A Look at the Finances Behind the Miami Heat’s Success
Micky Arison was one of five NBA owners who voted against the current Collective Bargaining Agreement back in December of 2011. It was mostly a symbolic move – he knew the agreement would pass either way. But the point that Arison was making was clear: the harshest elements of the new contract, the more penal luxury tax system and the new revenue sharing model, were clearly aimed directly at the Miami Heat.
The lockout having ended, the season was spared and the Heat went on to win its first, and now its second, championship of the Big Three era. Heat fans have thus far been spoiled by Arison’s willingness to spend his way into ensuring the future is bright in Miami. But the day of reckoning the league had envisioned for the Heat is now upon us.
Player salaries, when combined with luxury tax obligations, can get quite expensive for a title contender such as the Heat. Revenue sharing obligations only increase that financial burden.
In this new salary cap environment, where even the most lavish of owners such as Mark Cuban of the Dallas Mavericks and James Dolan of the New York Knicks are for the first time monitoring their payroll, where legitimate championship contenders need to part ways with budding superstars, some financial responsibility is inevitable.
An Overview of Heat Revenues
First, some background.
Micky Arison is a multi-billionaire.
He is the son of Ted Arison, co-founder of Carnival in 1972. He became Chairman and CEO of Carnival in 1979. He announced his intention to step down as CEO earlier today, retaining his role as Chairman, but he nonetheless remains the beneficial owner of 174 million shares of the company, currently valued at a whopping $6.0 billion!
He is the majority owner of the Miami Heat, having purchased the team from his father and two other men, Billy Cunningham and Lewis Schaffel, for $68 million in 1995, who themselves paid out $32 million in expansion fees in 1988 to bring the team to Miami. He is sitting on a many-hundred-million-dollar unrealized gain with the investment, a figure which figures to rise into the billion-dollar range in the years ahead!
The true revenues of his team is not a matter of public record. The Heat is a private entity, with no public disclosure requirements. Certain financial details, however, are known:
The Heat generates in excess of $1.4 million in ticket sales for each of its 41 regular-season home games – with an average ticket price of $72 per game, and a sold-out seating capacity of 19,600 – of which 6% is required to be repaid to the NBA in the form of a capital contribution. The average ticket price does not include premium seats (suites, booths, court-side seats, VIP packages), so this isn’t the entire picture – but it’s close. The team charges a premium for playoff home games, of which 45% is required to be repaid to the NBA in order to cover the league’s costs to fund the Player Playoff Pool and produce the playoffs, including expenses for travel, marketing and officiating. In all, the Heat generated approximately $80 million in gross gate receipts for the 54 home regular and postseason games played this past season.
The Heat collects an average of $31 million per year from its share of national TV revenues. In June 2007, the NBA executed an eight-year agreement that promises pro basketball a total of $930 million per year from ESPN/ABC and TNT, divided equally among all thirty teams. The current agreement expires after the 2015-16 NBA season, and recent deal precedents suggest the league could expect to generate in the range of $2 billion per year next time around, which would more than double the Heat’s average take, to $67 million, for the better part of a decade.
The Heat generates approximately $20 million per season under a 10-year local television deal with News Corp.’s regional sports network, Fox Sports Florida, which was signed in 2004. The deal expires in just two years, after the 2014-15 NBA season, and rumors are that the Heat could at least quadruple its current take, to as much as $80 million or more, supported by some the game’s best player and some of the league’s best viewership.
The Heat generates $2.1 million from American Airlines each year to have its name on the arena in which they play. The two parties signed a 20-year, $42 million arena naming rights deal in 1999, that comes due in 2019. That’s a tremendous bargain. American Airlines’ other sponsored arena, American Airlines Center, where the Dallas Mavericks play basketball and the Dallas Stars play hockey, yields about $6.5 million a year in naming-rights revenue from a 30-year, $195 million deal signed in 2000. Stadium-naming rights have become more trendy in recent years, and they reached a fever pitch in 2006 when Citigroup agreed to pay $20 million a year to christen the New York Mets’ new baseball home Citi Field when it opened in 2009. Barclays Bank set an NBA record last year by signing a $10 million-per-year deal to put its name on the New York arena that is home to Brooklyn’s professional basketball and hockey teams. The Heat will surely look to increase its take at the end of the decade.
