Is debt keeping Ravens grounded? Lenders' restrictions are contained in terms of loans totaling $185M

Payroll 2nd-lowest in NFL

Finances, poor record unrelated, team says

November 05, 1998|By Jon Morgan | Jon Morgan,SUN STAFF

Ravens fans are eager to pinpoint the cause of the team's abysmal performance. Is it the injury-induced quarterback shuffle? Underperforming offensive linemen? A coach who has seen the game pass him by?

Actually, the truth may be much farther from the field. It could lie in the financial ledgers of a team that has, by virtue of its new stadium, become one of the richest teams in sports -- but isn't acting like it.

The team is suddenly generating more cash than nearly any other NFL franchise. But it is also paying more money to lenders, money that could otherwise be going to players, coaches and training facilities that can build a contender.

In a sweeping financial restructuring last year, the Ravens borrowed $185 million. That set a record for red ink by an NFL team and came with restrictions imposed by the lenders on what the team can do with its money.

The team -- which has amassed the worst record in the NFL over its three-season history -- says its playing woes have nothing to do with money. Its borrowing was done with an operating plan that calls for fiscal prudence and postseason success, officials say, and the Ravens' 2-6 showing on the field this season can't be attributed to lack of cash.

"What we're trying to do is spend intelligently. It's a team that's trying to operate prudently within a plan to produce the best team we can without sacrificing the future," said Jim Bailey, Ravens executive vice president/administrative and legal.

"It's not correct to say we're restricted by our financial arrangement," he said.

But the franchise is next to the bottom in the NFL in spending on players, according to a recent analysis by the players' union. The team also hasn't replaced its training center in Owings Mills, a complex deserted by the Colts when that franchise moved to Indianapolis in 1984.

Although the role of money in building a winning team is less crucial in football than, say, baseball, spending does matter in the NFL. And a team as debt-burdened as the Ravens could find itself paying banks money it would prefer to pay quarterbacks, said Marc Ganis, a sports financial consultant and president of SportsCorp of Chicago.

"By not having that money around, you might not be able to pay that stud linebacker or key defensive tackle you need," Ganis said.

That may explain why the Ravens have developed a reputation for budget-mindedness when it comes to player salaries, he said. "They are not perceived as one of the big spenders, that's for sure. But they are not perceived as one of the most miserly teams, either," Ganis said.

Also restricting the Ravens is that the team owner, Art Modell, lacks the wealth of the billionaires who have bought into the league in recent years and can subsidize their teams.

"Organization is the key to success of an NFL team: coaches, scouting and administration. But if you don't spend money on a long-term basis on players, it will come back to haunt you," Ganis said.

Cash-poor or prudent?

Several agents say the team has shown a reluctance to pay that could indicate a lack of cash or a newfound frugality.

"The Browns always went after it," said local agent Tony Agnone, who represents Ravens linebacker Jamie Sharper, among other NFL players. But since the Cleveland Browns became the Ravens in 1996, Agnone sees them as "being much more fiscally conservative.

"You don't know if it's a change in coach and philosophy or them having less money," Agnone said.

Player agent Michael Azzarelli, who represents Ravens tight end Brian Kinchen and former Ravens quarterback Vinny Testaverde, said the franchise has treated players fairly in contract talks but hasn't been throwing money around. "They are not a Dallas or a San Francisco," he said.

The team paid Testaverde his guaranteed $1.5 million when he was cut last June even though the money was not technically due for another year. But in other matters, the team has sought to defer spending to later years -- a tactic to conserve cash, Azzarelli said.

"I think they have been really cash-strung. It looked like they were trying to defer a lot of money. I think they had to divert a lot of money to debt service," he said.

There's no question the Ravens are making money. The team appears to be generating cash at a furious rate of $128 million this year, with an operating profit of $51 million, according to an analysis by The Sun. Engorged with money from network television deals and a new, taxpayer-financed stadium downtown, the team could be worth more than $400 million if sold, experts say.

The team, like most sports franchises, does not open its books for public inspection. To determine the Ravens' financial status, The Sun estimated the annual profit by calculating predictable revenues and expenses.

Not included in the operating profit figures, however, is loan repayment. Like a new homeowner facing stiff mortgage payments, the Ravens could be getting squeezed by the cost of repaying loans -- known as "debt service" in the banking world.

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