Monthly Archives: May 2008
Circumstances have allowed me to move my planned trip to Nationals Park from August to June. Along with DC, I’ll be traveling north to take in games at Baltimore’s Camden Yards, Philadelphia’s Citizens Bank Park, Yankee Stadium, and Fenway Park. If time allows, I’ll be heading with some friends to Cooperstown as well. The trip is planned for June 19-29.
Here’s the tentative schedule I’ve planned:
- June 19: Nationals Park tour; Pirates vs. Orioles @ Camden Yards
- June 20: Angels vs. Phillies @ Citizens Bank Park
- June 22: Reds vs. Yankees @ Yankee Stadium
- June 23: Baseball Hall of Fame
- June 25: Diamondbacks vs. Red Sox @ Fenway Park + tour
- June 27: Orioles vs. Nationals @ Nationals Park
I’ve been to all of the cities before and all of the ballparks except for DC and Philly, but not in a quasi-academic capacity. If possible, I’ll try to get inside looks at both the new Yankee Stadium and CitiField. I’m not taking in a game at Shea, I figure once is enough.
Any suggestions for other baseball/sports-related places or events? FWIW I’m trying to cram in the NBA Draft (June 26) into the trip. I went to the 2003 (Lebron James) draft, and it was great pageantry. I’d love to do the NFL draft at some point too.
Wow, was that frustrating. Consider this: the Tampa Bay Rays are trying to do much the same thing the A’s are doing except for the following:
- Over half of the stadium will be publicly financed
- The public part is largely dependent on valuations and revenue streams that are not even close to guaranteed
- There are contributions from both St. Petersburg and Pinellas County, thus requiring approvals from both parties
- The Rays are trying to cram the whole approval process into 6-8 months
- There is a referendum in November
I have to say I appreciate the Rays’ positioning of several public sources of revenue (sale of land and development rights, parking revenues) as not public. It’s cagey and if the St. Petersburg City Council were born yesterday, they may have bought it. Instead, they’re chock full of questions for city staff and team officials that alas, couldn’t be answered.
The key part of the deal at this point is the shuffling of parking revenue from some 4,000 parking spaces in and around the downtown St. Pete area, within 3/4 mile of the ballpark site. Follow me on this. The Rays prepay a long-term lease on 2,000+ spaces downtown. The city takes that money and contributes that towards ballpark construction, around $35 million. There are also suggestions that a $1 parking fee be charged during games to create another $20 million for the project. Out of this discussion came concerns that there weren’t enough spaces to handle this revenue model, and that the city would be liable if there were a parking revenue shortfall.
I don’t understand why this thing is being rushed through like this. I’d like to give Rays’ owner Stuart Sternberg the benefit of the doubt, but too often important details are missed when the process is rushed like this. Fremont and the A’s are devoting the better part of two years to their project, this one merits a timeframe approaching that.
At least I got one thing out of the three-hour session, courtesy of councilmember Jeff Danner:
A lot of what I hear is “All you have to do is put out the referendum and let the people decide.” But that’s gonna be two questions, fifty words, and I’ve got a stack a foot high of what we’re deciding. We’re expected to do a lot more than that.
I’ve never heard a more effective argument against ballot box planning.
Last night the San Jose City Council approved the first part of the Earthquakes’ stadium development plan. The stadium/hotel/office/retail project will be built on the old FMC property west of Mineta San Jose International Airport, along Coleman Avenue. Financing the stadium is still tied to the second part of the project, a residential development at the iStar property in San Jose. There’s an interesting admission by one SJ official:
Paul Krutko, the city’s economic development director, said the hotel, retail and office project would go through regardless of whether a stadium gets built.
I’m off to the businessperson’s special.
Ann Killion’s latest column on the demise of Peter Magowan has a little info on his successor, William Neukom. Not surprisingly, Neukom maintained the status quo:
Neukom was also adamant that nothing will change with the Giants’ position on territorial rights, so the notion that Magowan’s departure will hasten the A’s move to Santa Clara County is a false one. He said that it’s a significant part of the rights package that makes up the value of the franchise.
