maloof arena options reported from espn dime mag

[voteno]

from the article referenced before

[[/B]

Well, LadyJay won't say it, but I can deal with this part. Only interest being paid on a loan can be shown as a business expense each year. Payments applied to prrincipal cannot be shown as a business expense. The payments on the principal can only be shown as a reduction in liability and an increase to equity, basically. That's the simple version.

Here is where the Kings claimed the interest and principal payments as expenses.
"Last year, Maloof Sports and Entertainment - the corporate parent of the Kings, Arco Arena and the Monarchs of the Women's NBA - posted a $5.4 million loss on revenues of $100.6 million. Among the expenses was $5.7 million for interest and principal payments - mainly toward the team's $73 million, 30-year loan from the city of Sacramento."


This was taken from the article that was posted on this board. The numbers came directly from Joe and Gavin Maloof.

Can you still really claim that they can not do this? The Maloofs themselves counted the payments for interest and principal against their earnings.

 

[kennadog]

[[/b]

Here is where the Kings claimed the interest and principal payments as expenses.
"Last year, Maloof Sports and Entertainment - the corporate parent of the Kings, Arco Arena and the Monarchs of the Women's NBA - posted a $5.4 million loss on revenues of $100.6 million. Among the expenses was $5.7 million for interest and principal payments - mainly toward the team's $73 million, 30-year loan from the city of Sacramento."


This was taken from the article that was posted on this board. The numbers came directly from Joe and Gavin Maloof.

Can you still really claim that they can not do this? The Maloofs themselves counted the payments for interest and principal against their earnings.

EDIT: I should make it clear that how things are reported for corporations for financial statements and tax purposes is as I explained above.

Let's make it more personal. Its true that people see their mortgage payments (principal and interest) as an expense. They have to pay it out of their income. Actually what it is is a reduction in liabilites (reducing the amount you owe) and an increase in equity (you own incrementally more) in the property you own, in theory. Of course, the market can play havoc with that equity part.

So theoretically, in the simplest terms, you own a home that you purchased for $200,000. You have a $200,000 asset in your name. The $180,000 loan you have is a liability against that asset, so the "net" value or your equity in your asset is $20,000. If you paid $1,000 of principal, your asset's "net" value to you increased $1,000 and your liability decreased $1,000. Of course, you did have to pay that $1,000 somehow and it came out of your income, usually.

So I can see them claiming the principal and interest payments as an expense, in the fact that it certainly has to be paid out of the revenue stream. In reality though, the balance sheet of the business would show principal payments as a reduction in corporate liabilities (they owe less) that increases the "net worth" of the asset and the interest payments are shown as an expense. At least for tax reporting and audit purposes for the business.

Bottom line, though, is MSE, just like the homowner, has to make the debt service payments every month, unless they want a default and foreclosure. The money to pay that has to come from somewhere. For MSE, the money to make that payment has to come from the revenue earned by MSE.

If MSE had a savings account, they could make payments that way. That's conversion of a liquid asset to a non-liquid asset. Same if a homeowner had a 5-year CD mature and decided to use the money to make a few house payments, instead of paying it out of current paychecks. Then it wouldn't be coming out of current income and technically isn't a current expense, because it would not change your monthly cash flow. It was one asset (a CD) and it became another asset (house equity).

 

[kennadog]

I just read my own post. I need to stop reading the arena threads for awhile. 1) there's no deal to even talk about and 2) I'm boring the he** out of myself.

 

[LilMissDiva]

Could you provide a link to that article, please?

And please do not present your opinions as FACT unless you can prove them. It's not up to me to prove you wrong until you detail what you're talking about.

Just one example? How much do you think Arco pays for electricity?

And one more example? Do you know the percentage of employer-incurred costs for personnel? It isn't just salary we're talking about. I believe the standard ratio is now somewhere around 60% about the initial salary cost. So, if someone is making $1,000,000 in salary, their employer also has to pay $600,000 over and above that salary for things like health insurance, unemployment insurance, etc. and my 60% estimate could actually be pretty low. That doesn't show up in salary costs but MSE still has to pay it, just like any other employer.

Nope, you're pretty right on there VF. I took Payroll Accounting and the employer pays many taxes along with pensions and insurance benefits, then the salaries. Employees are very expensive part of business.

