The God Particle to Miami Marlins fans

Up with Carl Loria

Up with Carl Loria

Gary Nelson’s question to Jeffrey Loria properly identified what truly binds [aka ¹God Particle] Miami Marlins fans, he asked:

Your organization and you are, quite frankly, much despised among many in this community…. Can a deal like this wash that much bad blood away?

Nelson’s point was deliciously undeniable. Jeffrey Loria is [sports] despised by an overwhelming majority of Miami Marlins fans. It is an enmity earned by repeated lies and obfuscation. It will not go away until he goes away. It binds us.

Two great things have happened for us Miami Marlins fans as a result of the Stanton signing. First, given the way the contract is structured, heavily back-loaded after the first 3 years, we can now see the light at the end of the Loria ownership tunnel. Second, we get to have Giancarlo Stanton on our team for the next 6 years. In that order.

So for us Marlins fans, Nelson’s question during the televised press conference carried the emotional equivalent of D’Angelo Barksdale asking Stringer Bell, “where Wallace at?”

Like Stringer, who must have assumed he could con D’Angelo one more time, so too Loria must have thought that the Stanton signing would at least provide a temporary respite from the enmity. While listening to the question, and no doubt noting the mortified straight-ahead gazes of his employees, the unlikelihood of any PR rehabilitation must have registered deep in an area other humans refer to as a soul.

Yo Jeffrey, where Miggy at?


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How not to grow MLB in Miami – part 305

espn screenDo the laws of supply and demand apply to MLB ticket sales? See the nearby screenshot of a portion of the Miami Marlins 2014 schedule. The last column reflects the tickets available for purchase through a MLB approved ticket broker. At first glance, it would seem to indicate that the Dodgers, Giants and Nationals have many more tickets to sell than the Miami Marlins. They don’t. Well, not really.

Welcome the world of MLB finances. A world in which if regular fans were more aware of its realities, they would feel like more like Alice in Wonderland than Costner in Field of Dreams.

A recent Forbes article by Jesse Lawrence does a good job of explaining the logic behind the attendance figures shown in the screenshot above:
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Highly questionable or in the tank?

Graphics by G. Costales

Dan Le Batard’s recent column makes various assertions about the finances of the Miami Marlins which echoes what Jeffrey Loria would have us believe. I don’t know when Le Batard would ever reach the point of skepticism about his Marlins sources, but his patience is impressive. While he is critical of Marlins management on non-financial issues, what he accepts as fact about their finances just doesn’t add up. He wrote:

The team overspent assuming we’d fill the ballpark [#1], which we didn’t, and that meant losing about $40 million [#2] in that calamity of a season…. Unlike Micky Arison, who lost money every year he owned the Heat except last year, Jeffrey Loria doesn’t have enough money [#3] to keep losing $40 million a year even as the ballpark appreciates his and the franchise’s value [#4].

  • #1 – Depends on the meaning of the word ‘fill.’ Marlins stadium capacity is 37,442. To have sold it out, or filled it, would have meant drawing 3 million fans. David Samson is on record with ESPN’s business reporter Kristi Dosh noting that they expected attendance of 2.7 million [89% capacity], or about 500,000 higher than the 2.2 million [73% capacity] it turned out to be. Noting 89% vs 73% capacity may not be sexy, but it sure is more useful for the purposes of determining expected revenues.
  • #2 – The lower than anticipated attendance would not even come close to accounting for a $40 million loss. It is misleading to imply that the 1st year attendance is to blame for dramatically altering the Marlins business model in year 2 of the stadium. Here’s why.

Marlins revenues from gate receipts, as per Forbes, averaged between $15.1 & $16.3 per fan [gate receipts divided by attendance] between 2007 and 2011 [click on spreadsheet within blog post]. Assuming a healthy 25% increase in per fan revenue to $20 per fan in the new ballpark, multiplied times the missing 500,000 fans, equals a nice round $10 million in missing revenue. A more accurate description of what had to occur to make up for the missing fans was to dump Heath Bell’s contract.

On the positive side, its good to know the Marlins are back to discussing the results of their yearly operations. Let’s hope it’s not a 1 year thing, given that 2013 is looking a lot like 2006 through 2009.

