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City of Miami in the mix: Good or bad news?


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Hialeah's Mayor Robaina statements suggest that the stadium deal in his city is almost a done deal.

 

A downtown Miami stadium may more attractive to MLB and others but it appears to still be in the relatively early planning stages. Many of the City of Miami officials had not heard about it before the Herald article and one is even suggesting reviving the Orange Bowl site. There seems to be no definite plan to bridge the funding gap and I have heard no talk of a special taxing district similar to the one Hialeah has planned.

 

We need a stadium built SOMEWHERE. I have no problems with a downtown stadium, I actually prefer it. However, my fear is that throwing a Miami stadium into the mix right now may delay and possibly jeopardize what appears to be a sure thing in Hialeah. If the Hialeah commissioners feel that all their hard work for the past 5 or 6 months have been in vain and think that they are being used " a la San Antonio" they may bolt the negotiations and we will be left with only the City of Miami once again. Granted that the city has a new city manager (abrasive, egomaniacal, non-compromising Arriola won't be there), but is that is a risk we are willing to take?

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Good poiont about a downtown ballpark maybe messing up what Hialeah has. But the concept of a stadium out there (has anybody been west of 75 where it is??? it's filthy disgusting, landfills and areas like that all over)... the Downtown site is the definite obvious one: development in the area is nuts... a nightlife area is getting established, people will be moving into teh condos in teh area, etc)

 

So I feel like since that area is soo much better than the Hialeah site (and I'mg uessing MLB sees the same... this talk can only be a good thing).

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The important component that Miami brings to the table, and one that Hialeah can match, is a predictable and thus bondable taxing mechanism.

 

When the City of Miami was jettisoned as a participating partner with it went their share of the Professional Sports Franchise Tax which is collected through the Convention Development Tax. It was the loss of those $$$ that skyrocketed the deficit.

 

Here's how this works. Let's say a project cost $100 million to build (numbers used for illustration purposes to keep it simple). The general contractor, architects, subs, suppliers all need to be paid during and immediately after the construction process yet there is no revenue coming in to pay these costs.

 

A government, either a city or a county, will issue (sell) tax-exempt bonds in the required sum (actually a little more to cover the commission paid for selling the bonds), let's say $110 million. But before that happens the bond community needs to know there is the cashflow or a revenue stream to cover repayment of those bonds.

 

And the repayment of these bonds includes an interest component so let's say over the term of the bonds the total cost, $100 million for construction, $10 million for sales commission and another $90 million in interest will have to be paid so the total cost of financing the stadium is actually $200 million.

 

In the case of the Marlins' new stadium both the city and the county's share will come from their respective shares of the Professional Sports Franchise Tax, which has been in existence for a number of years and already taxpayer approved. In fact there is a huge pot of money already collected but unspent but let's ignore that for this explanation.

 

Analysts for the city and county, looking at prior years collections of this tax and conservatively calculating future collection based on tourist and convention trends might extimate that a minimum of say $3 million a year in the first year and $8 million in the twentieth year will be available. They can't just pick numbers out of a hat because the bond community has their own number-crunchers and will be looking at every facet of the deal to make sure the people they sell these bonds to will in fact be paid.

 

So in the end the city and county can peg their collection share of the over twenty years at $90 million. That leaves $110 million unaccounted for.

 

This is where the Marlins component comes in. First they put $30 million in, reducing the bonds necessary from $110 million to $80 million, and the overall cost down to $160 million (less borrowed, less interest due over the term). The city and county have already committed $90 million, bringing the rent the Fish have to pay down to $70 million over the twenty years which they agree to pay, pledging a) not to move for the life of the bonds and b) pledging the team as collateral to the city and county (who are ultimately responsible for the bond repayment) so as to the the local governments comfort in getting involved in the first place.

 

Okay, so now Miami pulls out, leaving a big shortfall because the PSF taxes that flow to the city are no longer part of the deal.

 

Enter Hialeah.

 

Hialeah doesn't get as much if any of the PSF tax as Miami so they must find a different way to make up the missing piece. In this case, what they have is a dump that is spinning off zero property taxes (collected on the "improvements", buildings, etc. on the property of which there are none). By "improving" the property, any improvments are now taxable like any other building.