 

[JB_kings]

[[/b]

Here is where the Kings claimed the interest and principal payments as expenses.
"Last year, Maloof Sports and Entertainment - the corporate parent of the Kings, Arco Arena and the Monarchs of the Women's NBA - posted a $5.4 million loss on revenues of $100.6 million. Among the expenses was $5.7 million for interest and principal payments - mainly toward the team's $73 million, 30-year loan from the city of Sacramento."


This was taken from the article that was posted on this board. The numbers came directly from Joe and Gavin Maloof.

Can you still really claim that they can not do this? The Maloofs themselves counted the payments for interest and principal against their earnings.

I'm getting lost in all this. How does this support your theory that the Maloofs are hiding profits. This says that the loan repayments are being deducted as an expense. I'm no expert, but if I have to repay a loan that was taken out by my business, than it is an expense in my book. And on the practical side, I don't see this as hiding money at all. Again I'm no expert, but if you want to take money out of your business, you take it out before it gets reported as income. I can't see where this is possible when the income sources are pretty well established and easily auditable. Tickets, parking, TV and radio revenue, etc. Where are they skimming the revenue where it can't be counted. Anything is possible, but I have to have something specific besides a "you know they do" nebulous reason.

 

[voteno]

please tell me where I said that they are skimming profits?

I'm getting lost in all this. How does this support your theory that the Maloofs are hiding profits. This says that the loan repayments are being deducted as an expense. I'm no expert, but if I have to repay a loan that was taken out by my business, than it is an expense in my book. And on the practical side, I don't see this as hiding money at all. Again I'm no expert, but if you want to take money out of your business, you take it out before it gets reported as income. I can't see where this is possible when the income sources are pretty well established and easily auditable. Tickets, parking, TV and radio revenue, etc. Where are they skimming the revenue where it can't be counted. Anything is possible, but I have to have something specific besides a "you know they do" nebulous reason.

Several people have claimed that this could not be claimed as an expense. I have shown that not only can it, it was. The Maloofs have the choice on how much they make on payments. If they wish to, they can spend any prfofits on the loan payments. Is this wrong? No Its part of business. However, what I feel is wrong is that when they claim that they are losing money on this deal, so the public will pay for all or most of an arena. Did they in fact lose money. Yes. Did they influence whether they lost money or not? I think so.

Another point to make is that they did not take the loan out. It was taking out by th eprevious owners which they tool over the liability for when they purchased the Kings. They could have made it a point that the previous owner had to pay off that loan. Instead they took over the loan, and paid less for the business.

 

[JB_kings]

Several people have claimed that this could not be claimed as an expense. I have shown that not only can it, it was. The Maloofs have the choice on how much they make on payments. If they wish to, they can spend any prfofits on the loan payments. Is this wrong? No Its part of business. However, what I feel is wrong is that when they claim that they are losing money on this deal, so the public will pay for all or most of an arena. Did they in fact lose money. Yes. Did they influence whether they lost money or not? I think so.

Another point to make is that they did not take the loan out. It was taking out by th eprevious owners which they tool over the liability for when they purchased the Kings. They could have made it a point that the previous owner had to pay off that loan. Instead they took over the loan, and paid less for the business.

From everything I've read, other than one lump payment against the loan that was widely publicized, they have been making their regular payments. That's a far fetched theory just to get to "losing money" in order to get a new arena. They had plenty of good excuses just by going over the luxury tax threshold. Much easier to run up millions in expenses and reduce their revenue all in one. In fact, some of the years they lost money they did exceed the luxury threshold. And when you do exceed that, it's a dollar for dollar tax that gets distributed out to teams that don't exceed the threshold. So it's a double whammy.

As for why you negotiate to assume the loan instead of paying it off, that is real simple to answer. Nobody pays cash to buy a pro team. It has to be financed just like any other huge purchase. The interest rate on the '97 loan is much less than any rate they would have had available to buy the team. That was the whole reason that Jim Thomas went to the city. It was the ability of the city to get the better loan terms than any private entity. So assuming Jim Thomas isn't a fool, if he was required to pay off that loan, he would have jacked up the asking price by the outstanding balance. So in effect, you are trading a 70 million loan at a low rate for a 70 million increase in the asking price for the team at the higher rate.