I don’t think it’s a stretch to say that the Giants would have to be major financial straits for territorial rights to become an issue. Will that happen? I doubt it.
In November 2005, Gwen Knapp wrotewhat many called a tongue-in-cheek article about the A’s trading Barry Zito to the Giants for the territorial rights to San Jose. How ironic it must be now that the Giants, facing dwindling attendance and sizable debt loads (one of which is Zito), may very well entertain such a concept. Mark Purdy is back drumming up San Jose again. We’ll see if it goes any further from there.
Before I get into the transaction, it’s important to set the table. According to Cot’s, Zito is owed $101.5 million on his contract after this season, which includes the $7 million buyout for the 2014 season. If for whatever reason he’s kept on the team, his salary is $14 million, bumping the remainder to $108.5 million. The Giants also supposedly have a mortgage payment of $20 million per year until 2017, with no way to pay it off early.
That doesn’t mean the Giants are taking on water. Thanks to tax rules they can write off Zito’s contract. They can write off the stadium in a similar manner. And they have the “actual stadium expenses” deduction as part of revenue sharing to soften the blow there too. That isn’t to say it’s a dollar-for-dollar write-off, it’s more like 40-50 cents on the dollar. For argument’s sake let’s say that it’s on the higher side. That puts the combined Zito-ballpark hurt at $19 million.
The Giants are also down 4,500 per game in paid attendance. Project that dropoff over the course of the season, and they’re down $11 million in revenue ($35 x 4,500 x 81 games). From the looks of the TV broadcasts, it’s far worse with what appear to be at least another 5,000 no-shows per game. That translates to another $5 million or so in lost concessions revenue through the end of the season. Revenue-wise that puts the Giants $16 million off from last year.
To compensate for the revenue drop, the Giants dropped payroll from $90.2 million last season to $76.6 million this season, a drop of $13.6 million. That doesn’t quite make up for the shortfall, but it’s close. In other words, they planned for this drop-off reasonably well. According to Forbes they made almost $20 million in profitlast season. It’s hard to say how much that will drop due to the switch from KTVU to KNTV, or Bonds’ departure for that matter. The new 30% stake in CSNBA allows for the Giants to potentially hide some revenue from revenue sharing. For this season, they should be fine. Multiple years of under .500 teams will not look kindly on the Giants’ ledgers, and their profits should drop significantly.
How to ease the burden? In my last post, I noted that the Bay Area is the only two-team market that is split, not shared. It’s also the only market in which one team is a net payer into the revenue sharing system (Giants), while the other is a net payee/receiver (A’s). It’s been reported that the A’s received anywhere from $12-20 million each year for the past several years, amounts that have allowed them to be profitable while escalating salaries. It can be argued that the Giants are directly paying the A’s their revenue sharing receipt. Ted Robinson noted on his MSNBC blog that neither Giants nor the traditionally big market teams are happy about the baseball welfare state.
The simple solution, then, would be for the A’s to give some of their revenue sharing receipt to the Giants. It could start at a minimum, around $15 million. Any amount above that could either go to the A’s or be split between the two teams. $15 million would go a long way towards easing Giants ownership’s concerns about the “unfair” aspects of revenue sharing, while also largely taking care of the ongoing, long-term debt burden. This adjunct to the revenue sharing agreement would continue until the A’s completed construction of their new baseball stadium in San Jose, probably in 2012 or later due to the land acquisition costs at the Diridon South site and negotiations that need to be done with PG&E to move the substation there. If you’re wondering, part of the site has already been cleared. Once all of the land has been acquired (not through eminent domain – that’s been ruled out), the A’s could conceivably start building thanks to the already certified EIR (some changes would have to be made to accommodate the smaller ballpark size). Surprisingly, even after the stadium’s built, there’s a decent possibility that the A’s would continue to get revenue sharing if their TV contract situation doesn’t improve. That smaller check could also go to the Giants until 2017. Total revenue sharing rebate for the Giants: $90 million over ten years($15 million per year from 2008-11, $5 million per year from 2012-17).
