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Marlins' profits came at taxpayer expense

Jeff Passan
Yahoo Sports
Marlins' profits came at taxpayer expense
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Documents revealed Marlins owner Jeffrey Loria misled the public to get a new stadium deal

The swindlers who run the Florida Marlins got exposed Monday. They are as bad as anyone on Wall Street, scheming, misleading and ultimately sticking taxpayers with a multibillion-dollar tab. Corporate fraud is alive and well in Major League Baseball.

A look at the leak of the Marlins' financial information to Deadspin confirmed the long-held belief that the team takes a healthy chunk of MLB-distributed money for profit. Owner Jeffrey Loria and president David Samson for years have contended the Marlins break even financially, the centerpiece fiscal argument that resulted in local governments gifting them a new stadium that will cost generations of taxpayers an estimated $2.4 billion. They said they had no money to do it alone and intimated they would have to move the team without public assistance.

In fact, documents show, the Marlins could have paid for a significant amount of the new stadium's construction themselves and still turned an annual operating profit. Instead, they cried poor to con feckless politicians that sold out their constituents.

The ugliness of the Marlins' ballpark situation is already apparent, and the building doesn't open for another 18 months. Somehow a team that listed its operating income as a healthy $37.8 million in 2008 alone swung a deal in which it would pay only $155 million of the $634 million stadium complex. Meanwhile, Miami-Dade County agreed – without the consent of taxpayers – to take $409 million in loans loaded with balloon payments and long grace periods. By 2049, when the debt is due, the county will have paid billions.

Most harrowing is the takeaway that baseball’s biggest welfare case could have funded a much greater portion of the ballpark. In 2009, when the Marlins started spending some of their profits on their portion of the stadium, they still had an operating income of $11.1 million. The team fought to conceal the $48.9 million in profits over the last two years because the revelation would have prompted county commissioners to insist the team provide more funding. Loria, an art dealer with a net worth of hundreds of millions, wouldn't stand for that. He wanted as much public funding as possible – money that could've gone toward education or to save some of the 1,200 jobs the county is cutting this year.

Surely Samson was joking when he called the leak of the Marlins documents and those of five other teams "a crime." No, the real misdeed occurred when the head of a professional sports franchise misled the public in order to secure money that wasn't his. When Forbes in 2007 reported the Marlins had the highest operating income in baseball, Samson denied the team profited, saying: "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."

Well, now we have a look, and it's clear what happened: The Marlins loaded money into their coffers and held hostage a city afraid of losing a team, then leveraged it into a sweetheart deal like so many teams across baseball during the stadium boom of the last 20 years.

"It's not that teams need new stadiums, either," said Neil deMause, whose book "Field of Schemes" blew the lid off ballpark boondoggles. "They need new revenues. It's really just a bailout. It would be cheaper to just give the teams the money. But then it would just look like a handout. The stadiums have become part of the business model for teams."

Not nearly enough credit goes to the proliferation of new stadiums for turning the game into a $6 billion-plus business. In case after case, teams built stadiums with a majority of the funding from public sources and today keep nearly all of the profits generated from games. Commissioner Bud Selig traveled city to city, the pied piper of ballparks, urging voters or city councils or whoever held the checkbook to do the right thing. Always left unsaid was his implication: Or else. However idle the threat, it almost always worked.

And it's still working. Even if Miami isn't exactly a baseball town – the Marlins are behind the Dolphins and Heat in popularity – Samson believes the new stadium on the old Orange Bowl site will expand the team's season-ticket base from around 5,000 to 15,000 or 20,000. If-you-build-it-they-will-come is nothing more than a myth, proven false by Pittsburgh and Washington and Cincinnati.

It matters not how sparkling the new stadium is, though the embellishments on the Marlins' only add to the ridiculousness of the whole project. Guess which of the following is not true:

a. The Marlins procured $5.3 million in funding from the county's Art in Public Places department and gave $2.5 million of it to pop artist Red Grooms, who will design a piece with pelicans and seagulls and bright colors and abstract shapes and, best of all, animatronic marlins that celebrate home runs.

b. Billy the Marlin will hold nightly karaoke sessions in left field.

c. Behind the catcher will be 58 feet worth of reef-fish-stuffed aquariums built into the backstop.

