Pirates open the books to show profits
By Rob Biertempfel
Published: Sunday, August 22, 2010
About two-thirds of the Pirates' $29.4 million net income from 2007 and 2008 was paid to the ownership group to help pay taxes and fulfill loan interest payments.
This afternoon, the ballclub released selected information from its audited financial statements from 2007, 2008 and 2009, which shows a total payout of $20.443 million its partners. The payouts were approved by a vote of the Pirates' board of directors.
The family of principal owner Bob Nutting received a total of $9.604 million via two payments in December 2007 and July 2008. That money covered the interest due on a loan the family made to the franchise in 2003.
Under the terms of the loan, the Nuttings could have gotten an increased share of ownership instead of a cash payment. But the minority owners did not want to give up even more of their stakes.
Also in two payments, coming in January 2008 and April 2008, the Pirates distributed $10.839 million to its partners for tax liabilities in 2006 and 2007. Those payments were made after some members of the partnership group insisted the team help them pay their annual federal and state taxes on the team's profits.
The Pirates had a net income of $15 million in 2007, $14.4 million in 2008 and $5.4 million in 2009.
The two payouts in 2008 are the only times the Pirates have paid dividends to their partners. Nutting, who is chairman of the board, prefers not to make dividend payments to the partners. Rather, Nutting wants profits to remain within the franchise to pay for long-term expenditures — such as capital improvements, increased budgets for scouting and player development and increased player payroll.
Nutting, who does not draw a salary, emphasized ownership is not lining its pockets with the team's profits. He also has denied the revenue has been used for any of the Nutting family's other businesses, such as the Wheeling, W. Va.- based Ogden Newspapers or Seven Springs Mountain Resort.
"I really believe we are doing the right thing for the club," Nutting said. "I know we are acting honorably. I really believe what we're going through is worth it. If I didn't, there'd be no reason to put up with the agony — not only the on-field performance this year, but the public lashing we take."
The team's decision to release some of its financial information does not signal a change from its previous refusal to open its books for public inspection. Rather, according to president Frank Coonelly, it's a response to the leak of the team's financial statements for 2007 and '08 to The Associated Press.
"After a period in which the club incurred large losses, the club has operated on a sound financial basis over the last several years," Coonelly said.
The Pirates have turned a profit every year since 2004. The team was in the black by about $25 million in 2006, when it had a $46.7 million payroll and PNC Park played host to the All-Star Game.
In December, Coonelly said the Pirates had put all their revenue into capital investments, such as a $5.4 million academy in the Dominican Republic, a $2 million renovation of Pirate City in Bradenton, Fla., and various improvements at PNC Park.
The Pirates' payroll has dropped steadily over the past four seasons. It went from $51.4 million in 2007 to $50.7 million in 2008 to $49 million in 2009 to its current $39 million. The team slashed payroll by trading away more expensive, veteran players such as Jason Bay, Adam LaRoche, Xavier Nady, Jack Wilson, Freddy Sanchez and John Grabow.
Coonelly admitted that the team would not have turned a profit last year if players such as Wilson and Sanchez had not been traded.
"We did not feel compelled to make those trades," Coonelly said. "We felt they made sense (from a baseball standpoint). We had budgeted close to the break-even point."
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