Miami Marlins Stadium Agreement: What Went Right

David Samson has lied so often with his public comments about the Marlins finances, he is understandably ignored even when making a good point. David meet Aesop, he no Hee-seop [Choi].

Here are Samson’s comments as reported in Juan C. Rodriguez’s post in the SunSentinel about the issue of property taxes on parking garages:

“That really has nothing to do with the team. It’s really between the city and the county. It’s a city-owned garage. I don’t know if the city pays property taxes on all its other garages or not. These are the same. It’s being run by the Miami Parking Authority. The only thing we are is tenants who are agreeing to buy a lot of spots. It’s like when you pull into a garage in any downtown office building and buy a spot for a day. You don’t pay property tax.”

This is what the actual agreement entails, again from the Rodriguez post:

The Marlins are buying all 5,700 spaces for the 81 home games at $10 each [for next 15 years]. The City of Miami annually will receive $4,617,000 from the Marlins for those spots, whether they are sold or not. What the Marlins in turn charge fans for those spots is up to them.

In a recent Miami Herald article [copied in its entirety below], it was reported that Miami-Dade County is attempting to charge the City of Miami property taxes on the 4 parking garage structures built around the new stadium. The County’s reasoning is that since the Marlins have discretion in pricing the parking spaces [all of them] leased from the City, the garage is “controlled by a for-profit enterprise,” and as such should be subject to property taxes. Having to pay property taxes on the garages was not something the City anticipated and would cost City taxpayers up to $2 million annually.

The initial public reaction is probably best captured by Carl Hiaasen’s opinion column [copied below] in Sunday Herald. While Hiaasen made good use of the red meat he was tossed–the 800 word column used the following adjectives; outlandish, foul, breathtaking, boondoggle, dysfunction, incompetence, fiasco, bombed [as in drunk], outfoxed, harpooned, Sucker Ball and an allusion to “law degrees purchased online from Nigeria”–the column made the following specific points.

  1. “In the two years since financing was approved, the numbers are looking more dismal than what was feared.”
  2. “There is nothing public about those garages. They might be owned [and operated] by the city, but they’ll be controlled by the Marlins, purely for profit. The county is absolutely right to treat them as commercial property.”
  3. “On the bright side, the City did get the Marlins to cough up $10 whether or not the parking space is used…. If the Marlins start [I'm sure he meant continue] losing, there will be a drearily familiar abundance of empty seats and empty parking spaces.”

Point #1 – My reply to Hiaasen’s “numbers looking dismal” claim

  • Leaving the parking garage property taxes aside, given that it may not be an issue, it’s hard to figure out what exactly Hiaasen is referring to. There were two big contingencies associated with the new stadium: potential construction costs overruns with a franchise whose finances were uncertain and whether Miami-Dade County’s Hotel [or Bed] tax receipts would bounce back after the financial crisis.
  • The stadium itself apparently did not have cost overruns. [My links are to my own blog posts where I always copy the article being referenced at the end of the post.] There were structural issues with at least one of the garages which raised construction costs from $94 to $101 million for the garages.
  • County Hotel taxes were the biggest concern at the time of the Stadium Agreement was approved. In effect, the anti-stadium advocates stated that tourism could not be counted on to recover. Miami-Dade argued that they would.
  • The results are in, or about 3 years worth of data. Tax receipts fell by 15% for the fiscal year ended [FYE] 2009, rose 9% for FYE 2010 and rose 15% for FYE  2011. For the first time since the financial crisis, the tax receipts for the fiscal year which ended this past June 30th [FYE 2011], exceeded those in the year [FYE 2008] before the financial crisis. Miami-Dade’s bond payments were structured to account for a growing tax receipts following the recovery from the financial crisis.
  • Here are the comments of George Burgess, Miami-Dade’s county manager at the time: “Our belief is the slowdown will last two or three years and then rebound,” he said. “Is it reasonable that we’ll be flat-lining for six or seven years? It is not.”  So far so good on that prognosis.
  • In April of 2010 there was concern that the City of Miami would not be able to issue bonds due to an SEC audit, but that was resolved.
  • Another development was the Deadspin release of the Marlins financials, but that revelation is positive news from the point of view of the stadium deal, since it meant that the Marlins would be able to meet their construction costs obligations.
  • Also, the terrible economic environment since the financial crisis has translated into good news for local governments ability to obtain financing with lower interest rates.
  • If Hiaasen was a Monty Python character, he’d be calling for a draw at this point.

