County subsidizes Miami Heat's arena without profit split
By Scott Blake
For Miami-Dade County, Christmas has come and gone yet again without a revenue-sharing gift from the Miami Heat.
As the Heat opened its home season against the Boston Celtics on Tuesday night, the irony that the county technically owns AmericanAirlines Arena, where the Heat plays, but it shares in none of the profits has been well documented.
That's because a Heat subsidiary, Basketball Properties Ltd., has continuously failed to report a $14 million annual profit, which is the threshold under a 1997 agreement for the county to get 40% of the money above that level.
It also is known that, under the same agreement, the county pays a $6.4 million annual subsidy to Basketball Properties, which was created to build, manage and operate the arena.
County spokeswoman Suzy Trutie says the money is to repay the Heat for fronting the construction costs for the 19,700-seat downtown arena, which opened Dec. 31, 1999.
If it sounds like a bad deal for the county, Ms. Trutie says it could have been worse had the NBA contract stalemate continued and canceled the season, wiping out 41 regular season home games for the Heat.
Under that scenario, the county would have lost an estimated $492,000 to $738,000 in tax receipts from ticket sales. In addition, Miami area hotels would have lost an estimated $8.2 million to $12.3 million in room rental revenue, according to Ms. Trutie.
Instead, the NBA and its players settled their contract issues, but the season's late start will result in only 33 home games, so part of the ticket taxes and hotel revenues still will be lost.
Yet from a taxpayer's perspective, the worst of it is that the county government doesn't know when it will ever share in the profits from AmericanAirlines Arena, which has become one of the nation's most successful arenas, according to its website.
Citing Pollstar, an entertainment industry publication, the website states the arena sold more than 340,000 tickets from January through September, ranking it seventh in the nation and 18th in the world. That includes concerts and other special events.
In a statement on the arena's website, Mike Walker, executive vice president of Heat Group Enterprises, attributed the strong ticket sales to the venue's ability to attract "world-class performers," even during a recession.
However, Mr. Walker refused to discuss the Heat's 30-year agreement with the county, instead referring questions to Heat Group Executive Vice President and General Counsel Raquel Libman.
Ms. Libman also refused to discuss the agreement, saying in an email to Miami Today that "as a matter of policy we don't comment on the matters you have asked about."
Perhaps the most controversial part of the agreement has been the revenue sharing provision. It calls for the county to receive 40% of profits above $14 million a year from the arena. However, Basketball Properties has yet to report a $14 million annual profit through the years, leaving the county without a share of the money.
On the basketball court, the Heat is on a quest for a championship. On its financial statements, the organization's profitability has not been so stellar.
In October, Basketball Properties submitted to the county its annual financial statement for the 2011 fiscal year ended June 30.
A copy of the statement shows the organization's fiscal 2011 revenues totaled $60.6 million, including $31.4 million from suite and premium seating sales. That was up from $45.4 million in total revenue and $20.5 million in seating sales in the prior year.
However, the organization reported total expenses of $47.4 million in fiscal 2011, including a $12.07 million line item for depreciation and amortization. The line item does not specify what the depreciation and amortization are for.
That, among other expenses, left a profit of $13.22 million — much higher than the $1.97 million profit reported the year before, but still under the $14 million threshold to share revenue with the county.
Former County Commissioner Katy Sorenson, now CEO and president of the Good Government Initiative at the University of Miami, has criticized the arena pact.
"It was going to give a lot of benefit to the team and not so much to the county," Sorenson told Miami Today. "We own the land and we own the arena — but so what? As long as there's a contract we don't really get anything out of it."
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