Guest Post: A Local Take On Dolphins Stadium Issue

I wanted to provide an argument for the other side of the stadium deal. Let me start by stating that I am a staunch opponent of the stadium deal, and while I think the term “welfare for billionaires” is hyperbole, the sentiment certainly fits.

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 second part is about the other teams in South Florida.
The Marlins (or as the Dolphins like to think of them “the team that shall not be named”) fleeced the tax payers.  The city funded the entirety of the stadium and will ultimately owe more than $2 billion in loan payments.  And essentially, they have nothing to show for it.
The Heat did also get money from the city of Miami, as part of a bond issue, which is the way these types of financing deals should be managed.  And in return, the city owns a stake in the stadium.
The Panthers got money from the state of Florida, and some from Broward county. Again, in return, the county got a stake in the stadium.

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?

And so it strikes me that this is a bad deal for the citizens of Miami-Dade county overall, and for the city of Miami residents it has to be downright scary to think that they could be on the hook for even more money for a stadium.
On the other hand, its a great deal for Mr. Ross and the Dolphins.
And soon it will be in the hands of the voters.  I would be interested in shade for 1pm games.  But not at that cost.  I say “vote NO”….
That’s my take.
- Bitchin Dave
Dave is a very good friend of mine and his opinion is always welcome and appreciated.  While I personally do not agree with his opinion on this topic, I do respect it and hope that our readers who do not share his opinion also show the same.
I do not believe that it is fair to compare what the Marlins did to what the Dolphins are trying to do.  The bad taste left in the locals mouths as a result of that horrendous situation is likely a key point in the voters who will go to the polls on this subject.  My question would be what is the local economy making when Miami does host a Super Bowl or a major sporting event?  I would have to assume that over time, say 26 to 30 years, the community should benefit significantly from those events.  Perhaps more than enough to offset the 46 million divide.
Now, of course I do not live in Miami and Dave has done a great job of illustrating the stadium changes over the years in all of the major sports locally.  There is no question that this should be a debated topic and one that without question should not be arbitrarily granted or vetoed.  I would add one caveat to the support of this referendum and that is this.  The Miami Dolphins do more than any other NFL franchise in the league for the community.  They do more than any of the other sports in Miami.
Through the Miami Dolphins Special Teams program, the Dolphins support the local children of south Florida.  Not just those in Miami-Dade County.   The support that the Dolphins give to the community from youth organizations to food drives is not a “in season” only program but one that is a 12 month effort.  The Dolphins do give back to the community and they do it in a big way.
There are locals who vocally speak out against this referendum calling it “billionaire wellfare”.  I wonder how they would feel if the Dolphins turned their attention from the charity events they do and put those efforts into paying for the stadium renovations with their own money?
This is not an easy subject to debate.  Dave is Miami resident and he understands the state laws and the history far more than I do.  I thank him for taking the time to show a point of view from someone who does not support the referendum.

Tags: Miami Dolphins Miami Dolphins Stadium Referendum Stephen Ross

  • Miami Jules

    Brian, thank you. I appreciate and applaud Phinphanatic’s willingness to offer a local and highly informed perspective on the stadium renovation issue, but what is more important to me as a reader and Miami resident, is that it comes from a Miami-Dade resident There’s a lot of information about the history of the stadium and its financing issues, as well as the detailed breakdown on the issues facing local voters later on this Summer. A lot to process even for an accountant with moderate public sector experience like me. I’m not necessarily against the deal, but then I am a City of Miami resident and NOT a Miami-Dade County resident so I would not be affected as far as any potential future homeowner’s tax increase or reduction in emergency services are concerned. I am not about to argue publicly at least, on either side of the vote because I have to respect those neighbors and friends who would be more directly affected by a surplus or deficit left from tourist activity from the initial projected numbers. The problem I have with the prior post is the part of it which I viewed as an attempt to judge Miami residents’ level of loyalty and how true we are as football/Dolphins’ fans.
    Dave, thank you for passing to the uninformed like me, such an eloquent and detailed explanation on this very important issue. I have a couple of questions which I would hoe you are available to answer for me.. these questions may be trivial when compared to the larger issue.
    1-I thought the Robbie family lost their ownership because of an unexpected hit in inheritance tax and not because of an outstanding loan… A combination of both maybe? I’d love to know the reason.
    2- Are these potential revenue projections based on all the pro bowls, super bowls or any other additional college level bowls which could come to the area as a result of these proposed improvements? Curious as to how these projected returns are calculated and just who made those.
    3-You cited benefits to Steve Ross coming from the stadium improvements. How are these calculated or has he discussed a ticket price increase?
    Following consecutive losing seasons, it wouldn’t be smart to raise prices based solely on renovations alone. Locals want to see a winning team for a change and it’s the young who lack on loyalty because there hasn’t been much in their lifetimes to be loyal too. The Dolphins have become their parents and grandparent team and we are getting old.

