Cash Rich and Honor Poor

In business, there are times when bad news is released and there is no apparent reaction because the information had been anticipated and already discounted. So it was yesterday in Miami, when Jeffrey Loria admitted lying and no one was surprised.

The Sun-Sentinel’s Sarah Talalay documents how Jeffrey Loria [through David Samson] reacted to the public release of the Marlins financial statements:

However, with their contents revealed, Samson changed his long-held contention the team wasn’t making a profit and instead said the documents prove the team has been saving its dollars to pay for its new baseball-only ballpark under construction in Little Havana.

Changing ‘long-held contentions’ could come as a result of soul searching. When it comes after financial documents prove you have been lying, the proper analogy involves rats instead of souls.

The article will ultimately be remembered for a particularly incisive quote towards the end:

“Local government’s in business with a very profitable baseball team,” said Jorge Costales, a Miami CPA, who blogs about Marlins finances. “To me, there’s no doubt the Marlins’ strategy since 2006 has been ‘Let’s budget as if we’re not getting a cent from revenue sharing.’ When it comes time to make payments on stadium, there should be no concerns about defaulting. The irony is to get the stadium, they’ve misinformed people about the profitability of the team.”

For the record, I believe this story will have a good ending. A Major League Baseball franchise firmly established in Miami, a new stadium on the site of the great former Orange Bowl and at some point, the team of Loria and Samson voluntarily exiled from the City of Miami. They will leave financially enriched and little respected. Solovalla, ….

The Talalay article referenced is copied in full at end of post.

—————————————————-
Marlins more than profitable, records show
By Sarah Talalay, Sun Sentinel

August 23, 2010

The Marlins, who for years have said they weren’t making a profit, generated nearly $50 million in operating income the past two years, documents show.

Financial records for a handful Major League Baseball teams obtained by Deadspin.com, show the Marlins had a net operating income of $37.84 million in 2008, when the team’s on-field payroll was a league-low $24.8 million, and a more modest $11.1 million in 2009, when the payroll was up to $35.1 million.

Marlins President David Samson called the release of the information “disappointing” and a “crime” and said MLB and its clubs will launch an investigation.

However, with their contents revealed, Samson changed his long-held contention the team wasn’t making a profit and instead said the documents prove the team has been saving its dollars to pay for its new baseball-only ballpark under construction in Little Havana.

“It basically confirms everything we have said over the years of how we’ve operated the team,” Samson said Monday. “It’s about making sure baseball would be secure in South Florida.”

Samson said to ensure the team could meet its $155 million obligation to the $515 million ballpark, which is also being funded by $347 million from Miami-Dade County and $13 million from the city of Miami, it needed to show it had paid down debt and had assets to borrow against.

The team has been profitable in part because of its low payrolls – which ranked last among the 30 clubs in three of the last four years and second to last in 2007. Over the years, Samson has repeatedly denied the team made a profit and said payroll would reflect revenue.

“Very often the mistake that’s made is they look at revenue sharing numbers and the team’s payroll and take the difference and see profit without looking at our expenses,” Samson said in 2007 in reference to a Forbes report the team had the league’s highest operating income.

In 2008, he said, “We’re always going to do what we can with revenues and match payroll to revenue in a current year.”

But that contention clearly ruffled MLB and its Player Association enough to reach agreement with the team earlier this year that requires the club’s 2010-12 payrolls better reflect the revenue sharing dollars it receives.

The Deadspin documents show the team benefited handsomely from the Major League Baseball’s revenue sharing program — the system by which the richest teams share revenue with the lowest revenue ones to even competition.

Revenue sharing plus the dollars from MLB’s central fund — the pot that includes items such as national TV contracts and to which all teams contribute and then receive an even distribution — brought the team more than $75 million each of the past two years. That’s before factoring in ticket sales, sponsorships and the $16 million annually the team gets from local television and radio broadcast contracts.

Total revenues in 2009 were $135.5 million with expenses of $122.8 million, including dollars spent on the ballpark, the records show.

“Local government’s in business with a very profitable baseball team,” said Jorge Costales, a Miami CPA, who blogs about Marlins finances. “To me, there’s no doubt the Marlins’ strategy since 2006 has been ‘Let’s budget as if we’re not getting a cent from revenue sharing.’ When it comes time to make payments on stadium, there should be no concerns about defaulting. The irony is to get the stadium, they’ve misinformed people about the profitability of the team.”

Miami politicians, who approved the ballpark deal, never saw the Marlins’ finances.

“The Marlins’ net worth was never a concern of ours,” said Victoria Mallette, a spokeswoman for Miami-Dade County Mayor Carlos Alvarez. “The mayor and the [county] manager thought it would be an asset to the community. It’s always been about a community asset and keeping professional sports in Miami-Dade County.”

Staff Writer Juan C. Rodriguez contributed to this report. Sarah Talalay can be reached at stalalay@SunSentinel.com.
———————————————-

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About Jorge Costales

- Cuban Exile [veni] - Raised in Miami [vidi] - American Citizen [vici]
This entry was posted in Marlins Ballpark & Finances and tagged , , . Bookmark the permalink.

4 Responses to Cash Rich and Honor Poor

  1. Robert says:

    You know, for some strange reason I thought your quote in the Talalay article was something you yourself inserted in your post. So much for my total misunderstanding of your sense of humor! 😉

    Nice quote and congrats!

  2. Jorge Costales says:

    Hey you're onto something there – coming to a future blog post – I'll insert a fake quote into a normal looking article with Ahmadinejad wondering why MLB's CBA doesn't have a salary floor.

  3. Great work Jorge. Frankly, your first post on this contains more analysis than either of the news pieces that appeared in both local papers the next day. Yes, that includes Sara's, (sorry). So when do we start talking again about the revocation of MLB's anti-trust exemption? And, a meaningful salary cap and floor?

  4. Jorge Costales says:

    Thanks David

    It helps that I don't have to consider readers 😉

    Actually I was happy to see that all the local coverage clearly were dismissive of the Marlins claims – they finally used up the benefit of the doubt – I thought Talalay did a nice job of weaving in alot of Samson's past BS – heck his BS could fill up a whole blog [like mine].

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