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.

Miami Heat demanding arena upgrade subsidies, because it’s 2013 and that’s what you do

And double whuh-oh:

The Miami Heat has begun talks to rework a deal for public subsidies at AmericanAirlines Arena in exchange for a longer lease and a significant upgrade of the 13-year-old facility.

Citing mounting costs for keeping the 19,600-seat arena competitive for concerts and to provide basketball fans more amenities, Heat executives say they will need more help from Miami-Dade to sustain the arena’s current top-notch quality into the middle of the century. They warn that without the start of a new wave of upgrades, the facility faces the fate of the team’s original home at Miami Arena, which was demolished five years ago.

Okay, so the Miami Heat‘s original home of Miami Arena was demolished because the Heat successfully got Miami to approve building them a new arena in 1996, even though their previous one was just eight years old at the time. So this “warning” is, in essence, a threat that if Miami doesn’t agree to give the Heat money for a refurbished arena, they’ll risk losing the team to … a new arena that Miami will build? What?

Anyway, this is yet another sign that asking for subsidies to fund renovations is the new asking for subsidies to fund new stadiums — all the kids are doing it! And also that team owners are realizing that when your team is in the championship finals is probably a good time to go asking for money, especially when it’s a team whose superstar is a free agent at the end of next season. (Send us money or we’ll shoot Lebron!) If nothing else, maybe it’ll distract everyone’s attention from whether the Heat has been stiffing Miami-Dade taxpayers on their share of profits.

Audit: Miami-Dade hasn’t checked whether Heat owes taxpayers profit-sharing money

Miami-Dade County’s inspector general has released a report charging the county with failing to keep an eye on the Miami Heat‘s finances, potentially costing taxpayers millions of dollars in lease payments:

A key provision in the 1997 accord between the county and Basketball Properties Ltd., the Heat’s operating arm, stipulates that Miami-Dade is to receive 40 cents of every dollar of profit after the team earns $14 million in profits. Yet, 15 years into the deal — even after a 2006 world championship and nearly two years with league Most Valuable Player LeBron James — the Heat maintains it has never come close to that magic number.

That’s because despite some profitable years, the contract allows the Heat to pay off all of its losses before declaring profitability. The team reported losses totaling $156.6 million through 2010.

Translation: The Heat are accused of cooking the books to keep their profits below the $14 million threshold in any given year, and the county hasn’t bothered to check whether the team is doing this.

How much could this have cost taxpayers? If we go by the Forbes estimates, there are three years where the Heat crossed the $14 million threshold: 2004 ($19 million), 2006 ($21 million), and 2007 ($18 million). If the team had had to pay profit-sharing to the county on those excesses, taxpayers would have collected an additional $6.4 million toward paying off the $37.6 million in land cost and $6.4 million in annual operating subsidies that the public is spending on American Airlines Arena.

That’s not a huge sum, and in any case it’s not certain that the Heat lease calculates team profits on the same basis (EBITDA) that Forbes does. Still, money is money, and given the legendarily murky world of sports bookkeeping, it’d be nice for the county to, you know, check every once in a while whether the Heat is going all Paul Beeston on them.

Florida bill would enforce law to use public stadiums as shelters

A pair of Florida state legislators have unearthed an old law requiring that state-funded sports facilities be used as homeless shelters on days when there’s no event on, and is out to enforce it. “These organizations have failed to follow the law for over 20 years,” declared state rep Frank Artiles, co-sponsor of legislation that would require teams that have received public cash to return it if they don’t obey the law. “This is the simply the State of Florida holding them accountable.”

While it’s hard to picture the Miami Marlins, say, setting up cots around the Red Grooms home run sculpture, the bill is certainly getting media attention, and now has attracted an amendment to require publicly funded stadiums to ban TV blackouts of games. Which sounds like it has even less chance of being enforceable, but it’s certainly interesting, to say the least, to see what options people come up with for demanding conditions in exchange for public funding. Of course, it would be easier if somebody had thought to demand them before actually opening the public’s checkbook…

Miami-Dade paying $1m to Heat for not playing during lockout

In today’s Adventures in Bad Lease-Writing, we bring you Miami-Dade County, which the Huffington Post reports has been paying the Miami Heat to run the AmericanAirlines Arena even though the team hasn’t played there yet this season thanks to the lockout. The county pays the Heat $6.4 million a year in operating subsidies, meaning the Heat will have received about $1 million in public funds for not playing for two months — while the county, at least according to the county, will lose “as much as” $2.4 million in hotel and ticket taxes, though we’ve discussed before how those numbers are likely overblown.

Quote of the day:

Some sort of escape clause for lockouts or other season disruptions “would have been a good thing to have,” said Katy Sorenson, a former county commissioner who has long been critical of the arena deal. Sorenson added, “This county’s not famous for great deals on sports arenas.”

No kidding: Not only did the county agree to build a new arena just ten years after the Heat got their old new arena, and agree to pay the operating costs, but the only rent the Heat agreed to pay is part of a profit-sharing deal that has generated no actual rent because the Heat have managed to avoid reporting much in the way of profits.

I’d make the obvious point that local governments need to hire smarter people to negotiate their stadium and arena leases, but given the way they approach paying to build the buildings in the first place, they’d probably object that smart leases would only get in the way of “getting things done.”