Points # 2 & 3 – My reply to “garage is commercial property”

  • Here I would repeat Samson’s point. What is done at the other comparable venues? While it’s interesting that a columnist would take such a definitive position on an intra-governmental legal issue — by stating that the garages should be treated as commercial property — actual reporting about the why would have been useful.
  • Hiaasen is relying on reputation to get away with writing that ‘…there is nothing public about parking garages that happen to be owned [and operated] by a city government…’ Ownership and responsibility for running the four garages ain’t nothing.
  • I think Hiaasen’s 3rd point [Marlins unlikely to sell out parking spaces, especially in the long run] counters his 2nd point [garages are commercial property because the Marlins might profit from the deal]. If profitability is the key to who is controlling the garages, what happens to that analysis if the Marlins start losing money on the garages after year 2?
  • Bottom line, the City of Miami has outsourced the responsibility for selling parking spaces at the new stadium for the next 15 years.  Hard to imagine that would cost them their tax-exempt status.
  • Mr Hiaasen, Malcom Gladwell on line 2 for you.

All articles referenced are copied in full at the end of the post.

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Posted on Tue, Nov. 22, 2011

Miami may have to pay property taxes on Marlins stadium garages

By Andres Viglucci and Patricia Mazzei

aviglucci@MiamiHerald.com

When the city of Miami agreed to build parking garages for the new Miami Marlins stadium, borrowing $100 million in the bond market to do so, officials assumed the structures, like most such municipal facilities, would be exempt from property taxes.

Oopsie.

That is now looking like a serious miscalculation that could not just upend the city’s financing plan, but allow the Marlins to rake in profits from parking while city taxpayers eat a hefty, and unexpected, tax bill.

The realization hit city officials only recently, as the four garages approach substantial completion — the point at which they would go on the tax rolls. That’s when Miami-Dade property appraiser Pedro Garcia and county attorneys told a flabbergasted Miami Mayor Tomás Regalado during a big pow-wow that they could have a problem.

The gist of it, according to county officials: To be exempt from property taxes, municipal property must be used solely for public purposes.

The city, however, has leased all 5,700 parking spaces in the four garages to the Marlins, at $10 a spot, for every home game and for any other events the team chooses to put on. The team can charge whatever it wants for the parking spots.

Though they caution no final decision has been made, county officials say they believe that means the garages will not function exclusively as a public facility but will work part of the time as a commercial operation controlled by a for-profit enterprise, the Marlins — thus making the structures liable for commercial property taxation.

And that wasn’t even the worst news for the city: It seems the city would also have to foot the tax bill, which Regalado estimates at $1.5 million to $2 million.

Why the city and not the Marlins?

The contract for the garages between the city and Marlins contains a clause — an unusual one — stating in no uncertain terms that the city is responsible for all taxes. In most of its contracts, Miami places the tax burden on the tenant or party using city property.

A steamed Regalado, who as a city commissioner opposed the stadium project, says the annual tax bill on the garages would not be covered by expected parking revenue and would force the cash-strapped city to dip into its budget.

“That’s going to be huge,” Regalado said. “That really complicates things for us.”

County officials say there’s little they can do about that, calling the tax responsibility a contractual matter to be negotiated between the Marlins and the city.

“If we tax the city, then the taxpayers are taking the hit,” Garcia acknowledged, adding that he has rarely if ever seen a clause in a leasing contract that has the city assuming tax responsibilities. “I don’t agree with that. But when they did the contract, there was no conversation with the property appraiser, and now there is nothing we can do.”

Garcia said he will soon meet again with city officials, insisting that no final determination has been made and that none is likely until January, when the garages would go on the tax rolls.

“We have December to argue whatever we have to argue,’’ Garcia said.

But Regalado said Garcia and other county officials seemed unmoved by his pleas.

“They are really putting their foot down,’’ he said.

The Marlins did not respond to a request for comment Tuesday.

The stadium has sparked controversy since county and city officials signed off two years ago on the plan to provide $487 million in public financing for the $642 million East Little Havana facility for the privately-owned Marlins.

Neil deMause, a New York-based journalist whose blog, Field of Schemes, takes a critical look at public subsidies for professional sports stadiums, says surprises like the Miami tax imbroglio aren’t common, but teams and their lawyers have proven proficient at ensuring the contract fine print protects them no matter what.

In Kansas City, he said, the city and county have been locked in a long-running dispute over which government is responsible for annual payments for improvements to the baseball Royals’ and football Chief’s stadiums because the contract doesn’t specify that. When the city’s mayor proposed discontinuing its $2 million a year payments, the teams’ lawyers threatened to sue the city for default on the stadium lease, which guarantees the team the public subsidy. The city reluctantly kept paying.

