The Miami Heat, which won a second championship this year but has yet to pay Miami-Dade a dime in profits after 12 years at its bayfront arena, wants to extend its 30-year agreement with the county for another decade.
The existing agreement doesn’t expire until 18 years from now, in 2030. But, as permitted in the contract, Eric Woolworth, the team’s president of business operations, sent Mayor Carlos Gimenez a letter last week asking the county to begin negotiations on two five-year extensions.
The team wants to plan for its future at the county-owned AmericanAirlines Arena in downtown Miami, said Sammy Schulman, chief financial officer for the Heat Group, the team’s parent company.
“We’re here. We’re a long-term partner. We’re not going anywhere,” Schulman told The Miami Herald on Monday.
The Heat’s request comes on the heels of a title-winning season that generated about $62 million in revenue — bringing it closer than ever to the threshold that would require the team’s arena-operating arm to fork over some of the money to the county. A separate entity handles Heat-related finances such as player salaries.
As part the county’s 1997 accord with the Heat, the team owned by Micky Arison financed construction on county land of the $213 million arena, which the team says ended up costing $239 million, after it bonded out a state sales-tax rebate. Miami-Dade agreed to let the arena keep profits up to $14 million a year, with the county set to receive 40 percent of any additional profits. The team has yet to reach that number since it debuted at the arena 12 years ago, essentially remaining at the facility rent-free.
Most of the Heat’s revenues have gone toward reimbursing the team for the money it borrowed to build the arena and to pay off past operating losses, with interest, as stipulated in the contract with the county. The arena ran a deficit through 2010; its finances improved with the arrival of LeBron James, the reigning league most valuable player.
Despite the team’s championship run last season, ticket and concession revenues at the arena dropped thanks to an NBA lockout that did away with about two months of basketball. Still, the team reported making $12.5 million in profit in the fiscal year that ended June 30.
The county also provides the arena with a $6.4 million annual subsidy, funded by taxes charged to hotel guests. The total paid out by the county so far: about $70 million. The building also receives a $2 million annual sales-tax rebate from the state.
All of the county terms could be tweaked as part of the negotiations, though the county says it’s too early to say which provisions it will focus on.
“There’s no real time crunch for this, at least contractually,” Deputy Mayor Ed Marquez said. “We’re amenable to discussing anything with our partners. I don’t know what they have in mind.”
Schulman, the team’s CFO, wouldn’t delve into specifics. The Heat’s lobbyist, lawyer Jorge Luis Lopez, who is close to Mayor Gimenez, called the profit-sharing provision “the elephant in the room.”
“All terms of the extension are on the table,” he said.
He added that the county may not be in a position to continue providing an annual subsidy to the arena, which would put a greater burden on the team to maintain the facility. That suggests that more revenues could go toward capital improvements and less toward potential profits to split with the county.