Inspector General: The Miami Heat Owe County $3 Million
MIAMI (CBS4) – The Miami Heat owes Miami Dade County between $3 million and $4 million, according to the county’s Inspector General, whose yearlong investigation found the Heat repeatedly violated its agreement with the county over how to operate the American Airlines Arena.
Those findings are included in the initial draft of the Inspector General’s report which was provided to county officials earlier this month. A final version of the report could be released as early as next week.
Heat officials are expected to object to those findings and maintain they did nothing wrong. In an email to CBS4 News late Tuesday, a team spokeman wrote: “there have been no `violations’ of the agreements nor does [the Heat] `owe’ the County any money.” The team said they have provided a response to the Inspector General’s report and sent it to the IG.
At issue are improvements and other changes the Heat have made to the arena without first getting the county’s permission.
Jose Galan, the county’s chief of program legislation, who was recently appointed to oversee the contract between the Heat and the county, said county officials are aware of the IG’s findings. “We’re still looking at that,” he said. “We’re still looking at what the IG is reporting. They may have misread the agreement.”
The controversy could pose a serious political risk for County Mayor Carlos Gimenez who is up for re-election this year.
The question becomes: Will Gimenez, who has had to close libraries and parks, as well as cut salaries and benefits for county employees, accept the Inspector General’s findings and demand the Heat reimburse the county millions of dollars? Or will he side with the Heat and allow them to keep those funds?
If he sides with the Heat, the mayor will open himself up to questions of political favoritism. The Heat’s lead lobbyist, Jorge Lopez, was a senior campaign advisor to Gimenez when he ran for mayor. Lopez is also one of Gimenez’s chief political fundraisers.
A spokeswoman for Mayor Gimenez issued the following statement: “The administration does not comment on draft reports. Once the final audit report has been published, Mayor Gimenez will respond.”
The Inspector General launched its investigation in response to a CBS4 News report last year highlighting the fact that even though the arena had been open for more than a decade, it hadn’t generated any revenue for the county.
The county had been promised revenue sharing as part of its 1997 agreement with the Miami Heat, and its billionaire owner, Micky Arison.
Arison had threatened to move the team if a new, waterfront arena wasn’t built on county land and subsidized with nearly $200 million in taxpayer money.
In return for county’s investment, the Heat promised that if the arena generated more than $14 million a year in profit the team would share that money with the county.
But every year, it’s been the same story. Although it takes in tens of millions of dollars a year through basketball games, concerts and events like the circus – the Heat always claim the profits are eaten up by expenses.
Even last year, when LeBron James arrived and overall revenue for the arena jumped by nearly $15 million, the Heat still found a way to declare that the arena still wasn’t profitable enough to share any revenue with the financially struggling county. Indeed, in the twelve years the arena has been open the Heat hasn’t shared a single penny of revenue with the county.
Within weeks of the CBS4 News story, the IG moved in and copied boxes of records and contracts related to the agreements between the Heat and the county. The investigation soon expanded beyond revenue sharing to other issues.
A draft of the report was sent to county officials earlier this month and the findings are “deeply troubling,” according to one official who reviewed the report.
Perhaps the biggest concern is that while the Heat manages and operates the facility, the arena is still owned by the county. And yet for more than a decade no one at County Hall has ever bothered to question or even review the arena budget.
In essence, the county has allowed the Heat to do whatever they wanted at the arena without any oversight.
The main reason is that no one at the county even realized they had the right to review the arena operating budget prepared by the Heat. CBS4 News found this hidden provision in the hundreds of pages that constitute the contract between the Heat and the county.
The contract states that if county officials do not object to anything contained in the budget within ten days then the budget is considered approved. No one at County Hall was aware this provision even existed until CBS4 News started asking questions about it last year.
CBS4 News went through ten years of budgets for the American Airlines Arena and we found that since 2002, the overall budget for the arena has gone up nearly 60 percent.
Salaries at the arena have increased by 45 percent.
The arena spent $435,000 on its own public relations firm and another $1.3 million on lobbyists.
Last year, CBS4 News interviewed Gimenez regarding the Miami Heat shortly her took office. At the time, Gimenez admitted the county had done a poor job of providing oversight. He promised that going forward he would demand the county be more engaged. He arranged a meeting between county officials and the Heat and told them he wanted the arena budget scrutinized.
“It may be totally appropriate but we have to do a better job of looking at it and making sure it is appropriate and we are not being short changed in any way shape or form,” Gimenez said last November.
“Look I’m not an arena operator and so part of the process we are going to look at is, are these customary charges,” he added. “We need some kind of comparison.”
According to those familiar with the Inspector General report, the Heat repeatedly violated the terms of its agreement by making changes and improvements to the arena without first getting the county’s permission. They then charged the county for those unauthorized improvements.
The IG maintains the county should be reimbursed for the charges. The IG argues the Heat owes the county between $3 million and $4 million. A final report by the IG is expected to be released next week.
Galan, the county official overseeing the contract, said the county is now in the process of reviewing those specific charges to see if they were “reasonable and customary” under the contract and didn’t need to be approved by the county in advance.