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The Pohlad's and the Cry for Them to Spend More Money

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#1 powrwrap

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Posted 09 July 2012 - 06:14 PM

Lots of Twins fans pine away for the Pohlad's to spend more money on payroll. Did you ever stop and think about the transactions that must take place before they can do that? In other words, where does the money come from? The Minnesota Twins LLC is a limited liability corporation. Jim Pohlad is the CEO, Dave St. Peter is the President. The board of directors include Jim Pohlad, Bob Pohlad, Bill Pohlad, Dave St. Peter, and Jerry Bell. It is likely that these five individuals own stock in the LLC and that the Pohlad's own a controlling interest. There are probably other shareholders as well. So if the Twins want to increase payroll they have to find the money somewhere. It's either in a bank (or other financial) account under the corporation's name or they have to get a loan from a bank or from individuals. I'm guessing that if the Twins need money they don't take out a bank loan, rather they get it from the Pohlad personal fortune. So how does the Pohlad's money get into the Minnesota Twins' bank account(s)? I'm guessing that the Pohlad's make a personal loan out to the Minnesota Twins LLC, with the expectation of getting paid back at some point. I doubt that they issue more shares of stock, but they could. In other words when fans clamor for the Pohlad's to quit being so cheap and spend more money in essence they are asking them to loan their personal money to a corporation. The Pohlad's don't write out personal checks to Joe Mauer every two weeks to cover his contract. The money comes out of the LLC. So the calculation that the Pohlad's and the Twins board of directors must make is: 1. How much money should I loan to the company? and 2. When and how will I get paid back? The construction of Target Field helped the owners capture more revenues than they were getting at the Metrodome. That's why payroll went from $65M in 2009 to $98M in 2010. The Twins owners knew they could recoup their money. It also helps to explain why the Twins had such lousy payrolls in the mid to late 90's. With the MetroDome lease they couldn't see a way to get their money back. Some owners might have a higher tolerance for the time frame needed to recover their money, or they have more revenue streams than the Twins, or both. For example, it is easy for the Steinbrenners to sink their money into the Yankees because they own the YES TV network, the new Yankees stadium, etc. etc. and they can be (mostly) assured that they will recoup their money. When fans yell for owners to spend more money on the team what they are really asking them to do is make riskier loans to the corporation. Their personal wealth is not the deciding factor. No baseball owner is going to throw money away on their team without the expectation of getting it back. My point is that there is the wall of separation between an owner's personal money and the money that the corporation controls.
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#2 gunnarthor

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Posted 09 July 2012 - 06:21 PM

We don't know and, if the owners have their way, never will know, where all avenues of revenue come from. Agents and the player's association are not allowed to look at owner's books. The Dodger fiasco showed how some owners are willing to hide/move money into different places to lower official revenue. Other owners have paid family members huge sums of money for "work" which came out of the teams budget. Sports Illustrated (I believe) noted that most people inside baseball believe that player salaries have not grown as fast as owner's revenues and that today player's might make less than 50% of baseball revenues, as opposed to a decade or so ago when they made something around 57%. Sorry I'm too lazy to look for that link.

#3 powrwrap

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Posted 09 July 2012 - 06:31 PM

We don't know and, if the owners have their way, never will know, where all avenues of revenue come from.


This is true but by examining new stadium deals and digging up info from the CBA, we can make good guesses. The concession revenues at Target Field are basically an ATM for the Pohlads. The profit margins on everything is incredible. How many beers an hour do they have to sell at $7.25 a bottle to show a profit, including paying the guy hawking the beer? Two beers? I'm pretty sure that beer vendors sell more than two beers an hour. Ha!

Sports Illustrated (I believe) noted that most people inside baseball believe that player salaries have not grown as fast as owner's revenues and that today player's might make less than 50% of baseball revenues, as opposed to a decade or so ago when they made something around 57%.


I've heard similar things about the player's share decreasing, but I think it's still above 50% but just barely. The Twins have said their payroll is 55% of their gross revenues, to which I would respond--Yeah, and what year was that and for how many years?

In any event, if the Pohlads want to increase payroll beyond their percent of revenue threshold, they probably make a personal loan out to the company. They simply cannot keep doing this, unless they are idiots for businessman, and I don't think they are.
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#4 Guest_USAFChief_*

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Posted 09 July 2012 - 06:35 PM

Do you have a source reference for "The Minnesota Twins LLC" as the owner of the Twins?

