What a stadium means to the Marlins

BY JOHN DORSCHNER

jdorschner@herald.com

 

 

 

 

 

 

 

Three tough questions keep popping up:

 

Did the Marlins really lose $20 million last year, as they say they did?

 

How can the team, supposedly one of the poorest in baseball, promise to spend $137 million of its own money to finance a new ballpark?

 

How much would a new ballpark boost their payroll?

 

The best answers we have at the moment:

 

Though the Marlins refuse to open their books, an analysis by The Herald shows that the $20 million figure is, ahem, in the ballpark but might be a little high.

 

Through various ways, the Marlins can get the construction money, but the cost is the equivalent of a veteran all-star pitcher they could otherwise afford.

 

A new home might boost their net revenue by $20 million or $30 million a year, but that doesn't mean they can use that money for better players. What it might do is allow them to afford their present payroll for the long term.

 

''Remember, our payroll this year was sufficient to win a World Series,'' says Marlins President David Samson.

 

Now let's get to the details.

 

Q: WHAT DO WE REALLY KNOW ABOUT THEIR FINANCIAL SITUATION?

 

First the background: Wayne Huizenga paid Major League Baseball $95 million to start the Marlins in 1993, and he complained he endured staggering (but undocumented) losses for six years, including a $34 million loss in 1997, the year the Marlins won their first World Series. That year, the team drew 2.36 million fans and had a payroll of $53 million.

 

In 1999, Huizenga sold the team to fund manager John Henry for $158 million. Henry owned the team for three years, with losses totaling $25 million to $40 million, and sold it in early 2002 for $158 million to New York art dealer Jeffrey Loria.

 

Loria and 14 minority Canadian partners had just sold the Montreal Expos to the league for $120 million. Major League Baseball gave Loria a loan for the $38 million difference.

 

Our best insight into Marlins financing came in March 2001, when Henry released detailed financial information to journalists and season ticket holders about the 2000 season: $23.7 million in player salaries, attendance of 1.17 million, loss of $9.9 million.

 

For 2003, we know the payroll ended up at $54 million, attendance was 1.3 million and the purported loss was around $20 million.

 

`PRIVATE COMPANY'

 

Samson says Henry's data look accurate, but he refuses to provide specifics for the championship season.

 

''Typically, owners and Major League Baseball just don't discuss specifics,'' says Marlins spokesman P.J. Loyello.

 

''We're a private company,'' Samson says. He believes it makes no difference that the Marlins are asking for tax dollars. Many private companies ask for public help -- in tax abatements, incentives to move firms to new areas and other kinds of government help. ``And you don't see those companies releasing their figures.''

 

Samson did acknowledge, however, that some of the details have not changed, particularly the contract with Huizenga Holdings to use the stadium formerly known as Joe Robbie.

 

Whereas most Major League teams get all their ballpark revenue, the Marlins receive 37.5 percent of net parking and 70 percent of net concessions, which amounted to $2.1 million for the two categories in 2000.

 

Since the team paid Huizenga $2.9 million in various rents in 2000, the bottom line is that the Marlins picked up nothing from the stadium except ticket sales, and generally they don't even pick up all of that, says Samson, because a substantial portion of each club seat ticket goes to Huizenga.

 

LOW TICKET SALES

 

Tickets brought in $14.4 million in 2000. This year, with a 2 percent increase in average ticket prices, according to Team Marketing Report, and 120,000 more fans during the regular season, ticket sales brought in a little over $16 million.

 

The sad truth is that the Marlins just don't attract many people to their games, even when they have a championship team. Their 2003 regular season attendance was the lowest for a World Series champ since the small-market Oakland A's drew 845,000 in 1974, the last of three consecutive years in which they won the Series.

 

Other Marlins budget categories are also thought to have remained basically unchanged in recent years, including the local broadcast contract, which brings the Marlins about $15 million a year. (The national contract brings in another $18 million.) Player development -- the minor leagues -- continue to be a substantial cost. In 2000, the number was $17 million.

 

Differences, however, exist between the Loria and Henry eras. In 2000, Henry reported spending $4.1 million in expenses toward a new ballpark, most of that in lobbying fees. Samson says the present club spends zero for lobbying.

 

Another difference: In 2003, the Marlins brought in $6.2 million from postseason revenue. Even so, says Samson, the club still lost $19 million or $20 million because, in the run-up to the playoffs, the payroll climbed during the year. Samson does not provide figures, but industry analysts say that the payroll was $51 million on opening day and that it climbed to $54 million during the year.

 

REVENUE SHARING

 

A huge unknown for both years is revenue sharing. Major League Baseball doesn't release such figures, and neither do individual ball clubs, but last year's contract with the union boosted such transfers from rich teams to poor teams.

 

Sports economist Andrew Zimbalist estimates the Marlins gained about $20 million from revenue sharing in 2003. It's not clear how much they received in 2000, but it was probably somewhat less.

 

Assuming that the revenue sharing increased by perhaps $10 million from Henry's 2000 balance sheet and considering the vastly higher payroll in 2003, Loria's $20 million loss fits with the numbers Henry provided.