The A’s would, of course, take a major hit to their revenue. However, the way the revenue sharing is conducted, with payments and receipts occurring well after the season ends, the A’s see less benefit than if they had the money up front. Receipts are meant to be reinvested in the club, but as we have seen with the Marlins and Twins in recent years, that isn’t always the case. To compensate for the drop in revenue, the A’s would have to keep payroll low as long as they remained at the Coliseum. It could even drop well below the current $48 million level depending on which players the Billy Beane decides to retain. The $30 million drop in payroll this season, combined with the major drop in attendance, could translate into a $20 million revenue sharing check.
Beyond the day-to-day operations of the club, there still remain several questions:
- What about Fremont? This is where it gets dicey. Although the area columnists like to say that nothing’s a done deal until the A’s break ground, it’s a lot more complex than that. The A’s have invested in nearly $200 million worth of land that, if the ballpark isn’t built there, will remain industrially zoned. They could move forward with plans to build up to 4 million square feet of office originally intended for Pacific Commons. They could also go with an alternative that could be mapped out in the EIR: the lifestyle center in Fremont, but surrounded by office/industrial instead of residential. The residential portion of the lifestyle center could stay or go. Fremont gets the lifestyle center but without the ballpark. Pros for Fremont: little infrastructure cost, less environmental and political opposition. Cons: No name recognition, less bang-for-buck appeal, the appearance of having been used as a stepping stone for San Jose. As for the A’s, the problem with this is simple: they can’t use this plan to finance the ballpark, at least not much of it.
- Is San Jose ready? No, not even close. They have a certified EIR, which is a big step. But they stopped with land acquisition proceedings and the prices are only going to go up. San Jose would have to sell the portion they’ve already acquired to the A’s, which is good for the city’s budget. The A’s would be on their own to do the rest. The city’s issue would be the renewed political squabbling that an impending deal would cause, especially neighborhood outcry. A lawsuit would seem possible if not altogether likely. The city could also buy the remaining land and lease it to the A’s for cheap, similar to what S.F. has done with China Basin for the Giants. That would be harder to accomplish because of limited resources and budget constraints.
- How much would it cost? Fortunately for the A’s, there are a dozen landowners instead of dozens. Still, it’ll cost somewhere in the neighborhood of $100 million unless they are leased the land. Added onto that would be cost of the ballpark construction, currently $450 million and rising thanks to inflation and materials costs.
- How would it be financed? The only thing I can think of right away is development of the eight acres immediately in between the ballpark and the arena. The Sharks have already shown their opposition to a ballpark because it could reduce available parking, especially on nights when both venues are in operation. The A’s could combine multi-level parking facilities with residential development there. In the past I projected that they could only get 900 units out of the land because of height restrictions. That land already has a light rail tunnel running underneath it and a future planned BART tunnel, limiting the amount of available below-ground development. Perhaps they could funnel some of the revenues from the scaled down Fremont development if that’s approved, but I don’t see how the numbers would add up. There may be the possibility of the iStar development, which the A’s are using to finance the Quakes’ stadium, but I don’t know if taking a portion of that will make a big dent either.
It’s for those financial reasons immediately above that I still say San Jose’s a difficult proposition. In the end, these plans have to pencil out. In Fremont, it’s pretty straightforward. My money’s still on Fremont to be the future home of the A’s, though if that doesn’t pan out, it’s not hard to see what Plan B could be.
Today I was looking through my 539 blog posts for something offered a proper treatment of the territorial rights issue. Alas, there was no real explanation. So I’ll try to put it in fairly simple terms.
A team’s territory can also be considered its sales region. Most national companies that have local branches or a remote sales staff follow a similar construct: they sell and advertise to customers within a defined area or region.
Two types of territorial rights exist, those for siting a stadium and those for broadcasting. The dynamics couldn’t be more different. Site placement tends to be determined by placing a stadium in the center of a large, dense population base. Historical matters come into play, as do peripheral factors such as transportation and civic redevelopment plans.