The Heat generates food and beverage revenue under an arrangement with concessionaire Levy Restaurants. According to Chris Bigelow, the president of Bigelow Companies, a consultant to stadium operators, fans tend to spend an average of $18 to $26 a person on concessions. The Heat’s arena capacity is 19,600, which would suggest concessions revenues of between $15 million and $20 million before accounting for the playoffs. It is unclear how those revenues are split between the two parties.
The Heat generates additional revenue through sponsorship deals, though it is unclear as to just how much. Each sponsorship deal is different, and contracts are confidential. They work something like this: A company signs up to partner with the team for a season or multi-year. For example, Kia becomes “the official vehicle of the Miami Heat.” A contract spells out details: what kind of game tickets; how much access to luxury suites; what signage at the arena; how much exposure in print, broadcast, websites and social media; and even which players might visit their stores or offices. Experts say the bulk of Heat deals run between $100,000 and $500,000. Some cost less, partly because of relationships forged before LeBron James and Chris Bosh joined. And some cost more for a broader partnership, with more media. Major corporate sponsors include American Express, Anheuser-Busch InBev, Coca-Cola, Bacardi, Kia Motors, Papa John’s, T-Mobile, and Tsingtao beer. With the Heat now back-to-back NBA champions, the list is sure to increase in the years ahead.
The Heat generates additional revenue through merchandise sales, though it may be substantially less than you’d think. Despite the popularity of LeBron James and Dwyane Wade jerseys, all merchandise sales are split equally among the league’s 30 teams, except for what the team sells locally.
The Heat generates a small amount of revenue from other sources as well, including on-site parking.
Though it’s not all that difficult to envision the Heat’s annual revenues to reach $300 million in the years ahead, for now, they remain closer to $180 million.(1)
An Overview of the Heat Cost Structure
An analysis of cost is a far more difficult proposition, made even more challenging by the scores of non-cash charges and intra-company arrangements professional sports franchises often incur in an effort to reduce both their tax liability and their reported profitability for when they need to negotiate with their local governments for arena/stadium funding.
Arison, for example, negotiated a favorable arena funding deal with Miami-Dade county in 1997. Under the terms of the 30-year deal, the Heat agreed to privately finance the $213 million construction cost for AmericanAirlines arena, which opened on December 31, 1999. In return, the Heat pays no rent to play in the arena, an oceanfront venue that the county bought from the city of Miami for $38 million; instead, the team actually receives $6.4 million in annual operating subsidies.
While the arrangement includes the yearly subsidy, it also calls for Miami-Dade to collect 40% of all yearly arena profits above $14 million. But the team has never once paid a profit-sharing payment to the county. That’s partly because the Heat deducts lots of non-cash charges. Over a past five years, the team has claimed depreciation expenses – a method of allocating the cost of a fixed asset over its useful life – of $55 million. It can be argued that depreciation expenses shouldn’t be factored into the calculation at all, because they don’t reflect an actual outflow of cash, because they presumably relate to fixed assets for which the team initially agreed to pay, and because the subsidy was designed to maintain and replace such fixed assets as they age. In 2012, arena profits hit $16.4 million – net of $47.8 million in operating expenses, including $12 million of depreciation – according to records filed with the county. If not for past losses, the arena would have paid Miami-Dade almost $1 million. But the deal also allows the Heat to deduct arena losses from prior years before it pays the county. The Heat will reportedly make its first ever payment to the county this year.(2)
Backed by the team’s recent success and before it recognizes and is thus required to provide details to the county of the massive new revenue streams that lie ahead in the near future, the Heat is currently looking to extend the deal for another 10 years, and is reportedly asking the county to increase its subsidy to nearly $17 million per year over the extended term. County officials have questioned the apparent self-serving nature of the timing of the Heat’s request for an extension (the current deal still has another 15 years remaining on it), and have slammed the Heat’s proposal as too generous to the Heat and too costly for the county.
What we don’t know is how much it truly costs for Arison to operate his basketball team. Among the many costs involved are gross revenue charges such as excise, sales, and admissions taxes as well as payments to the league based on the sale of tickets; sales and marketing expenses such as TV, print and other advertising; general and administrative expenses such as arena operating and maintenance costs (net of any financial arrangements with the county), costs associated with concessionaire Levy Restaurants, and payroll expenses for front office employees; salary obligations to, among others, the team’s players, general manager Pat Riley, CEO Nick Arison, head coach Erik Spoelstra, and all of the team’s assistant coaches; and overhead costs allocated by the NBA to support its operating needs, marketing, global expansion efforts, and revenue sharing arrangements.
