Take me out to the cleaners

Andrew Zimbalist

July 15, 1992|By Andrew Zimbalist

THE ROMANTIC view of major league baseball's relationship with cities -- such as Baltimore or San Diego, site of last night's All-Star Game -- is that it is a benevolent partner.

After all, a new old-fashioned stadium has revived Baltimore's fortunes.

But the realistic, business-as-usual view is that baseball squeezes revenues out of already impoverished urban areas.

Baseball franchises are publicly-held corporations. There is no functional separation between ownership and management and, hence, there is no pressure to produce book profits to please individual or institutional stockholders.

Through accounting legerdemain, even baseball's most lucrative and successful franchises can show losses. Every year eight to 10 teams claim they lose money, but baseball is profitable.

According to its most recent figures, baseball's return on sales was 10.6 percent in 1990, well above the 6.3 percent average in U.S. manufacturing.

Part of baseball's success is due to the millions in public subsidies it receives every year. Why is baseball able to get away with this? Because demand exceeds supply.

In 1991 when two National League expansion franchises were auctioned for $95 million a piece, 18 prospective ownership groups in 10 cities paid a $100,000 application fee just to compete for the opportunity to own a team.

Supply is restricted by a self-regulating monopoly, major league baseball.

The result is that some worthy cities are denied teams and the cities with teams are held hostage to threats of moving. Fiscally strapped cities are blackmailed into floating bonds or introducing taxes to finance the construction of fancy new public stadiums.

Typically, city guarantees on ticket sales and heavily subsidized rent are also part of the deal.

New York spent more than $100 million to refurbish Yankee Stadium during 1974 and 1975. Today, the franchise has annual revenues in excess of $100 million but pays less than $1 million a year in rent.

Chicago built the White Sox a stadium two years ago and threw in a $2 million a year maintenance subsidy through 2001 and attendance guarantees thereafter.

Despite a record home attendance of 2.1 million in 1991, Seattle almost lost the Mariners this year.

When San Jose, Calif., voters rejected an initiative to build the San Francisco Giants a new ballpark, Commissioner Fay Vincent gave the Giants' owner his blessing to consider another home for the team.

To keep its team in 1985, Pittsburgh was obliged to put up $20 million to help finance the purchase of the Pirates by private owners.

In 1991 Montreal and Quebec put up $33 million to assist in the private acquisition of the Expos for $98 million. In neither case did major league baseball allow the municipalities to retain an equity interest in the team.

In 1990 Joan Kroc was prohibited from giving the Padres to the city of San Diego. The old boys' club of baseball's owners says public ownership is too inefficient.

But if inefficiency were truly their concern, baseball's barons would have banned themselves long ago.

The real threat of public ownership is not inefficiency -- several publicly owned minor league franchises have been run profitably without political encumbrances for years -- but accountability and financial exposure.

Baseball has abused the public trust. But how do we stop its mugging of our cities?

For starters, cities should be given the right of first refusal to purchase a franchise before allowing a move. They could undertake municipal ownership or, like football's Green Bay Packers, arrange for fan ownership.

Before leaving office in 1952, Commissioner A.B. (Happy) Chandler said: "I always regarded baseball as our national game that belongs to 150 million men, women and children, not to 16 special people who happen to own big league teams."

A lovely thought.

Andrew Zimbalist is author of the forthcoming "Baseball and Billions: A Probing Look Inside the Big Business of Our National Pastime."

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