  • #3 – Sloppy and misleading. Does Le Batard know how much money Loria has? Does ‘money’ refer to cash flow as opposed to assets? When exactly would Loria run out of ‘money,’ given the assumed losses? Answering any of those questions would be useful information. Or is Le Batard suggesting that 1, 2, or even 3 lean years would affect the net profitability of Loria’s MLB investment, given the Revenue Sharing fat years which preceded it and the new ballpark which came after? Here’s what is known:

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Marlins fan pesadilla draws to an end?

Graphics by Gabriela Costales

Graphics by G. Costales

Pesadilla is the Spanish word for nightmare and a feminine noun. For Miami Marlins fans, pesadilla is a particularly accurate description for having our MLB team owned by a Manhattan bred arts dealer who made his bones running Expos out of Montreal. But this nightmare is likely coming to an end soon, since selling the team now constitutes Jeffrey Loria’s best option.

While I believe selling the team makes business sense, personal factors also point to a sale. Being the Marlins owner in 2013 appears to be a miserable use of septuagenarian millionaire’s time. This without even considering potential health issues and whether his spouse–on whom he appears to have about a quarter-century of life head start on–has an opinion about being married to a locally despised figure.

In addition, the Non-Relocation agreement’s penalty for early sale is not significant enough to deter the sale. The additional amount due the County if the team is sold between now and the next operational phase [April 2014], would be around $2 million — assuming a sale price of $450 million — or roughly the equivalent of what a typical Babalao would earn for not managing your team for one season.

Business reasons to sell sooner rather than later:

  1. No factors which would increase that the value of the franchise over the next few years. The ballpark was a great success, with potential parking and traffic issues proving to be manageable in the 1st year. The expected significant increase in national broadcast contracts would already be factored into any sale negotiation.
  2. No long-term, heck, no commitments period on the team’s payroll. A team paring down salary for profit, would still have keep at least one of their free agent signings for appearances sake if nothing else. When they all were shipped out, that’s how ‘dead’ owners roll.
  3. Attendance – The Marlins drew 2.2 million in the new ballpark and that figure is widely described as both inflated and disappointing for a 1st year stadium. However, Guillen’s Castro comments stifled enthusiasm that the Marlins should have enjoyed at the beginning of the season. Despite that, the Marlins averaged 28,988 during the 1st half of the year [thru July 1st] when their record was at 38-40 — average attendance ended up at 27,400 for the year. Soon afterwards, the trades of Ramirez, Sanchez and Infante signaled that ownership had given up on the season. The point is that a case can still be made that MLB in this market is *viable, in comparison with overall MLB attendance. Owning the team past the coming season, could begin to undermine that argument.
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Forbes March 2012 update: Recap of their yearly reporting on the Marlins since 2002

April 2003

Recap of Forbes view on the Marlins based on their 2002 finances — Operating loss of $14 million and an *estimated franchise valuation of $136 million . *Jeffrey Loria purchased the team prior to the 2002 season for for $158 million:

Shoddy marketing delivered second lowest attendance in baseball. The Florida Marlins play in Pro Player Stadium.

April 2004

Recap of Forbes view on the Marlins based on their 2003 finances — Operating loss of $11 million and an estimated franchise valuation of $172 million:

Last year’s World Series title brought glory and slightly more revenue to the Florida Marlins. Give management credit. Unlike some other low-revenue owners who pocket the payouts from high-revenue teams, Jeffrey Loria invested in players like Pudge Rodriguez (since departed to the Detroit Tigers). But the long-term viability of this franchise in south Florida remains in question, unless the team can convince legislators and taxpayers to help finance a new ballpark.

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Marlins representation: Turning a profit or turning the screws

For those looking for more blog posts about ‘Marlins Ballpark & Finances’ – please look in the ‘Categories’ box in the top right corner.

The Wall Street Journal weighed on on the SEC probe of the Marlins Stadium deal. I was most interested on their perspective on what the SEC probe could be expected to focus on. An excerpt:

A person involved with the ballpark’s financing said the investigation may revolve around the Marlins’ claims that the team needed public help because it could not afford to pay for a new ballpark.

The Marlins had argued that the team needed public help to shore up its finances. Financial documents published last year by the website Deadspin showed the team had been turning a profit.

