Marlins Owners Get Huge Christmas Gift Public Gets Coal
Written by Michael Lewis on December 27, 2007
By Michael Lewis
Wrapping a stadium among gifts on a City of Miami Christmas tree adorned with unrelated but very costly goodies just handed a bonanza to Florida Marlins owners.
Team owners can pocket hundreds of millions once the county, which is driving the deal, finishes negotiating a complex series of stadium agreements that the city joined into last week.
And while county administration is telling commissioners that the ballpark now is to cost $525 million versus $490 million that had been proposed for a downtown stadium, real costs to the public are far higher.
How much higher we don’t yet know, because even commissioners haven’t been told everything. The last sentence in the detailed 12-page document they got from County Manager George Burgess before this week’s vote on the stadium left this massive loophole:
"It should be noted that while the above outlined County obligations and terms represent the major elements, they do not constitute all of the provisions in the draft BSA [Baseball Stadium Agreement]."
In his cover letter, Mr. Burgess further notes that even the details that commissioners got before their vote aren’t final — he’s still negotiating with Major League Baseball, the Marlins and the City of Miami on these.
Even the fully-enclosed stadium with a retractable roof that Marlins had been calling vital to their future and the county had been promising isn’t for sure in this fluid agreement. Mr. Burgess notes that the outfield and sides of the ballpark might not be covered at all for our $525 million — skyrocketing from the $360 million to construct a completely enclosed stadium that was rejected just two years ago.
So county commissioners were buying a pig in a poke, voting on a deal whose provisions they don’t know. Not that they’re likely to read details anyway, but it would have been decent to give them a chance.
While we don’t think spending hundreds of millions on a stadium to benefit private owners in the face of almost-certain property tax cuts still to come and a current economic slump is wise, if government is hell-bent on a giveaway it should give with care.
When the county went down this road in 2005, it drafted a memorandum of understanding with the Marlins that allowed either side to step away before signing a pack of subsequent agreements — a stadium lease, development agreement, ballpark management agreement, agreement that the team wouldn’t leave town, cost overrun guarantee, development agreement guarantee, ballpark management guarantee and more.
This time, though, an agreement to do the deal is to bind both sides even before other pieces have been hammered out. It will cost the county $10 million to walk away if it gets stuck on details of the various agreements with the Marlins.
It’s not smart to put yourself $10 million in the hole if you don’t like what the other side might yet require. It’s dumber than dumb if the other side is the Florida Marlins — just ask the general managers of teams who complained in the press in recent weeks because the Marlins agreed to player trades and then reneged again and again, asking for more and more.
That, in fact, was what the Marlins just did to the county. They had agreed to put $192 million into a stadium, then cut back to $155 million, saying they were taking a second-class site at the old Orange Bowl. Want to bet they won’t keep using that tactic?
They shouldn’t, of course. This is already a terrific deal for Marlins owners.
By borrowing $155 million for their share, they risk no money of their own. They plan to repay that loan from profits at a stadium that taxpayers will fund.
That is, if they keep the team. Once we build a stadium, the team’s value soars. They can sell for a huge profit if we build it for them.
The public, it’s true, would get a sliver of sale profits — but based on the team being worth $250 million today, which is far, far more than owners paid for the franchise. So they’d profit greatly from a sale before the public got a penny.
That penny to the public, by the way, would be 10% of the team’s sale price above base value in 2011, 9% the next year, 7% the third, 6% of the fourth, and 5% up through year 10 — after which the public would get nothing.
Even those tiny slices of the public’s money might not come back. First, the agreement inflates the franchise value 8% a year — meaning the $250 million base rises $20 million the first year, $21.6 million the second, $23.3 million the third and so on, starting as soon as a deal is signed. By the time a ballpark opened in 2011, the base before which the public would get a penny in a sale would be more than $340 million — more still if the owners actually invested cash in the team.
And one more caveat: if controlling owner Jeffrey Loria should die and the team then be sold, the public wouldn’t get a penny for their hundreds of millions invested.
I stress the profits from a sale only because that’s the only way the public could get a cent back.
Once we build the stadium, the county owns it but the Marlins get it rent free. They keep every cent from ticket sales, concessions, naming rights, parking in a new 6,000-car garage that the City of Miami is nice enough to lease to them, luxury suites, stadium advertising, broadcast rights, marketing, promotions and more. We build it, they keep it.
Oh, we do get some public benefits — at least, public official benefits. The deal gives the county and city free use at every one of 81 games of two private suites and 22 box seats — which works out exactly to one box seat for each city commissioner, each county commissioner, and both mayors and managers. How convenient.
Beyond that, benefits get fuzzy: the Marlins must maintain a community foundation, but the deal doesn’t say if they have to invest even $1 in it. They’re supposed to help all sorts of local charities, but the deal doesn’t say how. They’re supposed to ask advertisers and sponsors to support the foundation, with no specifics. Players and officials have to appear in public a total of 25 times a year — less than once per person. You’d think they’d appear far more than that just to build ticket sales.
The city and county would get to use the public’s own stadium a total of 12 times a year at no rent, but they’d have to pay all the expenses. While terms of the deal are vague on stadium use, the Marlins can certainly use it free for their 81 home games and quite possibly for the 272 days not otherwise spoken for, promoting their own events and pocketing all revenues rent free.
There are minor public benefits — if you talk about being able to buy 50,000 tickets a year at a 25% discount from what will undoubtedly be far higher prices than today. You learn about that price hike when you’re told that 7,200 seats must be "affordable," meaning $15 or less the first year, with no ceiling thereafter, which is hardly a bargain basement.
One more benefit that really repays us: once they go into the stadium, the Florida Marlins must become the Miami Marlins. You’d think they’d have the good grace to do that now, as a Christmas present, but no — we have to negotiate even that.