“It’s not often you see huge bills no one noticed until the steel is in the ground,’’ deMause said. “But teams, because they make so much money on these deals, can afford the best lawyers. Whenever something unexpected comes up, you find the team has covered its butt.’’

The disagreement over the Marlins garages doesn’t include retail and restaurant space built into two of the structures. City and county agree that square footage is subject to property taxes. The issue is the use of the parking spaces.

Regalado says he’s baffled by the county’s interpretation. He argues that whether or not the Marlins control the parking spaces part of the time should be irrelevant because the garages are part of a global, inter-governmental agreement hammered out to support the county-owned stadium

“That would be pretty weird,” he said of the prospect of paying taxes on the garages.

Under state law, county-owned property is automatically exempt from property taxes. That’s why the new stadium, which is owned by the county, is not subject to property taxes.

But towns and cities must show that municipal property is used exclusively for public purposes to earn an exemption from property taxes, county officials said. Municipal parking garages generally get a pass because they serve the general public, and proceeds go to government coffers.

Some Miami-Dade municipalities have seen parking lots and garages, or portions of them, go on the tax rolls after being leased to private businesses, county officials say.

If that happens in the case of the Marlins garages, Regalado and deputy city manager Alice Bravo say, the city may have to tap its general fund to pay for the taxes.

To pay off the $101 million in bonds — which will total more than $223 million with interest — the city needs to collect an average of $7 million a year from the garages through 2026, and a varying amount for more than a decade later. More than $4 million will come from the $10-a-spot Marlins deal, with an additional $3 million from county tourism-tax dollars.

There could be additional sources of revenue, too, including a parking surcharge and any rents the city receives from its commercial tenants.

But if the guaranteed revenue — from the Marlins and tourism taxes — all goes to paying off the bond and little else comes in, money to pay property taxes would have to come from elsewhere in the city’s budget.

It’s too early to worry about that worst-case scenario, cautioned City Attorney Julie Bru. Miami plans to submit an application to the property appraiser asking for a tax exemption. The city will argue that the garages, built to support a public stadium, will be owned by a municipal government and run by one of its agencies, the Miami Parking Authority.

“We believe it should be tax exempt,” she said.

Read more: http://www.miamiherald.com/2011/11/21/v-print/2515040/miami-may-have-to-pay-property.html#ixzz1ev9I4GXd

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Posted on Sat, Nov. 26, 2011

Taxpayers harpooned on stadium

Carl Hiaasen

chiaasen@MiamiHerald.com

The new Miami Marlins stadium is rising to completion in Little Havana, and rising with it is the blood pressure of taxpayers who are learning how much the new ballpark will really cost.

On paper, the city and county committed about $487 million in public funds toward the $642 million stadium project. The outlandish arrangement was never presented to voters because they would have pulverized it.

Their mistrust was well-placed. In the two years since the financing was approved, the numbers are looking even more dismal than was feared.

Last week’s foul surprise came when Miami-Dade officials informed the city of Miami that the four parking garages being constructed for the stadium might not be exempt from county property taxes, as the city had assumed.

Miami Mayor Tomás Regalado says residents could be on the hook for another $1.5 million to $2 million annually. It may not sound like much, given the breathtaking totality of the Marlins boondoggle, but the city can’t afford it.

Dysfunction and incompetence being the twin hallmarks of Miami government, both are on grand display in this latest fiasco. Officials charged into the bond market to borrow $101 million to build the stadium parking garages, which they say they believed would be exempt from property taxes, the same as most municipal facilities.

One little problem: Municipal structures aren’t supposed to get off tax-free unless they are used exclusively for public purposes.

The Marlins are a private corporation; you can’t walk into the ballpark without buying a ticket. The contract provides that the city will lease the 5,700 parking spots to the team for $10 each per event. In turn, the team can charge the fans as much as it wants for parking.

This lucrative allowance isn’t just for ball games, but also for rock concerts, rodeos or anything staged at the new stadium.

There’s nothing public about those garages. They might be owned by the city, but they’ll be controlled by the Marlins, purely for profit. The county is absolutely right to treat them as commercial property.

Normally, the taxes would be the responsibility of the tenant — in this case, the baseball team. Strangely, though, the garage contract between the city and the Marlins stipulates that the city will pay any and all taxes.

That’s quite a deal. The mystery is: Why did Miami officials ever agree to it?

One possibility is that they were bombed out of their minds when they read the contract. Another possibility is that they didn’t read the contract at all.

