March 13, 2002
The Daily Prospectus
There He Goes Again
There is simply no perfect spring day that Bud Selig can't ruin.
Yesterday, Selig announced that he was going to begin enforcing a 27-year-old rule that had been ignored for, well, most of the last 27 years. According to the so-called "60-40" clause, teams cannot have debt higher than 40 percent of their asset value.
The sudden decision to enforce this rule, after allowing it lay dormant for years, affects two primary categories of teams: those with long-term contract commitments, and teams that have helped finance their own ballparks. Those teams--the ones who have invested the most in their product via acquiring talent and creating a fan-friendly environment--are the ones the Selig hates, because they do more than whine about their lot in life and demand that governments and players give them millions of dollars and guarantee their profits regardless of the caliber of their management. They take the bold step of spending money--yes, even borrowing it--knowing that the cash they lay out now will come back to them in higher revenues in the short term, and in a higher price when the franchise is inevitably sold.
Doug Pappas, whose series "The Numbers" here at Baseball Prospectus has laid out the many shenanigans of Selig and his cronies in assembling their financial data, had this to say about Selig's decision at his Web site:
"At best, this is one more example of Bud's arbitrary and selective enforcement of MLB's rules, retroactively punishing owners who've spent more on players than Bud would like. At worst, it's yet another grotesque case of Selig, he of the permanent conflict of interest, twisting the rules for his own benefit."
Loans between owners? A bad idea, unless Selig is involved. Realignment? A great idea, because it gets his team in the league he prefers. A charitable foundation wants to sell its most prized asset? Not to the highest bidder, because Bud doesn't like the highest bidder. Asset-to-debt ratio?
Back to Doug Pappas:
In 1995, Bud's Milwaukee Brewers were so far in debt they couldn't borrow money to contribute to the construction of their new park. Forbes estimated that as of the 1997 season, the Brewers' debt had risen to an incredible 97% of franchise value. Selig said nothing about the 60/40 rule.
Even the details of this plan are a joke. Selig plans to set the value of clubs at twice their revenues, a number presumably pulled from the same place as the rest of baseball's numbers.
Three teams--the Expos, Marlins, and Red Sox--were sold this winter. The Red Sox had revenues of $177 million in 2001, and were sold for $660 million. The Expos had revenues of $34 million, and were sold for $120 million. The Marlins has revenues of $60.5 million, and were sold for $158 million.
Setting the asset value of clubs at double revenues is vastly underestimating their worth. The formula appears designed solely to mesh with the underlying idea here: scare clubs into spending less on salaries, and away from privately-funded ballparks. Make every team like the Brewers: profitable thanks to the work of other organizations and a pliable statehouse, and damn the product on the field.
I have just about had it with Selig's mealy-mouthed, craven attempts to force another 1994. He has lied at every step of the way, relying on an increasingly skeptical media and--OK, I'll say it--an underinformed and often jealous fan base to ensure that public opinion remained on the side of his cartel.
Hasn't his basic thought process been revealed? Invest in your product, and you're the enemy. Better to get the money from 1) taxpayers and 2) ballplayers, no matter how many lies have to be told to get it.
Bud Selig has one goal, and one goal only: lowering labor costs. Not competitive balance, not the growth of the game, not a partnership with labor, and damn sure not "the fans." He wants a salary cap, or a reasonable facsimile, and he's more than willing to drive off the cliff to get it.
Go away, Bud. Go away before you do something that the good people in the game can't fix.