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

[Boom Boom]

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.

Huh?

 

LLC or not... the Pohlads own that money. It's theirs, regardless of how they launder it.

[edavis0308]

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.

I think you are bringing this up to the wrong crowd. I would think that a very high majority of people here are pretty understanding and accepting about how the Twins' money spending ways are.

[powrwrap]

"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.

 

Because if the nature of LLC's--profits or losses must be passed through to the owners each year--if the Twins want to sign Cole Hamels and Zack Greinke next year I bet they don't have $40M per year lying around waiting to be spent on that. Ask yourself--how are the Pohlads going to get $40M a year more in revenues? Raise ticket prices $100 per seat? No, so they are going to have to find the money somewhere else.

 

"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.

 

Not quite. There is a legal separation between the Twins money and the Pohlads money. Any dividends paid to the shareholders of the LLC will show this as income on the shareholder's tax return. Or losses will be deductions from their personal taxable income. How many dividends did the Pohlads put "directly into their bank account" in the losing years of 1994 through 2001? In these years the Pohlads likely had losses flow through to their form 1040.

 

"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.

 

We don't know the Pohlads tax situation. They do have other investments in other companies. Maybe for tax reasons they don't want the Twins to have more revenues, which would mean more profit, which would mean more dividend payments to them from the LLC, and more personal tax liability. Owners of LLC's and S-Corps can manipulate their expenses and dividends to minimize their personal tax liabilities. Ownership has the risk of paying higher personal taxes if their LLC has higher revenues.

[powrwrap]

Huh?

 

LLC or not... the Pohlads own that money. It's theirs, regardless of how they launder it.

Yes, and they are owners of multiple businesses. Maybe they don't want to put more money back into the Twins for a couple of years because that money is needed for another business. Maybe they WANT to lose money with the Twins. I often wonder if Carl was purposefully losing money on the Twins in the 90's because his investments elsewhere were raking in the dough and he could more easily manipulate profits and losses with the Twins to adjust his personal income tax payable compared to manipulating his other businesses profits and losses.

[powrwrap]

I think you are bringing this up to the wrong crowd. I would think that a very high majority of people here are pretty understanding and accepting about how the Twins' money spending ways are.

Hey, it's a Twins discussion forum. I can't think of a better place to bring it up.

[JB_Iowa]

Without going into the details of ownership (which NONE of us know unless there is a Pohlad posting here), I have one simple question: What is the Twins "profit margin"? We know that they earmark about 50%-52% for player's salaries. Then we know that there is the whole range of other costs: minor league operations, scouting, day to day operations of TF, executive compensation, etc., etc., etc. BUT somewhere in there, I'm sure that they also "plan" a profit margin.

 

Presumably that margin was not big enough last year -- leading to this year's payroll cut.

 

BUT at what point do you sacrifice current profits to acquire the on-field talent that will allow you to continue making a nice profit and to perhaps increase those profits?

 

We all know that baseball is profitable -- even for losing teams -- but how much risk do you want to take of getting into a continually downward spiral?

 

(For the record, I'm not one who says the team needs to spend, spend, spend -- because I believe that the team's current difficulties go beyond acquring a few good pitchers -- but I DO believe that management of this club needs to fish or cut bait: either be upfront about rebuilding so that fans know what to expect OR invest the resources necessary to avoid rebuilding and be truly competitive)

[powrwrap]

I have one simple question: What is the Twins "profit margin"?

Most companies run a net-net profit of between 5% and 10%. Of course, MLB is not most companies, so who knows? If the Twins have revenues of $180M and they have a 7.5% net-net profit, that would mean dividend distributions of $13.5M to the owners.

[Mike Sixel]

Most companies aren't bought for $45MM, and later valued at $500-700MM though either. Now, that's not liquid or real unless they sell, so I understand the cash flow implications.....all that said, if I was a billiionaire, and had other businesses making money, and owned a baseball team, I'd just want to break even or even lose a little money on that, to make it great. But, unfortunately, I'm more of a tenthousandaire....

[Highabove]

How many private corporations receive a 390 Million dollar subsidy from the public?

 

I will wait for my answer.

[powrwrap]

How many private corporations receive a 390 Million dollar subsidy from the public?

 

I will wait for my answer.

How much of that $390M goes into payroll?

 

I will wait for my answer.

[Guest USAFChief]

How much of that $390M goes into payroll?

 

I will wait for my answer.

Apparently not very much. That seems to be the issue.

 

We do know a couple hundred million plus of that has gone into the Pohlads pocket, in the form of doubling the teams value.

[Highabove]

How much of that $390M goes into payroll?

 

I will wait for my answer.

Last year's Revenue was 213 million. 97million dollars of that is going torwards this year's payroll. Its not that complicated.

[SweetOne69]

How many private corporations receive a 390 Million dollar subsidy from the public?

 

I will wait for my answer.

Why deal with private corporations?

 

While the subsidy may not be $390M per company, virtually all corporations get public subsidies in one form or another as incentives to build a new facility in their location.

[Highabove]

A separate county sales tax was instituted specifically for this Cooperation.

