Miami Heat gets new arena deal
The county commission approved a new deal with the Heat, agreeing to subsidize the team’s home court for an extra five years at $8.5 million a year.
06/03/2014 1:49 PM
06/03/2014 9:48 PM
The Miami Heat easily won a new arena deal Tuesday from Miami-Dade County, with commissioners agreeing to subsidize the team’s home court for an additional five years in exchange for regular donations to the county’s parks department.
Miami-Dade would still pay far more into the county-owned AmericanAirlines Arena than it would receive from the Heat’s new $1 million payment to parks, but commissioners touted the deal as a welcome investment in South Florida’s hottest sports team.
“There is not enough money out there to spend to get the publicity the Heat brings this community,” Commissioner Bruno Barreiro said before casting one of the 10 votes in favor of the agreement. Two commissioners voted no: Lynda Bell and Xavier Suarez. Commissioner Juan C. Zapata did not attend the meeting, and a staffer said he was ill.
The $6.4 million in hotel taxes that Miami-Dade currently pays the Heat annually as an operating subsidy would continue as planned until the end of the current deal in 2030, then rise to $8.5 million a year for the extra five years tacked on under the agreement approved Tuesday. Miami-Dade would also retire a profit-sharing arrangement that was a central part of the 1997 agreement that provided for the Heat to finance construction of the 19,600-seat arena on county waterfront, then pay itself back with interest out of arena profits.
Due to those deductions and other provisions in the contract, the Heat has shared profits with the county only once, when it wrote a check to Miami-Dade last fall for less than $270,000. That was despite back-to-back championships under LeBron James. Heat executives said this week they expected the deal would yield no profit-sharing money in 2014, thanks to heavy spending on arena upgrades.
The deal’s easy passage before the County Commission marked a victory for both Mayor Carlos Gimenez and the Heat, both of whom had to overcome the political hazards attached to subsidized stadium deals in Miami. Heat lobbyists, led by Gimenez confidant Jorge Luis Lopez, initially pushed for a decade of new subsidies worth about $15 million a year.
Gimenez balked, citing mounting debt obligations from Marlins Park. While negotiating with the Heat, Gimenez separately endorsed a tentative proposal to pay the Miami Dolphins special subsidies for hosting major events, and endorsed letting David Beckham build a soccer stadium on publicly-owned land along the Miami waterfront.
Both of those deals are still pending, making the Heat agreement that first major sports deal approved by Miami-Dade since the unpopular Marlins vote in 2009. Gimenez voted against that plan as a county commissioner, rose to power on the backlash from the deal, and pointed to his Heat negotiation as proof of a smarter take on sports subsidies.
“In one year, we’ll see nearly four times the compensation that we did during the entire life of the current contract,” Gimenez told commissioners, comparing the Heat’s yearly $1 million payment to the lone profit-sharing check Miami-Dade received from the 1997 deal.
Only Suarez, a frequent Gimenez critic, questioned the heart of the deal, saying Miami-Dade had wrongly opted to share future revenue with the Heat from naming-rights.
The current contract lets Miami-Dade sell the rights itself once the American Airlines sponsorship resets in 2020. The new deal preserves that right, but also sets up a system where the county can let the Heat sell the rights itself and then negotiate a split with Miami-Dade. A county stadium consultant, Carl Hirsch of Stafford Sports, said American’s current $2.1 million-a-year deal is about half what NBA sponsorships go for today, and Suarez characterized the possible split as a needless giveaway.
“We don’t need to share that with anyone else,” he said. “I think we are giving away a lot in this deal.”
Lynda Bell, the lone commissioner facing a well-funded opponent in a reelection bid, commended Gimenez on his negotiations before voting against the proposal. “I’m not sure, sitting here, this is the best deal for Miami-Dade County,” she said. “I never want to sacrifice the better for the best.”
Heat front-office executives sitting in the second row of the commission chambers were mostly silent during the debate. Former star Alonzo Mourning spoke briefly for the team. Addressing commissioners, the current vice president of player programs said: “We’re very, very excited to be extending this contract.”
The Heat’s current subsidy consumes about a 10th of a 3 percent hotel tax collected countywide, one of three taxes Miami-Dade charges hotel guests. Miami-Dade also spends about $3 million yearly on the debt used to pay for the arena’s $37 million waterfront land. The state pays the Heat $2 million yearly in sales-tax rebates.
While the new deal would cost Miami-Dade an additional $19 million through 2035, the county’s finance department said projected inflation in future years should leave the total expense at closer to $2 million in 2014 dollars.
Though the current contract doesn’t expire for 16 years, Heat executives said they wanted to renegotiate the deal now in order to plot out a long-term business plan for the arena. While the new deal provides for a 10-year extension, the subsidies and park donations are only mandated through 2035 and the Heat can negotiate new terms for the remaining five years.
With the Heat’s negotiating team pushing for a quick vote, county officials cited the NBA’s postseason schedule as a motivator for the haste. Commissioners agreed to bypass the normal committee system in favor of Tuesday’s vote. The Heat’s try for a third consecutive NBA championship begins Thursday with a game in San Antonio.
The most contentious part of the Heat discussion centered not around basketball, but soccer.
County lawyers issued a memo warning that the Heat’s original 1997 contract contained a non-compete clause that could apply to the proposed 20,000-seat Beckham soccer stadium. The provision bars Miami-Dade from providing direct or indirect “monetary support” for an entertainment venue seating up to 45,000 people. (It included exemptions custom-made for both Marlins Park and the county’s nearby Adrienne Arsht Center for the Performing Arts.)
The memo said the new Heat agreement includes no provision to exempt soccer, and county attorneys said they couldn’t rule out the possibility that clause applies to Beckham’s plans.
“At this point, it’s difficult to give you any advice,” Geri Keenan, an assistant county attorney, told the commission.
The legal discussion briefly unleashed a larger debate over a key piece of land in the Beckham proposal: Parcel B, a corner of county-owned waterfront behind the AA Arena. The land has long been promised as a park, but the Heat uses it as a staging ground for trucks and large equipment when major concerts, circuses and other big events use the arena.
Beckham’s proposed stadium, to be built partly on a filled-in yacht basin, would also stand on part of Miami’s new Museum Park. Gimenez has endorsed giving Parcel B to Miami to compensate for the lost green space.
Barreiro noted the county-owned arena needs Parcel B to function as an events destination, and said using it “entirely” as parkland wouldn’t work.
The non-compete proviso could give the Heat significant leverage in the soccer talks, but Gimenez said he doubted the clause applies since the county would offer Beckham no cash subsidies.
Aside from the Parcel B back-and-forth, the Heat deal was met with mostly warm words Tuesday. Commissioners said the proposal looked much better than the terms the Heat wanted weeks earlier.
That deal — for new annual subsidies of $15 million and no naming-rights money for the county — was close enough that Gimenez aides were briefing commissioners on the terms, but Gimenez said the agreement wasn’t acceptable after Heat owner Micky Arison revealed it in an April 23rd e-mail to fans.
“Mr. Mayor, the first deal you came up with I wouldn’t have supported,” said Commissioner Barbara Jordan, a co-sponsor of the resolution to adopt the new Heat agreement. Gimenez responded: “I wouldn’t have either.”
Miami Herald staff writer Patricia Mazzei contributed to this report.
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