Player Salaries and Luxury Tax Obligations
What we do know is that the biggest individual cost component for the Heat is player salaries and related luxury tax obligations.
The Heat may be two-time defending champions and the top pick to take the title again next June, but they’re paying the cost to be the best. Even with only four players making more than the league’s average salary, they paid out $83 million in salaries this past season, vaulting deep into the dreaded luxury tax territory. When adding the dollar-for-dollar tax payment, the Heat shelled out $96 million in total payroll obligations. They will, however, receive back $6.5 million from the league’s escrow fund, lowering total payroll obligations to $90 million for the year. Even still, that’ll be the most in team history. And payroll obligations are about to get even more expensive.
As a result of the new Collective Bargaining Agreement, the NBA will amplify its already painful luxury tax penalties by instituting a more punitive “incremental tax” that starts next season, and an even more onerous “repeater tax,” aimed at teams that have paid the tax in four out of five seasons, starting the season after.
These punitive tax consequences will affect the Heat in a way with which dynasties of the past never had to deal. The luxury tax as a concept was only started in 2002. When the Chicago Bulls outspent their nearest competitor by a whopping 30% in support of their dynasty in 1997, they didn’t need to worry about luxury tax consequences. They didn’t need to worry about luxury tax consequences when they led the league in spending the following season either. Neither did the Lakers and Celtics dynasties of decades past.
The Heat has produced three straight finals appearances, two straight titles, without ever having led the league in spending – not even close – and yet the new and more punitive tax rules threaten its continued existence as presently structured. It is, quite simply, far more difficult to build a dynasty now than it has ever been in the history of the NBA.
The Heat is in the midst of doing so, but it’s getting expensive.
Attached below is an overview of the Heat’s current payroll obligations, including luxury tax consequences, for this past season as well as the next three. Bear in mind that league rules stipulate a team must have no fewer than 13 and no more than 15 players on its regular season roster (and that future luxury tax thresholds are based on current estimates, which will be updated in the first week of July).
2013-14: For the 13 players it currently has under contract, the Heat is already facing a tax bill of $29 million and a total payroll of $115 million. That’s a $19 million increase from last season’s record total, and that’s before addressing the Chris “Birdman” Andersen situation.
2014-15: Projecting out two years into the future is an exceedingly difficult task, made even more complicated by the fact that the Heat only has 7 players currently under contract, and all of them are subject to player or team options. However, as things currently stand, this figures to be the most expensive year the Heat will ever face in the Big Three era. The team’s biggest contracts will still be on the books, and most of the ones that expire, those of Chalmers, Allen, and Battier, figure to be for key contributors whom the Heat may look to re-sign or replace. That would imply a payroll of around $140 million after incorporating the repeater tax. That’s almost double the highest ever payroll in team history prior to the Big Three era!
And that number could easily increase even more. It assumes the minimum 13-player roster. It doesn’t account for the Heat’s 2014 first round draft pick, and it doesn’t account for the potential first round draft pick received from Philadelphia in the Arnett Moultrie trade. When including these draft picks, bringing the roster to 15 players, payroll obligations could reach $155 million or more!
2015-16: Relief! The contracts of Mike Miller, Udonis Haslem and Joel Anthony all finally expire. The Heat starts the offseason with only 3 contracts on the books, at a total cost of $66 million. But the team still needs to build out a roster. And given that the 3 contracts take up the team’s entire projected cap space, options with which to do so will be limited. The team’s first round draft pick will go to Cleveland as part of the sign-and-trade that brought LeBron James to Miami.
Revenue Sharing Obligations
Revenue sharing obligations increase the team’s financial burden.
The NBA’s new revenue-sharing plan was years in development and today represents a staggering shift in league policy as the league redistributes wealth among its teams.
It was fueled by a plea from eight small-market teams in 2007 and grew into one of the league’s most contentious issues, running parallel with the league’s Collective-Bargaining Agreement negotiations during the lockout in 2011.
The high revenues generated by the big-market teams increases league-wide revenues, which increases the salary cap, which increases the amount all teams (including low-revenue, small-market teams) are forced to spend on player salaries — leading to an unsustainable system.
It used to be that revenue-sharing in the NBA was largely a theoretical concept. It didn’t really exist. Monies were only distributed from certain teams to certain others on the basis of luxury tax payments. Higher spending teams, those whose payrolls exceeded the tax threshold, were made to pay luxury taxes that were then distributed to teams whose payrolls did not exceed the tax.