 

Outside of the three other Sports Franchises, what other private Corporation has received this consideration?

[drivlikejehu]

The OP just has no idea what he's talking about. There is no "legal separation" between the Pohlads and the Twins. Whatever unincorporated business entities they use is irrelevant for anyone except their lawyers and accountants. The Pohlads have 100% control of the team. They have instant access to all cash inflows and are responsible for all cash outflows. They are free to sign contracts as they see fit.

 

When they choose to cut payroll, the reason is that they are cheap. It's not complicated. They own the team and that is their right. Likewise, the First Amendment gives me the right to say they have fleeced taxpayers and arguably perpetuated non-actionable fraud in their pursuit of said taxpayer money. We see now that the purpose of the stadium is only to enrich the Pohlad family, rather than fully support a competitive baseball club.

[powrwrap]

The OP just has no idea what he's talking about. There is no "legal separation" between the Pohlads and the Twins. Whatever unincorporated business entities they use is irrelevant for anyone except their lawyers and accountants. The Pohlads have 100% control of the team. They have instant access to all cash inflows and are responsible for all cash outflows. They are free to sign contracts as they see fit.

 

The legal separation has to do with the savings and checking accounts of the individuals and the team. The team is a legal entity separate from the individuals. In real life execution of business duties it may not appear to be that way. My point is that when fans yell for payroll to be increased, it's not as simple as Jim Pohlad writing a personal check.

 

When they choose to cut payroll, the reason is that they are cheap. It's not complicated.

 

No, it could be for other reasons, such as adjusting their year end dividend they receive from the team's profit (or loss.) Is that being cheap? Or avoiding taxes? If people decide they don't want to pay taxes are they cheap?

 

They own the team and that is their right. Likewise, the First Amendment gives me the right to say they have fleeced taxpayers and arguably perpetuated non-actionable fraud in their pursuit of said taxpayer money. We see now that the purpose of the stadium is only to enrich the Pohlad family, rather than fully support a competitive baseball club.

 

You're funny. "We now see..." after only 2 1/2 years of operation? The payroll numbers have been: $98M, $112M, and $94M. These numbers come on the heels of a $65M payroll in 2009.

[powrwrap]

Last year's Revenue was 213 million. 97million dollars of that is going torwards this year's payroll. Its not that complicated.

How much of the $390M subsidy that the Twins received to build Target Field went into payroll? Where did you get the $213M revenue number from?

[Boom Boom]

If people decide they don't want to pay taxes are they cheap?

 

Well... not to get too political here, but I'd venture a guess that half of everybody would consider that to be very cheap.

[Highabove]

How much of the $390M subsidy that the Twins received to build Target Field went into payroll? Where did you get the $213M revenue number from?

 

Fobes Magazine links below

 

These numbers are cited by numerous publications.

 

The Business Of Baseball, 2011

 

 

The Business Of Baseball 2012

[powrwrap]

Fobes Magazine links below

 

These numbers are cited by numerous publications.

 

The Business Of Baseball, 2011

 

Says the Twins had $213M in revenues and $26.5M in operating profit (before depreciation, amortization, and interest expenses). So how many big impact free agents can you buy with less than $26M? Who was available?

 

The Business Of Baseball 2012

 

Says the Twins had revenues of $213M and $16.6M in operating profit (before depreciation, amortization, and interest expenses). So how many free agents can you buy with less than $16M? I'm guessing not a big impact player. Not Zack Greinke or Cole Hamels. Looks like you're going to have to find some money elsewhere.

[powrwrap]

If people decide they don't want to pay taxes are they cheap?

 

Well... not to get too political here, but I'd venture a guess that half of everybody would consider that to be very cheap.

 

Really? So it's wrong to take all the legal deductions you are entitled to by law to lower your tax burden? For example, if you take the home mortgage interest deduction to lower your taxes, you're cheap? Or put pre-tax money into a 401k to reduce your taxable income, you're cheap? Wow.

[Highabove]

Says the Twins had $213M in revenues and $26.5M in operating profit (before depreciation, amortization, and interest expenses). So how many big impact free agents can you buy with less than $26M? Who was available?

 

 

 

Says the Twins had revenues of $213M and $16.6M in operating profit (before depreciation, amortization, and interest expenses). So how many free agents can you buy with less than $16M? I'm guessing not a big impact player. Not Zack Greinke or Cole Hamels. Looks like you're going to have to find some money elsewhere.

In 2011, the 16 Million is realized AFTER the Twins had payed out a 113 million payroll.

 

The operating income number is taken AFTER operating expenses INCLUDING players cost.

[powrwrap]

In 2011, the 16 Million was realized AFTER the Twins had payed out a 113 million payroll.

Yes, and your point is...?

[drivlikejehu]

The legal separation has to do with the savings and checking accounts of the individuals and the team. The team is a legal entity separate from the individuals. In real life execution of business duties it may not appear to be that way. My point is that when fans yell for payroll to be increased, it's not as simple as Jim Pohlad writing a personal check.

