BRADENTON, Fla. — After five hours of dissecting agreements with the Miami Dolphins for public funds to assist with a $400 million renovation of the team's stadium, Miami-Dade County Commissioners Wednesday approved scheduling a binding referendum for local voters to approve the deal.
The Dolphins have agreed to pay the estimated $4.8 million cost of the May 14 special election, which the team could forfeit.
That's because the Florida Legislature still must approve bills giving Miami-Dade the authority to increase the local tourist tax to 7% from 6% for stadium renovations, and a companion measure giving the team a sales tax rebate of $3 million a year over 30 years.
If legislators fail to approve the bills, the referendum will be cancelled and the money paid by the Dolphins for the election remains with the county. If the election is held and voters disapprove of the tax increase, the deal is dead.
There was urgency for commissioners to approve agreements for the stadium project and special election in order to meet a 30-day deadline to advertise the referendum.
The goal is to hold the election before the National Football League's meeting May 22 in Boston, where the host cities for the 50th and 51st Super Bowls will be announced.
Dolphins owner Stephen Ross has said the team's 25-year-old Sun Life Stadium must be upgraded in order to compete for one of those two Super Bowls.
"I think it's as good a deal that were going to get," said Commissioner Juan Zapata, calling it "innovative and creative."
Mike Dee, chief executive officer of the team, said the Dolphins would do their part to educate voters "so they can make an informed decision."
While refining the agreement, commissioners repeatedly said that the county would not issue debt on behalf of the team or be liable for its payment.
County Mayor Carlos Gimenez, who negotiated terms of the agreement, said the Dolphins would only receive a "subsidy" and they must do "all the financing."
"We're not on the hook for anything," he told the board.
The Dolphins plan to issue bonds through the Miami-Dade County Industrial Development Authority, according to the agreement between the county, the team, and Ross. It is not clear if the deal will include tax-exempt and taxable bonds.
If approved by voters, the county's local tourist tax will increase to 7% from 6%, though it is also contingent upon legislative action.
About 75% of the 1% increase in the bed tax, or $7.5 million plus a 3% annual growth factor, will go toward a portion of the stadium's financing.
The total tourist tax revenue dedicated to the project is estimated to be $289 million, and would support the issuance of between $112 and $120 million of bonds, depending on market conditions at the time of sale.
The team is also expected to leverage the state sales tax rebate, and pay more than half the cost of the improvements.
According to county consultants who conducted a limited review of the Dolphins financial statements, the team will be eligible to borrow about $150 million from the NFL's G4 loan program.
To sweeten the Dolphins' deal for the local public, the team promised to repay the net amount raised by the tourist tax, and the net amount of the sales tax rebate after 31 years. The payment is also secured by Ross's personal guaranty. Interest on the debt would not be repaid.
The team's offer to repay the public funds, if those funds back tax-free bonds, could present a problem with the Internal Revenue Service, according to an attorney who specializes in tax-related issues involving municipal bonds.
"Any sort of understanding that the grant would be repaid would probably be troublesome to the tax lawyers," the attorney said, adding that he did not know specifics about proposal.
To avoid problems with the IRS in a stadium financing, public funds backing tax-exempt bonds cannot be subject to repayment by a private business like the Dolphins, he said.
"Generally, if there's an obligation to repay the money, it's considered a loan and you can't use tax-exempt bond proceeds to make a loan to the team," said the attorney. "Essentially, there has to be a grant where public money supporting the bonds comes from tax revenues rather than from the team."
Those restrictions would not apply if taxable bonds, currently selling at favorable interest rates, are used for the project, he said.
The plan of finance has not been released by the Dolphins, so it is not clear what kind of bonds will be sold.
In the agreement with Miami-Dade County, if Ross sells a controlling interest in the team in the next five years, he must pay the county $20 million.
The team must meet certain milestones and pay penalties for missing them. Those include paying up to $120 million if a certain number of major events do not take place over the next 30 years such as Super Bowls, World Cup Soccer, and BCS Championship games.
The deal includes a 30-year non-relocation covenant that could be extended another 10 years if the team has not satisfied payment obligations to the county.
The Dolphins also said they would include small businesses and local residents when contracting for the improvements.
The stadium opened in 1987, and was constructed with private funds.
While the stadium is privately owned, the Dolphins lease the land for $1 a year from Miami-Dade County, which gave the team a 99-year lease in 1984.
The team also pays nearly $4 million in property taxes annually for the land, improvements and tangible personal property. The Dolphins are believed to be the only professional sports team in Florida that pays property taxes, Gimenez said.