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?

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

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

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

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.

Florida house speaker: No new sales tax “checks” for stadiums this year

Florida House Speaker Will Weatherford, who said earlier this week that he’d be introducing a bill to require sports teams to show they actually have a reason to ask for sales-tax kickbacks, upped the ante slightly yesterday by declaring that he doesn’t intend on approving any sports subsidies this year at all:

“Our focus right now is on a process that treats everyone equitably and not writing any checks,” Weatherford said during an interview with The News Service of Florida in his Capitol office.

Currently, the state of Florida pays $2 million a year to the Miami Dolphins, Jacksonville Jaguars, Tampa Bay Rays, Tampa Bay Lightning, Florida Panthers, Tampa Bay Buccaneers, Miami Heat, and Orlando Magic in exchange for the teams doing the state the favor of existing. (The Miami Marlins got left off this list after getting the $2 million a year break for their previous stadium, but did get everything else they wanted, so no complaining.) Right now the Orlando City Soccer Club, David Beckham’s as-yet-unnamed Miami MLS expansion team, and the Daytona International Speedway are all lining up to ask for sales-tax rebates as well, but it sounds like they’re going to have to wait — until next year, anyway, when Weatherford will, at the ripe old age of 35, be term-limited out of office. If Weatherford has his way, by then there will be new laws requiring team owners to “go through the process with the Department of Economic Opportunity just like everybody else does that wants to create jobs in Florida” to prove that their projects will provide a return on the state’s investment, though it remains to be seen whether he has a chance in hell of getting it through the state senate, which has historically been much more lenient about this kind of thing.

Miami county commission to mayor: Give Heat some money, already

The Miami Heat play in a publicly subsidized arena that opened in 1999, and have a 30-year lease that doesn’t expire until 2029. They’re asking for about $66 million in future subsidies to fund renovations they want to do to their arena; Mayor Carlos Gimenez has been negotiating with the team, which like most negotiations involves a lot of staring each other down across a table.

So, naturally, the Miami-Dade County Commission has voted unanimously to undercut their guy by telling him to hurry up and make a deal:

On Wednesday, the commission voted unanimously to direct Mayor Carlos Gimenez to sit down with the Heat, whose executives are seeking a 10-year extension of the deal that lets the team play at the arena and receive about $6.5 million a year in hotel taxes to subsidize operations.

The agreement doesn’t expire until 2029, but the Heat has been trying to capitalize on its back-to-back championships to extend the terms until 2039 in exchange for a significant upgrade to the 14-year-old arena.

“They’ve gone back and forth, but things have not finalized,” said Commissioner Bruno Barreiro, who sponsored the measure “to bring an ending to this.”

If there’s an upside, it’s that at least Barreiro backed away from his initial resolution to declare that Gimenez should “finalize” negotiations by February 22, which would really be the county holding a gun to its own head. Plus, the commission authorized spending up to $50,000 to hire a consultant to advise the county on its lease extension talks, which is something more cities should do to avoid terrible leases. Hopefully the first thing the consultant will advise is “Don’t set deadlines for yourself, especially when LeBron James may leave after this year and reduce the Heat’s leverage, what are you, stupid?”

Heat offering to stay put 10 more years in exchange for $66m worth of arena renovation subsidies

The Miami Heat’s arena deal is one of the weirdest in pro sports, thanks to a last-second switcheroo that the team pulled in order to win a public vote back in 1996. With time running down and the vote looking close, the Heat owners decided to scrap their original plan in which the city would pay for a large chunk of the arena costs, and instead pay for the entire construction cost themselves — but in exchange for $6.5 million a year in “operating subsidies” from the county. It came to the exact same thing in terms of who was paying for what, but it sounded better to voters, and the arena measure passed.

Now, with the operating subsidy deal set to expire in 2029 (only 15 years away!), the Heat are looking to do some renovations to AmericanAirlines Arena, and want to get the public to help pay for them the same way they did the original construction:

The current deal expires in 2029, and the Heat said it wants to work out an extension through 2039 now in order to invest in more upgrades at the county-owned arena. A county commissioner is pushing the mayor to get the deal done by March…

In November, team lobbyist Jorge Luis Lopez said a new deal may require as much as $17 million a year in public subsidies to produce the kind of renovations that will keep the arena competitive. Marquez declined to say what the Heat was asking for, or whether the team wants to increase the current $6.5 million subsidy as part of a new deal.

“There have been numbers thrown around,’’ Marquez said.

Those are some numbers, all right, so let’s crunch ‘em. If the Heat are really looking for $17 million a year over ten years, starting in 2029, then in current value, assuming a 5% annual discount rate, that would be … I get $66 million. Which is less than the county kicked in the first time, but then it was getting a promise by the team to stay put for 30 years, whereas here it would only be extending the Heat’s lease by 10 years. That seems like a good candidate for a dictionary illustration to me, but let’s wait and see where the numbers land after they’re done being thrown around.

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.

Miami scheduled to be underwater within decades — anyway, how are those arena upgrades coming?

Here’s one reason we didn’t consider for why it might not be a great idea for Miami to give the Heat lots of money for renovations to AmericaAirlines Arena or the Dolphins money for upgrades to Sun Life Stadium: The arena and the stadium, and indeed Miami itself, may not be habitable for long enough for it to matter.

The unavoidable truth is that sea levels are rising and Miami is on its way to becoming an American Atlantis. It may be another century before the city is completely underwater (though some more-pessimistic­ scientists predict it could be much sooner), but life in the vibrant metropolis of 5.5 million people will begin to dissolve much quicker, most likely within a few decades. The rising waters will destroy Miami slowly, by seeping into wiring, roads, building foundations and drinking-water supplies – and quickly, by increasing the destructive power of hurricanes. “Miami, as we know it today, is doomed,” says Harold Wanless, the chairman of the department of geological sciences at the University of Miami. “It’s not a question of if. It’s a question of when.”

The article by Jeff Goodell in Rolling Stone is somewhat speculative, as it has to be given that not only don’t we know the exact amount of sea level rise that coming decades will bring, but we don’t know precisely when south Florida may be hit by the kind of massive hurricane and storm surge that would lead to the sort of chaos that Goodell predicts (raw sewage dumped into Biscayne Bay, salt water corroding wiring and leaving much of the city dark for months, drinking water wells ruined). But it’s a good reminder that while stadiums, and their debts, are expected to last 20 to 30 years, there’s no guarantee that we’ll still be living in the same world three decades from now. In fact, politicians in, for example, Sacramento and Glendale might want to be catching up on their climate-related reading as well — just in case it turns out to be useful.