Mayor Could Quarterback A Winwin Dolphins Stadium Deal
Written by Michael Lewis on January 31, 2013
By Michael Lewis
The best thing about the quest for public aid to upgrade the Dolphins’ stadium is that a mayor who had the brains and guts to fight the Marlins giveaway will negotiate for taxpayers, aided by national experts.
The worst thing is that a hurry-up Dolphins offense has confused officials and touted marquee games that might not come here even if the team spiffs up the stadium for $400 million.
The vital question is whether the public purpose in any deal can attain a payback greater than cost. Unlike the discredited Marlins deal, that is possible — though clearly not in the deal the Dolphins are selling.
Look at the misapprehensions.
While the Dolphins tout super bowl and college bowl games, rebuilding the stadium isn’t sure to get us any. The Marlins deal dangled lures of the 2014 or 2015 All Star Game if we built. We did, but the games are going elsewhere. Leagues, not the team, control choices.
When commissioners last week voted 9-4 to ask to raise mainland hotel taxes 16.7%, from 6 cents on the dollar to 7 cents, to add $10 million a year for stadium upgrades, many said the tax wouldn’t hit home.
"It comes from other people’s money," said Dolphins CEO Mike Dee.
"Whenever you can use other people’s money that’s the kind of deal that you want to get," echoed Commissioner Barbara Jordan, who sponsored the measure for the Dolphins.
"These are tourists that are coming here… so it’s almost like we were reaping the benefits of other people’s money," reechoed Commissioner Lynda Bell.
But it’s not other people’s money. It would shift cash from others to a single beneficiary: the Miami Dolphins.
Every dollar visitors pay on a hotel bill is a dollar not spent in a store or restaurant or attraction here or back home. In raising the bed tax we’d get some funds that would have been spent elsewhere, but we’d also lose millions that would have been spent here. Other businesses lose; the Dolphins gain.
Another loser would be mainland hotels, where the tax would be collected.
Adding $25 to a week’s hotel bill wouldn’t deter many vacationers, but it would in group travel, where pricing is closely competitive. Adding 1% to every bill would make mainland hotels less competitive.
Think about it: If raising prices 1% cost no sales, every hotel would do it. Every business would. Every business bases prices on profits. If hoteliers thought they could get 1% more without any cost, they’d start tonight.
So it’s only other people’s money if you exclude Miami-Dade hotels, restaurants, stores and attractions — businesses that employ thousands more residents than could get temporary jobs fixing a stadium, the goal of many commissioners.
Few added jobs would remain after construction. A stadium operates on the site today and it would later. What new jobs would that create?
Commissioners used team talking points to argue that if our mainland hotels’ bed taxes rose from 6% to 7% we would still tax far less than other cities. They cited competitive bed tax percentages in the teens in some cities. Jose "Pepe" Diaz cited 18.25% for New York and only 6% here now, 7% with a stadium tax.
That’s wrong, for three reasons.
First, New York doesn’t tax 18.25%. It’s 14.75% plus $3.50 per room — and $3.50 is not 3.5% unless the room rate is $100 per night, which in New York is impossibly low. On a $400 room, the rate would be 15.63%. Good New York rooms cost more; the higher the room rate the more the percentage falls. Do the math.
Second, while 15.63% is indeed more than double the 7% room tax that commissioners cited to claim a low impact from a stadium tax, the New York number is total tax, not room tax but others too, including sales tax.
Total Miami-Dade tax on a hotel bill, including sales tax, today is 14% on the beach and 13% on the mainland. Raise the mainland room tax to 7% and it would be 14% countywide — close to New York’s level.
Any wonder the few hotels the Dolphins cite as supporters expect gains other hotels wouldn’t get? Teams might stay in some. Those on the beach wouldn’t face a rise as mainland hotel guests pay more.
Third, while a higher bed tax would leave us below many cities — Knoxville, TN, is tops at 17.25% total taxes, Houston and Indianapolis are 17% and San Antonio and Columbus, Ohio, are 16.75% — they aren’t our competitors, nor is New York.
No, our biggest competitors are in Florida — and among them we are one of only five counties to charge as much as 6% total bed tax today.
And because our sales tax is also high, guests here pay more total tax than in other Florida cities. Mainland Miami-Dade hotels now add 13% tax to room bills versus 12.5% in Daytona Beach; 12% in Orlando, Tampa and Sarasota; and 11% in Fort Lauderdale.
Fort Lauderdale in particular would benefit if we taxed mainland hotel bills 14% to match beach hotel bills while its own rate remained 11%, and we’d be offering its guests a better stadium without Broward paying a cent. They’d win both ways.
Another "free money" myth is that if we didn’t tax hotel guests for a stadium we couldn’t tax them more at all because the tax being considered is the sports facilities tax.