#5 powrwrap

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Posted 09 July 2012 - 06:45 PM

Do you have a source reference for "The Minnesota Twins LLC" as the owner of the Twins?




http://mblsportal.so...86-001ec94ffe7f
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#6 birdwatcher

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Posted 09 July 2012 - 06:48 PM

Terrific writeup, powrwrap. The Twin's LLC DOES have other shareholders. The board has a fiduciary responsibility to them that supercedes any "responsibility" they have to us as fans. I opposed the public financing of the stadium. Not because Carl Pohlad was rich, but because I was irritated by the incongruity of public financing without full financial disclosure on the part of the Twins, and because of the structure of the deal. The team has no obligation to the players and their union to open the books, but I really think we as taxpayers deserve more transparency. If I was the Czar, I'd step in and stifle the greed all around: players, owners, agents, and fans. How ridiculous is it that games are out of reach financially for so many families? As Czar, ticket prices would go down, salaries would go down, public financing would cease. And the players would still play, even at a frifth of what they make right now.

#7 Guest_USAFChief_*

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Posted 09 July 2012 - 06:52 PM

http://mblsportal.so...86-001ec94ffe7f


This reference proves none of claims in your original post.

#8 powrwrap

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Posted 09 July 2012 - 06:56 PM

This reference proves none of claims in your original post.


Asked and answered your question. What is your beef?
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#9 birdwatcher

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Posted 09 July 2012 - 07:01 PM

USAF, there may be innaccuracies, but remember, his point was simply that there is a "wall" (distinction?) between Twins money and personal money. That particular claim is spot on.

#10 powrwrap

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Posted 09 July 2012 - 07:27 PM

USAF, there may be innaccuracies, but remember, his point was simply that there is a "wall" (distinction?) between Twins money and personal money. That particular claim is spot on.


Yes, that is my main point, separation between corporate funds and personal funds.

Also, I am speculating as to how the Twins' get their money which is why I used words like "I'm guessing", "probably" and "might".
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#11 Highabove

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Posted 09 July 2012 - 07:33 PM

In 2010 the Twins showed an operating income of 26.5 million dollars

2011 the Twins showed an operating income of 16.6 million dollars


Those are not bad before tax earnings.


The Business Of Baseball, 2011


The Business Of Baseball

Edited by Highabove, 09 July 2012 - 07:39 PM.


#12 mike wants wins

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Posted 09 July 2012 - 07:43 PM

Regardless of the ownership situation, they can spend more money if they want to. They choose not to. That's their right. It is also the fans' right to stop spending money on a AAAA product at MLB prices. Which will only decrease revenue, which will lead them to get a lower payroll, and a vicious cycle will be borne out, until either the cheap youth is great, or the owners spend more money on legit free agents.

What I just typed is probably an opinion, not a fact. I mean, I'm usually right, so you should maybe assume it is or will be a fact soon, but that's up to you. :)


#13 Guest_USAFChief_*

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Posted 09 July 2012 - 08:09 PM

Asked and answered your question. What is your beef?


I have never before heard that people outside the Pohlad family own any part of the Twins, nor that an LLC "owns" the Twins. I want to see some proof before I believe any of those claims.

#14 Guest_USAFChief_*

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Posted 09 July 2012 - 08:13 PM

In 2010 the Twins showed an operating income of 26.5 million dollars

2011 the Twins showed an operating income of 16.6 million dollars


Those are not bad before tax earnings.

The Business Of Baseball, 2011


The Business Of Baseball


Nor is the return on investement of the original purchase, which went for $45M when purchased, to the team's current estimated $500M value.

Ownership could chose to spend more, quite a bit more, on major league salary if they wanted, and not lose money. They don't. It's as simple as that.

#15 Top Gun

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Posted 09 July 2012 - 08:30 PM

Wait till he sells the team then you will see that he made 5 times what he paid for it.

#16 powrwrap

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Posted 09 July 2012 - 08:56 PM

I have never before heard that people outside the Pohlad family own any part of the Twins, nor that an LLC "owns" the Twins. I want to see some proof before I believe any of those claims.


I showed you that the Twins are an LLC. It's a given that if you are on the board of directors of a corporation and active in the day-to-day running of the company you are going to own stock in that company.
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#17 powrwrap

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Posted 09 July 2012 - 09:02 PM

[quote name='mike wants wins']Regardless of the ownership situation, they can spend more money if they want to. [/QUOTE]

Yes, they COULD spend more money, which at this juncture probably means they are throwing it away.

[QUOTE]It is also the fans' right to stop spending money on a AAAA product at MLB prices. [/QUOTE]

Absolutely.

