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Kevin Acee Article on Padres Finances

https://www.sandiegouniontribune.com/sports/padres/sd-sp-padres-debt-finances-payroll-fowler-seidler-owners-0118-story.html

So this article from the other day has received a ton of blow back locally. When I read it, I felt like it described a smart and reasoned approach to building a long term, sustainable winner: investing in infrastructure at the big league level and minor league levels, investing in talent development, bringing in a huge amount of international free agents, spending on the draft, spending on gambles like Mitchell, all with an eye on an arrival time of 2020 with a combination of developed talent and signed FA.

And yet people are incensed. They see the article as an excuse for not having spent money on the team. What do you guys think?

Makes sense to me as a strategy. Once you embark on a 5+ year plan to build via the international FA and the draft might as well use you money to reduce debt and make the infrastructure improvements while the funds are there then shift the spending to the roster once the prospects are arriving to set the base to build around. Remember it took Houston over 5 years to rise out of their 100 loss seasons.

For some, short memory. 2015 was an explosion of spending (Shields, Kemp, et.al) adding to a mediocre team and it remained mediocre (or worse). Not sure why 2015 happened ... introductory offer or misguided influence for the marketing guru Mike Dee. Should have proved spending to add to a currently bad team will not get them very far UNTIL the prospects are here and production ... that is not yet.

IF they find a real piece that they see as a key for the next 5+ years (and he is willing to sign with SD) could make that exception but keeping in mind their may be only a limited number of players to take that kind of gamble on ... Padres cannot commit to long term and be wrong (see Shields).

IF there are moves I do find fault with, it would be Headley, Hughes, and Richards. Significant money with little short term value and the real long shots of Mitchell, Comp Pick, and whatever comes form Richards being of value long term.

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Side note: I do like their efforts to make the ballpark an excellent destination for fans ... hard core fans don't care ... but they get over 2MM in attendance because the casual fans (and their families) like coming to the ball park even when the team is not all that good. A good business strategy.

Thanks Sport for starting this thread.   I just re-read the Acee article yet again. I worked in Mortgage biz 15+ years, into stock market/investing/spreadsheets/accounting, etc...   And my big takeaway from the article is:   It's confusing as hell; even if you're "into" #'s like I am...

I think a major issue is Acee is dealing with incomplete info & maybe trying to fill in some blanks.  But the way the article jumps around subject wise addressing different points is on him; it could have been much better organized.   While the massive investments in the Minors system and ballpark are undeniably good, There are SO many things that are disingenuous or don't add up in the article:

  • HOW can a team sitting @ about 85 MM MLB payroll that is "pretty set", with all of the debt paydown/lower interest etc already achieved, be looking at LOSING between 8-16 MM this year?
  • If that's the case, beyond being smarter and having less dead $ & more players actually still on Pads towards that 85 MM payroll... HOW could team EVER possibly spend ex. 125 MM  on MLB payroll and reach breakeven?   Would having a good team, higher ticket sales generate 40 MM (payroll increase) + 10 MM (2019 shortage) = 50 MM??  Says right in the article that even with all the excitement around 2015 team then (should we re-post some of our lunatic rants from then? 🙂 payroll increased 40 MM, ticket sales 15 MM.?!?!
  • I understand how reducing the debt burden increases the franchise value, but don't see how gaining even 8-10 MM/yr to spend on MLB payroll makes THAT dramatic an effect even for a low-medium budget payroll team like Pads?

fenn68 sez ... "Padres cannot commit to long term and be wrong (see Shields)"

My fear is that the Padres have already made a wrong long term commit ... to Hosmer.

Otherwise, I completely agree with what fenn68 says ... they seem to be creating a VERY SOLID foundation which will feed prospects into the major league club for several years ... a strategy which worked for KC and Houston recently ... so it sure seems like we're headed for a period of pennant races ...

Why be upset with Padres' owners now?  THIS seems like the good times!  THIS is what building a winner looks like!

I think it's obvious the Padres are prepared to spend....but no one wants them to spend just to prove they're willing.

We need to do it at the right time on the right player(s).

Is this off season a year too soon?

Do we really know which positions we need to spend long term on when we have so many prospects who may or may not be a cheaper/better option?

