Sony Open Seeks 50 Million County Bond
Written by Scott Blake on September 27, 2012
By Scott Blake
Organizers of the Sony Open Tennis Tournament on Key Biscayne want Miami-Dade County to issue municipal bonds to finance $50 million in upgrades to the county-owned tennis complex where the tournament is played each year.
County commissioners have yet to agree on a financing method, but they have placed the project on the Nov. 6 election ballot. The ballot question asks voters to approve the project at Crandon Park Tennis Center for "public park and tennis tournament use," and states the work will be "funded solely by tennis center and tournament revenues and private funds…"
The tournament’s organizers said the municipal bonds would be backed by tournament monies and not by any county revenue source.
"We would hope to persuade the county that a revenue bond, with security limited to the pledged tournament revenue, is the appropriate way for private interests to fund a public facility," said Sam Henderson, a spokesman for International Management Group, the tournament’s organizers.
The county, meanwhile, said it will address the issue after the election — if voters approve the project, which needs a two-thirds vote.
"It’s premature for the county to comment on the funding and financing, since the outcome of the Nov. 6 election will determine the viability of the construction project and the tournament organizer will be underwriting the costs," said county spokeswoman Suzy Trutie.
"Negotiations with tournament organizers, necessary reviews, and considerations for project approval by all oversight governance groups including the Board of County Commissioners will begin after the Nov. 6 election," she added.
According to municipal bond experts, municipal bonds can be issued with backing solely from a private revenue source, in this case, the Sony Open and its organizers.
"It’s not typical," said Peter McAleer, a municipal bond specialist and head of McAleer Wealth Management Group in New Canaan, CT. "Generally, they’re backed by revenue and taxes by government."
If municipal bonds for the project are issued as tax-free bonds, the county could be entering a legal "gray area," Mr. McAleer said.
He said the bond issuer would have to show the bond sales have some kind of public benefit and do not only benefit private interests.
There have been cases in which the Internal Revenue Service has ruled against the tax-free status of municipal bonds after they have been issued, and "the lawsuits go flying," he added.
The Sony Open, held at Crandon Park since 1987, is among the tennis world’s high-profile events, drawing many of the biggest names in the sport.
Tournament Director Adam Barrett said his firm wants the upgrades to continue to make the Sony Open one of the premier professional tennis events.
Mr. Barrett said the project, in addition to upgrades to the tennis courts and other facilities used by the tournament, would include improvements around Crandon Park that would be available to the public.
The ballot measure also asks voters to approve a "modification or extension of agreements" with the tournament.
What that is requesting, Mr. Barrett said, is an extension of the tournament’s lease with the county to use Crandon Park. Under the lease, which expires in 2023, the tournament pays the county about $1.1 million a year, he said.
In addition, the lease prohibits the county from letting any other pro tennis tournaments use the facility during the 49 weeks or so that the Sony Open is not using or preparing to use the facility, according to Mr. Barrett.
The reasoning behind that clause, he said, was that the Sony Open did not want another event in Miami competing with its brand, even if it was at a different time of the year.
Mr. Barrett said this year’s Sony Open drew a record 326,000 people. This year’s tournament also offered a record $9.7 million in prize money, he added, and next year’s purse is expected to exceed $10 million.
Mr. Barrett would not disclose the tournament’s revenues, but said revenues from this year’s event probably were at or near a record high.
If the stadium improvements and lease extension are not approved, he said, the tournament might want to look for another home when the current lease expires in nine years, as tennis facilities have been upgraded or are being upgraded in a number of cities.
"Our goal has always been to stay where we are," Mr. Barrett added. "Everything here has developed into an unbelievable relationship."
When asked who would be responsible for paying off the bonds for the Tennis Center if International Management Group were to go bankrupt or the tournament were to end, Mr. Barrett could not provide a definite answer.
He said perhaps insurance would cover such a situation, and indicated that bankruptcy would be highly unlikely, noting that his firm organizes big events worldwide with annual revenues of about $1 billion.
Mr. Barrett maintained the tournament’s organizers do not see their county bond-financed proposal as the use of public money because the bonds would be paid off with private funds.
"One of our biggest challenges," he added, "is to get people to understand that we’re not looking for money."To read the entire issue of Miami Today online, subscribe to e -Miami Today, an exact digital replica of the printed edition.