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.”