 

Sorry, you just don't understand the law. Legal separation is only the case with incorporated business. Unincorporated businesses, such as LLCs, are pass-through entities that have no independent existence. The Pohlads control any Twins-related LLCs just like their own personal bank accounts.

 

There is zero difficulty in adding payroll, unless it would mean operating at a loss. Even then it would not be a real problem unless the amount was quite large.

 

No, it could be for other reasons, such as adjusting their year end dividend they receive from the team's profit (or loss.) Is that being cheap? Or avoiding taxes? If people decide they don't want to pay taxes are they cheap?

 

LLC's don't pay dividends, they make distributions as someone else already pointed out. Again, you do not understand what you're talking about. Cutting payroll doesn't save the Pohlads anything on their taxes.

 

What is it about the internet that makes people think they can just randomly spout off on a subject despite complete ignorance of that topic?

[Highabove]

Yes, and your point is...?

 

The point is (After paying out 113 million dollars in payroll, the Twins still realized operating income of 16.6 million dollars.)

 

Where is the out of pocket expense? A 16.6 million dollar surplus to turn over to the Accountants is not bad.

[tobynotjason]

At first this read like laughable apologetics, but further statements by the OP make me think it's just a matter of emphasis (notwithstanding factual inaccuracies re: real world ownership).

 

If you want to make an argument like, "Look, MLB owners are greedy capitalists. They're incredibly rich people that got incredibly rich the way pretty much all incredibly rich people get incredibly rich: by screwing people over in generally legal and applauded ways. Getting the public to hand them a $300 million asset is par for the course. The Pohlads are no different. Carl Pohlad got started foreclosing on farms in the Depression. He fleeced the public for his ailing bus company. Fundamentally he made his fortune in that noblest of productive arenas: [pause to vomit] banking. So don't expect the Pohlads to sink one cent of personal money or their expected profits back into the team. I want to have a realistic discussion, and that's just naive," that would be perfectly reasonable.

 

You'd basically be saying: let's have a debate that's relevant to readily-potential reality. And that's actually worth saying, since a discussion about the best course of action for the Twins (or any MLB franchise) that relies on "the owners should worry less about their bottom line" is only ever going to be pie-in-the-sky, and it might be more intellectually interesting to say "what would I do if I were GM" than "what would I do if I were God."

 

The thing is, lots of people don't want to have a debate relevant only to the status quo and its most likely permutations. Lots of people think people like the Pohlads kind of utterly suck, and don't really care about their expected profits or net worth. People like this are always going to criticize them for not spending enough on the payroll. They're right from their point of view, and irrelevant from the viewpoint of the status quo. But pointing out that there's a board of directors has nothing to do with who owns the Twins, nor with excusing the state of the payroll.

[powrwrap]

Sorry, you just don't understand the law. Legal separation is only the case with incorporated business. Unincorporated businesses, such as LLCs, are pass-through entities that have no independent existence. The Pohlads control any Twins-related LLCs just like their own personal bank accounts.

 

Sorry, but LLC's, like corporations, provide a shield for the owners against debts incurred by the LLC's as well as protections against other liabilities the LLC may incur. There is a separation.

 

 

LLC's don't pay dividends, they make distributions as someone else already pointed out.

 

You are correct about the terminology. LLC's pay distributions, not dividends. I was merely repeating what others had said so as not to introduce new terminology. The income or loss of a partnership is reported on Schedule K-1.

 

Again, you do not understand what your'e talking about. Cutting payroll doesn't save the Pohlads anything on their taxes.

 

I don't believe I said that cutting payroll would save Pohlad's taxes. Cutting payroll would (likely) increase the LLC's profit, which would increase their distributions, which would probably increase their personal taxes. I did say that fiddling with payroll is a method for the Pohlad's to manipulate their personal tax exposure. Of course, they likely have other ownership in other companies that would enter into the overall equation as well.

[powrwrap]

At first this read like laughable apologetics, but further statements by the OP make me think it's just a matter of emphasis (notwithstanding factual inaccuracies re: real world ownership).

 

The thing is, lots of people don't want to have a debate relevant only to the status quo and its most likely permutations. Lots of people think people like the Pohlads kind of utterly suck, and don't really care about their expected profits or net worth. People like this are always going to criticize them for not spending enough on the payroll. They're right from their point of view, and irrelevant from the viewpoint of the status quo. But pointing out that there's a board of directors has nothing to do with who owns the Twins, nor with excusing the state of the payroll.

You've got a handle on what I'm trying to say. Basically, it boils down to this: The Pohlads are going to run the Twins like a business, not a hobby. They are going to make financial decisions, not emotional ones. Saying the "Pohlads are extremely wealthy and because they don't outbid the Yankees for such-and-such free agent means they are cheap" is a simplistic argument that ignores real world situations.

[Fire Dan Gladden]

Excuse me from reading anymore of this thread, my eyes are burning and I need to go gouge them out.

 

Can somebody please go find the teeth I pulled out about 15 posts ago?

[tobynotjason]

I wouldn't say every such argument is "simplistic" (unless it's really merely "THEY'RE RICH AND THEY'RE CHEAP!"), although "ignores real world situations" is absolutely accurate.