The House That Everyone Else Built
by Raine Daniels(MLB)
Posted on September 16, 2006, 7:13 PM
The 2002 MLB Collective Bargaining Agreement is incredibly flawed. Give it a read some time – it’s just a glut of poor, short-sighted decisions orchestrated by ridiculously intelligent lawyers and owners.
Alright, that’s not exactly fair. Some teams were intelligent (Yankees, Red Sox, Royals, and Marlins to name a few of the handful), while the rest were bullied into the agreement by owners with enormous clout and the prospect of losing revenue by shutting stadium doors in case of a strike.
Up until this point, the CBA has favoured players and a few teams. Unfortunately, it’s kept 80% of the league in status-quo by not really providing much cash in return in regards to the Revenue Sharing Plan, while the wealthy clubs are free to continue their obscene spending thanks to the Salary Tax system being so laughable. For instance, there’s the Competitive Tax Threshold (Luxury Tax), which is somehow $136.5 million for the ’06 season (or roughly $120 million more than the Marlins payroll). Now if Florida somehow tacked on $130 million in extra salary to pass the threshold, they somehow don’t have to pay the tax because it’s only their first offense. Teams don’t have to pay unless they consistently break the rules.
Where it gets interesting in the Revenue Sharing Plan is when teams submit a Financial Information Questionnaire, which is a breakdown and total of a club’s expenses for that year. They use the FIQ to determine how much a team puts into the RSP, which is all well-and-dandy. The problem arises when teams see “Actual Stadium Expenses” pop up on their FIQ. If you look it up in Attachment 22, Sec 2 (B), we find:
“Stadium-related debt incurred for or in connection with ballpark construction or improvements.”
So we’re not just talking about paying popcorn vendors or fixing a leaky faucet. Building an actual stadium counts as part of the Total Club Debt, which goes on a team’s FIQ, which calculates their piece of the pie into the RSP.
New Yankee Stadium is a $1.3 billion project, which would make it easily the most expensive stadium/arena in North America. The total figure is not just for the building, of course; estimates for the ballpark are $800 million, leaving the rest to account for new parking, highway and road upgrades, and basic maintenance. For the most profitable team in baseball, the price should be well worth it. After all, if the Cardinals could afford the $646 million new Busch Stadium cost (with little financing from MLB), the Yankees would surely have no problem.
And they won’t.
After all, they’re only on the hook for $450 million.
(Well, sort of.)
When all is said and told, the taxpayers of New York will foot a bill equivalent to that of the Yank’s ($450 million) while the city will chip in anywhere from $70 million to $320 million. An outrageous amount considering the Yankees have spent $450 million on player salaries over the past two-and-a-half years but the taxpayers are the ones responsible for putting up the walls around Derek Jeter and Robinson Cano.
That’s not even the best part in this grand scheme, however. Wrapped up in that cost the city is responsible for is the building of parking garages to around New Yankee Stadium. Those cement blocks will go where two parks are currently situated, which will be moved at a price of $150 million to the city and re-built elsewhere. The price the Yankees have to pay to build those parking garages or rent due since the city will still own the land?? Absolutely nothing.
Now with that $450 million price tag the taxpayers are consuming, you’d think they’d at least catch a break in all of this. As a reward to the people who are paying the same amount the Yankee’s are paying for their own building (once again, more on that later), New York is strongly considering putting in licensing fee’s for their season ticket seats and taking away another 6,000 seats (the difference between Old and New Yankee Stadium max attendance).
What’s a licensing fee, you ask?? It’s a down-payment for the right to buy a season ticket, of course. Paying for the right to pay more. Right now, the Yankee’s charge the eighth most in the league per ticket at $25.23, a $2 increase on the year before. (Boston is currently tops at $46.46 largely due to the fact Fenway Park only seats 38,805 for such a huge draw as the Red Sox.) By saying they’re considering a licensing fee, the Yankee’s are leaving every impression they fully intend on bleeding the public for every dollar they can even after spending $450 million of their money on a stadium a good percentage may never visit.
Ah yes, that $450 million price tag again, the exact figure the Yankees are on the hook for. The public is paying that much, the city could incur costs of $320 million, and the baseball club won’t even have to pay for half of the building when they’ll generate billions of dollars in revenue from it. And the absolute, terrifically best part of that??
As many as 29 other MLB clubs get to pay for 40% of that!!
Because the Yankees can put a $450 million debt on their FIQ, they fall from a Payor Club (a team that makes has a large profit) to a Payee Club (teams with thinner bottom lines). This means that all the money the Yankees have put into the RSP thanks to the “Luxury Tax” could be right back in their pockets. The money the Yanks have been contributing since ’02 go into a Central Fund, and as their payroll has soared, so have their payments. Now they stand to get $180 million (roughly 40%) of it back thanks to being grossly in debt.
Of course the Central Fund isn’t made up completely of New York money. All teams pay into the Central Fund, no matter if they’re the Angels or the Royals. The teams that fall under the “average” operating cost (what each teams spends) get their money back plus the difference between their cash and the average. The average changes every year, but the Yankees have paid more than $60 million each season since ’02. In contrast, a team like the Royals will see an extra $30 million thanks to owner David Glass’ cheapskate ways.
That’s not all of it, though, since there’s also the luxury tax that the Yanks have the dubious honour of being the only four-time payer of. On average, they’ve paid $25 million, until recently when that figure skyrocketed to $40 million thanks to being over the limit (which is excessive in itself) so often.
All that money, over all this time, has either been handed out to the Twins and Brewers of the MLB world, or collecting dust in the Central Fund. Well now thanks to being an extra $450 million in the hole, MLB is going to hand George Steinbrenner a cheque for $180 million thanks to being even lower than the Marlins on the “average” scale. Every owner, of course, realizes the Yankees will make up that figure – most likely two or three times over – by the time New Yankee Stadium opens in ’09, but the contract they signed means all they can do is sit and grumble until they decide the stipulations for the next CBA.
The Yankee’s cross-town rivals are, of course, building a new stadium of their own. The Mets new home, however, will come in with a cost of $610 million while the team will pick up $420 million of that bill. They, like the Yankees, will benefit from the flawed CBA which sees already financially-strapped teams in outdated stadiums like the Twins and A’s paying for two new digs in New York because they can’t come up with the cash to cover the difference for their own new homes.
In the end, it’s just another attraction in Bud Selig’s MLB Circus. Too bad half the league can’t afford the admission.