Sadly, $2.4 billion is not enough to buy mascot sing-alongs.

It is enough to stink. In the annals of bad stadium deals, it's among the most odious, right alongside the Washington Nationals' extraction of $611 million from the D.C. city council to get Nationals Park built. The team spent $20 million on a parking garage and pays $5.5 million a year in rent. So desperate was Washington to become the landing spot for the Montreal Expos, it ignored reality – there were no other legitimate options for MLB – and vastly overpaid.

Such sentiments are echoed when looking at the Marlins' deal. One of the county's loans is particularly egregious. According to the Miami Herald, J.P. Morgan gave a $91 million note – $80 million of which will go toward construction – that from 2041-47 will cost $118 million per year. In all, the county will spend $1.2 billion to pay off $91 million.

One of the county commissioners who voted against the funding, Katy Sorenson, told the Herald: "It is very expensive money." The county is banking on inflation making $118 million a relative pittance by the 2040s, by which time Hanley Ramirez(notes) will be social security age.

It's entirely possible – and quite probable – that the Marlins profited more than $91 million in the three years leading up to the county commissioners' passing the stadium plan in '08, even with their games at Sun Life Stadium, supposedly the only thing holding the team back from being able to spend on payroll. The inclination to keep salaries at pathetic levels – a dozen players around baseball each made more in 2006 than the entire Marlins team – went unchecked until last offseason, when MLB finally reprimanded the Marlins for purloining too much of the $75 million or so in revenue sharing and Central Fund monies they receive annually.

It was nothing more than a slap on the wrist. MLB knew the Marlins were saving their money to pay off their stadium debt, which, though prudent, does not support Samson's contention Monday that "we could have had [Miguel] Cabrera but no ballpark." That's more propaganda, more truth-stretching. With the new revenue streams, the Marlins could have kept Cabrera. They essentially sandbagged half a decade worth of games by using their money to cover their $155 million on the stadium's construction, $35 million of which will be rent payments and some of which likely will be subsidized by naming rights.

Every cent from inside the stadium will end up on the Marlins' balance sheets. Come 2012, they'll be free to reap their revenue-sharing, Central Fund and ballpark profits while the county prays enough tourism-tax dollars pour in to help pay off the loans.

"[Owners] simply don't tell the truth about the finances,” deMause said. "Or if they do, it's in such a narrow way."

Take a January 2008 luncheon Tampa Bay Rays president Matt Silverman spoke at in St. Petersburg. According to the St. Petersburg Times, in front of a crowd of businesspeople, Silverman declared: "We're cash-flow negative."

The Deadspin documents show the Rays were anything but in the red. In fiscal 2007, which had ended exactly 26 days before Silverman spoke, the Rays' operating income was $21.7 million. And, if Silverman cares to quibble, the Rays listed $37,626 on the line of "cash and cash equivalents." While in 2008 the Rays' earnings dropped to $14,202,206, they didn't have any kind of a cash-flow problem: Their cash and cash equivalents were $32,521,742.

It brings to mind the famous quote from Paul Beeston, the former president of MLB who now runs the Toronto Blue Jays: "Under generally accepted accounting principles, I can turn a $4 million profit into a $2 million loss, and I can get every national accounting firm to agree with me."

The truth of big business is ugly, and while a peek inside baseball's sausage factory is fascinating, it's also sobering. A 37,000-seat, baseball-only stadium is going up in Little Havana right now, and the team that procured it systematically hid the truth from the people whose money they're using to build it.

During the county commissioners' stadium tete-a-tetes with the Marlins, they asked time and again for the team to release its financial statements. It was only fair, right? The county was willing to pledge billions of dollars. It deserved to know who would reap the bounty.

The Marlins never budged. They kept everything a secret and set themselves up for a bountiful future and had the gall to grow angry when documents surfaced that should've been made public in the first place. They were shown for the swindlers they are.

Unfortunately, it was $2.4 billion too late.

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