Something I like to harp on here is that news articles that rage against governments still paying off stadiums after they’ve been torn down are missing the point: How to pay for a stadium, whether with cash now or bonds that can be refinanced into the far future, is just a financing choice, like deciding whether to pay for a car up front or over time. And while continuing to pay for a car that’s long since been totaled (or for Bobby Bonilla) can stick in one’s craw, it doesn’t necessarily cost more than making all the payments while you were still enjoying your stadium/car/alleged third baseman.
There can still be financing decisions that are terrible, though, and the bills for one of those are starting to come due for the Marlins stadium in Miami:
Here’s what we do know: the county issued bonds to build a stadium that it owns but from which the Marlins derive all income. An issue that yielded $80 million was to cost $1.2 billion to repay, one that yielded $319 million was to take $1.3 billion to repay, and one that yielded $50 million was to take $200 million to repay. Most of that debt remains, and payments are soon to balloon.
That’s not good! Also not good: Miami-Dade County commissioners apparently don’t even know exactly how much they’ll be on the hook for, even as they try to figure out where to come up with the money to make the balloon payments that Miami-Dade agreed to when the stadium was first planned in 2009. On the bright side, the county got out of paying its Marlins stadium bills in 2009, when it didn’t have the money; on the less bright side, it now has to pay even higher bills over the next two decades, when it still doesn’t have the money.
Way back in 2013, I guesstimated the county’s ultimate cost as being about $800-900 million in present value to pay off about $400 million in bonds, which was not a great deal no matter how you slice it. (One Miami financier told the Miami Herald at the time, “This is the sort of financing you do when you cannot afford it.”) But it was an emergency after all, with the Marlins threatening to move someplace — today’s Miami Today op-ed says Las Vegas, I remember it as mostly San Antonio, it was probably both of those and more over the decade that Marlins owner Jeffrey Loria spent going back over and over to local governments in search of subsidies — and who can put a price on what Miami got out of its investment:
Today, in a covered ballpark built solely for baseball and with a winning team, sales average 12,735 per game – two-thirds as many as in an open-air football stadium. The problem clearly wasn’t the stadium.
A second promise was that a new stadium on the site of the defunct Orange Bowl – whose bonds were still being paid off – would rejuvenate Little Havana, which surrounds it. It hasn’t happened yet, 15 years later.
The third promise was that in a ballpark for which it pays no rent the team would spend more to get better players. The New York Mets this year top league payrolls at $328 million, followed by Los Angeles Dodgers at $302 million and the New York Yankees at $297 million. The Marlins, in contrast, pay $80 million, more only than Cleveland’s $79 million.
Oh, well, live and learn! Or at least Loria gets to live his life, still running his beloved art dealership after selling the Marlins for more than seven times what he paid for the franchise, while Miami-Dade taxpayers learn the dangers of balloon payment financing. Whether they or their elected officials will remember the lesson the next time it comes up is another story: The Marlins’ lease expires in 2047, so we can expect whoever owns them in a decade or so to start talking up the need for a new stadium then, unless all of Miami has relocated to Texas or Nevada by then.
It’s almost as if The Things People Say When Trying To Get Public Money For A Stadium aren’t true at all.
Like, demonstrably untrue. Without any advanced degree needed to interpret those three paragraphs, it’s simple, clear, and obvious: the purported benefits do not accrue to municipalities whose taxpayers pony up for new stadiums.
(But if you’re here a lot, you already know that. The question is….why does the lie persist?)
Because it’s difficult to get someone to understand something when their being invited to throw out the first pitch and getting praised at the right parties depends on their not understanding it?
https://www.thenation.com/article/archive/why-do-mayors-love-sports-stadiums/
Tobias: You know, some cities engage in taxpayer-funded stadiums, in which the municipality pays for a stadium in hopes of attracting more customers, rejuvenating the local neighborhood and enabling the team to better compete for high-priced talent.
Lindsey: Well, does that ever work for those cities?
Tobias: No, never, somehow they delude themselves… but… it might just work for us!
They know those things aren’t true. They just don’t care. By the time everyone else sees through the deceit, they’ve either convinced everybody to not believe what their eyes are seeing… or they’ve already made it somebody else’s problem.
Given that the rancor against the Marlins still remains among long-time Miami residents, this is clearly the case of the latter.
Could Miami do what an underwater home owner would do? Just walk away from it? If Marlins want to keep playing there, they’ll have to take ownership.
Good idea, but stadium bonds aren’t typically secured with the value of the stadium, like an underwater home mortgage. They’re secured with the value of the entire county, so Miami-Dade would have to walk away from Florida entirely. (Though as noted above, in a decade or two they may have to do so anyway.)
Agreed, and the county would take a ‘rating’ hit if it defaulted in any way.
