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Saturday, May 01, 2004

Feds Get Baseball Drug Results

In a blow to the confidentiality which owners and players alike agree is essential to MLB's drug testing policy, federal investigators working on the BALCO matter have obtained a complete list of all drug test results from 2003. This outrageous prosecutorial overreaching will almost certainly doom any attempt to broaden MLB's drug testing, as demanded by Congress and requested by MLB.

The investigators clearly have a right to know whether the 10 players who testified before the BALCO grand jury perjured themselves. Beyond that, though, there is no legitimate reason for anyone outside of MLB and the MLBPA to possess this information -- the records of a private-sector drug testing policy negotiated with great care, subject to all parties' agreement and understanding that the results were to remain absolutely confidential. But as law professors contacted by the New York Times note, there's nothing the parties can do once the government served a warrant and obtained the information and samples.

According to the Times, prosecutors intend to re-test all samples in their possession for THG -- a drug that was not on the banned list last season. One anonymous MLB insider quoted by Newsday called the seizure "a potential disaster." Another said it had the potential to create "hysteria."

I call it "a disgrace, but unfortunately par for the course for John Ashcroft's Justice Department." If Ashcroft or one of his minions ever asks you for a urine sample, give it to him -- on the spot. Tell him he can wring what he needs out of his trousers.
Harbor Park Can Expand in Time for Use by Expos

Norfolk's always-entertaining bid for the Expos gets funnier by the day. Yesterday, after a meeting with architects for HOK Sports, city officials breathlessly declared that their 12,000-seat minor league stadium could be expanded all the way to 18,000 seats by next season if the Expos were to move there. It's unclear how the 50% larger crowds would actually get to the park, though, since Norfolk plans to build the club's permanent home in the parking lot of the existing facility.

Such an expansion would cost about $12 million. Assistant City Manager Shurl Montgomery said that the temporary park might have to be expanded to 25,000 seats, at a cost of $25 million or so -- "That could be quite expensive." But the frugal bureaucrat found a silver lining: “All of the seats in Harbor Park could be reused,” Montgomery said. “That would save a pretty nickel.”

Norfolk's promoters have launched a season ticket and luxury box sales drive, too. A $1,000 deposit will reserve one of the 70 luxury boxes they hope to lease for $75,000-$125,000 each. $100 will hold a season ticket, the cost of which would range from $800-$2,835/season. They forecast an average ticket price of $19, a range of $10-$35/seat.

The intrepid pair of stockbrokers behind Norfolk's bid have also launched a Web site, The very first statement on the home page is a lie:

"Hampton Roads (Norfolk area) is the largest metro area in the United States without a major league baseball team."

The Census Bureau thinks otherwise. Based on 2000 metro area populations, Norfolk/Hampton Roads is the seventh largest metro area without a baseball team. It has 700,000 fewer residents than Portland, Oregon. Sacramento, Orlando, Indianapolis, and San Antonio were also larger as of 2000, and Las Vegas has passed it since then. But I guess "America's Seventh Largest Unserved Market" or "Smaller Than San Antonio" wouldn't do much for the cause...

Here are the biographies of the two "principle officers." One graduated from college in 2001; the other, graduation date unspecified, was a trainee at Merrill Lynch before leaving to start this project. Fills you with confidence, doesn't it?
Marlins Shut Out by State on Park

After the Florida legislature adjourned for the year last night without voting on proposals to give the Marlins the final $30 million of funding for their new stadium, Marlins president David Samson declared, "We will now discuss with the county and city all possibilities remaining which will enable us to complete a retractable-roof stadium by opening day 2007."

The Miami Herald reports, "not a word concerning the team and its last-minute bid was spoken publicly in either the House or the Senate on Friday." Nonetheless, a "source close to the negotiations said the team would still probably lobby state lawmakers next year for the sales tax rebate that has been given to many other professional sports teams in Florida, even if the team secures the $30 million this summer."

Yeah, that's going to work. "You already have the money, and the stadium's going ahead, but you still want us to give you $30 million? Hahahahaha!" Legislators remain understandably peeved at former owner Wayne "The Leech" Huizenga, who's still pocketing a $2 million/year tax rebate given the Marlins when they began play. That's over and above the oppressive lease terms he "negotiated" with himself for the club.

