As Lastminute Facts Dribble Out Stadium Deal Gets Worse
Written by Michael Lewis on February 19, 2009
By Michael Lewis
After listing six reasons not to build a ballpark, our friends at the Herald editorialized last Thursday that we ought to anyway because we "shouldn’t stop a dream whose time has come."
Well, how do we feel about stopping a nightmare?
Miami Commissioner Marc Sarnoff at least woke us up Friday when rather than rubberstamp an atrocious contract he asked for three reasonable changes.
When President David Samson balked and said that without a yes vote the Florida Marlins would try to leave town, he bluffed the city into a delay to March 12 rather than swap a rotten deal for something far better.
The Marlins, after all, can’t leave. Nobody wanted them last time around, and no city in today’s economy would give them what they’d get here, even if we improved terms markedly to public advantage.
Still, holding no cards, the Marlins have conned government into handing them a bonanza. It shows the need to use professional dealmakers rather than county staff who aren’t adept at playing with cardsharps.
That assumes we want a deal at all, the first of five questions lawmakers should answer:
•Do we really want to finance a stadium the Marlins run?
This newspaper for years has said no and most residents concur, but reasonable people can disagree. The issue is philosophical, not analytical. We respectfully suggest that new Dolphin Stadium owner Steve Ross could cut the team a deal that makes a new stadium unnecessary.
But let’s assume that, like some commissioners, you do want to build. That takes us to four more questions:
•Is it the best use now of public resources?
•Can we do it without slicing into important needs?
•Will the contract accomplish what the public wants?
•Is it the best deal we can get?
Even stadium supporters should answer no to all these for many reasons.
Take question two: Is this the best use of resources?
Fighting the recession requires economic engines to create permanent jobs. A stadium would create none, a point even County Manager George Burgess, the chief negotiator, admitted in a document he sent to commissioners hours before they were to vote Friday.
While the team and Mayor Carlos Alvarez have been selling the stadium as a jobs engine, Mr. Burgess acknowledged for the first time that after construction, all a stadium would do is retain jobs that are now at Dolphin Stadium, the Marlins’ present home, not create any.
An easier way to retain those jobs is to stay put, not build for well over $2 billion — four times the $515 million quoted just two weeks ago. The new price tag is derived using Mr. Burgess’s last-minute memo.
A far better use of tourist taxes the plan covets is to expand our outmoded convention center. In his memo, Mr. Burgess says all the money to expand is there already. We doubt that, but if so why in heaven’s name aren’t they pouring concrete today, when our convention industry is floundering just as vast added hotel space has opened?
General obligation bond money for a stadium could find far better use. The last-minute Burgess memo shows the true cost for that isn’t the previously-touted $50 million but $55 million. What’s a few million between friends?
Next, will we have stadium funds without shorting vital needs?
The Burgess memo quadruples stadium estimates by listing for the first time interest payments but admits it’s still just a guess. Commissioners won’t know when they vote how high costs can actually go.
In fact, there’s no assurance the county can sell the bonds. Mr. Burgess says it can, but at what cost? Once commissioners vote yes, only Mr. Burgess gets to decide whether to continue if bond interest should multiply.
In fact, papers he gave commissioners Thursday detail 53 major types of stadium decisions that he alone would make once commissioners OK a deal.
Among them are whether, if the team were sold within seven years, the county was getting the correct payoff.
Another solo decision would approve the stadium name — and even he would be shut out if the brand was a major corporation’s.
He’d also get sole right to OK all manner of changes, including stadium completion date, design changes and — get this — the actual budget. Commissioners are to vote on just a framework — and even that’s a moving target.
Commissioners got hundreds of pages of the deal 15 days before a vote was due, others a week before, the 21-page Burgess memo the night before and after that an agenda with 66 more changes, some substantial, some technical (though none fixed an error noted on this page that sharp-eyed county Commissioner Carlos Gimenez spotted).
In his memo, Mr. Burgess acknowledged for the first time that "important changes to the global credit market and national economy have impacted the county’s financing plans for the project."