But if we ask legislators to raise our bed tax ceiling, we could seek it instead in another bed tax category that could help create a world-class convention center. That’s a policy decision — it’s just as easy to ask for either one. When commissioners say it’s impossible, they mean it’s not what they and the Dolphins want.
Yet another myth is that giving the Dolphins a $3 million sales tax rebate — more than any Florida team has ever gotten — would be state money we don’t get now.
The state uses sales taxes to operate statewide. It would be easy to legislate $3 million less state general spending here each year to shift the money to the Dolphins, but that’s hardly free money. It’s taking from social services or education or whatever and shifting it to a team owner.
More free money that isn’t: once the stadium was paid for, the proposed legislation would still feed sales tax and room tax revenues to the Dolphins. The cash flow doesn’t end when work does. The bill specifies that receipts can maintain and operate the stadium — funds that team owners would otherwise expend, so their profits rise. Is that good use of public money?
This is no textbook example of a good public-private partnership. Commissioners said it’s better than the Marlins deal. And it’s true that Dolphins owners have been better corporate citizens than Marlins owners.
But don’t compare this to the $3 billion Marlins handout. Any deal is better than that.
The objective, however, isn’t to strike the second-worst deal. If a deal can be found to help upgrade the stadium to the public’s benefit — and Mayor Carlos Gimenez has made clear it might not be reached — it should be a win-win for both owners and taxpayers, not a win-lose.
Legislators should block a raid on sales taxes. Mayor Gimenez meanwhile should reject the Dolphins’ plan but negotiate a better way to a true win-win.
We’re pleased that he’s hiring experts. Most stadium deals have failed from public policy and public purse perspectives. Indeed, three of the last four National Football League stadiums were built with private funds.
The mayor and his team undoubtedly will ask hard questions. Among them are likely to be:
nWhy did the Dolphins two years ago say they could fix up the stadium for $225 million yet now it’s $400 million? It wasn’t inflation.
nIf the Dolphins get tax revenue, do they expect the county to issue bonds at its low interest rates to turn those future revenues into construction cash? A county guarantee to repay with general revenues if cash streams fell short should be a deal-killer.
nHow about a public referendum on any negotiated deal? Failure to allow a Marlins stadium vote helped cost a mayor and a commissioner their jobs.
nMr. Dee said the Dolphins receive not a cent from super bowls and aren’t likely to under a future college bowl structure. So it would cost the team nothing to share any bowl revenues — not profit but revenues — 50-50 with the county. Should that be in a contract?
nWhat is the University of Miami’s responsibility? It plays in the stadium. Since more and better seats would help the university, shouldn’t a share of revenue from added seats and concession sales go to the county? Should the university simply add funding for a better stadium? Or, should the county be guaranteed 50% of future added UM rent?
nHow can the Dolphins get aid from Broward? No wall keeps hotel guests out of Broward, where hotel sales taxes already are below ours.
Any deal that Miami-Dade and the Dolphins can agree upon should take months — particularly if commissioners want changes to aid constituents.
One problem with 13 district commissioners is that each responds only to a sliver of county voters, so each has a special agenda. Since commissioners’ main aims are reelection and campaign funds, that’s vital to them, if not to a final deal or to the county as a whole.
Our system leaves Mayor Gimenez as our only official involved who’s elected at large, the only one forced to think broadly. He showed his mettle in the Marlins deal by repeatedly asking the right questions, though administrators never bothered to answer.
So while Mr. Gimenez too wants reelection, he’s our best choice to cut a deal that might actually benefit Miami-Dade.
A workable partnership could take several forms.
The Dolphins could turn over stadium title to the county, giving us a reason to finance upgrades. It sits on county-owned land, so that would unite all the assets.
Giving the stadium to the county would save the Dolphins $3.2 million a year in property tax, money that would exceed the distasteful sales tax rebate.
The county then could hire the Dolphins to run the stadium, just as the Miami Heat runs a county-owned arena. But instead of a Heat contract that guarantees the county a slice of profits above a set level, a Dolphins deal should share receipts, not profits. That would guarantee a return to the public.
If the Dolphins and county can’t agree on a stadium title turnover, an alternative might be a larger county share of stadium receipts — not profits — with a kicker of a county slice of receipts — again, not profits — of any sale of shares by any team owner.
In any deal, the county should share in every revenue stream, from tickets to concessions to naming rights to parking to luxury suites. It should also get a number of days yearly to lease out or use the stadium for events, with proceeds to taxpayers.
If such terms seem onerous, remember, this is supposed to be a business deal, not a fundraiser for a multi-billionaire team owner.
We all like the Dolphins. Its owners have done many things right. We agree, this is not the Marlins.
That said, a bad deal made with good people is still a bad deal, one the county should never consider. Doing it better than the Marlins deal is not the criterion. Doing it right is.