Miami Heat, Mayor Gimenez clash on proposed deal over AmericanAirlines Arena

The team sent out an email saying it had a deal for a 10-year extension to play at the arena, but Mayor Carlos Gimenez said not yet.

04/23/2014 6:58 PM

09/08/2014 7:16 PM

Miami Heat owner Micky Arison announced an agreement Wednesday evening with Miami-Dade Mayor Carlos Gimenez for extended county payments to the AmericanAirlines Arena — only to have Gimenez say an hour later that the proposed subsidies are too high for him to endorse the deal.

“We don’t have a deal that I’m recommending,” Gimenez said shortly after Arison wrote season-ticket holders with news of an agreement with the mayor to keep the team in the county-owned arena for an additional 10 years — through 2040. “It’s unfortunate the Heat put this out now.”

The misfire on the deal announcement came as both sides were at least close enough for Gimenez aides to begin briefing commissioners on the “term sheet” — the document with the proposed figures for the deal.

Taking into account the increased subsidies minus the rent the team would pay between now and 2040, the agreement would cost Miami-Dade an additional $121 million through 2040. That’s on top of the $6.4 million the county must pay yearly for the next 15 years under the terms of the 1996 agreement in which Arison financed construction of the $240 million arena. The yearly subsidy would increase to $12 million in 2031 — the first year of the extended lease — and hit $17 million nine years later.

The deal would also mean the county would start collecting a fixed rent as soon as the new deal is signed. That would replace the current profit-sharing deal that could have brought millions each year to Miami-Dade but instead has netted less than $300,000 after 14 years, thanks to the Heat reporting either weak sales or extensive arena improvements that cut into profits.

To provide guaranteed revenue immediately, the Heat entity that runs the arena would pay Miami-Dade a yearly rent that would start at about $500,000 this year and top out at $1.5 million in 2040. In all, the term sheet outlines $147 million in new subsidy payments and $26 million in new rent. Gimenez said the rent money would be earmarked for the county’s park system. Gimenez told the Miami Herald the subsidies the Heat proposed for 2030 and beyond are too high. “I’m not comfortable with the bottom line” cost to the county, he said.

Commissioner Juan C. Zapata, whose district includes part of Kendall and western Miami-Dade, slammed the proposed agreement as too generous to the Heat. He cited one provision that would end the county’s ability to collect more revenue if the arena’s naming rights sell for more than $2 million a year once the current agreement with American Airlines ends in 2020.

“It’s a horrible deal,” he said. “I’ve never seen anything so ridiculous.”

In his email to ticket-holders, Arison, the billionaire chairman of Carnival Corp., touted the deal as a milestone for the team and Miami.

“I am happy to announce that we have come to an agreement with Miami-Dade County Mayor Carlos Gimenez, subject to the approval of the Board of County Commissioners, to extend our partnership with Miami-Dade County for an additional 10 years and remain at the County-owned AmericanAirlines Arena through the 2040 NBA season,” Arison wrote. “We make this agreement with Miami-Dade County proudly as we formalize our commitment to remaining in the Magic City.”

Zapata said he left his briefing with Gimenez chief of staff Lisa Martinez believing the term sheet would be presented to commissioners for a vote, and Arison told ticket-holders to expect commissioners to decide on the agreement at a May 6 meeting. But Martinez said she told Zapata she was there only to update the commissioner on the negotiations, and collect commission feedback for the mayor.

The Heat talks come as Gimenez is warning of a $208 million budget gap. On Wednesday, commissioners held a hearing to consider the library system’s budget, which must find an additional $20 million next year to avoid laying off about half of its full-time workers. Poor public reaction to a Heat agreement also could complicate matters as the mayor negotiates a potential soccer stadium on PortMiami with David Beckham and a tax-relief deal with the Miami Dolphins for a privately financed $350 million renovation of Sun Life Stadium.

Sammy Schulman, the Heat’s CFO, described the proposed agreement as aligned with the team’s need to invest heavily in the arena, which opened in 2000. The current lease agreement would have yielded about $2 million for Miami-Dade this year if not for offsets allowed for the team’s capital investments, and Schulman said the Heat must pump even more money into the facility as it gets older.

“We’re at midlife right now,” he said. Schulman said the team expects to spend $160 million on the arena through 2040.

Gimenez’s aides initially resisted opening lease talks with the Heat, citing the 15 years still remaining on the current deal. But in 2012 the team exercised its option to start renewal talks early, and in January commissioners voted to have Gimenez speed up the talks. Team officials say the timing is linked to the arena’s age, and not to the potential end of the hottest era in Heat history. Attendance at the AmericanAirlines Arena surged after LeBron James joined the team in 2010, and this is the star’s last season before his contract allows him to go another franchise.

The team’s attorney and lobbyist, Jorge Luis Lopez, said the Heat has “no regrets” about Arison’s Wednesday announcement. “He has a basis for what he said,” Lopez, a Gimenez confidante, said of Arison. “Mr. Arison felt comfortable communicating what he believed the status of the negotiations are. The administration always has a right to reconsider and change its mind. We respect the mayor.”

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