This week in “Last Week in BizBall”, a slew of reports on the politics of baseball stadium developments, MLB Network hopes to increase distribution, plus tidbits.
UPDATE ON THE POLITICS OF STADIUM DEVELOPMENT
Over the decades, citizens and media have become increasingly cynical about the merits of spending public dollars on constructing stadia for professional sports franchises. Professional baseball (MLB, MiLB and independent baseball) typically fares better than the other of the “big 4” when requesting public funds due to their greater number of games played. (ie. The ostensible economic spin offs are greater) More recently, public funding for stadia is more difficult to acquire, due to a combination of bust municipalities and a general awareness that many of these projects have failed to live up to their promises. In response, local stadium advocates (franchise owners, construction industry, construction unions, politicians) have become more sophisticated in their approach to securing public dollars. Local stadium authorities issue tax-exempt bonds to raise financing for construction, in turn the tenant (team) makes Payments in Lieu of Taxes back to the authority (aka PILOTS). Stadiums/arenas are constructed in “entertainment districts” where future tax revenues are used to pay off the construction bill (aka Tax Increment Financing or TIF). Team owners are awarded “development rights” in the entertainment district surrounding the stadium/arena. Some combination of county and/or state amusement taxes, plus taxes on car rentals and hotel rooms are used to pay off construction. Politicians often justify such public expenditures as key to the success of “stadium centred” urban renewal projects in blighted neighbourhoods.
LWIB saw a spate of reports from a handful of different communities on the state of past, present and future ballpark developments. The most high profile was the public spat between anti-stadium advocates in St. Louis and the Cardinals over monies that may, or may not, be owed the local government. David Hunn of the St. Louis Post-Dispatch reported:
Eight years ago, as the St. Louis Cardinals aimed to build a new baseball stadium, team owners signed an agreement with the city worth millions of dollars a year in tax breaks.
In exchange, the team agreed to a series of annual perks for the region's residents — 100,000 free tickets, 486,000 seats for under $12 and $100,000 in donations to recreation for disadvantaged youths.
The Cardinals also agreed to give the city a cut of profits made if any portion of the team was sold.
Then, last year, owners sold a sizeable chunk of the Cardinals — more than 13 percent. Now, a group of anti-public-stadium advocates is alleging that the team owes the city hundreds of thousands of dollars.
The big news to me was that Bill DeWitt III. had sold some of his stake in the Cards, I’d like to know what it fetched. As for the dispute over whether the Cards owe the city any of the proceeds from the sale, you can read yourself, but it seems to boil down to accounting. See Brian Borawski, The Sports Economist and Neil deMause for more.
There was plenty of news LWIB around future ballpark developments in MLB. Much of the aforementioned scepticism around the benefits of public investment in stadia to house pro sports has resulted from decades of criticism from “The Sports Economists”. Almost unanimously, this group of academics has long and consistently argued against this sort of public investment. However, LWIB one of their brethren, Stephen J.K. Walters, argued in the Chicago Tribune that the Cubs proposal to use future growth in amusement taxes generated at a renovated Wrigley Field to pay for said renovation, is a good plan. (HT Ed Sherman) Later in the week, the Cubs proposal died in the Illinois General Assembly. Not to worry, the Assembly reconvenes in January and already there is talk in the media of a Wrigley entertainment district and TIF and…you know the drill. Back to St. Louis, LWIB Cardinals President Bill DeWitt III announced that construction of the Cardinals long delayed “Ballpark Village” development adjacent to Busch Stadium might soon begin. Mr. DeWitt and his development partner Cordish Co. have begun the process of applying for tax breaks from the local government before the development proceeds. The Cards Ballpark Village has been delayed for years due to the downward economy. Similar planned projects in Arlington and Fremont CA. have been abandoned. Conversely, the San Diego Padres leveraging of Petco Park to launch a mixed use development in the area around the stadium was a huge success. The politics of ballpark developments also include Spring Training. Glendale AZ invested $200 million in the Camelback Ranch Spring Training home of the White Sox and Dodgers. LWIB, The Arizona Republic reported that a proposed mixed use development associated with Camelback Ranch has cratered. (HT Ballpark Digest) Glendale had planned that future tax revenues from the, now failed, development would help pay off their investment in the baseball facility.
