Government and public venues: A paradox waiting to strike
By Michael Lewis
Paradoxes abound when government builds venues for events. Those paradoxes often wind up hitting us right in the pocketbook.
As we reported last week, City Manager Joe Arriola wants to sell Miami's James L. Knight Center, which annually earns an operating profit, because it's a "real white elephant we got stuck with."
Nearby, meanwhile, the county blissfully builds a massive Performing Arts Center that anticipates an $8.6 million operating loss for its first four years.
The sticker for the Knight Center is $5.9 million in annual construction debt cost. That exceeds the $1.2 million operating profit.
Nobody even mentions the Performing Arts Center's debt service, which will be many times the Knight Center's.
The city just sold 16-year-old Miami Arena for $28 million, a loss of tens of millions, because it, too, was classified as a white elephant though its revenues went to the city. Money that paid debt service there would help build a baseball stadium for the Florida Marlins.
Yet the city won't get a penny at the Marlins stadium from either rent or concessions.
Government money also built American Airlines Arena, which replaced Miami Arena, yet revenue from that arena goes to the billionaire owner of its tenant, the Miami Heat basketball team.
Sale of the Knight Center would put the site onto the tax rolls for the first time, adding to government revenue. That happened when Miami Arena was sold.
Yet to build the Marlins' stadium, the city would buy and raze 55 taxpaying residential properties. County government would own the stadium, at least nominally, so what is now tax-generating land would become tax-exempt.
The city has talked off and on about selling its convention center in Coconut Grove and now is trying to sell its downtown exhibition center, the Knight Center, even while business leaders have sought a stronger convention presence. Studies show that convention and exhibition centers bring in overnight visitors, generating revenue and jobs.
Meanwhile, government builds basketball arenas and now plans a $420 million baseball stadium that could wind up costing taxpayers $800 million with debt service. Yet studies show that sporting events provide negligible numbers of overnight visitors and generate little added revenue - they just shift it from other entertainment uses.
Paradoxically, most government spending for the baseball stadium is to come from funds earmarked to develop the convention and visitor industry.
A baseball stadium is needed, according to Marlins owners and government officials, because the for-profit Marlins are losing money so must be subsidized by a government-built ballpark from which the team would derive revenues. So the Marlins would pay about a third of their current rent and pocket multiple revenue streams the present stadium owner now gets.
Yet the new Performing Arts Center, also being built and largely financed by government, will house not-for-profit arts groups that are losing money and the four principal tenants will be asked to pay far more than they do elsewhere today. Other non-profit groups probably will pay even more.
As the city sells off its assets, expect it to look next at the Gusman Center for the Performing Arts, a downtown gem whose performances would enhance the lifestyle of tens of thousands who would live in high-rise condos in development nearby.
Meanwhile, the city has looked at selling off the once-popular Miami Marine Stadium on Virginia Key, a wreck since Hurricane Andrew smacked it in 1992. Not a penny has been put into its reconstruction since then, and it won't be now.
What, then, is the purpose of government developing and owning venues for performance, sports and meetings?
Are these venues built to earn a profit for government and be sold off or dismantled when profits diminish, as is the case at the Knight Center?
Are venues created to enhance a community's lifestyle, as is the stated case for the Performing Arts Center?
Do governments build venues to economically buttress the businesses and non-profits that use them, which is the real reason for a Marlins stadium and was an initial impetus for the Performing Arts Center?
Do we build public venues to further enrich the rich, such as at American Airlines Arena?
Or are they meant as catalysts for real estate deals in surrounding areas, as was the case when the site for the Performing Arts Center was chosen next to land Knight Ridder bought cheaply under cover immediately before the site selection and just sold for $190 million?
Our philosophy of public venues, if we have one at all, seems to change from project to project and from government administration to government administration.
The Knight Center was built in a deal hatched in 1978 by developers from Atlanta to energize downtown and bring the University of Miami and a hotel into a complex whose synergies would accomplish that goal.
In the end, government didn't make money and the university was a fringe player, but the Knight Center has been a popular venue and the Hyatt Regency at the site enhances downtown.
Now, government wants to get out from under the burden of debt service there. Paradoxically, if it does, it's likely to simply shift funds it gets from selling the Knight Center to refurbish the Orange Bowl and fund a baseball stadium next door.
Then, a few decades from now, a new city administration can sell off the white elephant Orange Bowl to fund the latest idea for a new public venue, and we'll start all over again.