 

What Hialeah does, with the county's encouragement and permission is create a "special taxing district". Keep in mind all property taxes are collected by the county and distributed county-wide, with a only a portion collected in each community coming back to that community. But in the case of a "special taxing district", let's say if Hialeah would normally get back 20% (again all this is all illustrative, for you accountants or government bureaucrats bear with me I know it's much more complicated but basically it works as a demo), in this "special taxing district", the city of Hialeah will be allowed, for the same twenty year period as the bonds, to keep 80% of the taxes collected, and use that $$$ to make their contribution to the new stadium, in effect replacing the City of Miami's Professional Sports Franchise Tax component with their "special taxing district" revenue component.

 

All this happens under the understanding that were it not for the creation of the special taxing district, which funds the creation and improvement of a dump into a useful piece of taxable property, no taxes would be collected in the first place. The county comes out ahead, collecting 20% instead of nothing, people are employed in all those new businesses, money is coming in to help pay off a stadium - in short everyone wins.

 

So while Hialeah has a tougher road to hoe, it isn't out of the running by any means. And beyond that, one other thing. If the Marlins move to Miami, the team changes names as a prerequiste of the deal, if they wind up in Hialeah they continue to be a "regional" team still called the Florida Marlins.

 

So let's not pronounce Hialeah dead quite yet, in fact they may have a leg up on Miami for any number of reasons. Right now MLB and Miami "want" the Marlins but Hialeah, with the county's help has the land and resources (not mention location for all three counties) to actually make it happen quickly enough to be out of hell on earth, er Dolphin Stadium by opening day of the 2011 season.

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Hialeah's Mayor Robaina statements suggest that the stadium deal in his city is almost a done deal.

 

A downtown Miami stadium may more attractive to MLB and others but it appears to still be in the relatively early planning stages. Many of the City of Miami officials had not heard about it before the Herald article and one is even suggesting reviving the Orange Bowl site. There seems to be no definite plan to bridge the funding gap and I have heard no talk of a special taxing district similar to the one Hialeah has planned.

 

We need a stadium built SOMEWHERE. I have no problems with a downtown stadium, I actually prefer it. However, my fear is that throwing a Miami stadium into the mix right now may delay and possibly jeopardize what appears to be a sure thing in Hialeah. If the Hialeah commissioners feel that all their hard work for the past 5 or 6 months have been in vain and think that they are being used " a la San Antonio" they may bolt the negotiations and we will be left with only the City of Miami once again. Granted that the city has a new city manager (abrasive, egomaniacal, non-compromising Arriola won't be there), but is that is a risk we are willing to take?

 

 

"I'm going to do everything I can to make a deal in Hialeah, but if it's not a sound economic deal for the city, I will make sure to work so that the Marlins stay [in South Florida]," Robaina said.

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Marlins2003 -

 

Great post. I have a comment and a question.

 

My comment is that I see no way that Hialeah can generate enough revenue to the special taxing district to cover the current funding gap. As I pointed out a few months ago in another thread, by my calculations they would need to generate over a billion dollars in improvements, and even then it would be at a cost of property tax dollars that might otherwise go to funding schools or essential services in the area. Given what I've heard about the immediate area, I can't see the bond community rallying around it without massive amounts of guaranteed future developments locked in place.

 

My question has to do with the franchise tax. What is the source of this revenue? Property taxes? Sales taxes? Ticket taxes? Hotel taxes? Something else? And why would Hialeah have any less of a claim to that money compared to Miami?

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umm...im pretty sure every city in the county has the same right to that money as the city of miami...ive heard this mentioned a few times by a few politcos.

 

when miami pulled out they took their $30M contribution. which doubled the gap from 30m to 60m at the time (this was the MOU of early 2005) and as a result of inflation and construction costs the gap is now 100m.

 

if you look at burgess' ballpark report from february 06 he had a ballpark in hialeah or in sw miami dade getting as much money from the cdt tax as a ballpark in miami.

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Marlins2003 -

 

Great post. I have a comment and a question.