He went on: "Financing of this magnitude is undeniably more complicated and potentially more costly that a more straightforward conventional financing. Like any deal of this scope and importance, the costs and risks should be weighed against the project and its rewards."
All that’s missing is BEWARE, in red letters. He’s gambling, and he’s telling us so.
He also issued another warning that commissioners won’t vote on the deal’s final form. After they approve, the agreements get massaged. Would you sign this blank check?
He also admitted that the deal will tap water and sewer funds and might dig into more Building Better Communities bond funds as well.
As to whether the three declining tourist-related taxes will bounce back enough to meet obligations in this deal, his memo says "we feel comfortable." Great, but the visitor industry doesn’t.
And as for taking for baseball $27 million that was to finish the New World Symphony’s home now rising on Miami Beach, Mr. Burgess left the door open to funding the job some day. Meanwhile, who pays to finish construction?
He admits the county might have to fund stadium delays and says $5 million is reserved for that. Those who saw years of airport and performing arts center delays would seek more than ten times that amount.
Now, would this deal accomplish what the public wants?
Some stadium boosters care less about preserving public funds than keeping the Marlins here. The deal would in fact do that.
Even so, most fans won’t be overjoyed. They’d pay twice as much to park as at Dolphin Stadium — assuming they could find parking within a mile.
The deal lets the Marlins set parking fees, gives them the best 250 spaces free and guarantees only 5,250 more spaces, with season ticketholders first in line. Ordinary Joes would scour the area to park in backyards at $20 or $25 — and there aren’t that many backyards. Walking shoes would be essential.
When they do get to the stadium, fans would pay far more. The cheapest seat, $9 today, would soar to $15 the first year, $18.44 the seventh.
But at least you’d get a covered stadium, right? Well, maybe. By contract, the Marlins could unilaterally change design.
Finally, even if you’d swallow all this, is this the best deal we can get?
Even Mayor Carlos Alvarez finally concedes it’s probably not. He just wants to get on with it. But as taxpayers, we want the best.
In this deal the Marlins are on the hook for overruns. But beyond a $20 million credit line, there’s no way to collect big overruns from a team that’s in debt.
A subordinate lien on Marlins assets, the Thursday memo from Mr. Burgess notes, lasts only until the team gets construction funds. Overruns would only surface near the end of construction, after the lien expired.
So if the team is on the hook for overruns and there’s no lien, could we look to owner Jeffrey Loria for money? No. The contract exempts him from all liability. His millions are untouchable if the team can’t meet obligations.
The Marlins are to handle construction not only of the stadium but infrastructure outside too. The county and city split that $24 million. But Mr. Burgess admits the public might pay for infrastructure overruns controlled by others. They err, we pay.
Another bad apple is an insurance clause for Mr. Loria. The public is to get a slice of profits if the team is sold within seven years. In year six, if the price was $600 million the public would get $7.5 million and the Marlins, who put in far less, would get $592.5 million.
But as Commissioner Sarnoff pinpointed Friday, if the owner dies in that span the public gets nothing. That wrinkle could give the Loria heirs a $60 million gift from taxpayers the first year, less each year thereafter.
The Burgess memo clarifies for the first time that the Marlins won’t use a cent out of their pockets. They’re to borrow $35 million interest-free from the county and $120 million elsewhere before construction is done and pay it all off from profits from the public’s stadium. They play on credit.
The meter is running. The memo says the team gets design and development drawings in March. The more done, the more the public might pay if a stadium never rises.
Documents commissioners got late Thursday reveal if government exits the deal by June 30 the public will be on the hook under a complex formula for part of the Marlins’ expenses to date. Terms had changed from just two weeks before. Yet commissioners got them, unheralded and buried in an agenda, hours before they were to vote.
They also were to act as a holiday weekend began, voting and running. That and the last-minute documents created the worst scenario for flyspecking a plan that would tie up our tourist development money for four decades.
Thanks to city commissioners Sarnoff and Tomás Regalado for refusing to swallow this. Now we have a month to persuade city and county colleagues to follow suit.
We might disagree on whether taxpayers should build a stadium, but all know that this nightmare deal is unacceptable. This community must do far better.