What is the real reason for our off season?

[ThisIsBirdland]

1 minute ago, JR Oriole said:

I wonder if he will ever use the word "liftoff" again in any conversation for the rest of his life.  Not even sure I would ever speak to the media again if I was him.

He probably regrets saying it but he also probably knows no one will care if they win 85+ games next year.

[ThisIsBirdland]

51 minutes ago, NCRaven said:

Next years list of free agents is pretty weak.  Means might be one of the better ones.

Per MLB.com for next year's FA class, I see plenty of good options here.

Starting pitcher: Carlos Carrasco, Alex Cobb (club option), Yu Darvish, Jack Flaherty, Lucas Giolito, Sonny Gray, Clayton Kershaw, Lance Lynn (club option), Kenta Maeda, Tyler Mahle, Germán Márquez, Miles Mikolas, Frankie Montas, Jordan Montgomery, Charlie Morton (club option), Aaron Nola, Jake Odorizzi, Shohei Ohtani, Eduardo Rodriguez (opt-out), Hyun Jin Ryu, Max Scherzer (opt-out), Luis Severino, Blake Snell, Marcus Stroman (opt-out), Julio Urías, Alex Wood

[ThisIsBirdland]

40 minutes ago, ThisIsBirdland said:

Per MLB.com for next year's FA class, I see plenty of good options here.

Starting pitcher: Carlos Carrasco, Alex Cobb (club option), Yu Darvish, Jack Flaherty, Lucas Giolito, Sonny Gray, Clayton Kershaw, Lance Lynn (club option), Kenta Maeda, Tyler Mahle, Germán Márquez, Miles Mikolas, Frankie Montas, Jordan Montgomery, Charlie Morton (club option), Aaron Nola, Jake Odorizzi, Shohei Ohtani, Eduardo Rodriguez (opt-out), Hyun Jin Ryu, Max Scherzer (opt-out), Luis Severino, Blake Snell, Marcus Stroman (opt-out), Julio Urías, Alex Wood

Just looking a little closer at this, the big three SPs this year all had risks with age/health. I think you could realistically make a case that Ohtani, Urias, and Nola are all comfortably safer signings than this year's top three. I think Darvish, Gray, Giolito, Mikolas, Marquez, Stroman, Montgomery and Lynn would all at least fall in the Bassitt tier, probably above Eovaldi/Taillon. That's eleven pitchers in 2023-2024 that would offer better value than committing major resources to the guys outside of this year's top four. And then if Severino puts together a healthy year, or Scherzer opts out, or Mahle stabilizes, you're talking about the potential for a very strong SP market next year. This list doesn't include one year signings who may have strong seasons such as Syndergaard, Manaea, Clevinger, Perez, or our very own highly appreciated Kyle Gibson 

Is it disappointing to look at next year's class instead of celebrating signings this year? I guess so, but the better value looks like it may very well be there next year. I'm obviously bought in (maybe naively) on this rebuild being performed methodically and not forcing signings or over-bidding this off-season. They've managed the rebuild well enough to earn the benefit of the doubt to this point. If our 2022 FA signings struggle like so many on here expect it to, it's obviously going to be a different story. But looking at next year's class, they'll have plenty of chances to correct course at that point, we'll just need to see how it plays out. 

Edited December 30, 2022 by ThisIsBirdland

[Frobby]

3 hours ago, Going Underground said:

But the MASN revenue given to the  Nats and Orioles is not all the revenue MASN makes. The rest goes to the owners of MASN which is mostly the Angelos clan 

That is not a lot of money, once the Arbitrator raised the rights fees payable to the two teams.   I forget the fact exact amounts, but it’s like $10-20 mm left over once expenses and rights fees are paid.  

[spiritof66]

5 hours ago, Camden_yardbird said:

If Goldman Sachs was hired to evaluate the team for sale that evaluation would tell the current owners that multi-year deals decreases value on sale.  As such, no multiyear deals. 

Dear Angelos': Sell the f-ing team and stop ruining my fandom.

Very, very unlikely the team gets sold until Peter Angelos (who still is the majority owner) dies. If it were sold while he's alive, he (and each of the minority owners) would have to pay a large capital gains tax, in addition to the estate taxes due on the sale proceeds in his estate. I haven't run estimates for a few years, but there are hundreds of millions of dollars involved. 

MLB could have forced a sale when Georgia Angelos became the decision-maker, but I believe MLB and the Orioles have made a deal that permits the sale to be deferred until Peter's death but requires a sale soon after that event.

