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Wednesday, December 7, 2011

Fishy Financing (and other bad Marlins puns) 12.07.11

Jeffrey Loria is a man, considered by many (at least these 60) to be slime.  The owner of the (now Miami) Marlins, he has a reputation across baseball, and most fans who have an opinion at all have a general distaste for the man.  Players & owners could not be reached for comment to confirm or deny general disgust within the game's inner circles, though there's no shortage of 'unofficial' or 'unconfirmed' reports.  None of that matters, though, honestly.  Some have come to dislike Dan Lozano in recent days.  Many loathe Scott Boras, and for the most part, you can't throw a dead cat in most major metropolitan cities without hitting at least half a dozen Steinbrenner haters.  I'm not a big fan of Loria, dating back to his days with the Expos, but that's neither here nor there.

Loria is a pursuer of fine art, and that's where his wealth stems from.  I imagine his home being filled with paintings by artists I've never heard of--the kind that the guys in Ocean's Eleven would stage some elaborate heist to steal.  Laser security systems and all that.  He now pursues the great living legend, Albert Pujols.

This comes on the heels of signing the biggest closer on the free agent market (arguably, that is.  The Phillies already sank $50MM into Papelbon.  Wow, Ruben, really?), Heath Bell for $27MM.  Then he signed former Mets shortstop, and young star, Jose Reyes to a 6 year, $106MM deal.  The Marlins' offer to Pujols is said to be 10 years, somewhere north of $200MM.  And there's little sign that Pujols would be the last deal of the Marlins off-season, if they net this year's free agent big fish.

According to Cot's, the Marlins Opening Day payroll has never exceeded $60.4MM, and that was in 2005.  Since then, it's been:

2006 - less than $15MM
2007 - $30.5MM
2008 - $21.8MM
2009 - $36.8MM
2010 - $47.4MM
2011 - $57.7MM
2012 - $A hundred eleventy ba-jillion dollars (projected)

I have a background in business, which includes economics as well as finance.  I understand that economic downturns have very little impact on the wealthy, so it stands to reason that the fine art industry is healthy and thriving.  But, I'm having a hard time understanding where all this money is coming from, and I've got some questions about the legitimacy of its source.

I get that new stadiums generate revenue.  Check that.  Fans coming to new stadiums and buying fancy-schmancy seats in luxury boxes generate revenue.  Revenue is maintained and becomes profit when instead of paying for your new stadium, local municipalities and taxpayers bear the financial burden.  But, the fans still have to buy tickets to generate revenue--there is no getting around that.  ...for the most part, anyway.

The last time the Marlins didn't rank dead last in the National League in attendance was 2005, six years ago.  They've ranked 13th or worse every year since 1997 (5th), including 1998, the year after they brought home the franchise's first-ever World Series!  'course, Loria held a fire sale, and dismantled the team before the champagne was even warm, so there was little to draw the fans to come back the next year.  Only twice in Marlin's history have they ever drawn more than 2 million, 1993, their inaugural season, and 1997.  It's been 15 years since the Marlins have drawn 2 million fans, including 1992, when attendance barely finished about 813,000.  Where in the WORLD is all this money coming from?!?  In my house, the kids save their allowance every week (and they've been saving for a long time) to have enough money for that one Wii game they really want. I don't think anyone would be surprised to learn that Loria has been stashing revenue sharing money, particularly in light of some leaked documents from a little while ago.  Maybe he's been saving up for those free agents that he really wants.  Who knows?  Maybe he figured that the grand opening of the new ballpark is the perfect time to unleash the funds from the past several years.

But I simply can't see how it's sustainable.

I get that the new fish tank has a roof.  No rainouts, hurricanes, unbearable south Florida heat and all that, sure.  But if you don't have butts in seats, you're going to have to sell  your Picasso collection to make up for it.  I believe that some fans would come out to see Jose Reyes, and more would come out to see Albert Pujols.  In 2012.  And maybe even 2013 and 2014.  But, I can't help but wonder about the long-term sustainability of Loria's "go after everyone and spend whatever it takes" mentality--it's irresponsible at best.

Perhaps this is why the Marlins, their executives, and their finances are currently under Federal Investigation.  The Securities & Exchange Commission is checking into the Marlins financing, and while no one has been convicted by a jury of peers or anything, rarely does the SEC open an investigation without good reason.

This might sound crazy, but I'm not convinced that most of this money is even really there.  (see: Madoff, Bernard)  Loria might just be trying to make a huge splash, and trying to win big in the "now"...and do so before Federal charges come his way.  "Win now, fire sale later" has never been a problem for him, which I suspect is why he is so stingy with no-trade clauses for player contracts--he wants to be able to dump salary once he decides it's time.  He may consider what he's doing a Robin Hood-like act, in that he believes he is inspiring baseball fans in south Florida, even if by questionable or illegal means.  After all, MLB stepped in and loaned the Dodgers money back in June, when it became apparent that Frank McCourt's dumb ass wasn't even going to be able to make payroll.  Perhaps Loria figures it's all worth it, even if it all comes crashing down in a couple years.

Could Loria just be setting up one last hurrah?  The 2012 Marlins are bringing some great things to the table: a big new revenue stream, beautiful new stadium, good-looking new roster, uniforms that...well...did I mention the beautiful new stadium?

More links about the Marlins' fishy financing:  (likely updates are available since the original posts below)