The league’s revenue-sharing plan now works in parallel with the luxury tax concept as a one-two punch to address franchise economic disparity. It is designed to help redistribute money from high-revenue teams (generally in big markets) to needier teams (generally in small markets).
Under the old plan teams received much less than under the new plan, with the highest individual receipts averaging $5 million. With the new plan, a stunning $180 million is projected to be redistributed in 2013-14, moving money through a complex formula that shifts some of the financial wealth of big-market NBA teams to the league’s less wealthy teams, the neediest of which are projected to receive as much as $20 million each.
While the system does not completely close the financial gap between high and low-revenue teams, it is by far the most progressive form of revenue distribution in the league’s history. By the 2013-14 NBA season, all 30 teams are projected to be profitable under this system if they meet reasonable revenue and expense standards.
The plan is rooted in a philosophy of including locally generated dollars from the big-market, high-revenue teams to be spread among the low-revenue teams. The core of the plan calls for all teams to contribute an equal percentage, roughly 50%,(2), of their total annual revenues, minus certain expenses such as arena operating costs, into a revenue sharing pool. Each team then receives an allocation equal to a 1/30 share of the pool. Smaller market teams with lower revenues will typically contribute less than they receive, and will be net beneficiaries under the plan. Large market teams will typically contribute more than they receive, and will be net payers under the plan.
There are limits built into the new plan to protect high-revenue teams, such as the New York Knicks, Brooklyn Nets, Los Angeles Lakers and Chicago Bulls, with no team to contribute more than 30% of its total profits in excess of $5 million into the revenue-sharing pool.
There are also limits built into the plan to protect against low-revenue teams from collecting too much, such as the Memphis Grizzlies, Indiana Pacers, Charlotte Hornets and Milwaukee Bucks, with no team to receive revenue-sharing distributions would increase a team’s profitability to more than $10 million.
As is the case in calculating league revenue to determine the salary cap, audits are used to determine team revenue and expenses.
To protect teams from backing their way into an elevated revenue-sharing payment, the definitions of both “revenues” and “expenses” for the purposes of the calculations are strictly defined.
The plan makes teams responsible for meeting revenue benchmarks, based on the size of the market (based on the number of TV households in the team’s designated market area) in which they play. Revenue benchmarks range from 65% (New Orleans) to 160% (New York and Brooklyn) of the league average revenues. Any team that falls short of its benchmark is credited with excess revenues it didn’t actually collect for the purposes of the calculation — in other words, teams are penalized for underperforming, by being made to appear more profitable than they truly are, and thus requiring them to contribute more to the pool.
In order to avoid a team spending its way out of a revenue-sharing obligation (i.e., spending excessively in order to decrease profitability, and thus cause a smaller contribution to the pool), expenses are tabulated by expensive category, each of which is limited in cases where it exceeds the league average by a large enough amount. If a team’s expense in any category is too high, then, for the purposes of the calculation, it is adjusted back down to the threshold amount, being made to appear more profitable than they truly are, and thus requiring them to contribute more to the pool.
The Heat is considered, by the NBA’s definition, to be a small market team. It has just 1.58 million TV households in its designated market area, which makes it impossible to compete with the likes of a New York City (7.4 million) or L.A. (5.6 million). In fact, the Heat ranks just 17th in overall market size among the league’s 30 teams. The mean and median market size for all NBA cities is 2.35 million and 1.77 million, respectively.
Therefore, in theory, money should flow from teams in larger market cities to the Heat — as it does for the Panthers and Marlins. However, despite its limited revenue potential, fueled by the success of the Big Three, the Heat maximizes its revenue potential better than just about any team in the league. Despite its small market size, and though it’s nowhere close to that of the leaders, the Heat still has one of the higher revenue streams in the league. Of course, it costs Arison a great deal of money to acquire such a lofty revenue stream; the Heat has the second highest payroll in the league. But that doesn’t matter much. Because the Heat’s revenues are so high, even though they’re spending more to achieve it, they actually become a net payer into the revenue sharing system rather than a net receiver. So revenue sharing doesn’t help. In fact, it hurts.
While the Heat’s 2013-14 revenue sharing obligation is unknown, and has yet to be determined, at current revenue levels it should presumably be about $10 million. That amount could increase, and rather drastically, when the Heat negotiates its new local TV rights deal. The Marlins and Panthers, for comparison, both reportedly receive more than $10 million in annual revenue sharing distributions.
