A new baseball stadium was supposed to fix South Floridas lukewarm embrace of professional baseball. But the Marlins first season in their new ballpark may have made things even worse for the team.
Splurging on payroll last year gave owner Jeffrey Loria a $100 million lineup that he couldnt afford without a windfall from a winning season. The trades that followed last years 93-loss debacle sent payroll down 60 percent to the second-lowest in baseball, leaving fans more furious at the Marlins than at any time in the franchises 20 year-history.
And while cutting payroll used to produce profits, the added debt and operating costs of a new $634 million stadium have left team executives predicting another loss on top of last years team record $47 million operating loss.
The attendance impacted everything, said David Samson, the teams president, in a recent interview. We looked at our revenue numbers, and the team has to be able to sustain itself.
As the new season opens Sunday, the team appears to be in the baseball equivalent of a foxhole, waiting to fight another day. With a payroll estimated at $45 million only the Houston Astros pay out less, at $32 million the odds of the Marlins winning the National League pennant are pegged at 150-to-1.
Samson says attendance needs to increase at least a third from last year for the Marlins to afford a mid-range payroll of $80 million in the coming seasons.
Thats highly unlikely. Would-be ticket buyers dont seem eager to forgive Loria for cutting costs so quickly after occupying a stadium set to cost taxpayers $2 billion over the next 40 years. Season-ticket sales have fallen by 60 percent to around 5,000, and the Marlins recently became the only major league team using Groupon to sell seats for Opening Day, according to the online discounter.
Fans really put their emotions into the 2012 season, and they really got hurt, said Michael Jong, a 26-year-old writer for the independent Marlins blog Fish Stripes, and a fan of the team since he went to a 1997 baseball-themed birthday party at what was then called Pro Player Stadium. They thought things were going to change.
A review of 10 years worth of Marlins financial statements illustrates the predicament now facing the team. Since Loria bought the Marlins in 2002, boosting the payroll has failed to bring the spike in ticket revenue needed to turn a profit. Only when he slashed player costs did the team record a cash surplus, according to the records.
A source with access to the Marlins audited financial statements allowed a Miami Herald reporter to review them and a 10-year summary of the reports during one two-hour session. The reporter could take notes but not make copies of the documents, meaning a thorough examination of the accounting and fine-print was not possible.
The review did identify some key financial metrics the team has not revealed before, including yearly revenue from tickets, payroll costs and how the team borrowed and paid down debt.
Before 2012, the teams worst year financially in the Loria era was also its best on the field: 2003, when the underdog Marlins managed to beat the New York Yankees in the World Series.
By the end of that championship season, the Marlins posted an operating loss of $43 million due in part to attendance that was the third-worst in the Major Leagues. Ticket revenue rose the following year as the Marlins charged more and cut back on discounts, but attendance inched up just one notch to fourth-worst in baseball.
Only in 2006, after Loria slashed payroll to the lowest in baseball, did the team begin posting healthy operating profits $110 million through 2009. The surplus dollars came mostly from Major League Baseballs revenue-sharing program, which pays out cash to all 30 teams but has special subsidies for franchises with smaller fan bases. The league paid the Marlins between $65 million and $75 million a year through 2009, according to the statements reviewed by The Herald.
While confidential, the statements are circulated to MLB headquarters and the leagues players union. A leaked set of the documents, covering the Marlins and five other teams, was published on the Deadspin website in 2010.
The release sparked outrage in Miami-Dade County, since the documents showed the Marlins had a $33 million net profit in the two years prior to county and Miami leaders agreeing to fund a stadium that Loria and Samson said was the only way the Marlins could afford to stay in South Florida.
Lorias first four years owning the team saw an overall loss of almost $60 million deficits covered with loans. Interest expense on team debt cost the Marlins between $4 million and $7 million a year, according to the statements. The team also used cash to pay down loans from MLB headquarters, commercial banks and Loria himself. The Marlins eventually agreed to contribute about $155 million cash to the new stadiums construction cost, so the team needed a leaner balance sheet to take on added debt.
Debt is eating into the Marlins income, and that is one of the reasons the team doesnt expect to turn a profit despite paying players so little this year.
Now its the same old low-revenue, low-cost scenario theyve been running most of the past 15 years, said Neil DeMause, of the popular blog Field of Schemes, which tracks stadium subsidies.
The Marlins do pay Loria. The 2009 financial statement published by Deadspin put the yearly management fee paid to a Loria company at $3.2 million, up from $2.8 million in 2008. Its not known what the management fee is now. Loria also collects interest revenue on the money he loans to the Marlins. In 2009, the financial statement had the balance at $15.4 million, with interest expense at $1.1 million.
Even if his franchise loses money, Loria likely saw his net worth grow when his lobbying team convinced Miami and Miami-Dade in 2009 to provide the Marlins with a new stadium. A recent valuation by Forbes estimated the Marlins to be worth $520 million, 15 percent more than a year before and double the $256 estimate in 2008, when a stadium deal was uncertain.
Loria paid $158 million for the team in 2002. The latest financial statement put the teams debt at about $200 million.
Loria has said he has no plans to sell, and the franchises finances should improve in the coming years no matter the outcome at Marlins Park.
All teams are supposed to see a significant boost next year from MLBs richer television contracts, and the Marlins also expect a windfall once they renegotiate their local broadcasting deal with Fox. The agreement expires in 2020 and pays about $17 million a year.
That pales in comparison to big-market teams such as the Los Angeles Dodgers (as much as $280 million per year) and Los Angeles Angels ($147 million). Even small-market teams like the Houston Astros ($80 million), San Diego Padres ($60 million) and Cleveland Indians ($40 million) make substantially more.
But in the short-term, the Marlins offer no signs of encouragement. In a recent interview, Samson said the Marlins could afford to pay a team the league average of about $80 million a year but only if average attendance hovered at around 30,000 to 35,000 a game. Last years tally: 22,000.
For some baseball watchers, the first year of Marlins Park showed the limited horizon of baseball in South Florida.
So far there is no reason to be optimistic about the future of baseball in Miami, said Roger Noll, a sports economist and Stanford professor.
But you have never had a team managed by someone who knows and understands Miami.