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Miami Heat Arena: County Still Pays Stadium Subsidies Even As NBA Lockout Cuts Tax Revenues

American Airlines Arena

Posted: 11/29/2011 5:41 pm

MIAMI -- Miami-Dade County forks over $6.4 million to the Miami Heat to operate the AmericanAirlines Arena every year. That was part of the contract when the arena, which is technically owned by the county, was built. The Heat run the place, and the county pays for their services. The basketball team would have played 41 games there during the 2011-12 season.

Would have played, were it not for the season-shortening NBA lockout.

Instead of 41 home games, the Heat will likely play only 33 games in downtown Miami once the season kicks off on Christmas Day. That means the county will miss out on as much as $2.4 million in hotel room and ticket taxes. It also means, according to the county, that the Heat will collect the full yearly allotment of operating subsidies for an arena that was barely used in November.

Some sort of escape clause for lockouts or other season disruptions "would have been a good thing to have," said Katy Sorenson, a former county commissioner who has long been critical of the arena deal. Sorenson added, "This county's not famous for great deals on sports arenas."

John Heffernan, press secretary for Miami-Dade Mayor Carlos Gimenez, acknowledged that the arena contract has no such lockout clause. But he defended the deal by pointing out that the AmericanAirlines Arena "operates year-round, hosting events that extend beyond professional basketball."

Not so much this month, at least according to the arena's online calendar of events. Taylor Swift played on Nov. 13. Jay-Z and Kanye West promoted their album "Watch the Throne" a few days later. That was it for November. December, with two events listed online, doesn't look much busier.

The mayor's office estimated that during a full season of 41 home games, the county would have taken in $492,000 to $738,000 in ticket taxes, and $8.2 million to $12.3 million in hotel taxes.

While the full schedule for the post-lockout season hasn't been announced yet, the Heat will likely play eight fewer home games. The cost to the county in lost tax revenues: somewhere between $1.7 million and $2.4 million, based on the average per-game taking.

Brad Humphreys, who holds the chair in the economics of gaming at the University of Alberta, has studied the economic effects of sports season disruptions. While the county's tax revenues may decrease, he said there will likely be no overall hit to the region's economy.

Why? When Humphreys and a colleague looked at the 1994 baseball strike and the two NFL strikes in the 1980s, what they found was that sports fans practice what economists call "substitution."

"People basically have a budget for entertainment spending," Humphreys said. "And if you take away one option, it's not that they save that money; it's that they simply spend it on some other entertainment option. So if they're not going to NBA games, they're going to movie theaters or plays or something else."

Meanwhile, hoteliers, restaurateurs and food vendors near the AmericanAirlines Arena are losing money. (The Heat would like to banish food vendors from the arena's neighborhood.)

As for Miami-Dade's operating subsidy, it doesn't seem likely the Heat, which declined to comment for this article, will be cutting the county a break anytime soon. In the first 10 years of the arena's operation, Miami-Dade sent the Heat $64 million in operating subsidies. The contract stipulates that at some point the team in turn is supposed to start sharing profits from the arena, but that hasn't happened yet, and some doubt it ever will. Under the contract, income must first be used to pay off the arena's construction costs.

Humphreys said he's an economist, not a moralist, but he thinks the NBA does not go far enough in acknowledging that cities and states have spent millions building or paying to operate the arenas where the league plays.

"They should recognize that part of the reason they have $4 billion to divvy up is that they have convinced local governments to subsidize their arenas," said Humphreys. "And they should have some sort of obligation to keep that economic activity going."

Some recognition of the Heat's responsibility to Miami "would be nice," Sorenson said. "That would indicate some sense of civic responsibility and some sense of contributing to the public good. But I don't really think that's what the deal was all about."

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