  • Todd Weaver

    I really think this is a hedge on Steven Ross. No one is talking about the soccer aspect of the potential. By putting up the shade you are making Ross a perfect person to own a soccer team. Then if the Dolphin Fans keep revolting. Not buying new logo or not showing up for games. Then you create two options for an aging Ross. Sell the Dolphins and newly created soccer team. Or say move the dolphins leaving a soccer team to fill Ross owned stadium till the city and fans get their expansion team. Or till he sells stadium to University of Miami. All of the above makes Ross a bundle.

    I think we need a national amendment that prohibits cities from building and maintaining sporting venues for all pro and minor league teams. I live in Ohio and Hamiliton county spent something like a Billion Dollars on REDs and Bengals stadiums yet they cant afford to repair roads, bridges and schools and are laying off policemen and firefighters. Proves to me these investments have not profited city enough to poor a billion dollars into sports.

    Ross is probably giving Miami fans a good deal. As far as fleacing the tax payers goes. If they have to eventually pay only 50 or even 100 million. That is much cheaper than what the other pro teams have done to their cities. Still think 100 million dollars could be better spent on cleaning up the apperance of Miami.

    Personally wouldn’t pay to have them put up that Horrid new logo in any stadium. This rebranding of the team is the worst rebranding since Coke changed their formula. Hope it doesn’t take as long to fix the mistake. We once had a no name D now we have a no spirit logo. Saw them using new logo on NFL net as they talked about draft didn’t feel like they were even talking about our team.

    Go Dolphins!

    • txmedic5

      IF the renovations happen from this referendum, the Dolphins have agreed to stay for 30 years. So there is no chance of them moving the team. Another point also would be that while Ross is asking for the money and as Dave pointed out the team in some way will get a benefit from the improvements, those will be minimal.

      The stadium and the team are two completely different entities but it’s the Dolphins who are pounding for it through Mike Dee as the CEO. In reality, the Dolphins don’t get the money, Dolphins stadium does.

      I think they should also look at renaming the stadium as Sun-Life no longer operates in the states and I believe the naming rights is going to expire in the next year or two.

      I still support this referendum regardless. The taxes i would pay on this are minimal and honestly, counties in the U.S. throw more money than this away every day. At least fans can get something out of it.

    • Miami Jules

      Todd, are you the same as buckeyefinfan? If so, good to run into you, if not, hello anyway, There are costs and benefits to grow from a sometimes sleepy retirement and tourist community into a major metropolitan area. There have been, at the City of Miami level, certain upgrades and additions to our ailing cultural venues. Some of those are sitting idly while they wait for growth projections to materialize. The Overtown (actually Midtown) renovation plan will undoubtedly yield a profit to Miami’s tax base…in the long run. Comparing these projected benefits against the life of their liability isn’t a way to calculated real benefits for any renovation, since the benefits will continue to be earned long after the debt is paid for… same thing for the stadium. Yes, according to Dave, there will be a shortfall which the county residents (unincorporated Miami-Dade County) will feel more than anyone else (liket Miami, Hialeah or Coral Gables among others), so it’s hard for me to take sides when I wont be as directly impacted, but I wanted to elaborate on that a bit.

  • Miami Jules

    Just for the record or just in case. I don’t want to over complicate the already complex issue. Construction or costly renovation projects can only be calculated after the expenditures (public sectorish for expenses) have been capitalized. These expenses will hit owner’s and/or funding entities (the county in this case) almost immediately, while the revenue will trickle in sloooowly, over a long time. That’s why the expenses are deferred and amortized over a much longer period.It is important to understand that the liability is one thing and expenses (although that’s why there’s a debt in the first place) is another.
    According to Dave;s excellent detailed explanation, between principle and interest the total cost to the county before the Dolphin’s rebate will be over 360 M. before revenue is calculated a tallied, leaving the county commission to figure out how they’re covering that part of the debt in their budget, which will be well over 200 M There’s expected to be a hit to area hotel bookings because of the bed tax (tourist can find beaches just as beatiful as Miami-Dade’s, only 10 miles up the road in Broward county), and these hotels in Miami-Dade will share the more even oriented tourist benefits with these hotels 10 miles to the north. Having expressed that, sometimes there’s a cost associated with enjoying cultural and sporting events which separate the smaller town mentality from the bigger metropolitan areas. How much of that cost are Miami-Dade residents willing to bare, we’ll find out after the vote. I know mayor Gimenez is a highly educated man in the areas of finance and public administration, so let’s see what happens. BTW Miami’s appearance is beautiful as it is, thank you.