Mr. Nortman, who teaches a class on SEC violations for Nova Southeastern’s law school in Fort Lauderdale, says the SEC will likely want to know whether the purchasers of stadium bonds were given full disclosure of the financial status of the borrowers involved, and also whether there may have been any “pay for play” involved on behalf of the parties.

Allow me to expand on “the team had been turning a profit.” According to Forbes — whose reporting the Deadspin financials validated — this is how the Marlins ranked among MLB teams in terms of operating profits in the years before, during, and after finalizing the Stadium agreement with local governments:

  • 2006 – $43 million – #1
  • 2007 – $36 million – #2
  • 2008 – $44 million – #1
  • 2009 – $46 million – #1

Appreciate the hurdle the Marlins face in defending themselves. How to suggest that they did anything but misrepresent their financial condition?

See my recap of the Forbes Business of Baseball reporting on the Marlins from 2002 through 2010 [click here]. Each year is linked to the Forbes reporting for that year.

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

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Why the SEC probe is not a replay of the Braman trial

To show why I don’t think the SEC probe represents a replay of the Braman trial, it is necessary to revisit what Judge Jeri Beth Cohen’s ruling stated in 2008.

While there were various claims to Braman’s initial lawsuit, the Judge’s ruling focused only on one [Count 4]. Another claim [Count 5] was invalidated due to a Florida Supreme Court ruling. They ruled that municipalities do not have get voter approval before committing ad valorem money toward bonds.

So the Braman trial boiled down to one issue. Did the baseball stadium serve a “paramount public purpose?” Judge Cohen ruled that it did and it doesn’t read as though it was a tough call. She wrote “… similar to the trend in Florida, courts across the country have consistently held that sports stadiums serve a paramount public purpose.” Cohen relied particularly on one case she described as “strikingly similar” to the Marlins situation, the building of a stadium for the Tampa Bay Buccaneers. I’ll leave it to others to wonder if the Poe case makes a po’ precedent [sorry].

Here is how Sports Illustrated has summarized the SEC’s request:

The parking garage tax issue is specifically mentioned by the SEC. Investigators also want records about the Marlins’ ability to contribute to the stadium complex’s financing, the team’s revenues and profitability, and whether any Marlins employees gave “any payments, loans, campaign contributions or any offers of anything of value” to city, county or state government officials.

The SEC also wants detailed information about the bonds used to finance the stadium and whether investors might have been misled.

Not all SEC investigations end in enforcement actions, but enforcement actions typically end in settlements that can include fines and other penalties. Investigators can refer individuals or companies to the Justice Department for potential criminal prosecution.

Now here are some of the issues documented in Judge Cohen’s order which were not part of the narrow “public purpose” issue she eventually ruled on:

  • “The financial condition of the Marlins is unknown to anyone except the Marlins and MLB.”
  • “… It is undisputed that the County has no idea whether or not the Marlins can satisfy any of their obligations under the BSA.”
  • “… the terms of the negotiated deal are not a subject for this Court’s scrutiny”
  • “While the Court agrees with Plaintiff that the Marlins are getting what amounts to a ‘sweet deal,’ this is, put bluntly, not the business of this Court.”

The reason I believe that the SEC probe is not a replay of the Braman trial, is that the SEC’s concerns differ greatly from that a civil court judge. I believe the SEC very much considers it its business if the Marlins obtained a ‘sweet deal’ through misleading representations to local governments. Especially if those representations were then relied upon to determine which government bonds to be issued.

Meet real Miamian’s favorite new fathead poster:

On The Wire: Pigs get fat, hogs get the SEC’s attention

On Saturday, the Miami Herald reported the following:

Federal authorities have opened a wide-ranging investigation into the Miami Marlins’ controversial ballpark deal with Miami-Dade County and the city of Miami, demanding financial information underpinning nearly $500 million in bond sales as well as records of campaign contributions from the Marlins to local and state elected leaders.

In a pair of lengthy letters delivered to government attorneys Thursday, the U.S. Securities & Exchange Commission gave the city and county until Jan. 6 to deliver everything from minutes of meetings between government leaders and Marlins owner Jeffrey Loria and Major League Baseball Commissioner Bud Selig, to records of Marlins finances dating back to 2007.