 

My comment is that I see no way that Hialeah can generate enough revenue to the special taxing district to cover the current funding gap. As I pointed out a few months ago in another thread, by my calculations they would need to generate over a billion dollars in improvements, and even then it would be at a cost of property tax dollars that might otherwise go to funding schools or essential services in the area. Given what I've heard about the immediate area, I can't see the bond community rallying around it without massive amounts of guaranteed future developments locked in place.

 

My question has to do with the franchise tax. What is the source of this revenue? Property taxes? Sales taxes? Ticket taxes? Hotel taxes? Something else? And why would Hialeah have any less of a claim to that money compared to Miami?

 

To the first part, it is depends on what is built on the land, it's density, height and ultimately it's value. If a bunch of Value-Stor mini-warehouses are built it's one thing, if the property development is towards a high-rise office park (think immediately south of MIA across 836) the value could be staggering.

 

As for the usual red herring regarding schools and essential services in the area, if nothing is built (the site is never developed, there is zero tax revenue. 20% of something is better than 100% of nothing.

 

To the last part. If after three years of writing about this you don't know, then you don't want to know. Here's link, do your own research. http://www.miamidade.gov/taxcollector/

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Residing where I do I don't care where it is built and have no preference.

 

Wherever it is built the same bonding mechanism will be used to pay for construction. And whether it's PSF tax dollars or a special taxing district in Hialeah, ultimately it means little to the fan.

 

If I had to lean towards one, I guess I would go towards Miami but only for reasons unrelated to baseball and more towards tourism, both convention-related and individual.

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Marlins2003 -

 

Great post. I have a comment and a question.

 

My comment is that I see no way that Hialeah can generate enough revenue to the special taxing district to cover the current funding gap. As I pointed out a few months ago in another thread, by my calculations they would need to generate over a billion dollars in improvements, and even then it would be at a cost of property tax dollars that might otherwise go to funding schools or essential services in the area. Given what I've heard about the immediate area, I can't see the bond community rallying around it without massive amounts of guaranteed future developments locked in place.

 

My question has to do with the franchise tax. What is the source of this revenue? Property taxes? Sales taxes? Ticket taxes? Hotel taxes? Something else? And why would Hialeah have any less of a claim to that money compared to Miami?

 

To the first part, it is depends on what is built on the land, it's density, height and ultimately it's value. If a bunch of Value-Stor mini-warehouses are built it's one thing, if the property development is towards a high-rise office park (think immediately south of MIA across 836) the value could be staggering.

 

As for the usual red herring regarding schools and essential services in the area, if nothing is built (the site is never developed, there is zero tax revenue. 20% of something is better than 100% of nothing.

 

To the last part. If after three years of writing about this you don't know, then you don't want to know. Here's link, do your own research. http://www.miamidade.gov/taxcollector/

Concerns over TIF revenue are anything but a red herring. If nothing is built, then no tax revenue is needed for those services in the first place. Many cities are abandoning or limiting TIF revenue as a funding source because in the long run it either puts an undue burden on the services which are normally funded by property taxes or it increases the overall tax burden. I'm not saying that would be the case in Hialeah, I'm just saying that $100m in TIF revenue from a swath of land that currently sits vacant is a large commitment and would be more difficult to bond than, say, a similar proposal would be in an area near downtown that is truly ripe for such development anyway (with or without a stadium).

 

To my question about the franchise tax... Well I haven't spent the past three years dissecting your posts. I just asked a simple and highly relevant question, so obviously I do want to know. You don't have to be an ass about it.

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Marlins2003 -

 

Great post. I have a comment and a question.

 

My comment is that I see no way that Hialeah can generate enough revenue to the special taxing district to cover the current funding gap. As I pointed out a few months ago in another thread, by my calculations they would need to generate over a billion dollars in improvements, and even then it would be at a cost of property tax dollars that might otherwise go to funding schools or essential services in the area. Given what I've heard about the immediate area, I can't see the bond community rallying around it without massive amounts of guaranteed future developments locked in place.

 

My question has to do with the franchise tax. What is the source of this revenue? Property taxes? Sales taxes? Ticket taxes? Hotel taxes? Something else? And why would Hialeah have any less of a claim to that money compared to Miami?

 

To the first part, it is depends on what is built on the land, it's density, height and ultimately it's value. If a bunch of Value-Stor mini-warehouses are built it's one thing, if the property development is towards a high-rise office park (think immediately south of MIA across 836) the value could be staggering.