[QUOTE]Which will only decrease revenue, which will lead them to get a lower payroll, and a vicious cycle will be borne out, until either the cheap youth is great, or the owners spend more money on legit free agents.[/QUOTE]

I'm sure the Twins have figured out their break even attendance numbers vs. payroll. Quick guesstimate, one point on the graph could be around 18,000-20,000 fans a game and around $80M in payroll. That sounds a lot like next year.
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#18 Guest_USAFChief_*

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Posted 09 July 2012 - 09:02 PM

I showed you that the Twins are an LLC. It's a given that if you are on the board of directors of a corporation and active in the day-to-day running of the company you are going to own stock in that company.


You have shown that a corporation named "Minnesota Twins LLC" was registered. You have not shown what, if anything, that corporation does. You have not shown they own the Twins, or if they do, what the corporate structure looks like or who owns stock. You could be correct, but nothing you've posted is in any way proof of that.

I do know the Twins formed an LLC to facilitate stadium funding and construction. Perhaps that's what this is. Perhaps not. I don't know, but I'm skeptical at best that the Pohlad family has given ownership to people outside the family.

#19 powrwrap

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Posted 09 July 2012 - 09:04 PM

Ownership could chose to spend more, quite a bit more, on major league salary if they wanted, and not lose money. They don't. It's as simple as that.


On a year-by-year basis, I don't think so. If they were to sell out every game, as they almost did in 2010, how high would you say their payroll can go and they still break even?
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#20 powrwrap

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Posted 09 July 2012 - 09:09 PM

You have shown that a corporation named "Minnesota Twins LLC" was registered. You have not shown what, if anything, that corporation does. You have not shown they own the Twins, or if they do, what the corporate structure looks like or who owns stock. You could be correct, but nothing you've posted is in any way proof of that.


Yes, privately held corporations don't need to divulge anything to the public. If Minnesota Twins LLC don't own the team, what the heck do they do? David St. Peter is listed as the manager.

I do know the Twins formed an LLC to facilitate stadium funding and construction. Perhaps that's what this is. Perhaps not. I don't know, but I'm skeptical at best that the Pohlad family has given ownership to people outside the family.


I think that is Twins Ballpark LLC.

Target Field is managed and operated by Twins Ballpark, LLC, a limited liability company ("Twins Ballpark").


http://minnesota.twi..._procedures.pdf

Edited by powrwrap, 09 July 2012 - 09:14 PM.

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#21 Oxtung

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Posted 09 July 2012 - 09:44 PM

Ownership could chose to spend more, quite a bit more, on major league salary if they wanted, and not lose money. They don't. It's as simple as that.


I think it's funny that you demand someone to show documentation of exactly who owns the Twins and what "Minnesota Twins LLC" is but then throw out this claim off the cuff. Me thinks there is a double standard here somewhere.

#22 edavis0308

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Posted 09 July 2012 - 09:59 PM

What exactly is the point of this entire thread?

#23 glunn

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Posted 09 July 2012 - 10:07 PM

You have shown that a corporation named "Minnesota Twins LLC" was registered. You have not shown what, if anything, that corporation does. You have not shown they own the Twins, or if they do, what the corporate structure looks like or who owns stock. You could be correct, but nothing you've posted is in any way proof of that.

I do know the Twins formed an LLC to facilitate stadium funding and construction. Perhaps that's what this is. Perhaps not. I don't know, but I'm skeptical at best that the Pohlad family has given ownership to people outside the family.


Chief, I am pretty sure that he is correct about the LLC.

Please keep in mind that "LLC" refers to "limited liability company", which makes it seem like a corporation. An LLC would be an ideal vehicle for the Pohlads to own the ball club (better than a corporation), because of various tax advantages over a corporation. I googled this and found a link to what appears to be the LLC's retirement plan -- http://401k-plans.fi...esota-Twins-LLC [please notice the address and # of employees]

I am not 100% sure that this is the same LLC, but it sure seems that way.

And LLC or not, there is no evidence of ownership by anyone other than the Pohlad family. In that regard, I believe that Chief is correct, as he usually is.

#24 Badsmerf

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Posted 09 July 2012 - 10:10 PM

This thread sucks.

#25 Kobs

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Posted 09 July 2012 - 10:10 PM

If Minnesota Twins, LLC does indeed own the Twins, it is basically guaranteed that it's either to reduce the Pohlad's taxes or to reduce the team's reported revenue. No one has ever made any claim that anyone other than the Pohlads have any control over the club. If Ol' Carl threw Jerry Bell 1% of the team in his will, it's not impacting the team's ability to spend money.

