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Profits drop at Heat’s home court, despite championship

 

dhanks@MiamiHerald.com

The Heat’s deal with the county only requires disclosure of costs and expenses tied to the arena (which must share excess profits with Miami-Dade) and the team (which doesn’t). Because of how the businesses were divided up in the original arrangement, the team keeps most revenue from upper-level tickets, while the arena gets the dollars tied to premium seats.

Miami-Dade County pays a $6 million subsidy each year to the arena out of taxes charged to hotel guests. Since the arena’s debut season in 2000, taxpayers have paid about $70 million to the arena.

Arison’s organization borrowed the money to build the $213 million arena on county land, and now is in the process of getting reimbursed through arena profits. The team’s contract with the county stipulates that any money left over is used to pay off past operating losses at the arena, with interest. Between 2000 and 2010, the arena ran a deficit of about $22 million.

LeBron James’ arrival helped turn around the finances, with the arena turning a profit of $13.2 million in 2011. For the 12 months that ended on June 30, 2012, the profit dipped slightly to $12.5 million. There are no team expenses or profits — such as salaries — involved on the arena side of the business.

The combined “Three Kings” windfall has gone a long way toward moving the AmericanAirlines Arena into a paying tenant for the county. For the first time in its history, the arena no longer records any past losses on its books. For purposes of profit-sharing, the arena recorded a gain of about $6 million in the 2012 season. Profit sharing begins at $14 million, with Miami-Dade collecting 40 cents of every dollar earned above that amount.

Also on Wednesday, the Heat released a summary of a study it commissioned that says the arena generates about $440 million in spending for the local economy. About half of that comes from dollars spent by the team and the arena, and the other half amounts to spillover dollars. Add in other intangible benefits — such as the tourism boost given by a popular hometown NBA team — and the study by Washington Economics Group calculates the Heat pumps up the local economy by $1.4 billion a year.

“A professional sports franchise adds significantly to the global brand of Miami,’’ said WEG founder Tony Villamil. “It’s not just payroll and general expenditures.”

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