carbon footprint was of these teams’ repeated building and upgrading of new stadiums, which is kind of a big omission when nearly a quarter of the world’s carbon emissions are related to construction.

The best way to keep sports from drowning themselves, really, would be for teams to play in whatever stadiums they already have and for fans to stay out of their cars and instead stay home and watch on the internet listen on the radio. Or maybe just play fewer games. Somebody ask Hershkowitz about that, maybe?

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Miami-Dade may have found a way to reduce its Heat arena subsidies, two decades later

The old joke about the New York Times is that you need to read the articles backwards, since all the most important information is usually buried way at the bottom. That’s sort of the case with this Miami Herald article about Miami-Dade County taking control of naming rights sales for the Heat‘s arena, which takes a long time to explain what’s really going on. With the unimportant bits redacted, we get:

Miami-Dade is exercising its option to end the Heat’s current exclusive negotiations with the airline in favor of a broader search for sponsors….

Miami-Dade had until the end of 2018 to exercise its option, or let the Heat negotiate the arena’s next naming-rights deal under more favorable terms for the county….

Superlative Group’s Myles Gallagher said a new sponsorship deal in Miami should bring at least $6 million a year….

By exercising its naming-rights option, Miami-Dade must pay the Heat an additional $2 million a year starting in 2020 to make up for the money the team currently receives from American Airlines. … Anything over $2 million, the county gets to keep.

If you’re still confused, here’s what’s going on: Back in 1996, when the arena measure was going to the polls for a public vote, there was a lot of opposition to the notion of putting tax money into a private sports arena. So the Heat owners pulled a last-minute switcheroo: Instead of Miami-Dade paying for the team’s arena, the team would pay for it — but the county would pay the team $8.5 million a year to play in it, amounting to the exact same amount of subsidy at the end of the day. But the team would at least pass along its $2 million a year in naming-rights fees to the county as part of the deal.

Flash forward to today, when $2 million a year is a relative pittance in naming-rights fees. Miami-Dade County leaders clearly realized this, and figured, “Hell, if there’s more money to be had from naming rights, we should be getting it to defray our annual subsidies to the team.” And thanks to that lease clause, they could do it.

The upshot: If Miami-Dade officials can manage to sell naming rights for more than $2 million a year, which they should be able to do if they hire a halfway competent rights-fee manager, Miami residents might finally see their annual costs for the Heat’s arena go down a tad. Score one for whoever got that naming-rights buyback clause inserted back in the day, and for today’s officials for remembering it was there — it’s only the kind of due diligence we should expect from our elected officials, but sadly not the kind we usually get.

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Hurricane Irma fails to knock over any of Florida’s sports venues

Time for your “What damage did Florida sports facilities suffer during Hurricane Irma?” rundown!

Also, two-thirds of the state is without power and many residents could remain so for weeks, at least 11 people died in the U.S. and 38 in Caribbean nations, nobody knows how many people are currently trapped in the Florida Keys, and a whole island of 1,800 people is now evacuated and uninhabitable. The Jaguars may move Sunday’s game to Tennessee if they have to.

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Miami celebrates subsidizing suddenly-crappy Heat by laying off librarians, cops

Now here’s a lede, courtesy of Bloomberg News:

Last month, Miami politicians approved a $19 million subsidy for the professional basketball arena. Six weeks later, they turned to a grimmer task: deciding how many police and librarians to fire.

It’s not quite fair to blame Miami-Dade County’s $64 million budget hole, which could require 700 layoffs, on the Heat arena subsidy deal, since that’s only costing the county $19 million in subsidies over 20 years (and more like $6 million in present value). Still, it’s not helping any, and does point up not only that it’s easier to get public money if you’re a rich guy with a sports team than if you’re actually working for the public, but that sports subsidies can often paint future elected officials into a budget corner. As Holy Cross sports economist Victor Matheson tells Bloomberg:

“You can’t stop your debt payments without actually declaring bankruptcy,” he said. “But you can cut the number of police officers and teachers and librarians and firefighters.”