I thought it right that the SEC extended their focus beyond Miami to Bud Selig and MLB. After all, in Miami’s version of The Wire, the Marlins just have one of the Towers. Bud Selig is the Avon Barksdale character pulling on the strings. Speaking of which, the Stringer Bell role in this play is a combination of Rod Manfred and Bob DuPuy.

In the hopes of obtaining public financing for the new stadium, the Marlins lied to reporters and fans about their finances. Who knows, for now, what they actually told or shared with government officials. They did it all with the blessings of Major League Baseball. Given that David Samson would often make silly [here], misleading [here and here] or false [here and here] statements about the Marlins finances, especially on his radio show, it must have all seemed like a very clever game to them. They acted, as Mr. Omar Little once commented, as though it was “all in the Game, y’all, all in the Game.”

The Braman trial has now become like a grand jury report for the SEC. Every government official who testified at the Braman trial is going to be spending a lot of money on attorney fees. The Marlins and MLB must be hoping that those attorney’s are very good because those officials are not the endgame in this investigation. Hard to imagine how this ends without some admission of guilt or complicity on the part of the Marlins and a fine which significantly increases their share of the stadium costs. Pigs get fat, hogs finally got someone’s attention that didn’t think it was a game and is in a position to do something about it.

The repercussions are just beginning. At the SunSentinel, Juan C. Rodriguez considers the initial effects:

With the new stadium, the possibility of another “market correction” as the club termed its pre-2006 purge would seem unfathomable. Yet the investigation conceivably might unnerve free agents looking for deals of five-plus years. Ultimately, players in most cases follow the money, but whether warranted or not, some might shy away from not having no-trade protection in light of this new specter.

The Marlins earlier this week with their 3-year, $27 million commitment to Bell silenced skeptics who believed their dalliances with upper echelon free agents were some kind of ruse. Though the SEC investigation barely is off the ground, the Marlins already may have lost whatever small earnings they made in public trust.

Update 12/04: My blog is mentioned in Juan C. Rodriguez’s article about the Marlins reaction to the SEC filing.

Articles referenced are copied in full at the end of this blog post.

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Miami Marlins Stadium Agreement: What Went Right

David Samson has lied so often with his public comments about the Marlins finances, he is understandably ignored even when making a good point. David meet Aesop, he no Hee-seop [Choi].

Here are Samson’s comments as reported in Juan C. Rodriguez’s post in the SunSentinel about the issue of property taxes on parking garages:

“That really has nothing to do with the team. It’s really between the city and the county. It’s a city-owned garage. I don’t know if the city pays property taxes on all its other garages or not. These are the same. It’s being run by the Miami Parking Authority. The only thing we are is tenants who are agreeing to buy a lot of spots. It’s like when you pull into a garage in any downtown office building and buy a spot for a day. You don’t pay property tax.”

This is what the actual agreement entails, again from the Rodriguez post:

The Marlins are buying all 5,700 spaces for the 81 home games at $10 each [for next 15 years]. The City of Miami annually will receive $4,617,000 from the Marlins for those spots, whether they are sold or not. What the Marlins in turn charge fans for those spots is up to them.

In a recent Miami Herald article [copied in its entirety below], it was reported that Miami-Dade County is attempting to charge the City of Miami property taxes on the 4 parking garage structures built around the new stadium. The County’s reasoning is that since the Marlins have discretion in pricing the parking spaces [all of them] leased from the City, the garage is “controlled by a for-profit enterprise,” and as such should be subject to property taxes. Having to pay property taxes on the garages was not something the City anticipated and would cost City taxpayers up to $2 million annually.

The initial public reaction is probably best captured by Carl Hiaasen’s opinion column [copied below] in Sunday Herald. While Hiaasen made good use of the red meat he was tossed–the 800 word column used the following adjectives; outlandish, foul, breathtaking, boondoggle, dysfunction, incompetence, fiasco, bombed [as in drunk], outfoxed, harpooned, Sucker Ball and an allusion to “law degrees purchased online from Nigeria”–the column made the following specific points.

