The Shell Game June 19, 2006

Thursday, February 01 2007 @ 03:58 am UTC

Contributed by: Staff

by Wilbur Miller

Pirate fans should take up a new slogan: “Show Me the Money.” The Pittsburgh Tribune-Review ran an article on June 18 discussing the Pirates’ take from revenue sharing, specifically asking the question, “Where is the money going?”

http://www.pittsburghlive.com/x/pittsburghtrib/sports/pirates/s_458555.html

It’s obviously a pertinent question, because the Basic Agreement provides that “each Club shall use its revenue sharing receipts (from the Base Plan, the Central Fund Component and the Commissioner’s Discretionary Fund) in an effort to improve its performance on the field.”

The question is especially relevant to the Pirates, because in 2006 they’ll be receiving $34.5M in central fund revenues and another $25M in revenue sharing proceeds, for a total of $59.5M before a single fan comes through the turnstiles. In spite of this, their season-opening payroll was only $46.7M. A flagrant violation of the Basic Agreement, isn’t it? Or not. According to the Trib article, MLB maintains the Pirates are in full compliance. The explanation is, uh, vague. As far as I can tell from the article, the idea seems to be that the Pirates’ spending on major league payroll plus player development need only exceed the total amount of revenue sharing. Although Kevin McClatchy has often made vague assertions about the team’s spending on development, rest assured, there are limits to what can be spent in that area. According to MLB, the Pirates spent $22.4M on development in 2003-05, an average of about $7.5M a year. It’s very unlikely they’ll spend much more than that in 2006, as they religiously follow MLB’s “recommended” (wink, wink) slot bonuses in the draft, so a generous estimate for 2006 might be $9M, for total spending on baseball talent of about $55.7M.

The $34.5M in central fund distributions is not entirely subject to the revenue sharing rules. The Basic Agreement includes a complicated formula for determining how much of it is, and I don’t have the information to figure it out. It’s probably safe to conclude, however, that at least a few million are not subject to those rules. Take a few million out of the total of $59.5M, and the Pirates’ total revenue sharing take probably drops slightly below the $55.7M or so that they’re spending on their on-field product. So they’re in compliance, according to MLB’s interpretation of the Basic Agreement.

But how much sense does that interpretation make? The agreement says recipients must spend their revenue sharing money in an effort to “improve” the on-field product. If you’re spending a certain amount on the team and your revenue sharing distribution then jumps, yet you end up simply spending the same amount or less, how is that an effort to “improve?” The entire justification for revenue sharing was to increase competitive balance by allowing lower-revenue teams to spend more on players. The obvious implication is that the revenue sharing distributions are to be added to what they’re spending out of their other sources of revenue. But according to MLB, that’s not required.

Just look at the Pirates. These are their payrolls for their six years in PNC Park:

2001: $52.6M

2002: $42.3M

2003: $54.8M

2004: $32.2M

2005: $38.1M

2006: $46.7M

Despite their much-ballyhooed “opening of the wallet” this year, the payroll is still only the third-highest in those six years. So are revenues dropping? Hardly. According to Baseball Prospectus, revenues for Major League Baseball Advanced Media, which produces the bulk of the central fund revenues, are projected to increase from $5M in 2000 and $30M in 2001, to an estimated $300M in 2006. The Pirates’ $34.5M share represents an almost entirely new source of income. It’s the same with revenue sharing. The Pirates’ $25M share is roughly a four-fold increase over 2003. So the vast majority of the Pirates’ $59.5M in outside income is revenue they didn’t have three years ago, yet the payroll remains lower than it was then, as well as being lower than the $59.5M bonanza itself.

Even if MLB’s interpretation of the Basic Agreement is correct, however, there remains the little matter of McClatchy’s breach of faith with the people who paid for his nice ballpark. At the time the funding for PNC was rammed through various governmental bodies, McClatchy claimed that the revenue streams generated by the ballpark would allow the team to maintain a competitive payroll. At the time the park opened, this was generally assumed to mean a payroll around $60M. That was before the Pirates started receiving their generous revenue sharing contribution from the Steinbrenners and the Henrys, and before the huge explosion in revenues from MLBAM and other central sources. Yet the team’s payroll remains below not only the $60M mark, but below what it was in the park’s first season. MLB’s, and McClatchy’s, claim that the team need only spend enough on payroll to cover its revenue sharing distributions is especially galling and duplicitous, because it effectively means that McClatchy sees no obligation whatsoever to spend any of his PNC-generated revenue on the team. Which, in turn, means he’s reneging on the promises he made in securing taxpayer funding to build the park.

McClatchy can’t have it both ways. If it’s the revenue sharing money that’s funding his payroll, then the money from PNC isn’t. Either way he’s a cheat and a fraud.


Onlybucs
http://onlybucs.net/home/article.php?story=20080128005840521