But at least Miami fans can now rest easy that they can keep watching LeBron James for another, um, whoops. Heat owner Micky Arison sure timed that subsidy demand right, didn’t he?

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Miami Heat lease extension approved, looks more resoundingly meh than ever

The Miami-Dade County Commission unanimously approved a lease extension for the Miami Heat last night, agreeing to increase annual operating subsidies to the team from $6.4 million a year to $8.5 million a year starting in 2030, in exchange for Heat owner Micky Arison immediately starting to pay $1 million a year in “donations” to the county’s parks department. It’s the first major sports subsidy deal approved in Miami since the Miami Marlins deal that everyone in the city violently hates.

I’ve gotten a fair bit of attention for calling this deal a “reasonable” price to pay for five more years of the Heat, though if you read what I wrote, I actually said that it was “one of the more reasonable deals,” which is grading on a pretty severe curve. (I’m clearly going to have to watch my words more carefully from now on.) In a conversation with the Miami Herald’s Doug Hanks on Monday, I called the lease extension, with its overall cost to the county of about $6 million in present value “resoundingly meh,” which is an assessment I’ll stand behind.

In fact, it looks like the deal if anything got a bit meher at the last minute. One of the reasons I praised the revised deal with faint damns was that it reversed course on earlier plans for the county to hand over to the team its future naming rights to the arena. But now it appears that the county has partially reversed course on that reversal of course:

The current contract lets Miami-Dade sell the rights itself once the American Airlines sponsorship resets in 2020. The new deal preserves that right, but also sets up a system where the county can let the Heat sell the rights itself and then negotiate a split with Miami-Dade. A county stadium consultant, Carl Hirsch of Stafford Sports, said American’s current $2.1 million-a-year deal is about half what NBA sponsorships go for today, and Suarez characterized the possible split as a needless giveaway.

“We don’t need to share that with anyone else,” he said. “I think we are giving away a lot in this deal.”

I’m not actually sure what that “negotiate a split means” — that if Arison can get more money for the stadium name, they can keep a finder’s fee for himself? But it’s a potential added gift to the Heat either way, even if only another small one.

According to one county commissioner, though, no amount of subsidy is too high a price to pay for the blessing that is the Heat:

“There is not enough money out there to spend to get the publicity the Heat brings this community,” Commissioner Bruno Barreiro said before casting one of the 10 votes in favor of the agreement.

Spoken like a guy who gets his campaign funds from stadium contractors.

Read more here: http://www.miamiherald.com/2014/06/03/4155689/miami-dade-commissioners-approve.html#storylink=cpy
Read more here: http://www.miamiherald.com/2014/06/03/4155689/miami-dade-commissioners-approve.html#storylink=cpy
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Heat arena subsidies cheaper than making a Michael Bay movie

I don’t especially disagree with the meat of this Miami Herald article on the Heat‘s lease extension proposal — though I’m not sure my assessment that it’s a reasonable price to pay for locking the Heat in for a few more years, if there’s nothing more to the deal we don’t know about, qualifies as a “thumbs-up” as the Herald puts it — but the lede, oh, the lede:

The Miami Heat sees a proposed arena agreement with higher government subsidies and fixed rent to Miami-Dade County as a more affordable option for the public than having to build the team a new arena.

“We’re trying to avoid a new stadium,” Eric Woolworth, the Heat’s president of business operations, told the Miami Herald Editorial Board on Wednesday. Added Jorge Luis Lopez, a Heat lobbyist and lawyer: “This is a conscious decision by the owner to avoid that kind of situation.”

Why, yes, giving the team about $6 million toward renovations would be cheaper than tearing down a 14-year-old arena that you abandoned a 12-year-old arena to move into. Other things that it would be cheaper than:

This is fun! So thanks, Micky Arison, for sparing the world the expense of all these other things you’re not doing. I can give an unqualified thumbs-up to that.