A few more details emerged about the Marlins' tentative deal with the city and county. The club would sign a 32-year lease at the new ballpark. Its $20 million equity contribution would be paid over time, as part of the construction of the park. The Marlins' rent, about $8 million/year, would go to pay off $127 million of construction bonds issued by Dade County. The club would be allowed to keep all money from in-stadium revenue sources, such as gift shops and concession stands -- which means that most or all of the $30 million financing gap could be closed through the sale of pouring rights and other concession contracts, unless the Marlins are already counting this third-party money as part of their own contribution.

Most importantly, the Marlins are responsible for all cost overruns on the stadium, whose $325 million budget sounds remarkably optimistic.


Friday, April 30, 2004

Management's Got It Covered

The Red Sox found a clever way to squeeze more fans into Fenway for the afternoon make-up of a rained-out night game.

Normally for day games, the club covers 420 center-field seats with a tarp to ensure a uniform hitting background for the batter. To allow these seats to be used for the make-up game, the club covered all the seat numbers with duct tape and gave fans sitting in those seats green T-shirts and instructions not to move around except between innings.

With Fenway virtually sold out for the season, how long before the club starts selling these special "human batter's eye" seats on a regular basis, subject to similar restrictions?

Antitrust Concerns Stop Victory Mediation

The Twins' dispute with cable operators over carriage of their new Victory Sports Network remains stalemated, too. Judd Zulgad of the Minneapolis Star Tribune reports that all of the major local cable and satellite companies are refusing to participate in the mediation requested by the Governor and supported by the Twins. The operators cite the antitrust concerns implicated by having a half-dozen competitors sit down together to discuss the price they're each willing to pay for the same commodity.

(This aspect of the antitrust laws wasn't a problem in the YES/Cablevision dispute, because it involved a single network and a single cable system. There, the antitrust issues centered on Cablevision's ownership of the two competing New York-area sports channels and the risk it was trying to put YES out of business to return to monopoly control.)

The Twins are already raising antitrust issues, noting that they received the same response -- "go back to Fox Sports Net" -- from each of the cable companies.
Risk Remains a Question in Stadium Finance Plan

Mike Meyers, National Economics Correspondent of the Minneapolis Star Tribune, discusses why economists have problems with the tax increment financing proposed by MInnesota Gov. Tim Pawlenty as the state's share of financing for the new Twins stadium. Meyers notes that to produce the $7 million/year of incremental tax revenues promised by the Twins, the club would have to generate over $100 million/year in new revenues.

Even assuming the club's own records can show such an increase in stadium-related spending, the revenue isn't "new" if it's simply being diverted from other sources. If the residents of Minneapolis-St. Paul spend $50 million more on the Twins that they would otherwise have spent on restaurant meals, movies and the like, the actual net economic effect is $0, as the additional taxes from Twins-related revenue are offset by declines in tax revenue from other forms of leisure spending.

Tax increment financing also involves a guarantee from the Twins that tax revenues will rise sufficiently to cover the club's obligations. The language of any such guarantee, and the collateral posted by the team to ensure that it will timely pay any shortfall, are crucial. In additional to usual-suspects Andrew Zimbalist and Roger Noll, the article quotes a Vanderbilt economist who's equally skeptical about the economic benefits of new stadia:

John Siegfried, a Vanderbilt University economist, said almost any stadium deal is likely to end up a "loser to the general treasury" because the new venues quickly lose their novelty with the public, as has been the case in a number of cities where big first-year gains in attendance weren't sustained."If the new stadium is what attracts people, then they should install the seats backward because they [fans] could get a better look at the stadium," Siegfried said.
Marlins Reach Tentative Stadium Deal; $30 Million Gap in Financing Remains

According to the Miami Herald, the plan calls for a $325 million, retractable-roofed park near the Orange Bowl, plus a $32 million parking garage. The garage would pay for itself. The stadium wouldn't. It would be funded as follows:

City of Miami: Land plus $28 million of tourist development tax money
Dade County: $120 million: $82 million from hotel tax, $38 million from sports facilities franchise tax.
Marlins: $157 million: $20 million upfront, $10 million from a ticket surcharge, $127 million in rent used to pay off a bond obtained by the county.