A third possibility, and not an unlikely one, is that they got outfoxed by the Marlins. The weird clause absolving the team of all taxes might have been printed in teeny, tiny words, but presumably there’s somebody at City Hall with a law degree that wasn’t purchased online from Nigeria for $69.

Mayor Regalado fought the stadium project when he was a city commissioner. He was surprised — and rightfully ticked off — when county officials told him that the garages belong on the tax rolls.

“That’s going to be huge. That really complicates things for us,” he said.

The city is nearly broke, as always, and doesn’t have an extra $2 million lying around. The anticipated lease income from the parking spaces is already earmarked to help pay the bond debt, which will eventually accumulate to $223 million.

Just to keep up with the bond payments on the new garages, Miami needs to bring in about $7 million annually through 2026 and fluctuating amounts for 10 years after that.

About $3 million of that $7 million would come from county tourist taxes. The additional $4 million-plus is supposed to be covered by income from the $10-a-space lease agreement with the Marlins.

In other words, each of the 5,700 parking spots needs to generate at least $702 annually for the city. On the bright side, Miami did manage to get the Marlins to agree to cough up the $10 whether or not the parking space has an actual car in it.

That’s important, because loyal attendance is no certainty. The super-modern new ballpark should be packed when it first opens, but the notorious fickleness of South Florida sports fans will hover over the festivities — and the finances.

If the Marlins start losing, there will be a drearily familiar abundance of empty seats — and parking spots.

The county says that no final decision has been made about taxing the stadium garages, which wouldn’t be added to the property rolls until January. One way or another, the public will get harpooned.

That’s what always happens when government subsidizes private sports franchises. There’s only one big winner, and it’s the millionaire who owns the team.

You’ve heard of Money Ball? This is Sucker Ball.

Read more: http://www.miamiherald.com/2011/11/26/v-print/2520223/taxpayers-harpooned-on-stadium.html#ixzz1evTmbjql

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Miami Marlins prez David Samson: City parking garage tax bill not team’s problem

by: Juan C. Rodriguez November 23rd, 2011 | 6:04 PM

The Marlins don’t get the benefit of the doubt much when it comes to financial matters. It wasn’t surprising the knee-jerk reaction by some was to skewer the club after this week’s Miami Herald article saying the City of Miami is looking at a huge property tax bill for the parking garages around the new ballpark.

Marlins President David Samson addressed the issue Wednesday on his weekly segment with Dan LeBatard and Stugotz on 790 The Ticket. The team had no hand in City taxpayers getting leveled with an unforeseen expense.

“We don’t own the garages,” Samson said. “We bought spots. It’s the same thing as you buying a parking spot in the building where you live and being asked to pay a percentage of property tax. Not that anyone has asked us because it wouldn’t make sense to have a private company pay property taxes of a publicly-owned building.

“That really has nothing to do with the team. It’s really between the city and the county. It’s a city-owned garage. I don’t know if the city pays property taxes on all its other garages or not. These are the same. It’s being run by the Miami Parking Authority. The only thing we are is tenants who are agreeing to buy a lot of spots. It’s like when you pull into a garage in any downtown office building and buy a spot for a day. You don’t pay property tax.”

The Marlins are buying all 5,700 spaces for the 81 home games at $10 each. The City of Miami annually will receive $4,617,000 from the Marlins for those spots, whether they are sold or not. What the Marlins in turn charge fans for those spots is up to them. Samson said he anticipates most if not all of the spaces will be earmarked for season ticket holders.

“The fact is, property tax never even came up in any discussion when it came to the garages,” Samson said. “They were building garages as part of the deal. They asked us to buy the spots and we negotiated what it would cost to buy the spots and that was that. It was a very heavily negotiated part of the deal. It’s not that it was a point of contention that there’s going to be property tax, who’s going to pay it, who’s not going to pay it? That never came up.”

Samson added he had not spoken with anyone in the city or county about it…

**Doesn’t sound like the Marlins will be announcing the ballpark name any time soon. Here’s what Samson had to say about the naming rights deal:

“It will be a name in good taste and a name that will not change over time. It will be a constant name for our entire 50- or 60-year stay there…It’s a very tough negotiating deal and we’re sort of waiting right now to see what happens with the team on the field, so there’s nothing imminent.”…

** Asked about when free agents might start signing, Samson said players generally like to know where they’re headed before Christmas, and it’s typical to see some action plus or minus a week of the Winter Meetings (Dec. 5-8).

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About Jorge Costales

- Cuban Exile [veni] - Raised in Miami [vidi] - American Citizen [vici]
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