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Business of Baseball Report

by Brian Borawski
June 28, 2006

Washington, D.C. Stadium Saga Drags On

The latest culprit in the Washington, D.C. stadium story is the D.C. Zoning Commission. The commission is criticizing the city's proposal to build two parking garages along with condominiums and retail near the stadium, and they’ve pushed back the date that they’ll give their approval until July 6, 2006. Clark Construction, who is leading the ballpark construction team, broke ground in May, but the company's held off on performing major excavations and construction work until the zoning commission gives the thumbs up.

In the meantime, officials working for the Washington Nationals' new ownership group are quietly whispering in the city council’s ears that they agreed to have the stadium ready by opening day in 2008. To accommodate this timetable, the city is hoping the commission will approve a second plan as well. This plan will call for just parking and will allow the whole project to move forward without the need to develop the surrounding area.

Pirates CEO Says Team Is Not For Sale

As of Tuesday afternoon, the Pittsburgh Pirates were mired in an 11-game losing streak. The media have been questioning how the team has spent its revenue-sharing dollars, and now rumors abound that CEO and managing general partner Kevin McClatchy is going to sell his stake in the team after the All-Star Game.

McClatchy has now come out and said that there will be no ownership change. Call me a skeptic, but whenever someone definitively says something like that, the first thing I think of is, “there’s going to be an ownership change.” He has a contract to be the team’s CEO that expires at the end of the year. After that, he says he’ll explore his options. As it stands, McClatchy controls 40% of the board of directors' vote. Members of the Nutting family, who initiated the most recent ownership change back in 1996, control 40% of the board and there’s speculation that they could be a potential buyer for McClatchy’s stake in the team.

Time Warner Continues to Negotiate With Liberty Media Over Braves Sale

With the next MLB ownership meeting coming up in early August, there’s speculation that one thing that won’t be voted on is Time Warner’s sale of the Atlanta Braves. It looks like it’s come down to one potential buyer, Colorado-based Liberty Media, because Time Warner has pretty much shut out any other offers over the last two months. Unfortunately, a deal hasn't quite been ironed out. If the two sides can agree on a deal and get approval by that August owners’ meeting, then it’s probable that the sale could close by the end of the year. If it doesn’t, then it will most likely drag out into the offseason. This could potentially leave the team in a tight spot during the free agency season, although it appears that Liberty are going to retain the current executives of the team.

The big issue is tax structuring. Both sides are trying to work a deal that would allow them to defer tax on any gain from both the sale of the team and the Time Warner stock that Liberty Media will use to buy the team. For a great look at the tax ramifications and machinations, you can check out Maury Brown’s latest column over at Baseball Prospectus. He lays it all out with diagrams and a great narrative.

Steroid Investigation About to Get Nasty

Former senator George Mitchell has asked MLB Commissioner Bud Selig to give him a hammer in the current investigation of the use of performance-enhancing drugs. As it stands, Mitchell has absolutely no authority to discipline anyone, but he’s asked Selig to serve sanctions on any of the team’s employees who don’t cooperate with Mitchell’s investigation. So in the event that an employee refuses to a request to be interviewed, Mitchell would pass the person’s name on to Selig, who would then be responsible for the discipline. This could include a fine or even termination of employment.

Selig hasn’t said anything on this subject, nor has he commented on the investigation. There’s speculation that he won’t be handing out pink slips right away though but the threat of some employees losing their job is definitely there.

Tribune Could Cash in on Sale of Cubs

The Cubs haven’t won a World Series since 1908 and they haven’t even been in a World Series since 1945. Neither of these two facts has stopped the team from being one of the most valuable in the league, and as the team's owner, the Tribune Company, remains under pressure from shareholders to sell the team, we might finally get to see exactly how much the team is worth.

Experts have pegged the value of the Cubs between $450 and $550 million. Even if the team sold for “only” $450, that would still place it in at least the top six teams as far as franchise value. One concern, similar to the sale of the Braves, is taxes. Tribune bought the team for $20.5 million and if the team was sold, they’d have to pay tax on any gain. Unless they can find someone who has 1.5 million shares of Tribune lying around to exchange for the Cubs, or even better, another tax loophole, you’ll see about a third of those proceeds go to the Internal Revenue Service.

Brian Borawski is a member of SABR's Business of Baseball Committee and writes about the Detroit Tigers at his own website, TigerBlog. He welcomes comments, questions and suggestions via e-mail.

Do you have a general question or comment for one of THT's writers? Send it in to our weekly mailbag We also welcome unsolicited op-ed pieces of approximately 500 words for consideration. We reserve the right to edit for length, clarity and consistency of style. Please include your whole name and location to be considered. If you have a comment about this specific article, please email the writer.

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