 

Still, Zimbalist says, such a loss ''strikes me as being on the high side,'' although he acknowledges a bad stadium contract and lackluster attendance would cause Marlins losses to be substantial.

 

Samson qualifies the statement about the $20 million loss by saying that he is not an accountant and that the team's chief financial officer, who deals with accrual and depreciation and other bookkeeping matters, might have a different definition.

 

In fact, most owners of professional sports teams make their money not in annual profits but in equity that they get only when they sell the team. One prime example: A group led by George W. Bush bought the Texas Rangers for $86 million in 1989 and, after getting taxpayers to build a new stadium, sold the team nine years later for $250 million.

 

In the Marlins' case, Samson says, he's not talking about fancy accounting techniques.

 

''I`m talking about cash,'' he says.

 

That means from April through September, when the team is spending money, Loria wired in $20 million.

 

''But what's that mean?'' asks Jeffrey Mutnik, a Miami certified public accountant. ``You need to ask: Did, at some point, the team send cash back to Loria?''

 

Samson says no.

 

''What's in it for Jeffrey to lie about this?'' asks Samson.

 

Another question: Where does Loria get the money? After all, he's a New York art dealer who is widely considered to have one of the smaller net worths among Major League owners.

 

''How Jeffrey came up with the money is nobody's business but his,'' Samson says, ``whether he borrowed it or sold some paintings or charged it to his credit card.''

 

MINORITY OWNERSHIP

 

Jeffrey Kessler, a New York attorney, thinks the answer may be that Loria is getting the money by bringing in more minority owners.

 

Kessler represents 14 unintentional co-owners of the Marlins, Canadian businessmen who had parts of the Montreal Expos and saw their shares transferred to the Marlins when Major League Baseball took over the Expos from Loria and gave him the Marlins while John Henry took over the Red Sox.

 

Kessler says his 14 clients, who are suing Loria, started with 6 percent ownership of the Marlins but have been told by club officials that their stake is now down to 2 percent.

 

The attorney believes that their share may have shrunk because ''Loria brought in additional partners'' to fund his losses.

 

Samson says Kessler is mistaken about the percentage of ownership his 14 clients have, but he refuses to say whether Loria has been getting funds by bringing in additional partners.

 

Q: DOES THEIR BALLPARK FINANCING MAKE SENSE?

 

The present plan has Miami-Dade County committing $73 million in tourist taxes, the Marlins spending $137 million and sources yet to be determined providing $115 million for a $325 million retractable-roof stadium.

 

How could the cash-strapped Marlins come up with so much money?

 

''There are several ways,'' says Richard Lehmann, a Miami bonds expert.

 

One would be by selling luxury boxes in advance of construction. Another would be by issuing bonds, offering future ticket revenue as collateral, either through a government entity, which could make for a lower municipal bond interest rate, or through corporate bonds, which have higher interest rates.

 

Samson says the Marlins hope to use a combination of all three. The team figures the cost to service the debt would run about $10 million a year. That's the equivalent of having an all-star fireballer like the Atlanta Braves' John Smoltz.

 

Another concern is the overall price tag. Three years ago, John Henry thought a retractable roof would cost $400 million -- and that's the cost for the latest such ballpark, in Milwaukee.

 

''We are comfortable with our numbers,'' Samson says, ``if we control the design and the process.''

 

The Marlins are so comfortable that they've agreed to pay cost overruns.

 

''We're taking a tremendous risk,'' Samson says.

 

A recent study of stadium construction in Wisconsin backs him up. Miller Park in Milwaukee, with construction overseen by the government, suffered $150 million in cost overruns.

 

Meanwhile, a $300 million remodeling of Lambeau Field in Green Bay was supervised by the Packers, who promised to pay all overruns. There weren't any.

 

Q: HOW MUCH WILL A NEW PARK HELP?

 

Samson says that, just in the advertising in a new park, the Marlins could pick up $10 million a year, but he won't give other specifics.

 

Here are some possibilities: According to public shareholder documents, the Cleveland Indians in 1998 earned $32 million from luxury-box licenses, parking and concessions -- while the Marlins, after paying Huizenga rent, gain nothing from those categories now.

 

A study by the University of Texas-Arlington found that teams with ballparks built from 1990 to 2000 showed $35.7 million more in annual revenue than other teams.

 

But newer parks -- in Detroit, Pittsburgh and Milwaukee -- have not shown the same positive results. The Brewers recently announced plans to cut their payroll to $30 million next year -- which would make their players the cheapest in the league, though they perform in a fabulous new park.

 

''A new park is not a panacea,'' says Marc Ganis, a sports-industry consultant, ``but it should certainly help.''

 

Ganis believes the Marlins shouldn't be compared to other teams that recently moved into new parks because they're currently captives in a stadium in which they get no benefit.

 

GAIN EXPECTED

 

Ganis expects the Marlins to gain also by a vastly increased average ticket price, not only taking advantage of fans' excitement with a new stadium but also by offering a far higher percentage of ''good seats,'' arranged around the infield in a baseball-only park.