Attendance of a team’s games is active, as opposed to broadcasts, which are passive. Regular attendance is primarily limited to those within a fairly tight radius, 18-20 miles from the stadium. However, a team’s territory isn’t defined by this radius. Instead, it’s often defined by specific counties within a team’s market.
A team’s broadcast territory is usually much larger due to the nature of over-the-air broadcasting. A VHF TV signal can cover at least a 50-mile radius around it. High power, clear channel AM stations (like KNBR) can reach numerous states and hundreds of miles at night. The definition has evolved to include coverage of regional sports networks, which are carried by local cable franchises and direct broadcast satellite.
Most large cities are well separated from other large cities, allowing teams to set up virtual monopolies within their markets. The notable exceptions to this are the two team markets: New York City, Chicago, Los Angeles, Washington-Baltimore, and the Bay Area. Check out the circa-1999 rules noted by the late Doug Pappas:
- The Orioles’ territory includes Anne Arundel, Howard, Carroll and Harford Counties in Maryland
- The Marlins’ major league territory includes Palm Beach County
- The Dodgers’ and Angels’ territory includes Orange, Ventura and Los Angeles Counties
- The Yankees’ and Mets’ territory includes New York City, plus Nassau, Suffolk, Westchester and Rockland Counties in New York; Fairfield County south of I-84 and west of SR 58 in Connecticut; and Bergen, Hudson, Essex and Union Counties in New Jersey
- The Athletics’ territory includes Alameda and Contra Costa Counties
- The Phillies’ territory includes Gloucester, Camden and Burlington Counties in New Jersey
- The Giants’ territory includes San Francisco, San Mateo, Santa Cruz, Monterey and Marin Counties, plus Santa Clara County with respect to another major league team
The rules have changed to reflect the Expos’ move to DC. Other than that, they haven’t changed at all. Yet one oddity remains in that the A’s and Giants have the only market that is split, not shared.
So by that count that gives the Giants seven counties (4.5 million population), while the A’s have two (2.5 million population). The most widely circulated explanation for this is the Giants, when they pursued a stadium in Santa Clara or San Jose in the late 80′s/early 90′s, had no outright claim to Santa Clara County, which was effectively up for grabs. Then owner Bob Lurie asked A’s owner Wally Haas for the rights to Santa Clara County. The change was granted by Haas, the commish, and the other owners. Subsequently, both stadium initiatives in the South Bay failed. Lurie held onto Santa Clara County’s territorial rights even as he moved his attention to St. Petersburg. The A’s were in the midst of a great run of on-field success and record attendance. Santa Clara County’s rights couldn’t have been further from Wally Haas’s mind. The rest is well-chronicled history.
The A’s, always the scruffy, overlooked team, have a decidedly adverse stadium and financial situation compared to many of their brethren. Who knew the Silicon Valley, fresh off recession and the closure of numerous defense contractors, would explode the way it did during the dot-com boom? That even after the bust, its economy would stay robust due to the continuing strength of tech stalwarts and the culling of the internet company herd? That it would become this desirable?
Territorial rights typically aren’t challenged, well, because there’s no need. Since most of the teams are already resident within exclusive markets, there’s no competition. Only NYC has the capability to hold another team, and while some teams have considered moving there, such a move has never been a serious threat. When it comes to television, it’s been more of a struggle. Potential moves to Portland, San Antonio, and the Carolinas all face challenges due to pre-existing broadcast territories. The explanation for why territorial rights haven’t been challenged is quite simple. Challenges haven’t been needed. That’s the rub. Since they haven’t been challenged whether on an individual team basis or on principle, owners haven’t wanted to set that precedent. Neither has any commissioner. It strikes at one of the core tenets of baseball’s antitrust exemption. It’s that kind of thinking that has MLB backing the largest set of lobbyists in pro sports.
In the next post, I’ll propose a clean, simple way for the Giants to give Santa Clara County to the A’s. Clean and simple? Really? Yes.
Then I’ll explain why it probably won’t happen.