Change Is Inevitable
Forbes data over the past several seasons approximates the Heat’s operating costs, exclusive of player payroll and revenue sharing obligations, at roughly $60 million per year. This figure may or may not be correct. It may or may not be close to correct. It surely changes, perhaps substantially, from year to year. There is no way to get a more definitive estimate. It is the best data we have.
So, then, the question becomes: If the Heat produce roughly $180 million per year, spend roughly$60 million on costs unrelated to player payroll, and spend as much as $10 million more on revenue sharing obligations, how much, then, would Arison be willing to pay for player payroll in the years ahead? Would Arison be willing to spend into the $100+ million range to keep his team together?
Over the long-term, as Heat revenues explode higher, such a cost structure will be both manageable and expected. But the current contracts of the Big Three exist only over the short-term, and over the short-term costs in that range may drive the Heat toward a lack of profitability that Arison may or may not want to incur. However much he may be willing to spend, some change is inevitable.
All Players With Options Should Return
The Heat holds a team option on Mario Chalmers while Ray Allen, James Jones and Rashard Lewis have player options. All should be returning for next season.
Mike Miller Should Be Amnestied
As valuable a player as he may be, as respected a teammate as he may be, as nice a person as he may be, Mike Miller is simply not worth between $27 and $50 million over the next two seasons to an owner who needs to think about saving money, nor is he worth the $11 to $25 million it would cost for the Heat to forgo amnestying him in favor of Joel Anthony. This is the ugly truth of the new Collective Bargaining Agreement.
A trade would be best, and such conversations have likely already begun, but is very unlikely.
Miller should be amnestied.
If he is claimed on amnesty waivers, the Heat will realize savings equal to the amount of the highest bid. The minimum possible bid for Miller for the final two seasons of his contract is $2.8 million. That, however, is unlikely. More likely is that he clears waivers. Once he does, there will be several teams vying for his services as a potential minimum salary free agent addition. That will allow the Heat to set-off $305K of their $6.2 million in salary obligations to Miller for next season.
Chris Andersen Should Be Offered A Minimum Salary Contract
The Birdman was a wonderful addition for the Heat this season. A perfect complement. The missing piece at a position of need. But he’s also a 35-year-old, low-minute, high-energy reserve. How should the Heat value such a player? How much can they afford to pay?
Basic math provides the answer: he should be offered a one-year minimum salary contract, with an undocumented and marginally-illegal second year promise.
Should he accept, he would be sacrificing a grand total of $892K over the MLE contract many are calling for — becoming the ninth Heat player to make such a sacrifice.
Joel Anthony Should Be Shopped
Joel is a useful player and a valuable contributor. But, let’s face it, if not for a Heat team emotionally attached to its hardest worker, his place in this league would be tenuous at best. Joel hit the free agent market in the summer of 2010, and no outside team showed any interest. He was worth, at the very most, the minimum salary contract he had opted out of. That’s exactly what the Heat should have offered. Instead, Riley chose to offer him a ludicrous five-year, $18.25 million contract!
Joel’s modest $3.8 million salary for next season will cost at least $10 million when considering the tax. In 2014-15, it will cost at least $14 million or more to retain him. That’s two years and $25 million for an aging bench warmer. Wow!
Riley should look to trade Joel without taking back any salary in return. It won’t be easy.
Give him away in return for nothing? There’s no team in the league that would be interested.
Give away a package of second round picks as an enticement for someone to take him? Nope.
Give away a first round pick or two as an enticement for someone to take him? Perhaps. Next year’s draft is strong. The bottom of the East is getting weaker. The Heat receives Philly’s first round pick next season if the Sixers finish in the top eight. They were ninth this year. They, at the very least, return their entire core. Milwaukee, Boston and Atlanta all finished just ahead, and all figure to get somewhat to substantially weaker next season. The pick could become quite valuable, perhaps somewhere in the mid-to-high teens. Could it serve as just enough inducement, along with cash considerations, for a cap-friendly team to take on Joel Anthony?
A Wait-and-See Approach Should be Taken to the Mid-Level Exception
There are certainly areas of need for the Heat, help at the center position chief among them. There are certainly free agents that could potentially fill the void. But with the Heat a two-time defending NBA champion and prohibitive favorite for next season, will Arison be willing to spend what it takes to entice them?
Utilization of the MLE would require that Anthony or Miller be traded and the other amnestied. If both happen, the Heat could utilize its Mid-Level exception and still remain below $100 million in total payroll.