 

As for the usual red herring regarding schools and essential services in the area, if nothing is built (the site is never developed, there is zero tax revenue. 20% of something is better than 100% of nothing.

 

To the last part. If after three years of writing about this you don't know, then you don't want to know. Here's link, do your own research. http://www.miamidade.gov/taxcollector/

Concerns over TIF revenue are anything but a red herring. If nothing is built, then no tax revenue is needed for those services in the first place. Many cities are abandoning or limiting TIF revenue as a funding source because in the long run it either puts an undue burden on the services which are normally funded by property taxes or it increases the overall tax burden. I'm not saying that would be the case in Hialeah, I'm just saying that $100m in TIF revenue from a swath of land that currently sits vacant is a large commitment and would be more difficult to bond than, say, a similar proposal would be in an area near downtown that is truly ripe for such development anyway (with or without a stadium).

 

To my question about the franchise tax... Well I haven't spent the past three years dissecting your posts. I just asked a simple and highly relevant question, so obviously I do want to know. You don't have to be an ass about it.

 

I gave you a link to the tax collector's webpage. If you're too lazy to click on the link and find the PSFT (hint look under hotel and restaurant taxes) there's nothing I can do about that. Blame your parents for your laziness, not me.

 

As for how much tax revenue can be gathered from the site, without knowing the value of what would be proposed to be built there, and the timeline, to suggest it's not bondable (and it's the revenue stream based on both a plans of the developer, in this case one with a tremendous record, and the plans proferred that creates the underpinnings for any potential bond sales) is foolhardy.

 

And as for my "red herring" comment it was in regard to usual, tired arguments about "we need new schools and roads before a a stadium for a gazillionaire...", not specifically about TIF (Tax Increment Financing).

 

I believe my point though is still valid. If nothing is built there, no jobs are created, no income or sales taxes are paid by that workforce, no property taxes collected, etc. Further the idea that somehow because this property is in West Dade it's less desirable ignores it's proximity to major highway systems. While it may not be worth alot to a guy who wants to build million dollar condos to the sky, but if a Fedex or Walmart or any one of a thousand other national and international companies were looking for corporate headquarters tied to a 2,000,000 sq ft distribution facility, this is the ideal spot.

 

Since there is not expected to be a housing component in the project there will be no impact on schools. Highway access improvements will be made in the course satisfying not primarily the stadium, which has limited use, 81 times a year, but rather the above described 300 day users.

 

If Walmart or Lowes or Home Depot wanted to build a few million sq ft there and provide 800-1000 job, the county and FDOT would be Johnny on the spot with funds to make sure they located there instead of Marietta GA. or Columbus OH. see Burger King.

 

As for TIF, btw, it seems to be working nicely all accross the country. I was just reading an article (for something unrelated) that had to do with a TIF program in Evanston, IL, the results of which include collecting much more in taxes than was anticipated. For every place it hasn't worked there are multiple ones which have. Painting with a broad brush isn't always the best way to get at the truth.

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Painting with a broad brush isn't always the best way to get at the truth.

 

I agree. So put away your brush and stop assuming that I'm some kind of a lazy wingnut antitax crusader.

 

I never said anything resembling that stupid "stadiums for gazillionaires" argument. Nor did I say that it would be impossible for Hialeah to generate or bond against TIF revenues. What I'm saying is that downtown baseball stadiums are an easier sell from an economic and land development standpoint. This is a FACT. If I'm biased, it's towards downtown stadiums... I have been researching similar development projects for many years and toured over 2/3 of the current MLB stadiums, and there is pretty much a direct correlation between siting a stadium in a prime downtown location and its success (both from a fan's standpoint and as an economic development catalyst).

 

Personally I find it hard to believe that a Walmart or a Lowe's would site their distribution center in Hialeah only on the prerequisite that they also get to shell out an additional $100 million in TIF revenue towards a baseball stadium... but hey, I'm no insider, I'm not sitting on any of these secret meetings, maybe there is some other quid pro quo going on here involving land, selling development rights, etc. If a downtown stadium is not possible and Hialeah can pull it off and draw from a broader fan base then kudos to all.

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