Business of Baseball Reportby Brian Borawski
June 29, 2005
Yankees' New Stadium Creates Revenue-Sharing Bonus
George Steinbrenner and the New York Yankees' revenue-sharing bill last year was $63 million. This year the number is anticipated to be between $63 and $68 million. When you top this number off with a projected $30.6 million competitive-balance tax, the Yankees will be parting ways with close to $100 million dollars, most of which will go to other teams, while a large piece going to the league’s offices.
In March, Steinbrenner said he was tired of a league that had basically turned into a socialist state, and now he’s taking matters into his hands. By building his new $800 million-stadium, Steinbrenner will be able to, once the stadium opens, take the costs incurred as a deduction over 40 years against his revenue when determining revenue sharing. In effect, Steinbrenner is basically building his own tax deduction.
Under the current collective bargaining agreement, teams’ revenues are taxed at a rate of 34%. One of the things they’re allowed to deduct are stadium expenses. Whether this provision escapes the next round of negotiations (the collective bargaining agreement expires at the end of the 2006 season) is something to keep an eye on. And whether this has a significant effect on the Yankees' revenue-sharing payments or not even once the stadium is built is open to question, because one would expect the team's revenue to go up once the new stadium is completed.
Cardinals Working on Radio Deal
For the past 52 years, KMOX (AM 1120) has carried St. Louis Cardinals games on the radio. That streak appears to be in jeopardy as KMOX has pulled the Cardinals' bid off of the table, as the team was contemplating whether it would make more sense to work a different deal with KTRS (AM 550). Under the current arrangement with KMOX, the Cardinals are paid a set “rights fee.” If they were to move to KTRS, they would basically be buying into the radio station, selling their own advertising and gearing much of the content around the team.
Cardinals' fans appear to be the big losers in all of this. KMOX has a much better range at night, so fans in the outlying metro areas could lose their broadcast if the Cardinals ultimately decide to make the switch.
New D.C. Tax Confuses Business Owners
A major provision of the Washington Nationals' stadium bill revolved around a new business tax on companies that have gross receipts of more than $5 million in a year. The first installment of that tax was initially due on June 15, and some business owners aren’t happy with their bill. Many feel it’s an unfair subsidy to MLB and some are even considering moving their businesses into nearby Maryland.
Another gripe is that the tax caps out at $16,500 for business which gross $16 million or more and is viewed as putting an unfair burden on smaller companies. It doesn’t matter if you have a business that has revenue of $16 million or $16 billion because those two companies would pay the same amount of tax.
Washington, D.C. Land Grab
Late last week, the United States Supreme Court ruled that local governments can force property owners to sell their property to make way for private development when the decision to do so benefits the public. I won't get into the political aspects (which could be the topic of an entire column) of the decision, but it definitely has Washington, D.C. politicians simply salivating.
The decision now gives D.C. political leaders fairly broad powers to seize private property for two somewhat controversial projects, one of which is the Washington Nationals' future home. D.C. will soon be trying to acquire 14 acres of land near the Anacostia River waterfront so they can begin construction of the new stadium, and this decision will allow them to simply take it for a fair price without the consent of the present owner.
The big question that will most likely be litigated if D.C. uses this new court case to “acquire” the land will be whether a ballpark actually benefits the public. In last week’s report, we saw the point man for the Twins' proposed stadium plan come out and say that a ballpark won’t help the local economy, and there are plenty of studies that back up this point.
Billionaire financier George Soros put his money into the pot of one of the groups trying to purchase the Washington Nationals from Major League Baseball. George Soros is also a Democratic supporter and spent nearly $20 million to try to get a Democratic candidate voted in over George Bush. Now congressional Republicans are threatening to take MLB’s antitrust exemption away from them if Soros’ team wins the bid.
Whether you’re a Democrat or a Republican, this just stinks. The politicians stuck their noses into baseball’s business with the steroid show earlier in the year, and now this? My hope is this just goes away.
Los Angeles Angels Live
These things rarely go away, and the whole “Los Angeles Angels of Anaheim” debate rages on. The ballclub once again scored a victory when the Fourth District Court of Appeal upheld the same decision made by an Orange County superior court judge to deny Anaheim’s preliminary injunction that would prevent the team from using “Los Angeles” in the team's name.
This thing won’t be settled until November when the two sides get their day in court. My personal opinion is that the city of Anaheim will lose the war; hoewever, we’ve seen with even the higher courts today that sometimes their decisions just don’t make sense.
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.
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