Sports Law Blog
All things legal relating
to the sports world...
Saturday, August 28, 2010
MLB financials and stadium funding

I don't understand finances enough to say much about Deadspin's (leaked) disclosure of the financial statements for a number of major league teams, which show that a number of the poorer small-market teams (including the Pirates, Marlins, and Mariners) actually have turned pretty good profits by keeping player payrolls way down and raking in (but not spending) revenue-sharing dollars. Several issues seem to be brewing here.

First, some are questioning revenue sharing as a workable means of leveling the economic playing field (at least without some other cost-and-spending measures, such as a salary cap or salary minimums) because of the incentives built into the system. Second, and relatedly, some are suggesting that teams (at least small-market teams) have no economic incentive to win because it is difficult to both win and turn a profit.

Third, and most interesting in these parts, is what this means for the future of stadium funding. The ridiculously advantageous deals that teams have been able to extort from communities have depended on cries of poverty from teams, which insist that they need the stadium to be economically competitive and that they currently lack the resources to pay for the stadium themselves and need substantial public funding. Certainly that was true for the Marlins, who are getting a roughly-$600 million ballpark for only $155 million ($35 million of which is a loan from the county) and keeping big chunks of stadium-generated revenue, with the city paying $125 million and the county about $360 million. But the Deadspin docs showed that the Marlins turned a $49 million profit in 2009. Several city officials would like to reopen the stadium deal and require the Marlins to contribute more towards the project.

The Marlins's response has been that "a contract is a contract." Which probably is true, if a bit arrogant. My contracts-professor colleague says it would take some showing that the city/county would not have entered the deal on these terms but for the Marlins' claims of poverty and that the Marlins either affirmatively lied about or withheld their true financial information--tough things to show. But this could have an effect on the deals that other small-market teams (notably the A's) are able to swing in the coming years.

The boondoggle nature of the public-stadium game is becoming clearer. But since it shows no sign of changing, I go back to my First Amendment interests. If public funds are going to continue pay for these cathedrals--which really only benefit the teams themselves--on largely false pretenses, then I should be able to wear whatever t-shirt I want, chant whatever I want, and decide whether or not I want to stand during coerced patriotic rituals. So there.



None of this is surprising given the nature of revenue sharing – money can be fungible so if a team receives $20 million in revenue sharing dollars, it can pocket that money (or technically, it would spend that money on player improvement, but not spend another $20 million pool of money that it was going to spend on player payroll or improvement…thus causing no net change in player payroll).

Without a team minimum salary, this will always be the case. In fact, we know that David Glass (owner of the Royals) has $3 billion or so in net wealth so it’s not as if the $20 million from MLB (this is just an example) is something he didn’t have access to anyway. If he thought investing $20 million in his team was worthwhile, he would have done so with his own money. His $20 million in MLB revenue sharing money can now be used to buy a yacht or Google stock or whatever he wants.

MLB teams always have it in their interest to look poor so they can negotiate with the public for stadium funding, negotiate with players for better CBA terms, stay out of antitrust trouble with Congress, etc. If Miami politicians did not know this, shame on them.


Anonymous Dan -- 8/28/2010 4:33 PM  

You make some fair points. I, too, do not know enough about all of sports ownership issues to generate an informed opinion. Nonetheless, from a fan perspective, I really believe that most sports franchise owners abuse the loyalty of fans and will look to hijack as much money as possible. Only a few teams out there, regardless of sport, really make an effort to win games. As a fan, that's all that matters at the end of the day--winning. If you really want to charge me $10 for a beer, the least you could do is put players out there that can win some ball games.

I actually think that the commissioners of each league, if it's in their jurisdiction, should try to approve owners who put winning above profit to some degree.

Blogger Nate -- 8/29/2010 2:54 AM  

Post a Comment