This is why spending on Pitching always seems to make sense.

We need enough that you can't have too many and you can always trade the young guys.

 

I believe we did pay too much for Hosmer but I also don't think it will be a "horrible" contract.

He should at least be a consistent #5 or #6 hitter for us though our "window of contention" and maybe more.

We can't count completely on prospects in the lineup.

 

Not in love with the Hosmer signing but reality it is "only" $105MM/5 years ... he will then opt out since the next 3 years drop to $13MM/year. Plus, need to let it run a bit (with some talent around him) to see if the deal is at least acceptable for the production.

Does somewhat open the discussion on what type of player the Padres would (should) consider for a major long term deal. Talent is obvious but since the Padres may only have a couple of these they can afford ... should it be more. This signing will be (should be) the face of the franchise ... a positive for the marketing of the club and a positive for the community ... that adds justification to the long term commitment and mega dollars. Once they sign him, cannot likely get rid of him without eating a chuck of dead money.

Sort of why Machado is a no for me. Talent yes but having the "face of the franchise" a guy who has come out saying he is going to the highest bidder (just not smart marketing), his "I am no Johnny Hustler", and his ankle stepping incidents ... plus clearly a Miami / NY preference making it unlikely he would be a SD presence beyond playing. He is not the only talent out there ... just as much a chance to land Rendon or Arenado each MAY present a better "face of the franchise" package along with on field production at 3B. Maybe that money should go to Cole as a #1 SP. Point is that Padres don't need to act now given alternatives coming soon.

Everything is a roll of the dice but might there be consideration (coming in a year or two) to signing that mega contact with Tatis via an extension beyond his 6 control years by spreading some of the total into the "early years". Same idea with any of the other very young top prospects as they arrive. Sort of working a complete 5 -6 year payroll plan to ensure they keep the elite homegrown talent before spending on the FA mercenaries. Maybe since it appears elite talent is rising from with ... I would be biased to make the mega-deals with the homegrown stars and work shorter deals (less costly) deals with FA to supplement.

 

That's another reason the Hosmer deal isn't "as bad".

He is the kind of guy you want in the Clubhouse and community.

5-6 years in San Diego he could become a kind of icon.

I agree with you about Tatis....or others.

If we sign another guy to a 5-8 year deal added to Hosmer it could limit us in a few years to lock up our own.

Maybe we end up with 4-5 guys we don't want to let go?

Like the Astros have in Correa,Altuve,Bregman,Springer,Cole.

Gonna be hard to keep them all and even harder to impossible  if they had recently added a Harper type contract.

I don't get this fanbase. It's a complete rejection of reality to have wanted us to spend money on our major league roster from 2016-18. That's how you stagnate for a decade never being a threat for the title.

Just for the record, nearly all of the expenditures on the stadium are costs they are contractually obligated to pay, not some remarkable benevolence (or even wise business strategy) on the part of the team. And assuming they're not idiots (which they aren't), the purchase price they paid was calculated recognizing the capital improvement costs they knew they'd be responsible for.

As for the article itself, the biggest issue is that asking Kevin Acee to write something cogent about a balance sheet is much akin to asking me to write something insightful about 17th century German poetry. The U-T should be ashamed that they sent him into the two meetings with the Padres' senior management without sending someone like Jeff McDonald or one of their business writers in with him.

Clearly Acee was way over his head in this piece.

Under the assumption that the objective was to further understand why the Padres are sitting where they are payroll wise ... his fragmented "facts" paints an incomplete (and misleading) picture.

He would have been better served not to focus on the balance sheet / income statement parts and report on "cash flow" (probably a couple of years past and a year forward projection). All the non-cash (current) items on the balance sheet / income statement just mislead on the cash available to deploy.

Even with a good cash flow statement ... broken down by fixed/variable revenues - fixed/semi-variable/variable costs ... still does not fully explain unless it is accompanied by some analysis the MLB rules, debt servicing rules, etc.

Get that then field the complaints that they are wasting money on the front office, marketing, minor league staff ... anything that is not ML payroll today. Can't win since most don't have a long term view on how to build (and maintain) a successful franchise.