Rater of bonds to put baseball in its lineup

VIEW FROM WALL STREET

May 12, 1991|By Thomas Easton | Thomas Easton,New York Bureau of The Sun

NEW YORK — New York--Baseball has always had the power to creat strong emotional bonds, such as those between adoring young Orioles fans and Cal Ripken Jr. Now, Standard & Poor's, the credit-rating agency, is prepared to examine baseball's impact on another sort of bond -- the tax-free government issues sought by many high-income investors.

It's an important matter at a time when cities spend more to catch and keep a major league team than they spend on the mayor's team. The impact of major league franchises on municipal and state-issued bonds is growing ever larger. In a sense, everyone in a community has become part of the game.

Several states around the country, including Maryland, Florida and Illinois, have borrowed millions of dollars to build new stadiums to house baseball franchises. And Standard & Poor's suggests the ultimate impact of baseball on a state's credit rating is likely to be even more extensive.

"From a purely quantitative perspective, a major league team is a multimillion-dollar service business," Matthew Korten writes in S&P's Creditweek publication. Slipping away from creditspeak, he hastens to add: "It is difficult to fully appreciate the plight of diehard major league baseball fans in the scores of metropolitan areas where there are only minor league teams or no baseball at all."

Less sentimental analysts at Standard & Poor's are preparing to do just that, by taking a swing at the financial issues involved in landing a franchise.

In June, when two new major league baseball franchises will be awarded, Standard & Poor's will issue special reports on the consequences for the winners. That will formally add baseball to sewer systems, highways, utility construction and other more mundane subjects for a rating agency. Football, basketball and hockey will have to wait for such consideration.

That baseball should be the first to receive its own coverage has less to say about the relative merits of the sport than it does about dollars. Baltimore may still mourn the loss of the Colts and the Bullets. But in retaining the Orioles, it retained the franchise with the most economic impact because it plays the most home games (81, verses 41 for a basketball team and eight for a football team).

More games translates into the sale of more tickets -- and also the sale of more beer, hot dogs and off-hour parking spaces. But from a rating agency's perspective, baseball also is a significant producer and consumer of public revenues.

Whether major league franchises provide more than they cost, however, is not clear. "Though generally positive, the introduction of a major league team does not ensure higher bond ratings," said Mr. Korten.

Public expenditures on stadiums and connecting transportation networks can do as much to undermine a community's credit as to enhance it. As Standard & Poor's notes in its bankerly way: "New infrastructure may become burdensome."

That, of course, would come as no surprise to people in Maryland and Illinois who have invested more than $100 million in new facilities to keep existing franchises. The St. Petersburg-Tampa area in Florida is coming to the end of a $135 million stadium project built in the hope, so far unrealized, that a major league baseball team will call the area home.

Typically, such investments are made without any real expectation that lease payments from the team itself will cover the cost. Maryland Stadium Authority bonds have a high rating because they are backed by the state treasury.

In the case of St. Petersburg, which at the moment seems to have something of a white elephant, funding comes from a special hotel and motel tax as well as a statewide sales tax.

Bonds issued for Chicago's new Comiskey Park are similarly backed by a broad sales tax. If Denver wins a new major league franchise, an arrangement has been made for a special sales tax that would encompass not only the city but the surrounding towns.

Once completed and in operation, stadiums can produce revenue, though how much is always a source of controversy.

Standard & Poor's notes a new team can stimulate sales tax receipts directly from concession sales and indirectly from the restaurants that spring up nearby. That may be particularly relevant if Washington wins a franchise, because its sales tax, at 6 percent, is the highest of any of the applicants.

Stretching a bit, Standard & Poor's says a team can also stimulate income tax receipts from the salaries paid to everyone from the multimillion dollar ballplayers to the pretzel vendor.

Washington would be the only winner here, as it is the only one of the applicants with a local income tax.

A new team can also shift money that would go elsewhere. That, of course, would be particularly true in Washington's case, since a new franchise may steal fans from Baltimore.

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