 

Read more here: http://www.miamiherald.com/2014/05/21/4130204/heat-extended-arena-deal-cheaper.html#storylink=cp
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Miami Heat lease deal announced, county cost trimmed to $6m

On Friday afternoon, the traditional time for politicians to announce things that they don’t want to get too much media play, Miami-Dade County Mayor Carlos Gimenez and Miami Heat owner Micky Arison finally announced the new lease agreement that Arison had jumped the gun on announcing last month. The details of the final plan:

  • Miami-Dade would give up its profit-sharing deal with the Heat (value: essentially worthless since the Heat never share any profits).
  • Arison would start paying $1 million a year in “donations” to the county parks department (value: about $12 million in present value).
  • The Heat would extend their lease, currently set to end in 2030, through 2035, and get $8.5 million a year in annual county subsidies for those five years (value: about $18 million in present value).
  • Miami-Dade would retain naming rights to the arena, something that Arison originally wanted transferred to him.

The Miami Herald reports that this deal would “cost Miami-Dade an additional $19 million through 2035,” but that’s not accounting for the fact that the Heat’s rent payments would start now, while the added lease subsidies wouldn’t kick in until 2031, and money now is better than money 17 years from now. If we assign zero value to the profit-sharing deal, I have this as costing Miami-Dade about $6 million, which seems completely reasonable for an extra five years of locking the Heat into not moving. (Or more realistically, not threatening to move in exchange for a new arena and/or new lease on the old one.)

There’s always the possibility that there’s something else hidden in the lease that we don’t know about — Friday coverage, remember — but for now, this actually looks like one of the more reasonable lease renegotiations. It’s certainly better than the $66 million in subsidies Arison originally wanted in exchange for a 10-year extension, so tentative props to Gimenez for bargaining him down, even if fewer props for the way he chose to announce it.

Read more here: http://www.miamiherald.com/2014/05/16/4122080/gimenez-and-arison-reach-deal.html#storylink=c
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Heat announce Miami lease deal with mayor, mayor says “Not me!”

It’s not just the Oakland A’s engaging in stupid press release wars this week: Last night, Miami Heat owner Micky Arison sent out an email announcing an agreement with Miami-Dade Mayor Carlos Gimenez on a new lease for his team — only to have Gimenez retort an hour later that he’d agreed to no such thing.

The terms of Arison’s proposed lease deal are still pretty much the same as when he first proposed it back in January: The team would stay put for an additional ten years (from 2029 until 2039) in exchange for annual operating subsidies — i.e., the county paying the Heat to play there. (The subsidies would actually start at $12 million and rise over time to $17 million, which is slightly less than had been previously reported, meaning the total present value would be a little over $50 million, not the $66 million I’d previously estimated.) The Heat would also ditch its profit-sharing agreement that never actually generates any profit for the county and instead pay a yearly rent starting at $500,000 and rising over time to $1.5 million; that’s potentially a small value for the county, though since the county would also be giving up other things (like the chance at a share of future naming-rights revenues), it could end up being a wash or worse.

Miami-Dade commissioner Juan Zapata called the proposed deal “horrible” and said he’d “never seen anything so ridiculous”; that seems a bit over the top, given that Miami would effectively be paying the Heat $5 million a year (in 2014 dollars) to promise to stay put for another ten years, and there are certainly worse lease subsidies out there. It still doesn’t make it a good deal — the Heat don’t have a viable threat to leave town right now, though it’s always possible things will have changed by 2029, especially if Miami is a post-apocalyptic hellscape by then — but it’s only ridiculous in, you know, a routine kind of way.

Anyway, from the sound of things Gimenez is only complaining about the scale of the subsidies he’s being asked to provide to the Heat, not the principle of the thing, so expect this to be worked out eventually. Whether the county commission goes along with it will be another story, but in Florida those things can usually be worked out.

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