But to play devil’s advocate on this one, could the county do what a private business would do in such a situation… transfer ownership of the facility and it’s associated debts/revenue streams to a newly created quasi-private entity and then allow that entity to go bankrupt?
I am not familiar enough with the stadium agreements to know what restrictions are placed on either party, but it is obvious that the then-current Marlins ownership was not bound by any restriction on selling the franchise (they did!) So I wonder why the county couldn’t create a management company to which it transfers all obligations and benefits of stadium ownership and then cut the facility adrift?
In what way is a sports facility that different from an ancient leaky single walled supertanker sailing the seas “full” of low grade crude oil of questionable origin?
The owners of said vessel set up a maze like structure of holding companies to obscure their control of it and also take out multiple loans against the vessel and it’s future income streams in order to ensure that there is no money left in the company for an injured part to file a claim against (“judgment proofing”). But they still own the vessel and derive financial gain from doing so.
The only difference here is that we know the county won’t ever earn any net money from the facility. All they are trying to do is avoid liability, just like the scumbag owners of a dodgy supertanker would be proud to do.
It depends on how the bonds are written, and I don’t have that information. If the collateral is some particular revenue stream, the county could just default and say, “Tough luck, bond buyers.” (Though as you say, it probably wouldn’t for fear of hurting its bond rating.) If it’s the county general fund, pretty sure the bond buyers could seek a lien on the entire county to get their payments.
Either way, though, I don’t think it has much to do with ownership of the stadium per se. The stadium could be blown up and/or taken over by alien invaders, and Miami-Dade is still on the hook for the bonds unless the bonds give them an out clause.
Could they just “bust it out” like the Copa in Goodfellas?
Most loan agreements of any kind have provisions against dumping or moving assets without consent. Otherwise every company or city will do that.
What I wonder about is why can’t they refinance the debt on better terms. Just issue new bonds to buy the old ones back.
I would assume it is because the underlying financials of the project look even worse now than they did when the original bonds were issued.
I agree on the ‘loan agreements’ requiring parties to retain, insure, maintain the asset mortgaged. However, this is not, strictly speaking, a loan agreement. It’s a municipal bond issue. It is not, as Neil pointed out, secured against the asset in question (as a house mortgage or car loan would be). It’s just secured against the county’s perpetual ability to pay.
The county is unlikely to vanish. And I would bet there is language covering the unlikely eventuality of dissolution. That’s why I am wondering about transferring the asset to a new owner… it would be the only way “out”, though I don’t know that that would even be a true “out”.
They’re gonna SWIM TF away.
In fairness to the sad sack Marlins franchise, there was a small new stadium bump (while the team was pretty crappy!) for a few years.
https://www.baseball-reference.com/teams/FLA/
But we’re talking less than 200,000 tickets sold annually over the course of a few seasons post Ozzie Guillen… and the ‘reversion to/below the mean’ since then has been even worse than expected (and with a better team to theoretically root for).
This stadium was a catastrophically bad idea. One “Florida” looks set to repeat in Tampa just to prove the point (again).
I attended a game in Miami earlier this season. Indoor baseball sucks, period. Paid $40 to park in a grass field. Took an hour to get out of the area after the game. It appears Miami didn’t get the message that you also have to spend hundreds of millions to displace the poor and build entertainment districts for the young urban lovers if you want to gentrify an area.
Paying $40 to park in a grass field and taking an hour to get out of the area after the game sounds just like how it was when the Orange Bowl was standing there!
(BTW, parking is complete BS. If someone said, “Do you want to go to the game?” and parking was $40, unless my kid’s making his major league debut, nah. That will turn me off faster than anything else.)
It’s $40 at the Mets stadium now, too. Though there’s additional parking a short walk away at the Flushing mall for $20. (And the subway is still only $3 a person, which is usually what I do, especially since it can take half an hour or more to get out of the lot after games.)
As I’ve noted here many times, a whole lot of our economy right now seems to be priced for a target market for whom money is no object. It’s not the majority of Americans by any means, but it’s enough that businesses can get away with it, sometimes.
I agree but I think owners are being short sighted in not providing affordable options. Baseball is passed down from generation to generation but what happens when young fathers are priced out? Will their children become fans?
People who forget history are doomed to repeat it. Shakespeare used to be a working-class activity. Now, its largely wealthy people (other than those at the Shakespeare in the Park events). Now some fans will keep anteing up because they have been doing this since they were young but kids growing up now probably won’t be diehards in the future.
It doesn’t help that any time the Marlins get remotely good, they’re just going to sell the players in a fire sale, which is a great way to alienate potential fans.
So you got a stadium built for a team with no fanbase, in an area with no development, that is probably going to be underwater soon. Great investment!
It probably doesn’t help that they removed everything that made the stadium fun and gave it character. The Clevelander. The sculpture. The aquariums. I mean, it’s basically a warehouse with windows now. Also, the WBC attendance shows that people will go there. They just won’t go to see the Marlins.