That leaves a $30 million gap. The club hopes to get that money from the State of Florida before the legislature adjourns for the year tomorrow, but Sarah Talalay of the South Florida Sun-Sentinel doesn't think it will happen. Leaders of both houses of the state legislature oppose the bill, and as Talalsy notes, the legislature has just "reached agreement on a nearly $58 billion state budget that strips millions of dollars from South Florida's schools."


Thursday, April 29, 2004

Squeeze Play

On the off chance that your copy of the April 2004 CFO Magazine got lost in the mail, here's a link to its cover story, a discussion of baseball economics by the ironically-named Tim Reason.

According to Mr. Reason, "even all of [MLB's harshest critics] agree that the sport's economic model is a mess." Oh? In the course of lamenting the MLBPA's power, he claims:

The union's control extends further than outright collusion. The current collective-bargaining agreement (CBA) between the players and MLB spells out rules for just about every aspect of baseball finance and its accounting, from obvious salary-cap substitutes like luxury taxes to more-subtle "fiscal responsibility" initiatives such as team debt limits.

Somehow he misses the fact that every single one of those rules was adopted at the insistence of the owners, not the players. The players didn't ask for a salary cap, a luxury tax or team debt limits. The players didn't demand a revenue-sharing formula that encourages clubs to find ways to shift revenues to related companies. All of these rules exist to prevent the owners from cheating one another or "competing unfairly" with one another, not to benefit the players.

Reason quotes Andrew Zimbalist to the effect that the owners' reported losses are irrelevant to their larger strategy. He then gets Jonathan Mariner, MLB's CFO, to call Zimbalist a "hack economist who's never had a job in sports," and to insist that teams can't hide revenue in the manner described by Zimbalist. Then he talks to Ray Schaetzle, former EVP-finance of the New Jersey Nets, who says, "Ask baseball CFOs about related-party transactions and see if they don't turn pale."

Appropriately for a magazine targeted to financial officers, Reason laments that owners often make the number-crunchers' job more difficult by placing a higher value on winning than on making money. He notes, "investors in professional sports are far less—if at all—concerned about financial payback than corporate investors." But if that's the case, if the owners themselves are willing to live with their losses, why should anyone else care how much money MLB claims to be losing?
On a Competitive Balance High

It's Rob Neyer's turn to punch holes in MLB's "competitive balance" laments. After measuring "competitive balance" for all seasons since 1969 under a variety of objective standards, Neyer concludes, "If by 'competitive balance' we mean that a significant number of teams have a fighting chance to win the World Series, then we're probably at an all-time high."

He continues:

And yet, the Commissioner continues to prattle on about "competitive balance" and, even more cloyingly, "hope and faith." Well, he and his fellow owners solved the "problem" 10 years ago when they created two new divisions and four new postseason berths. In the face of the evidence I've presented above, I'm led to one of two conclusions: that the Commissioner won't be happy until 1) MLB is like the NHL and the NBA, with more than half the teams not only having the chance to make the playoffs, but actually making the playoffs, or 2) the Commissioner's own team, which hasn't played a postseason game since 1982, actually makes the playoffs.

Then again, maybe those two things are one and the same.

Beyond Expos, Major League Relocation Unlikely

Unlike his credulous counterpart in Norfolk, Mark Anderson of the Las Vegas Review-Journal recognizes that the Expos are the only franchise likely to relocate anytime soon.

As MLB's Rich Levin put it, "We haven't moved a franchise in 33 years. It's not something we do without great and considerable thought put into it." Indeed, the Expos' experience shows that MLB's idea of "great and considerable thought" resembles the "all deliberate speed" with which Southern schools desegregated after Brown v. Board of Education.