#26 clutterheart

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Posted 09 July 2012 - 10:26 PM

"Loan" The only way a "loan" would be needed is if there is a shortfall between cash-on-hand and liabilities. I would bet by bottom dollar that such a shortfall does not exist. "Wall" There is no "Wall" between the Twins' money and Pohlad's money. Its a one way pipeline from the Twins to the Pohlads. Revenue is disbursed as a dividend and does not include their salaries. Those dividends go directly into the Pohlad's bank account. "When fans yell for owners to spend more money on the team what they are really asking them to do is make riskier loans to the corporation." No. That is not correct at all. Fans are asking the ownership to bets that if they raise the payroll they can gain more revenue. Ownerships only risk is less dividend. Not their personal money.

#27 Rosterman

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Posted 09 July 2012 - 10:37 PM

I seemed to remember reading that the Twins were leveraged with bank loans from banks other than Pohlads (better loan interest rate, perhaps). The get money from revenue and/or perceived worth of the Franchise. Supposedly they banked close to $200 million in revenue last season, and the Franchise has gone from something like $160 million in value to $459 million, with an outstanding loan to the corporation of $140 million or so to cover partial stadium costs and upgrades...which at $10 million a year in profits will be paid back in....... So if the family cashed out today with the worth of the organization at $450 million, they would come out pretty well. Major league baseball allows franchises to carry loans for 70% of the amount of worth... So, yes, someone other than the Pohlads have paper on the Twins.

#28 glunn

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Posted 09 July 2012 - 10:55 PM

"Loan"
The only way a "loan" would be needed is if there is a shortfall between cash-on-hand and liabilities. I would bet by bottom dollar that such a shortfall does not exist.

"Wall"
There is no "Wall" between the Twins' money and Pohlad's money. Its a one way pipeline from the Twins to the Pohlads. Revenue is disbursed as a dividend and does not include their salaries. Those dividends go directly into the Pohlad's bank account.

"When fans yell for owners to spend more money on the team what they are really asking them to do is make riskier loans to the corporation."
No.
That is not correct at all. Fans are asking the ownership to bets that if they raise the payroll they can gain more revenue. Ownerships only risk is less dividend. Not their personal money.


I think that what you are saying is essentially correct.

I would note that the owners of an LLC pay taxes on the income of the LLC whether or not the income is distributed. Usually, the owners take distributions that will at least cover the taxes on the imputed income for each calendar year. The owners can take more if they wish or they can leave the balance in the LLC to make an investment in the business.

If the LLC needed extra money, then the Pohlads could either loan money to the LLC or make a capital contribution. But I think that you are correct that the money generally flows only in one direction.

I also think that you are correct that the owners are being asked to make bets that they hope will increase revenues. However, because the LLC is a pass through entity as described above (the owners pay taxes on the net income whether or not it is distributed by the LLC), I do not think that it is accurate to say that they would not be risking their personal money. Any extra money paid to players reduces the amount that the LLC can distribute to the Pohlads.

On a more positive note, player salaries are deductible for income tax purposes, which has the effect of making the IRS a partner in all player decisions. If a $10 million player increases revenues by $20 million, then IRS gets its 35% tax on the extra net revenue. But if the Twins sign a $3 million pitcher who actually reduces revenues (cough Marquis cough), then the IRS loses, because there are less net revenues to tax.

Baseball is just another business, and the Pohlads are classical capitalists. They seek to maximize their economic returns. And they have had success with their business model and seem unlikely to change it. I would rather have an owner who has a burning desire to win a World Series and who does not mind taking a risk of losing a lot of money on a very risky contract (cough Prince Fielder). But it seems to me that there are a lot of other owners who are even more conservative.

#29 Highabove

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Posted 09 July 2012 - 11:01 PM

This definitely gets my thread of the year vote.

https://encrypted-tb...idATqN9CuArPEZm

#30 powrwrap

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Posted 10 July 2012 - 08:08 AM

What exactly is the point of this entire thread?


The point is that Twins fans that demand the Pohlad's spend more money on payroll should understand that they don't use their personal money to purchase contracts for free agents, the money gets funneled through the LLC. The Pohlads make a business decision. Owning a baseball team is not a hobby for them where they don't expect to get paid back. I'm kind of reacting to the idea that if the Twins don't sign Cole Hamels, Zack Greinke (or whomever) in the off season then the Pohlads are cheap. It's not that simple.
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