[OsFanSinceThe80s]

1 minute ago, spiritof66 said:

Very, very unlikely the team gets sold until Peter Angelos (who still is the majority owner) dies. If it were sold while he's alive, he (and each of the minority owners) would have to pay a large capital gains tax, in addition to the estate taxes due on the sale proceeds in his estate. I haven't run estimates for a few years, but there are hundreds of millions of dollars involved. 

MLB could have forced a sale when Georgia Angelos became the decision-maker, but I believe MLB and the Orioles have made a deal that permits the sale to be deferred until Peter's death but requires a sale soon after that event.

That's a rather morbid thought even though I want the Orioles sold ASAP, I'm not going to root for someone to pass away. I would prefer they just do it now  as I don't think Peter would really care or perhaps even realize the team was sold. 

[emmett16]

2 hours ago, ThisIsBirdland said:

Just looking a little closer at this, the big three SPs this year all had risks with age/health. I think you could realistically make a case that Ohtani, Urias, and Nola are all comfortably safer signings than this year's top three. I think Darvish, Gray, Giolito, Mikolas, Marquez, Stroman, Montgomery and Lynn would all at least fall in the Bassitt tier, probably above Eovaldi/Taillon. That's eleven pitchers in 2023-2024 that would offer better value than committing major resources to the guys outside of this year's top four. And then if Severino puts together a healthy year, or Scherzer opts out, or Mahle stabilizes, you're talking about the potential for a very strong SP market next year. This list doesn't include one year signings who may have strong seasons such as Syndergaard, Manaea, Clevinger, Perez, or our very own highly appreciated Kyle Gibson 

Is it disappointing to look at next year's class instead of celebrating signings this year? I guess so, but the better value looks like it may very well be there next year. I'm obviously bought in (maybe naively) on this rebuild being performed methodically and not forcing signings or over-bidding this off-season. They've managed the rebuild well enough to earn the benefit of the doubt to this point. If our 2022 FA signings struggle like so many on here expect it to, it's obviously going to be a different story. But looking at next year's class, they'll have plenty of chances to correct course at that point, we'll just need to see how it plays out. 

No doubt we throw 10/500 @ OOOOOhtani.  It’s fate. 

[Aristotelian]

8 hours ago, spiritof66 said:

Very, very unlikely the team gets sold until Peter Angelos (who still is the majority owner) dies. If it were sold while he's alive, he (and each of the minority owners) would have to pay a large capital gains tax, in addition to the estate taxes due on the sale proceeds in his estate. I haven't run estimates for a few years, but there are hundreds of millions of dollars involved. 

MLB could have forced a sale when Georgia Angelos became the decision-maker, but I believe MLB and the Orioles have made a deal that permits the sale to be deferred until Peter's death but requires a sale soon after that event.

We already know from the lawsuit that John had a sale lined up. He and Georgia were ready to pull the trigger.

[spiritof66]

15 hours ago, Since1984 said:

If the Forbes estimate of 1.4b is the Orioles sales price and they bought for 400m in the early 90’s that is $400m in inheritance tax, assuming a 40% tax rate. I’m sure there are ways around paying the entire liability in one year, but that puts the O’s in a less desirable spot for years to come, if the team is not sold. The team cannot compete in the $160-240m salary range (e.g Astros), in this scenario.

I think $400 million understates the estate tax that would be due on Peter's death, though the numbers are so large I'm not sure it matters.:

• The reported purchase price for the Orioles in 1993 was $173 million, not $400 million. If Peter Angelos's interest in the Orioles is sold during his lifetime, that $173 million would be relevant to the income taxes due on the capital gain Peter realized. But if we're looking at the estate taxes due on Peter's death after he's held on to the Orioles, the price he paid for the team thirty years (and zero World Series appearances) ago is irrelevant.  When you sell an asset, you have to pay an income tax (called a capital gains tax) on the amount that the price you received for the asset exceeds your investment in it. When you die, your estate has to pay estate taxes on the value of everything in your estate (with certain exclusions and exceptions), regardless of what you paid for it or invested in it. 
• The $1.4 billion Forbes valuation (and the $173 million purchase price) are for the whole team. Peter Angelos does not own the whole team. I've seen guesses that he owns 80 percent, and he may have bought up some more since then. I think I've used 85 percent in the past; that can't be too far off in either direction. 
• Based on my memory -- a dangerous source to rely on -- all or practically all sales of teams in recent years have been at prices above the Forbes valuations. There will a revised valuation from Forbes in the spring, and these valuations almost always show at least a modest year-to-year increase.) I've used $1.5 billion as the IRS's valuation, at the unknown time of Peter's death, on which estate taxes would be based. The Angeloses could contest that amount, but it's likely that they've created a record with Goldman Sachs suggesting that the value is higher than that.
• The value of the team, and Peter's interest in it, would be reduced by the amount of the team's debt. Forbes reports that amount as 30 percent of $1,400,000,000., or $420 million. There would be a similar reduction by any other factors that reduce the value of the team and aren't considered in the overall Forbes-style valuation. (Lousy, tight-fisted ownership should already be included.) I'm not aware of any such factors other than debt.
• In addition to the federal estate tax of 40%, there's a Maryland estate tax of 16%. 
• I guesstimate that upon Peter Angelos's death his estate would be responsible for estate taxes -- just on his majority interest in the Orioles --  in the neighborhood of .85 x (1,500,000,000 - 420,000,000) x (.4 + .16), or about $515 million. Other than by selling the team, I don't know where that sort of money would come from, even if it could be paid over time. 
• I have ignored the one-time estate tax exemptions, about $24 million in 2023 and increasing annually (federal), and stuck at $5 million (Maryland). Peter Angelos may already have used up some of these exemptions through lifetime gifts to his children. If not, those exemptions would reduce estate taxes by about (24,000,000 x .4) + (5,000,000 x .16), or about $10.4 million.
• Federal and Maryland estate taxes would likewise be due on the other assets in Peter's estate (cash, securities, real estate, etc.) that he leaves to anyone other than his widow.
• If they were to keep running the team, John and/or Lou Angelos would have to pay off or pay interest on the team's considerable debt.

In past discussions, some posters have insisted that Peter Angelos may have reduced or deferred these massive estate taxes by leaving ownership of the team to his widow (deferring estate taxes, not eliminating them) or by putting ownership or control of the team into some kind of trust structure. It's pretty clear from the Lou Angelos lawsuit that Peter Angelos did not create an estate plan that would reduce these taxes or increase the possibility that his sons (or one of them) would own the team after his death. 

I find it inconceivable* that MLB, after Peter's death, would approve an ownership regime that (as appears from Lou's lawsuit) would have the controlling interest split 50-50 between two brothers who don't get along, would have no majority owner to make the team's decisions without the possibility of disputes, would start out with a $500 million-plus tax bill and limited resources to pay it, would have zero outside revenue  to pay some of those taxes, service debt and run the team in case of a revenue downturn, has been making profits based solely on shared MLB revenues, has been near the bottom in MLB attendance despite playing in one of its most appealing venues, has become competitive or is approaching that status largely by implementing a tanking strategy, has hoarded the team's profits for several years, and has since 2018 continued the MASN litigation against MLB. Not. Gonna. Happen.

 

*  Yeah, I know: 

 

[Ripken]

If the sons knew they didn't want to run the team long term, why didn't they sell a few years ago when the old man was still coherent?  I hate that damn family.

[NCRaven]

1 minute ago, Ripken said:

If the sons knew they didn't want to run the team long term, why didn't they sell a few years ago when the old man was still coherent?  I hate that damn family.

You have just been hired as the Orioles Director of Community Outreach…oops…nevermind.

[SemperFi]

2 hours ago, Ripken said:

If the sons knew they didn't want to run the team long term, why didn't they sell a few years ago when the old man was still coherent?  I hate that damn family.

Because it's financial suicide to do so, they would be taxed on the sale and then the inheritance.

[SemperFi]

2 hours ago, spiritof66 said:

I think $400 million understates the estate tax that would be due on Peter's death, though the numbers are so large I'm not sure it matters.:

• The reported purchase price for the Orioles in 1993 was $173 million, not $400 million. If Peter Angelos's interest in the Orioles is sold during his lifetime, that $173 million would be relevant to the income taxes due on the capital gain Peter realized. But if we're looking at the estate taxes due on Peter's death after he's held on to the Orioles, the price he paid for the team thirty years (and zero World Series appearances) ago is irrelevant.  When you sell an asset, you have to pay an income tax (called a capital gains tax) on the amount that the price you received for the asset exceeds your investment in it. When you die, your estate has to pay estate taxes on the value of everything in your estate (with certain exclusions and exceptions), regardless of what you paid for it or invested in it. 
• The $1.4 billion Forbes valuation (and the $173 million purchase price) are for the whole team. Peter Angelos does not own the whole team. I've seen guesses that he owns 80 percent, and he may have bought up some more since then. I think I've used 85 percent in the past; that can't be too far off in either direction. 
• Based on my memory -- a dangerous source to rely on -- all or practically all sales of teams in recent years have been at prices above the Forbes valuations. There will a revised valuation from Forbes in the spring, and these valuations almost always show at least a modest year-to-year increase.) I've used $1.5 billion as the IRS's valuation, at the unknown time of Peter's death, on which estate taxes would be based. The Angeloses could contest that amount, but it's likely that they've created a record with Goldman Sachs suggesting that the value is higher than that.
• The value of the team, and Peter's interest in it, would be reduced by the amount of the team's debt. Forbes reports that amount as 30 percent of $1,400,000,000., or $420 million. There would be a similar reduction by any other factors that reduce the value of the team and aren't considered in the overall Forbes-style valuation. (Lousy, tight-fisted ownership should already be included.) I'm not aware of any such factors other than debt.
• In addition to the federal estate tax of 40%, there's a Maryland estate tax of 16%. 
• I guesstimate that upon Peter Angelos's death his estate would be responsible for estate taxes -- just on his majority interest in the Orioles --  in the neighborhood of .85 x (1,500,000,000 - 420,000,000) x (.4 + .16), or about $515 million. Other than by selling the team, I don't know where that sort of money would come from, even if it could be paid over time. 
• I have ignored the one-time estate tax exemptions, about $24 million in 2023 and increasing annually (federal), and stuck at $5 million (Maryland). Peter Angelos may already have used up some of these exemptions through lifetime gifts to his children. If not, those exemptions would reduce estate taxes by about (24,000,000 x .4) + (5,000,000 x .16), or about $10.4 million.
• Federal and Maryland estate taxes would likewise be due on the other assets in Peter's estate (cash, securities, real estate, etc.) that he leaves to anyone other than his widow.
• If they were to keep running the team, John and/or Lou Angelos would have to pay off or pay interest on the team's considerable debt.

In past discussions, some posters have insisted that Peter Angelos may have reduced or deferred these massive estate taxes by leaving ownership of the team to his widow (deferring estate taxes, not eliminating them) or by putting ownership or control of the team into some kind of trust structure. It's pretty clear from the Lou Angelos lawsuit that Peter Angelos did not create an estate plan that would reduce these taxes or increase the possibility that his sons (or one of them) would own the team after his death. 

I find it inconceivable* that MLB, after Peter's death, would approve an ownership regime that (as appears from Lou's lawsuit) would have the controlling interest split 50-50 between two brothers who don't get along, would have no majority owner to make the team's decisions without the possibility of disputes, would start out with a $500 million-plus tax bill and limited resources to pay it, would have zero outside revenue  to pay some of those taxes, service debt and run the team in case of a revenue downturn, has been making profits based solely on shared MLB revenues, has been near the bottom in MLB attendance despite playing in one of its most appealing venues, has become competitive or is approaching that status largely by implementing a tanking strategy, has hoarded the team's profits for several years, and has since 2018 continued the MASN litigation against MLB. Not. Gonna. Happen.

 

*  Yeah, I know: 

 

Thanks so much for the well thought out and insightful post, and the time you spent to write it.  I tend to agree with you on the MLB approval side and will add-forget about the fan base, his lack of reinvestment is alienating both agents and the Players Association which may sound trivial but it's not.  Anyway I would be interested in what you think the ultimate outcome is and what time frame.  Thanks in advance!!

[spiritof66]

2 hours ago, Ripken said:

If the sons knew they didn't want to run the team long term, why didn't they sell a few years ago when the old man was still coherent?  I hate that damn family.

It would have cost them hundreds of millions of dollars in additional  taxes. Read the first bullet point in my long post of earlier today.

Capital gains taxes are kind of complicated, and lots of facts about this situation are unknown. But here's a rough cut. If Peter were to sell the team (or in the future sells while still alive), and putting aside whether there'd be uncertainty over who has the authority to act for him, he would incur a capital gains tax on, roughly, the profit he made on the Orioles over 33 years. The team was purchased in 1993 for $173 million. Say Peter owns 85 percent of the team, that an additional $200 million was invested in the team over the years, and Peter sold or sells it for $1.1 billion after the team's debt is repaid. His capital gain would be .85 x ((1,100,000,000 - (173,000,000 + $200,000,000)), or about $725 million. The combined federal, state and local capital gains taxes in Baltimore appear to be 30.75 percent. That would lead to about $223 million in capital gains taxes for Peter, or over $110 million that wouldn't get to each of John and Lou. 

I'm pretty sure that's a lower number than I came up with a few years ago, so maybe I did something wrong. Anyway, it would be a lot of money to throw away.

[OriolesMagic83]

It seems a common assumption to assume the Angelos family owns 80% or more of the team.  One of the things I learned during the Angelos family Orioles control drama was that Tom Clancy and his wife at one time owned 24% of the team.  It seems possible/likely that the Angelos family ownership is 60% or less.  I don't see any Mlb approval of a partial sale that ends up w/ no clear majority owner.