Building the Miami Marlins’ new stadium may end up costing tens of millions of dollars less than planned.
And where would the left-over money go? To a maintenance reserve that would save the Marlins from having to dip into their pockets in the future to maintain and repair the stadium.
Part of the deal the baseball team negotiated with Miami-Dade allows the Marlins to keep all construction savings, and apply the money to future maintenance and improvement costs at the ballpark. Because the Marlins are responsible for a big chunk of those expenses anyway, the lower construction costs could mean a windfall for a team that is cutting player payroll and facing continued backlash over public dollars poured into the county-owned stadium.
As of the end of December, the team had spent only about $102 million of the $131 million it had agreed to kick toward construction.
Stadium construction was budgeted at $515 million, with the team benefiting from any savings from the total cost if the ballpark came in under budget.
“So they’re able to simply roll this into a fund that they would otherwise have had to spend money on,” said author Neil DeMause, whose 2002 book Field of Schemes skewers the greed of wealthy ballclub owners and explains how politicians bow to the pressure of handing over public money. “That’s interesting.”
A look around at some of the newer ballparks in the league shows the Marlins are likely to spend tens of millions more over the first decade upgrading the Little Havana ballpark than the $1.75 million a year the team, the county, and the city of Miami are obligated to place in the capital reserve fund each year. The stadium agreement stipulates the Marlins and the county each place $750,000 each year, and Miami $250,000, in the reserve. Any expenses over the $1.75 million in any year would have to be paid by the Marlins.
Elevators and escalators will need repair. Concession stations will have to be updated. Lights will have to be replaced. The typical lifespan of a new electronic scoreboard is only seven years, with a cost well in excess of $10 million
The Seattle Mariners’ Safeco Field has undergone more than $80 million in upgrades since 2000, including a new $11 million scoreboard built last year, with the entire cost picked up by the ballclub.
Stadium improvement costs were almost the same for Milwaukee’s Miller Park, though the team wasn’t on the hook for nearly as much money as the Mariners. That’s because the public/private partnership between the team and the Milwaukee Ballpark District makes the district the landlord and 70 percent owner of the franchise. Renovations must be approved by the authority unless the Brewers want to pay for them with their own money.
Each year the Brewers place $750,000 a year in an improvement reserve, while the authority invests $1.75 million. So far, Miller Park District Executive Director Mike Duckett says his authority has spent about $20 million, and he believes the Brewers have spent about twice that amount.
“If we go over, it stipulates the district must cover the cost,” said Duckett. “But we meet with the Brewers each year asking what their needs are. It’s worked out pretty well so far. I think we still have about $9 million in the fund.”
Like most of the Marlins stadium deal, the capital improvement clause heavily favors the team. The total $642 million for ballpark and parking facility agreement cost the county $384 million, the Marlins $131 million, and the city $127 million, mostly for the stadium’s six garages. Yet the Marlins collect almost 100 percent of the revenue, including those coming from concessions, concerts and parking fees.
Miami-Dade Commissioner Dennis Moss, who voted for the stadium, acknowledged it was far from a great deal for the county.
“No, I didn’t go through it [the contract] page by page. I don’t think anyone went through it page by page,” said Moss. “But what I did do was rely on the administration to lay out the deal.”
To be fair, it is still possible the Marlins will need to spend a portion of the $29.1 million they had not spent as of the end of December, before the books are closed on stadium construction.
Responding to questions by email, Carolina Perrina de Diego, the team’s director of business communications, said the Marlins have closed out 51 of the 65 contracts the team signed with contractors to build the ballpark. Some of the remaining contracts may still go to arbitration.
“We expect to be very close to the finish line by April 2013,” Perrina said. Any money the team comes in under budget “will be assigned to the capital reserve fund for future capital projects.”
While the $29 million the Marlins could save represents a small portion of the stadium’s $515 million construction budget, a lower tab could have made a big difference long-term for Miami-Dade taxpayers. A combination of a horrible credit market and Miami-Dade’s strained finances left the county to create a borrowing package that brought sky-high interest costs when commissioners approved the deal in the grim summer of 2009.
“The market was a hard market in 2009,’’ said Frank Hinton, head of Miami-Dade’s bond division.
One bond package in particular illustrates how shaving millions off the construction cost could have amounted to enormous savings.
When Miami-Dade sold a series of bonds to raise $91 million for the stadium construction in 2009, Wall Street financiers exacted repayment terms will have Miami-Dade paying more than $1 billion in interest on the bonds through 2048.
In all, the $91 million bond sale will cost $1.18 billion to repay, and cannot be refinanced, Hinton said.
Though the bonds are backed by Miami-Dade hotel taxes, lending terms require the county to dip into certain sales and property taxes if the lodging revenue ever falls short.
While interest payments will hit $110 million a year by 2042, inflation should render those figures far less eye-popping than they seem today. Still, the $91 million bonds stand out for their high repayment costs. Those bonds only account for about 20 percent of the money the county borrowed for the stadium, but they account for 55 percent of the full $2.4 billion that the county must pay to bondholders on stadium debt during the next four decades.
Jose Galan, the county’s project manager for ballpark construction, agreed that Miami-Dade could have borrowed money on better terms had the contract not called for it to contribute funding upfront. The Marlins paid their share at the end, as revenue poured in from advertising and suite sales and the global credit market was on the mend.
But Galan also noted that financial hindsight is 20/20, and it wasn’t known in 2009 if the credit market would be even worse in the coming years. He also believes the Marlins took the greater risk by agreeing to pay for any cost overruns. Meanwhile, Miami-Dade had a fixed construction budget to fund and did not have to worry about the expenses that come with delays or increases on, say, the price of steel.
“We’d much rather be able to say, ‘I know what my total expense is going to be,’’’ Galan said.