Gimenez and Arison reach deal on Heat arena
05/16/2014 12:17 PM
09/08/2014 7:18 PM
The Miami Heat would begin paying rent at AmericanAirlines Arena — but ultimately receive more than enough new subsidies to cover the new expense — under a deal Mayor Carlos Gimenez reached Friday that would keep the team in the county-owned facility at least through 2035.
Under the new terms, the Heat would end what has been a nearly fruitless profit-sharing arrangement for Miami-Dade in favor of an immediate stream of yearly $1 million donations to the county parks department. The Heat would get an extra five subsidized years at the county-owned arena, not the 10 that owner Micky Arison originally requested. Miami-Dade would also retain its claim to naming-rights revenue, rejecting the Heat’s proposal to end the arrangement before American’s current sponsorship resets in 2020.
As part of the extension, the Heat’s current $6.4 million yearly subsidy from county hotel taxes would jump to $8.5 million in 2031. In all, the deal would cost Miami-Dade an additional $19 million through 2035, far less than the $120 million price tag for the original deal that Arison publicly proposed shortly after his team entered the NBA playoffs last month.
“The national and international exposure provided by having the Miami Heat call Miami-Dade County home cannot be understated,” Gimenez wrote in a memo Friday to county commissioners, who must sign off on any agreement.
Mayoral aides and the Heat’s lobbying team both had pushed to get the deal ready for a vote at Tuesday’s county commission meeting, according to people familiar with the talks. But commissioners pushed back at what they saw as a rushed process, and late Friday Commission Chair Rebeca Sosa’s office sent word that the Heat item would not be included on Tuesday’s agenda.
“I want to make sure we do things right,” Sosa said. “I don’t think it’s fair to accept one item without giving it the proper time for the staff and commissioners to get involved.”
The proposed Heat deal comes during a spurt of sports negotiations for Gimenez, who came to office in part thanks to his opposition to borrowing more than $350 million for Marlins Park in 2009. Soccer star David Beckham wants Miami-Dade to provide waterfront county land for a soccer stadium, while Miami Dolphins owner Stephen Ross is asking for the county to take over his stadium and save the team almost $4 million in yearly property taxes.
Commissioner Juan C. Zapata, a critic of the first Heat proposal, said the new terms “changed significantly — that’s good. But I want to understand the details.”
He also said the Heat proposal will suffer from Beckham’s push to win approval by the summer of his offer to pay rent for his county-owned stadium without any local contributions beyond a site. Like Arison, Beckham offered to use private dollars to build the soccer stadium on county-owned land. Unlike Beckham’s proposal, though, the Heat is being paid back out of profits that otherwise would be shared with Miami-Dade.
“When this [Heat deal] gets compared to the soccer deal, it’s not going to be anywhere near as good,” Zapata said.
No sports team in Miami enjoys as much popularity at the moment as the Heat. Now chasing their third championship with LeBron James, the team regularly packs AmericanAirlines Arena and claims to be a force for downtown Miami’s economic revival. James’ contract allows him to leave for another team after this season, leaving him to decide his future and Arison to decide how much to pay to keep him in Miami.
Heat lobbyist Jorge Lopez said the proposed extension would give the Heat the kind of financial horizon that could help keep the star line-up intact. “It gives us the cost certainty that Mr. Arison has always wanted,” said Lopez, a lawyer. “It’s an era when we’re looking at extending our winning ways with the re-signing of players. … Sending the message that we have a good public-sector partner, and we’ve made these long-term agreements, can’t hurt.”
The proposed agreement would rewrite the Heat’s original 1997 deal with Miami-Dade, which doesn’t expire until 2030. While the higher subsidies wouldn’t kick in for another 16 years, the county’s finances are projected to be tight enough then that Gimenez said he did not want to risk committing extra dollars through 2040.
Miami-Dade pays the Heat out of the same hotel taxes that fund debt for the Marlins Park loans, and the payments escalate sharply by 2035. Debt service for Marlins Park tops $80 million yearly in 2038, then jumps to nearly $120 million a year between 2041 and 2046.
The proposed deal officially gives the Heat an additional 10 years in the arena, through 2040, but also gives the Heat the option of opting out of the last five years as early as 2025. Miami-Dade is not obligated to pay subsidies past 2035 and the summary of the deal assumes zero payments in those years — suggesting an all but certain renegotiation for the period between 2036 and 2040. The original 1997 agreement contains a similar renegotiating option that would let the Heat remain in the arena through 2040 if it could reach an acceptable agreement with Miami-Dade.
Gimenez and Heat negotiators were close enough on a new deal last month that mayoral aides briefed commissioners on a possible subsidy deal through 2040, though Gimenez said he couldn’t support the terms once Arison revealed them to fans in an April 23rd email hailing an agreement.
The new deal described in a seven-page memo outlines less generous terms for the Heat than the original proposal: about $23 million in park donations from the Heat through 2035 rather than $20 million, and $42 million in extra county subsidies instead of $67 million. (The original deal proposed an additional $80 million from 2036 through 2040.)
“What was sent around was the best I could do at the time,” Gimenez said.
The profit-sharing arrangement would end immediately, meaning Miami-Dade would have no claim on whatever windfall the arena records this year. The 1997 arrangement essentially gives Miami-Dade 40 percent of all arena profits above $28 million, but the threshold was only crossed once — when the Heat cut a check to the Board of County Commissioners in 2013 for $257,134.12.
Gimenez said his staff did not attempt to estimate what the profit-sharing arrangement might yield this year or in the future, saying history suggests it would be a wasted effort.
“If we had kept the agreement the same and expected different results that may be the definition of insanity,” he said. “The first year we’ll get close to four times the amount of the last 14 years.”
Miami Herald staff writer Patricia Mazzei contributed to this report.
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