O's may open '96 books to $6M loss But economists say deficit is product of tax loopholes

November 20, 1996|By Jason LaCanfora | Jason LaCanfora,SUN STAFF

The Orioles may soon reveal their 1996 financial records, which club sources say indicate losses of as much as $6 million -- losses some economists say could be the product of tax deductions and depreciations taken by nearly all baseball teams.

Owner Peter Angelos has been calling for teams to open their financial records since the 1994 players' strike, when many fans and union officials discounted teams' claims they were losing money. Angelos has said open records would legitimize those claims.

If the Orioles, one of baseball's most free-spending and well-supported teams, are indeed losing money, then the case could be made that other, less successful clubs are doing the same.

The Orioles had the majors' second-highest payroll this past season, about $55 million, surpassed only by the New York Yankees, at $61.5 million. The Orioles also finished second in attendance, with more than 3.5 million fans for the third time in the past five years.

When Angelos opened the team's records in 1994, they indicated a projected net operating profit of $7.9 million. In 1993, the last season under former owner Eli Jacobs, the Orioles were the biggest moneymakers in baseball, with an operating profit of more than $25 million. The profit dip from 1993 to 1994 was due to a $10 million increase in the team's payroll, an $8 million cut in national television revenue and the strike at the end of the 1994 season.

Joe Foss, Orioles vice chairman for business and finance, did not return calls yesterday, and public relations director John Maroon said Angelos and members of the organization would not comment on the financial records.

However, economists familiar with baseball finances said it is not unusual for teams, even high-revenue teams, to report losses.

Stanford economist Roger Noll has pored over several teams' records and said there are often tax loopholes that explain such losses.

In 1990, Noll, who has prepared reports for the players union, studied the Pittsburgh Pirates' claims that they were operating at a loss of $7 million, and reached a conclusion that the team was profiting $3 to $4 million.

Andrew Zimbalist, author of "Baseball and Billions" and a Smith College economist, though unable to see the Orioles' financial records, offered a theory to explain their loss in 1996.

Zimbalist, who has worked as a paid consultant for the players union, said Angelos is allowed to depreciate his players for the first five years he owns the club. Angelos paid approximately $173 million for the team in 1993, and can depreciate his players for about $17 million a year.

"If he's doing that, it's perfectly legal, but the cost is fictitious," Zimbalist said. "It's not a real cost. It happens to be a nice little tax loophole. Everybody does it. It's not cheating."

Pub Date: 11/20/96

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