Lastly, there was news LWIB concerning a potential new MLB stadium. San Jose Mayor Chuck Reed announced he is backing away from a plan to have a referendum in March on a stadium proposal for the A’s. Evidently the plan is still to hold a referendum, but it won’t be until at least April, probably longer. San Jose must wait for the A’s relocation politics within MLB to play out before going any further.
SELECT READ MORE TO SEE DETAILS ON MLB NETWORK, AND THIS WEEK'S TIDBITS
In January 09, MLB Network launched in approximately 50 million homes, a record number for a new channel. Presently, MLB Network is in approximately 56 million homes. By comparison, ESPN is in about 100 million, Versus 75 million and NFL Network 57 million. LWIB, MLBN CEO Tony Petitti told Reuters that he hopes to cut deals with Dish Network and AT&T which will result in his channel increasing its distribution to 70 million homes for next season. Petitti also says that ad sales for his channel will be up more than 20 percent this year. As well, Mr. Petitti declares that MLB is soon to recoup their original investment in launching the channel. "We'll have the ability to make distributions in 2011," Petitti said. "That's really up to the commissioner's office as to what form those take and when and what they want to do with that money." In a separate Reuters report Mr. Petitti acknowledges the possibility of …adding exclusive content, including games…to the channel after MLB’s current broadcast deals expire following the 13 season. The first Reuters report also tells us that according to MLBAM head honcho Bob Bowman, BAM is growing at 15 to 20% annually. As for the long rumoured IPO of MLBAM, Mr. Bowman said there are no plans for that. Recently I commented that according to the “leaked financial docs”, clubs were receiving an annual dividend from BAM of $2 million ea., a relatively small amount in a $7 billion a year industry. Said Mr. Bowman to Reuters, "As to the right dividend policy ... there's a real push and pull as to how much," he said. "You can probably remit higher dividends, but you're investing in your business and creating an asset." (HT Fang’s Bites)
- Details from the Texas Ranges bankruptcy continue to emerge. LWIB, Barry Shlachter reported on the millions of dollars in lawyers fees that have been requested from the presiding judge. At the end of the report we learn that, only recently, did the eventual owners of the franchise abandon a claim of upwards of $100 million from the former owners.
Earlier in the week, Greenberg-Ryan's Ranger Baseball Express agreed to drop its own claim for upward of $100 million for alleged breach of contract against the former ownership, according to attorneys involved in the case.
Two attorneys following the case noted that the claim was dropped before Greenberg was to be deposed.
Before the World Series, Express surprised other parties in the case, and apparently the court itself, by demanding back anything above the $495 million it had agreed to pay in a sales agreement that was part of the May 24 bankruptcy restructuring plan. The plan ultimately was replaced by the Aug. 4 auction.
Had that request succeeded, Greenberg-Ryan could have ended up paying much less than Cuban and Crane's bid for the team. But that in turn could have sparked legal action from Cuban and Crane. (Note, the bankruptcy auction yielded a sale price of $593 million)
- At Forbes, LWIB Wayne McDonnell argued strongly in favour of “floating realignment”.
- The annual Rule 5 draft will happen this week. Star players Josh Hamilton, Jose Bautista and Joakim Soria are all former Rule 5 picks. But the Rule 5 draft doesn’t yield the same quality of talent that it did before MLB changed the rules prior to the 06 draft. Read Matt Eddy at Baseball America to understand why. And to understand the rules governing the Rule 5 draft, read Darren Heitner.
- Reuters reported that the New York Times continues to search for a buyer for its 16.6% stake in New England Sports Ventures, aka the Boston Red Sox. (HT TicketNews.com)
- Former MLB commissioner Fay Vincent argued in the Wall Street Journal that star free agent players should negotiate for a stake in the team they sign with. It’s all about taxes. And before you say it’s against the rules, Mr. Vincent tells us, ” Under the current labor agreement in baseball, there is nothing that prohibits a player from owning a part of his team, but the ownership interest must be sold if the player leaves that team for another.” (HT Don Walker)
Pete Toms is senior writer for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.
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