Between One and Three New Minimum-Salaried Players Should Be Added
If all goes according to plan, the Heat should have as few as one and as many as three open roster spots below the 15-player limit, which will be serviced by new minimum-salaried players. There are definitive needs to be filled with those players.
It also needs to adjust to how it approaches signing such minimum-salaried players. Riley has traditionally favored two-year deals with a player option on the second, as Rashard Lewis received this past season. The inclusion of the second year, however, has significant salary cap ramifications.
When a player has been in the NBA for three or more seasons, and is playing under a one-year minimum salary contract, the league reimburses the team for part of his salary — any amount above the minimum salary level for a two-year veteran. For example, in 2013-14 the minimum salary for a two-year veteran is $884,293, so for a veteran of at least ten years, with a minimum salary of $1,399,507, the league would reimburse the team $515,214. Only the two-year minimum salary is included in the computation of team salary and luxury tax, not the player’s full salary. They do this so teams won’t shy away from signing older veterans simply because they are more expensive than younger veterans.
While that ~$500K per season probably doesn’t sound like much, it is significantly more than you might realize. The incremental difference, when incorporating the tax, is at least $3.4 million, and potentially much more, over the next two years. For every such player signed.
That’s right! Signing a player to a two-year minimum salary deal would cost at least $3.4 million more than signing the very same player to two consecutive one-year deals. Even though the player himself makes equivalent money.
So… No more second-year player options on minimum salary contracts. They’re too damn expensive!
All manner of options await the Heat as they work through the challenges of possibly winning another title before having to make some significant sacrifices. The possibilities feel just about endless.
Attached below is an overview of what the Heat’s payroll obligations could be for next season if the above rules are strictly adhered to. It does not account for any potential future signings, re-signings, or trades (other than as described above):
2013-14: The Heat roster remains largely as it was this past season, save for the departures of the amnestied Mike Miller, the traded Joel Anthony, and the inconsequential Juwan Howard and Jarvis Varnado, as well as the additions of a full Mid-Level Exception player and a minimum salary player. Dalembert at the MLE? Oden at the minimum? Would that not conclude a perfect summer?
2014-15: The Heat would be positioned as perfectly as possible for the harshest year it will face in the Big Three era. No new guaranteed contracts will have been added. Two big contracts, that of Mike Miller and Joel Anthony, will have been subtracted. The Heat will have maximum flexibility heading into the oh-so-expensive 2014-15 offseason.
2015-16: Nothing’s changed.
What It All Means
Pat Riley has constructed a roster that will be expensive to keep together. But, with shrewd salary cap management, it has the potential to be far less expensive than most realize. In fact, the Heat have the potential to remain profitable through it all.
The Big Three of James, Wade and Bosh will be under contract for each of the next three seasons. They are the playmakers. They are the heart and soul of the team.
The philosophy that head coach Erik Spoelstra has rightfully adopted requires that they be surrounded by nothing more than a slew of three-point shooters with a knack for spacing the floor and, perhaps, one or two with the capacity to defend at a high level. Ray Allen. Mike Miller. James Jones. Shane Battier. Rashard Lewis. Perfect additions all. But, on a relative basis, not all that expensive to keep or replace.
That’s enough to win. That’s enough to produce a potential dynasty.
And, by the time the contracts of the Big Three expire, the Heat’s new and massive local TV rights will have kicked in, enabling to build and retain its dynasty of the future.
(1) Forbes data estimates Heat revenues for the 2011-12 NBA season at $150 million, which feels rather low as a projection for this past season and beyond, particularly when considering the rising ticket prices in the LeBron James era.
(2) The fact that the Heat avoided a payment in 2012 despite reporting an operating profit of $16.4 million suggests that the arena was cumulatively unprofitable through that year. The fact that the Heat will make a payment in 2013 suggests that the arena will turn cumulatively profitable this year. The two, taken together, suggest that the arena may have been significantly unprofitable for the first several years of the deal, but has turned significantly profitable over the last several years, on the strength of four trips to the NBA Finals for the Heat over the past eight years. That, in turn, would suggest that the $55 million in depreciation charges over the past five years alone may have cost the county as much as $22 million – and maybe as much as $66 million thus far if depreciation averaged roughly $11 million over the past 15 years, and maybe as much as another $66 million if depreciation averages roughly $11 million over the next 15 years. The county, therefore, could be out as much as $132 million over the course of the 30-year deal because of these non-cash charges alone. This may have as much to do with not-so-financially-sophisticated county officials negotiating the terms of an arena lease as it does anything else.