 

[voteno]

again I ask you: where did I say that they were skimming profits?

Yes there are reasons that they can exceed the max and pay the luxury tax. I am well aware of that. My point was simply that they can control in any given season how much total that they are paying on the loan.

Thanks for the information on why you would keep a loan with a likely very favoarable interest rate. I agree with you entirely about why they would assume the loan.

Now where and when exactly did I say the Kings were skimming profits?

 

[Smills91]

Why? If you had a choice of you paying your home mortgage or somebody else, what would you do?

You're totally over-simplifying the situation. More happens in Arenas than just Kings basketball. It would benefit the Sacramento region to have a new arena. As much as I love Arco, I've had the opportunity to visit some arenas out east here and it's amazing what goes into these new arenas. Sacramento WILL be a better city with a new arena. It just can offer the region a LOT in terms of entertainment venues.

 

[JB_kings]

You're totally over-simplifying the situation. More happens in Arenas than just Kings basketball. It would benefit the Sacramento region to have a new arena. As much as I love Arco, I've had the opportunity to visit some arenas out east here and it's amazing what goes into these new arenas. Sacramento WILL be a better city with a new arena. It just can offer the region a LOT in terms of entertainment venues.

Smills, I think we are on different points. I was adressing the few people who still seem to think it's possible that the Maloofs are going to build a new arena with their own money. They don't have to because some other city will provide one if Sacramento does not.

 

[supamari0]

And if their venture is not profitable they expect the public to provide them with the means so they can make money.

I do not believe that the Kings lose money year after year. The NBA gives them enough money to pay most of the operating cost of the team. Combine that with the amount they get from local revenues and they have exceeded the operating costs. If there are additional costs, they should shoulder the costs.

Your argument is a very idealistic one and unfortunately does not reflect reality.

Look, every new stadium deal for NBA teams has come through public financing, period. In houston for example, our arena was 100% publically financed. Yes, 100%. The same goes for AT&T Center in San Antonio, or Target Center in Minnesota.

Now there are some cases in which the teams had to pay a little but in those cases you had something like 4 teams splitting the arena. in LA, half the cost got paid for by the Clippers, Lakers, LA Avengers, and LA Sparks. Same thing in Dallas where the hockey and basketball teams split the cost.

In one team arenas (memphis, milwaukee, Orlando, Cleveland) were almost entirely funded by the public. In fact most newer arenas today are getting almost all of their money from city bonds and tax hikes. Your argument that the Maloofs should pay up, may be true in principle, but it doesn't reflect the reality of arena financing. The Maloofs have the negotiating leverage to demand more city financing and support, especially considering that they are the only major team in Sacramento and that this arena would basically serve as the only major arena structure in the city. Also, there's no split costs with other teams like you had in Los Angeles or Dallas.

I think the Maloofs will have to pony up some money in the end but much of the funding will have to come from the city. It's just the reality that the NBA faces today.

 

[voteno]

I hope Stern realizes that things need to change

Your argument is a very idealistic one and unfortunately does not reflect reality.

Look, every new stadium deal for NBA teams has come through public financing, period. In houston for example, our arena was 100% publically financed. Yes, 100%. The same goes for AT&T Center in San Antonio, or Target Center in Minnesota.

I think the Maloofs will have to pony up some money in the end but much of the funding will have to come from the city. It's just the reality that the NBA faces today.

i think that Stern is smart enough to realize that a very large part of the taxpayers want to see something else done with their taxdollars, and that a 100% publicly financed arena will not likely get done. The Maloofs have to be willing to put up money or come up with investors. The really sad thing is that had the arena been built correctly in the first place, wqe would still have the same problem.

I think Stern is starting to see a trend in the smaller markets. That trend is the public doesnt want to pay millions of dollars for the NBA to have a new arena.

JB Kings: I am still waiting for you to tell me where I claimed the Maloofs are hiding their profits. Your actual words wer " skimming the profits"

 

[JB_kings]

Rather it is information from the current year or from 4 years ago, my point is valid. Ypu asked for facts I gave them to you. it really doesnt make a difference that the info is from 4 years ago as the amounts have only went up since then.