Marlins Near Deal for a New Ballpark

Look! The Marlins may not need that $60 million from the state after all. The Miami Herald reports that the club, Miami-Dade County and the City of Miami are close to a stadium deal. The city's willing to contribute the estimated $25 million it hopes to receive from the sale of the Miami Arena, while the county will throw in more money from a tourist tax.

The parties have also agreed on a site to the southwest of the Orange Bowl. The biggest holdup now is who will pay for a $32 million parking garage. The ever-optimistic Miami Commissioner Tomás Regalado said that the project "can even move forward without state money. They can go back to Tallahassee next year." Of course, the chance of the state contributing money for a stadium that's going to be built anyway is essentially zero...

16-Team Event Closer to Reality

Jayson Stark of ESPN explains how the proposed World Cup of Baseball might work. The tentative plan is to hold the tournament over a 13-day period in March. The 16-club field would be divided into four, four-team groups. The top two teams in each group would advance to the round of eight, after which the four winners would play a single-elimination semifinal, followed by a single-elimination final.

The first rounds would be held at spring training venues. The semifinals and finals would be played in major league ballparks -- either domes or warm-weather cities with little chance of a rainout. Considerable pressure would be applied on owners to let their best players participate, even if, like George Steinbrenner, they'd rather keep them in spring training, with its lower risk of injury.

Update: The Los Angeles Times reports that the Los Angeles Sports Council has begun discussing possible sites for the tournament. Rich Levin of MLB says it's too early to be talking about sites.
Communities Push State for Stadium Money

St. Paul wants to spend $244 million on the Twins, the money to come from parking and bar taxes. Hennepin County and Minneapolis want to spent $271 million on the Twins, the money to come from general sales taxes, food, liquor, lodging and parking taxes. Jay Weiner of the Minneapolis Star Tribine reports that they're both upset with the State of Minnesota for not coming up with another $100 million quickly enough.

Meanwhile the Twins say that while they're willing to pay a third of the ballpark's cost, they're not willing to pay a third of the project's total cost. According to Aron Kahn of the St. Paul Pioneer Press, the club has admitted, though, that the present bill would raise enough money for them to build and operate a ballpark.

Testifying yesterday at legislative hearings, Ball Four author Jim Bouton condemned staidum subsidies "as 'America's most costly hostage crisis.' He said team owners essentially say to the public, 'Build us a new stadium or you'll never see your team again.'" Supporting subsidies, Vikings coach Mike Tice said they would help the teams and thereby make people happy: "It creates confidence in our community when our sports teams do well."


Wednesday, April 28, 2004

Stadium Bill Hits Snag at House Panel Hearing

The Twins' stadium proposal took a hit in the Minnesota House of Representatives yesterday, as an influential legislator said he'd oppose the bill so long as $100 million in tax increment financing remained part of the plan. Rep. Ron Abrams, chairman of the House Taxes Committee, thinks it's a bad idea. Abrams also insists that the Twins' one-third contribution be "real and not a mirage," paid all at once rather than in the installments preferred by the Twins. Other legislators want more oversight of the Minnesota Stadium Authority that would be charged with negotiating a lease with the Twins.

The committee considering the proposal also heard from a skeptical Federal Reserve Bank economist:

"My kids and I are all the time talking sports," Art Rolnick, an economist at the Federal Reserve Bank in Minneapolis, testified before the committee. That quality-of-life issue is worth something, he said, but a public investment in early childhood education is far more important, he said. "Hands down."


Tuesday, April 27, 2004

"No-Site" Status Stresses Bill's Frailty

Reporting on the first day of legislative hearings on the Twins' stadium bill, Aron Kahn of the St. Paul Pioneer Press observes that the bill deliberately fails to specify a site for the park for fear that picking either Minneapolis or St. Paul would give legislators from the other community a reason to vote against the proposal.

Alice Hausman (DFL-St. Paul) said, "I'm feeling we're all being used to pass a bill." As she's a long-time stadium supporter who backed the Twins' 1997 and 2002 stadium proposals, her decision to oppose the current bill does not bode well for its future.