  1. “In the two years since financing was approved, the numbers are looking more dismal than what was feared.”
  2. “There is nothing public about those garages. They might be owned [and operated] by the city, but they’ll be controlled by the Marlins, purely for profit. The county is absolutely right to treat them as commercial property.”
  3. “On the bright side, the City did get the Marlins to cough up $10 whether or not the parking space is used…. If the Marlins start [I’m sure he meant continue] losing, there will be a drearily familiar abundance of empty seats and empty parking spaces.”

Point #1 – My reply to Hiaasen’s “numbers looking dismal” claim

  • Leaving the parking garage property taxes aside, given that it may not be an issue, it’s hard to figure out what exactly Hiaasen is referring to. There were two big contingencies associated with the new stadium: potential construction costs overruns with a franchise whose finances were uncertain and whether Miami-Dade County’s Hotel [or Bed] tax receipts would bounce back after the financial crisis.
  • The stadium itself apparently did not have cost overruns. [My links are to my own blog posts where I always copy the article being referenced at the end of the post.] There were structural issues with at least one of the garages which raised construction costs from $94 to $101 million for the garages.
  • County Hotel taxes were the biggest concern at the time of the Stadium Agreement was approved. In effect, the anti-stadium advocates stated that tourism could not be counted on to recover. Miami-Dade argued that they would.
  • The results are in, or about 3 years worth of data. Tax receipts fell by 15% for the fiscal year ended [FYE] 2009, rose 9% for FYE 2010 and rose 15% for FYE 2011. For the first time since the financial crisis, the tax receipts for the fiscal year which ended this past June 30th [FYE 2011], exceeded those in the year [FYE 2008] before the financial crisis. Miami-Dade’s bond payments were structured to account for a growing tax receipts following the recovery from the financial crisis.
  • Here are the comments of George Burgess, Miami-Dade’s county manager at the time: “Our belief is the slowdown will last two or three years and then rebound,” he said. “Is it reasonable that we’ll be flat-lining for six or seven years? It is not.” So far so good on that prognosis.
  • In April of 2010 there was concern that the City of Miami would not be able to issue bonds due to an SEC audit, but that was resolved.
  • Another development was the Deadspin release of the Marlins financials, but that revelation is positive news from the point of view of the stadium deal, since it meant that the Marlins would be able to meet their construction costs obligations.
  • Also, the terrible economic environment since the financial crisis has translated into good news for local governments ability to obtain financing with lower interest rates.
  • If Hiaasen was a Monty Python character, he’d be calling for a draw at this point.

Points # 2 & 3 – My reply to “garage is commercial property”

  • Here I would repeat Samson’s point. What is done at the other comparable venues? While it’s interesting that a columnist would take such a definitive position on an intra-governmental legal issue — by stating that the garages should be treated as commercial property — actual reporting about the why would have been useful.
  • Hiaasen is relying on reputation to get away with writing that ‘…there is nothing public about parking garages that happen to be owned [and operated] by a city government…’ Ownership and responsibility for running the four garages ain’t nothing.
  • I think Hiaasen’s 3rd point [Marlins unlikely to sell out parking spaces, especially in the long run] counters his 2nd point [garages are commercial property because the Marlins might profit from the deal]. If profitability is the key to who is controlling the garages, what happens to that analysis if the Marlins start losing money on the garages after year 2?
  • Bottom line, the City of Miami has outsourced the responsibility for selling parking spaces at the new stadium for the next 15 years. Hard to imagine that would cost them their tax-exempt status.
  • Mr Hiaasen, Malcom Gladwell on line 2 for you.

All articles referenced are copied in full at the end of the post.

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Marlins Stadium: Barry Jackson in depth coverage

The Miami Herald
Posted on Sun, Jul. 24, 2011
Marlins’ new stadium brings jobs, new business opportunities

Barry Jackson – bjackson@MiamiHerald.com
Construction of the Marlins’ dazzling new palace has entered the late innings now, a smidgen over three-quarters complete.

The 8,300-ton retractable roof is secured. Most of the seats, nearly all painted blue, are firmly in place. The 51-foot tall Jumbotron scoreboard towers over right field.

By September, the exterior skin of the stadium will be finished. So will the installation of the thermoplastic white membrane that will cover the roof. By January, televisions and furniture will be installed. By February, the playing surface will be laid down and fish will be frolicking inside two 24-foot aquariums on each side of home plate. And by March, the ballpark will be hosting events, including at least one Marlins spring training game.
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