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Financing a Stadium

David Pinto at Baseball Musing brought up a point that has been asked by many:  Why don't the Marlins fund the stadium themselves?  I have read the same question in many letters to editors and have heard it on talk shows on XM Radio and I would like to address it.

If a retractable roof stadium is the answer to the problem, why don't the Marlins just build one themselves? With their low team salary, revenue sharing, and a good TV contract the Marlins should be able to secure a loan to build a stadium. Then instead of looking for funding, they just get to pick the best site.

The main reason is they can't afford it.  According to Forbes, on April 6, 2006, the entire Marlins franchise was worth $226 million and had an operating income of $-11.9 million.  Granted that has changed since the reduction in payroll wasn't in full swing until late November of 2005, so the balance sheet may look more favorable after the 2006 season.  But still, I think it would be hard to secure financing to build a $425-$450 million dollar stadium when all the collateral the team could put up is $226 million.  I'm no banker, but I would be surprised if the Marlins could secure that loan. The only way they could is if MLB wants to be banker.

Mr. Pinto went on to give some very good suggestions for putting people in the seats.  Unfortunately, I'm not sure it applies to the Marlins situation.

And until then, maybe they should slash ticket prices. You would think that there's some price point at which people are willing to sit through rain delays. And if enough of those people buy $5 beers and $4 hot dogs, you probably make up the difference. See what happens if you sell box seats for $5 a pop. Again, with the low payroll of the team, they likely can get away with that.

It is not clear to me that the organization doesn't benefit more, revenue-wise, when the fans stay at home rather than attending the games.  Yes, I know that sounds weird but please bear with me.  Here is a partial breakdown of the stadium lease:

The Marlins pay rent along with the cost of ticket takers, ushers, custodians and security.  The team receives 37.5 percent of the parking fee and 70 percent of the net revenue from the sale of beverages, food and souviers.  The Marlins receive no revenue from suites and box seats and only limited revenue from signage

Basically, the majority of the income from the stadium comes from ticket sales and the Marlins already have some of lowest prices in the league.  In 2005 stadium receipts were only 13 percent of the Marlins total revenue and it will be less than that for the 2006 season.  Given the lease, getting fans out to stadium may not generate more revenue for the franchise than having them stay at home and boosting up the television ratings and therefore increasing the ad revenue above what they would generate at the park.

The other aspect of getting people to the stadium is it's about a 40 mile roundtrip drive for most people in the two large population centers in South Florida.  Not to mention that many have to travel down toll-roads, which is an added expense, just to make the journey to the stadium on a weekday night.  Also when the delays come, and they do come, the games don't end until near 11:00 p.m.

It's a strange situation the Marlins are in.