Attendance Pumped Up All Around the Majors

Murray Chass responds to Dean Bonham's handwaving:

"The fans are really showing them, those baseball players and club owners. You don't want to do everything you can to rid the game of steroids? Well, we'll show you. Not only won't we stop buying tickets and start boycotting your games, but we'll also buy tickets in record numbers and show up in record crowds."

Through three weeks of the regular season, attendance is up 14.4%, to an average of 29,718/game. That's the second highest ever, trailing only the 1994 season. 22 of the 30 clubs are ahead of last year's pace. The Cubs could draw 3.2 million; the Yankees could approach 4,000,000. In Florida, the Marlins are up 86%, the Devil Rays, 72%.

So can the steroid-obsessed sportswriters stop pretending that the fans share their panic?

World Cup Agreement Is Reached on Testing

Jack Curry of the New York Times provides more details about the proposed baseball World Cup. MLB hopes it can begin during spring training 2005, and has proposed a 16-club tournament: the host United States, plus the Dominican Republic, Puerto Rico, Japan, Cuba, Taiwan, South Korea, Venezuela, Mexico, Panama, Venezuela, Australia, China, Canada, the Netherlands and Italy.

The international drug testing applicable to the World Cup would differ from MLB's in several respects. The list of banned substances is longer, including growth hormone, androstenedione, norandrostenedione and ephedra. Players could be tested at any time after being named to their national club, 45 days before the tournament, and a positive test would bring immediate expulsion.

The MLBPA approved the broader testing because players don't have to participate in the tournament. Another issue is whether they will be allowed to participate. Curry quotes an adviser to George Steinbrenner as saying that because of the risk of injury, the Yankees probably won't allow anyone on their roster to play in the World Cup.


Monday, April 26, 2004

Major League Baseball Threatened by Looming Scandal

This week's Steroid Hysteria Article of the Week comes from Dean Bonham, CEO of an entertainment and sports marketing firm and columnist for the Rocky Mountain News. Bonham opens on an ominous note:

"There are some very dark clouds hanging over the nation's ballparks, and they're threatening to burst at any moment. "

In fact, attendance is up significantly in 2004. TV ratings are strong. But mere reality is irrelevant here; Bonham's talking about a Higher Truth. And he's talking language his client base can appreciate: Buoyed by a long string of victories over the owners, Those Uppity Players no longer know their place. Free agency

"gave the players a sense of empowerment that has colored all their decisions since the Flood case, including their resistance to drug testing."

Ungrateful workers -- give 'em a taste of freedom, and next thing you know they won't even urinate on demand. What's the world coming to? Finally, Bonham makes his Grand Pronouncement:

"The union's failure to accept - no, embrace - a stringent drug-testing policy for its membership is intolerable."

I'm sure Donald Fehr will give Mr. Bonham's opinions the respect they deserve.

Baseball Backers Plan Season-Ticket, Luxury Suite Sale

The Norfolk Virginian-Pilot breathlessly, and credulously, reports that MLB's only serious concern about the bid to move the Expos to Norfolk/Hampton Roads is whether the market has enough people to support a team. To address this issue, local promoters hope to launch a season-ticket drive within a month.

The promoters claim that $297 million would cover the cost of expanding Harbor Park, the existing AAA facility; building a new 38,000-seat major league ballpark; and then tearing down Harbor Park. Public funds would cover about two-thirds of the cost. While insisting that Norfolk's bid is fully financed, its public spokesmen, two twentysomething former stockbrokers, still refuse to identify the moneymen. (Might one of them be "billionaire" Donald Watkins?)

Author Harry Minium also writes:

"Reports in other cities indicate that at least three teams – the Florida Marlins , Minnesota Twins and Oakland A’s – may relocate after this season. "

Uh...sure. Time to adjust the medication, Harry...
Drug-Testing Agreements Set for Baseball World Cup

MLB announced this afternoon that the owners, the players and the International Baseball Federation have agreed that players who participate in a planned international World Cup of Baseball will be subject to drug testing under the international rules demanded by the World Anti-Doping Agency.

At almost exactly the same time, Buster Olney of ESPN The Magazine whined that the MLBPA was -- gasp! -- treating the issue of steroids as one of many issues to be collectively bargained, rather than as the Great Evil Menace That Mandates The Immediate Reopening of the CBA.

