As Zimbalist correctly observed on BP Radio, I'm a journalist, not an
economist--though I do consult with economists and other sports business
experts on a regular basis, to check both my reasoning and my Excel
skills. That said, he's an economist, not a journalist, and may not have
all the information on the nuances of the New York stadium deals. So I've
spent the last couple of weeks digging through the public record, and the
not-so-public record, to clear up the facts of the matter. The result is
going to take a bit to explain and will delve in places into economic
minutiae, but try to keep your eyes from glazing over for just the next
few minutes--this is worth getting right, not just for the sake of New
York taxpayers, but because it's an excellent lesson in the difficulties
of ferreting out the true costs of modern stadium deals.
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Who pays for a new ballpark for the Yankees? Zimbalist breaks it down.
DeMause's sarcasm is unjustified, as are his estimates. Let me try to set the record straight. In my January 22 op-ed, I argued that after accounting for a $44 million tax break, the Yankees would be covering $756 million out of a total expense of $1.01 billion for the project. The balance of the project would be spent on infrastructure and covered by the public sector (city and state). Overall, the Yankees would be paying 75 percent of the total project costs.
In fact, because the state's contribution of $70 million for parking garages would be repaid from the parking receipts (or indirectly via a subcontracting deal), the public outlay would be lower. Furthermore, the city will be able to sell off memorabilia from the present Yankee Stadium, which will lower its net costs.
As noted in my last column, operating losses account for only $232 million of the $519 million Major League Baseball claims to have lost in 2001. Another $112,491,000 represents net interest expenses. Here's how the interest was distributed.
As noted in my last column, operating losses account for only $232 million of the $519 million Major League Baseball claims to have lost in 2001. Another $112,491,000 represents net interest expenses. Here's how the interest was distributed:
The positive figures are no surprise. Every club--well, every one but the Expos--starts the season with an eight-figure bank balance, thanks to advance sales of luxury boxes, season tickets, and single-game seats. By the time the players start to collect their salaries, this money has been earning interest for months.
Thus, to estimate the interest actually paid by the other clubs, their reported interest expenses must be adjusted to reflect the offsetting interest income. This presupposes, of course, that interest earned on season tickets and luxury boxes is actually reported on the team's balance sheet... which doesn't appear to be the case for the Boston Red Sox. It's hard to imagine how the Red Sox, a club with no long-term debt, could have netted just $51,000 interest on local revenues of more than $150 million.
Since the two Chicago teams reported the most interest income, I'll use the average of their effective interest rates to estimate the total interest received by all 30 clubs. The Cubs earned 3.59% interest ($4,665,000 on total operating revenues of $129,774,000); the White Sox 2.03% ($2,263,000 on $111,682,000), for an average of 2.81%. Multiplying this rate by MLB's gross revenues of $3,547,876,000 yields an estimate of almost exactly $100 million in interest revenue--$99,695,000, to be precise. Since MLB reported net interest expense of $112,491,000, the 30 clubs paid more than $210 million in interest during 2001.
The black hole of MLB's financial disclosures is titled "National and
Other Local Expenses." This category includes all operating expenses
other than those associated with players on the 40-man roster. Legitimate
expenses in this category include salaries for managers, coaches, and
scouts; signing bonuses for draftees and foreign free agents; the farm
system; stadium expenses; front-office payrolls; and the cost of operating
Major League Baseball's central office in New York.
Except for stadium expenses, these categories are largely the same from club
to club. Everyone has about the same number of coaches, maintains the same
number of minor league teams, and contributes the same to keep MLB's lawyers,
lobbyists, and PR people working overtime to undo the damage created by
Commissioner Bud Selig's every utterance. But as the table below shows, some
teams spend twice as much as others to perform the same tasks.