 

The Marlins' average ticket is now $12.78, third cheapest in the major leagues, ahead of only Kansas City and Montreal, according to Team Marketing Report. The Red Sox, by contrast, playing in tiny, baseball-oriented Fenway Park, have an average ticket price of $42.34.

 

Samson refuses to predict what a new park might mean to revenue and player salaries, and the issue may not be upping payroll as much as maintaining a payroll without financial losses.

 

Loria might have one more year with ''another loss close'' to the $20 million he claims to have lost this year, Samson says, but that could be it. Eventually, the team needs to break even.

 

Baseball finances are a juggling act. The Marlins might have broken even this year with a $35 million payroll, Samson says, but everything is a moving target: Lower payrolls mean fewer fans; larger payrolls mean fewer revenue-sharing dollars.

 

Getting an additional $20 million to $30 million in net revenue could mean that the Marlins could afford to keep the team they have for the long term.

 

''We will always need to be financially responsible,'' Samson says.

 

Herald sports writer Barry Jackson contributed to this story.

 

Not too bad, alot of numbers and quotes which are good to see and not much opinion for a Herald piece.

Yeah I found it very informative. Also I dont think Loria lost the $20 million he said. I think it might be closer to $15 million, but that just a guess. :confused

To get the Herald to admit that Loria's number was right is like getting France to admit that the War in Iraq is just. Major victory for Marlins Ownership.

 

Loria 23 - Critics 0

great read. this helps me understand a lot about the stadium and baseball finaces

War in Iraq is just

War in Iraq is just

I second that :plain

 

Nice, factual article though...

Dont start bringing up war in Iraq here, especially you Bush haters...

 

Anyway, nice artcle. I cant believe the Herald actually reported something and stayed somewhat objective about it. Very good for most to read in order to get a glimpse of what is going on. Surprised the Herald didnt comment negatively on it - wonders if there is somethingup their sleeve.

Dont start bringing up war in Iraq here, especially you Bush haters...

yea... let's not ruin the topic...

Only problem with Loria is that he doesn't have $$$$....

Only problem with Loria is that he doesn't have $$$$....

that is false. there is no proof other than some media speculation about Loria's financial status. Just because he got a loan from MLB to buy the Marlins doesn't mean he doesn't have the money.

Only problem with Loria is that he doesn't have $$$$....

that is false. there is no proof other than some media speculation about Loria's financial status. Just because he got a loan from MLB to buy the Marlins doesn't mean he doesn't have the money. if we would have more money than we wouldnt have to worry about not being able to keep players because we dont have enough money.if we had more money than we would be able to keep our whole team together!we have an awesome team!and were not gonna be able to keep everyone bc we dont have enough money!

Dont start bringing up war in Iraq here, especially you Bush haters...

yea... let's not ruin the topic... just like the republicans to stomp down on free speech! :lol

 

anyway, capefish brought it up and DR and I just commented.

 

 

Masterfully put Marlins.

Only problem with Loria is that he doesn't have $$$$....

that is false. there is no proof other than some media speculation about Loria's financial status. Just because he got a loan from MLB to buy the Marlins doesn't mean he doesn't have the money. if we would have more money than we wouldnt have to worry about not being able to keep players because we dont have enough money.if we had more money than we would be able to keep our whole team together!we have an awesome team!and were not gonna be able to keep everyone bc we dont have enough money! there is a difference between his personal wealth level and what he is willing to spend on the team. Carl Pohland of Minnesota is the richest man in Minnesota but look at his payroll.

 

He is not obligated to spend all his available funds on the Marlins.

Dont start bringing up war in Iraq here, especially you Bush haters...

yea... let's not ruin the topic... just like the republicans to stomp down on free speech! :lol

 

anyway, capefish brought it up and DR and I just commented.

 

 

Masterfully put Marlins. DR?

 

Come on Shammy... is it to hard to hit the "T" key?

 

 

:lol

Why would he need to borrow money from MLB to finish purchasing the team?On top of that the guy is always adding minority owners.Don't lie to yourself and think Loria has the capital.Any body can do reasearch and find how much Loria net worth is reall worth?>?

if anybody can do the research, then i want you to come up with his yearly income, sources of that income, how much capital he has in holdings, how much he has in bank accounts, bonds, etc.

Why would he need to borrow money from MLB to finish purchasing the team?On top of that the guy is always adding minority owners.Don't lie to yourself and think Loria has the capital.Any body can do reasearch and find how much Loria net worth is reall worth?>?

 

The last number I believe saw was $250 mil, but I

 

a) can't vouch for the number or where I read it

 

b) don't know if that includes real estate, art and other illiquid assets

 

c) if that includes the marlins or not

 

d) what liabilities his corporations may have

since we don't know much, then let's not count out that he could have wealth, just not to spend only on the Marlins.

 

$60 million is a HUGE payroll for anyteam if you think of it. That is over an average of $1 million per player in salary for the 40 man roster.

$60 million is a HUGE payroll for anyteam if you think of it.

Not for the Yankees.

The Yankees cannot keep it up forever.

The Yankees cannot keep it up forever.

For now... they will...

 

 

They're going for a near $200 million payroll for 2004...