Opening the books

Washington Nationals outfielder Nyjer Morgan slides into third after hitting a triple during the first inning against the Philadelphia Phillies at Nationals Park in Washington on April 8, 2010. UPI/Kevin Dietsch Photo via Newscom — The Nyjer Morgan trade was a salary dump? - Kevin Dietsch/UPI/Newscom

Many fans got their wish today, as the Pirates opened their books to the public. Sort of. After financial records were leaked to the Associated Press, Bob Nutting and Frank Coonelly preemptively revealed the leaked details to local media members. I am far from an expert on finances, so I will just stick to a few of my general reactions. For a more in-depth look at the situation, check out the following links.

Associated Press: Alan Robinson’s report on the leaked information
Pittsburgh Post-Gazette: Dejan Kovacevic’s details from the media session with Nutting/Coonelly
Pittsburgh Tribune Review: Rob Biertempfel’s details from the media session with Nutting/Coonelly
Pirates.com: Jen Langosch’s details from the media session with Nutting/Coonelly
Pirates Prospects: Wilbur Miller’s reaction to the news

The profit numbers released ($5.4 million in 2009, $14.4 million in 2008, $15 million in 2007) are not exorbitant. Reports within the last year have accused ownership of pocketing much, much more than this each season. These are moderate profits that are keeping the organization in strong financial standing. As a fan, I would prefer the team to have that sort of financial flexibility.

The AP article glosses over this important passage. By the way, this has been said before.

“The Pirates have fully complied with the Basic Agreement requirements for the use of revenue-sharing proceeds,” Rob Manfred, MLB’s executive vice president for labor relations, told the AP in an e-mail.

There is quite a bit of nonsense in the AP article.

To cut payroll, the Pirates have shed former All-Stars Jason Bay, Freddy Sanchez, Nate McLouth and Jack Wilson in trades, along with nearly every other player who was arbitration eligible — or close to it — or free agency: Tom Gorzelanny, Ian Snell, John Grabow, Xavier Nady, Adam LaRoche, Damaso Marte, Nyjer Morgan, Ronny Paulino and Sean Burnett.

They also dealt slugger Jose Bautista to Toronto for a backup catcher who has since left their system, and cut NL All-Star closer Matt Capps without getting anything in return because he sought a $500,000 raise.

I repeat, this is utter nonsense. Tom Gorzelanny will not be arbitration eligible until after this season. Nyjer Morgan will be eligible after the 2011 season, if he is still in the majors. Ronny Paulino was traded after the 2008 season, still a year away from arbitration. Sean Burnett was earning close to league minimum when he was traded. With the Nationals, he received a giant raise to $775,000 this season. Using any of these players as evidence of payroll shedding is either ill-advised or disingenuous. Also, saying that the Pirates “dealt slugger Jose Bautista…for a backup catcher” is completely twisting the facts. There are 13 players listed in this section as evidence of management’s salary dumps. Two are now in Triple-A. Only about five are performing at anything approaching competency this year.

All in all, I don’t think there is anything all that newsworthy in this article, other than adding some more concrete numbers to the conversation.

EDIT: Actually, this is probably the most important aspect of the situation. From Dejan’s piece:

The Pirates’ $5.4 million profit for 2009, considered modest in the world of professional sports, raises another, completely contrasting issue: Can the team compete financially?

I would feel much better if the 2009 profit was much higher than $5.4 million.

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Realistically Speaking

13 years ago

#379

They made $30 million in the two years the AP had figures for. Prior to the leak, they said they made much, much less than that. How are we to believe the $5 million figure when they’ve been proven to have lied in the past?

Also, they made $30 million in two seasons when the payroll was just over $50 million. It’s much less than that this year. How much are they making this year? A lot more.

The bottom line is that PNC Park was built with public funds. It should not be used solely for the owners of the Pirates to pocket a bunch of money every year with little to no attempt to put a winner on the field.
I’m all for the owners making money. But not when they continually put a lousy product on the field.

DG Lewis

Reply to Realistically Speaking

#382

This is the third Pirates blog on which I am posting this explanation, which I guess is a good thing…

People need to understand the difference between net income (“profits”) and cash distributions (“money in the pockets of the owners”).

Net income — profit — equals revenues minus expenses. It is an accounting figure.

Cash distributions — money in the pockets of the owners — are cash payouts made from the Pittsburgh Baseball Partnership LLP to the onwers (partners).

From 2006-2009, the net income of the PBP was $50M. Over that same period, the cash distributions were $20M.

$9.8M of that $20M was a payout of accrued earnings (“interest”) on preferred limited partnership units (a “loan”) that the Nuttings made to the PBP in 2003. The minority owners voted to pay that out to the Nuttings in cash; the Nuttings didn’t get a vote.

$10.4M of that $20M was a payout by the PBP to all the partners to cover the partners’ tax liability for 2006-2007 net income. This is a payment which the PG revealed the PBP did not make in 2009, to the chagrin of the minority owners.

So the owners have “pocketed” $20M over the past four years; $30M was reinvested in the club. Had the Nuttings had their druthers, it’s reasonable to believe that NONE of the $20M would have been “pocketed by the owners”.

Matt Bandi

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Reply to DG Lewis

#383

Thanks for posting this, DG. These points are constantly ignored for some reason, so keep repeating it

#380

Don’t think the team ever released profit numbers prior to the leak. Dejan estimated an $11 million profit for the 2008-2009 period based on his own calculations. From today’s chat:

Fat Jimmy: Can you clarify your reporting? This morning you wrote that the $11 million in profit the past two years number did not come from the team, yet in your December 2009 article (in the first graph) you attribute that number to Frank Coonley. Did you make a mistake in 2009 or 2010? 🙂

Dejan Kovacevic: The part that attributes to Coonelly is to the team reinvesting all its profits, not to the dollar figure itself. I remember writing the very next day on the blog that I’d love to have had a second crack at the first sentence in December 2009. But once it goes in print and hits the trucks, there it goes.

To repeat for those who might not have seen it on the blog, the $11 million figure in that piece did not come from the Pirates. I said so at the time and repeated it in this morning’s main article. It came from my own computation of other information that I had.

Now, as is very obvious, that information did not include the ownership distributions. I asked at the time about dividends, which are different, and was told there were none. The amount, the timing and the placement of all of the four distributions into the 2008 books (even though they involved issues as far back as 2006) obviously would have changed that $11 million figure.

Drew

#378

I don’t understand the big deal about 10 or 15 million. Could it be possible that the owner and president actually are considering saving that money and having it on hand when McCutcheon and Alvarez need raises? Keeping that 30 Million, instead of spending it on the Jack Wilson’s and Nate McClouth’s of the world, will prove to pay big dividends/interest over the next few years when it comes to resigning Alvarez, McCutcheon, and the eventual young pitching staff.