Sunday, April 25, 2004

Summary of Minnesota Stadium Bill

In anticipation of legislative hearings on the bill, Jay Weiner of the Minneapolis Star Tribune summarizes the provisions of the Twins and Vikings stadium bill being considered by the Minnesota legislature.

The Twins are balking at the requirement that they pay one-third of the total cost of the project, including infrastructure work -- even though "the team's" 1/3 share can include not only the club's rent on the ballpark, but also money collected from third parties, such as naming rights fees and seat-license charges. The Twins would also be responsible for all cost overruns.

The bill provides that if the Twins are sold during the 30-year period of their lease at the new facility, the owner must share with the state the portion attributable to the increased value of the team in a new ballpark. If -- no, when -- the team and the state can't agree on this amount, the issue goes to an arbitrator.

Local governments could raise their share of the stadium money through a variety of targeted taxes, but the legislature would have to approve any general sales tax increase for this purpose. The bill also provides for tax increment financing: the club and the stadium authority would negotiate for an annual payment tied to the amount of extra tax revenue generated at the new ballpark over the average of the three final years at the Metrodome. If the expected revenues weren't realized, the Twins would be responsible for the shortfall.

Finally, the bill sets a December 31, 2004 deadline for the Twins to strike a deal with a local community and the proposed stadium authority. That's an awfully short deadline to negotiate an agreement with an entity that doesn't even exist yet.
Pirates Mining Latin America for Young Talent

Joe Starkey of the Pittsburgh Tribune-Review discusses the Pirates' re-emphasis on Latin American player development. The Pirates, who were among the earliest to realize the potential of Caribbean players, have doubled their Latin American scouting staff and maintain baseball academies in the Dominican Republic and Venezuela.

Club management makes clear that the Pirates aren't looking to skim the cream of the Latin American crop by paying high bonuses to the best prospects. Instead they're signing dozens of promising but unproven players for bonuses ranging from $5,000 to $100,000, assigning them to the developmental academies and hoping that at least 10 players a year will graduate from the academies to the regular minor league system.

The 65 players in Pittsburgh's two baseball academies receive the same $800/month salary as the lowest U.S. minor leaguers. They can be signed at age 16, and must be released if not placed on a minor league roster within three years. During their extended, paid audition, the players live year-round at the academies, leaving only for the winter holidays.
Network Associates Coliseum to Become McAfee Coliseum

Last Thursday, Network Associates, Inc. announced that it would rename itself McAfee, Inc., taking the name of its well-known antivirus program. A spokesman for the company confirmed to the San Francisco Chronicle that the renaming will extend to the Athletics' ballpark, which will be renamed McAfee Coliseum during the third quarter of 2004.

Unlike in San Francisco, where the change from Pacific Bell Park to SBC Park met with considerable public opposition, no one in Oakland seems to mind the proposed change. As Oakland Mayor Jerry Brown noted, "It's got fewer syllables."

Network Associates signed a 10-year naming-rights deal for the Coliseum in 1998. It paid $1 million for the first year, with annual 5% increases since then.

Twins Waiting Game Is Costly

Aron Kahn of the St. Paul Pioneer Press quantifies the two big open issues involving the Minnesota Twins. The club estimates a new ballpark would be worth $40 million/year in new revenue. At the same time, it's refusing a Fox Sports Net offer that would roughly double, to $12 million/year, the money the club receives from cable TV, while demanding that local cable systems pay more for the club's Victory Sports than they do for Fox Sports Net.

Kevin Cattoor, President of Victory Sports, insists the Twins will never go back to Fox Sports. (Of course he'd be out of a job if they did, so he might not be the most unbiased observer.) Cattoor says:
"Whatever they offer, it doesn't matter. It's not relevant. We're striving to maximize the dollars and take those profits and reinvest them into the club. If Fox takes the profits off Twins baseball, they just deposit them in a checking account in Los Angeles."

Reinvesting profits in the club? Has Cattoor cleared this notion with the Pohlad family?

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