My point was simple. That the Maloofs can be making money and investing it into the team. They are still making money. It may not appear so on paper, but they are makig money. They claim to have lost money most of the time that they have been here. In that very article it shows that they posted a loss of 5.5 million dollars. It also goes on to say that they made payments of 5.7 million dollars on the loan that they agreed to take over. This is a perfect example of ways where you can show a loss, but have really made money.

I am not making up things as you stated. You asked for my source. I gave you a source. It may not have been the one I origianlly referred to but it still backs up my claims exactly. Thank you for your apology. I deserve one after your comments to me.

Voteno, call me a conclusion jumper. When I see somebody claiming that the Maloofs are making money, but it doesn't show on paper. Then I think they are claiming that the Maloofs are hiding profits. Maybe I just misunderstood.

 

[VF21]

i think that Stern is smart enough to realize that a very large part of the taxpayers want to see something else done with their taxdollars, and that a 100% publicly financed arena will not likely get done. The Maloofs have to be willing to put up money or come up with investors. The really sad thing is that had the arena been built correctly in the first place, wqe would still have the same problem.

I think Stern is starting to see a trend in the smaller markets. That trend is the public doesnt want to pay millions of dollars for the NBA to have a new arena.

JB Kings: I am still waiting for you to tell me where I claimed the Maloofs are hiding their profits. Your actual words wer " skimming the profits"

Actually I think Stern is smart enough NOT to jump to the conclusion that the vote tally was strictly because people want something else done with their tax dollars. In all reality, people voted NO - I would hope - because the measures were poorly written, did not reflect any kind of actual deal that had come to fruition, AND had more holes than swiss cheese.

You really need to pay more attention to facts. As supamari0 pointed out, the public is paying for arenas.

And please don't pretend you weren't claiming the Maloofs were hiding profits. You may not have said so in so many words, but your implication was really very clear.

 

[voteno]

I believe that you are wrong.

Actually I think Stern is smart enough NOT to jump to the conclusion that the vote tally was strictly because people want something else done with their tax dollars. In all reality, people voted NO - I would hope - because the measures were poorly written, did not reflect any kind of actual deal that had come to fruition, AND had more holes than swiss cheese.

You really need to pay more attention to facts. As supamari0 pointed out, the public is paying for arenas.

And please don't pretend you weren't claiming the Maloofs were hiding profits. You may not have said so in so many words, but your implication was really very clear.

I believe that I have been looking at the facts and analyzing them correctly.. However, I have also been pointing out how the facts can also be misleading. For example: The Maloofs posted a loss of 5.4 million dollars in one of the years that they released their financial information. They also state that they paid on the loan 5.7 million dollars. My question is simple. How much did they pay on the principal over and above what was actually due? Now they have every right to pay what ever they want. However, I feel that if they are doing this and are claiming that they are losing money, thats wrong. Is it illegal? NO, I have never said that it was. Is it unethical to imply that they are losing money, when they are choosing to be losing money? I think so. Is this hiding profits? I dont think I would use those words. Is it misrepresenting how much your business made. I think that it is. Again, they have every right to do this. But they also used these very same figures to show that the team is losing money. Although it is correct and honest, I believe they are also being deceptive at the same time.

I think the time has come for the 100% public financing for arenas to go away. As I have said before, I really have no problem with a modest subsidy.

Now why did the arena measure fail? for lots of reasons. One of them was simply that there was no agreement in place. However another reason is that there is a large group of people who feel that it was an absolute waste of taxpayers money. Corporate welfare was the term that I heard talked about a lot. I am somewhere in the middle. There lots of other things that need our tax dollars.

I sincerely think that if: there had been a signed deal in place, it still would have failer. If the maloofs had put up a substantial amount of money up, it would have passed. However they tried to go with a lease that would have ripped off the community. Why dont they put their money where ther mouth is. They need to either pay a big chuk themselves or let the users of the arena pay part of the price by a ticket surcharge. But they wont do that, as they risk overpricing the market and offendign the very same people who are their clientele.

I guess time will tell who is correct.

 

[VF21]

Yeah, whatever.

Have a nice afternoon.