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June 01, 2012
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.