If you will allow me, I will provide my viewpoint, and why I am opposed to the deal. I have three parts to the story.
First comes the background. When Joe Robbie decided to leave the Orange Bowl, he negotiated a land deal and decided to build the stadium privately. At the time, it was the largest private financing for a stadium, at about $115 million in 1986 dollars (around $250 million in today’s dollars). He didn’t have enough cash to cover the costs, so he had to mortgage the team’s equipment to do it (and ultimately it cost his family ownership of the fins). But the curious part is that he was able to finagle a bond sale by the county in 1985, from which he got $90 million to fund stadium construction at 0% interest (details on the background can be found here).
It is my understanding that loan remains outstanding to this day, and who can fault the ownership for not paying off a zero interest loan?
Then, in about 1991, H Wayne Huzienga was able to secure some loan money to “retrofit” the stadium for baseball. It was reportedly a low interest loan, but more importantly, he was able to secure a tax rebate for the Florida Marlins. “The Marlins” receive about $2 million annually in a tax rebate from the state of Florida.
Also reportedly, most of this loan is still outstanding. And when H Wayne sold the Marlins, he kept the tax rebate as a part of the stadium, rather than keeping it with the team it was intended for.
And finally, a few years ago H Wayne privately financed some renovations to the stadium. Two things strike me about that deal: (a) he took some amount of money from the NFL stadium fund (reportedly another 0% loan source) and (b) when he sold the team to Mr. Ross, he passed along that amount, adding it on to the final price.
And essentially, when Mr, Ross says that he can’t take on more debt under the NFL rules, he’s right because he has about 17% debt, based on the outstanding low-or-no-interest loans.
Frankly, he should be required to repay those as a condition of being loaned more money.
The third part of the story is where we are today.
The Dolphins would like to renovate the stadium to “bring big events here, from which the dolphins get no direct benefit”…but we should be honest, here. They get a direct benefit by having improvements that allow them to charge more, and perhaps make it more attractive to fans. And while there is no direct benefit to them from events such as the superbowl, there are undoubtedly indirect benefits to the team.
They are trying to convince everyone there’s a big time crunch, just to try and ensure they can keep momentum. If they were to proceed slowly, its possible that the plan might fall apart. They also were “audited” by a couple of external people who produced a one-page report that suggests the Dolphins made $25 million in “operating profit” last year, and stand to lose $14 million this year because of their free agency spending (and the implication is that they couldn’t afford to do the renovations themselves, because they have so much debt!)
We have seen the designs and drawings. They appear to be the same ones presented about two years ago, when they were suggesting the cost would be about $150-$200 million. Today, we are being told its about $350 million.
The Dolphins are asking for two things: 49% in money from Miami-Dade county, and $3 million in tax rebates for Dolphins. The second one is somewhat galling, because the stadium group already received $2 million in the name of the Marlins (see the history above), and the Dolphins want an additional $3 million. They are both owned by Mr. Ross, of course.
Now as for the 49%, the Dolphins are suggesting that they could take the money from bed tax dollars – that is tourists. And sure that sounds nice, but its not quite that simple.
The county would be willing to loan the Dolphins $170 million. That money would come via a loan they secure, to give the money to the Dolphins up-front for construction. Let’s assume simple interest, and say its 4%. The interest payments over the course of 30 years amount to $190 million (yes, the interest is more than they borrow)
And so the county would have to pay back $360 million over the course of 30 years. Assuming they can get the bed tax (more on that shortly), they propose to collect on it for 26 years, repaying $7.5 million in those bed tax dollars every year. Now keep in mind, that if at any point they are unable to collect enough money from the bed tax dollars, it will come from the county’s “general fund” (ie, resident tax dollars).
Now, the math here means that they will have paid back about $195 million over those 26 years, leaving $165 million yet to be paid back. The Dolphins have agreed to pay back $112 million at the end of 30 years. Flat, with no interest (and you may notice that’s less than the $170 they were loaned).
Of course, the $112 million would be used to pay off part of the $165 million the county still owes. But notice that there is a 4-year gap in here. And the county is on the hook during those 4 years. And there’s still about a $50 million dollar discrepancy. The county has to pay for that somehow, but it is not coming from the Dolphins, and its not coming from the bed taxes….it would have to come from the taxpayers. Now its a long way off, so its easy to “kick the can down the road” and sort of forget about it.
For their part, the Dolphins need to come up with the remaining 51%, or around $180 million. There are numerous reports indicating that the team may ask the NFL for a loan to cover $150 million of it. That’s another low-interest loan they will be taking, presumably. And so the Dolphins – themselves – only have to cover about $30 million.
And back to the bed tax dollars. There is a lot of debate about whether that money could be used for something like schools. And I wanted to clarify why this is important. Florida law says: Hotel taxes are capped at 6%, and the taxes that are drawn may not be used for education or private enterprise. Mr. Ross has worked to try and modify the law to raise the cap to 7% and use the money for his private stadium. At the very least, he should be forced to give the county an ownership stake. And at the very best, he should be changing the law for the “greater good” (ie, education) rather than this use. That is, if the law can be changed, why should it be changed to favor a private corporation?