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THE STATE OF THE GAME

What Ruth Built, Let George Tear Asunder
By Neil deMause

For anyone who's grown up a Yankee fan in the last twenty years or so, it's become normalized, a constant background hum that underlies every trip to the Bronx. Every couple of years, like clockwork, George Steinbrenner makes headlines by declaring it's time for his team to abandon the House That Ruth Built for new digs elsewhere in the tristate region.

In the mid-1980s, it was Lakehurst, New Jersey, best known as the place the Hindenburg went to die. After that, it was Macombs Dam Park, a set of public ball fields across the street from the current stadium. In the 1990s, when Rudy Giuliani reigned, there was talk of a grand domed spectacular suspended over railyards on Manhattan's West Side. And finally, in a parting gift from Giuliani, it was back to Macombs Dam Park, with Rudy smiling alongside George over a scale model of a retractable-roofed stadium on his last weekend before departing Gracie Mansion.

All of these plans were announced with much fanfare. None made it past the drawing boards. New Jersey voters defeated a referendum to raise tax money for a new stadium; the New York city council was so appalled by Giuliani's Manhattan plan that it wrote and passed its own budget over the mayor's veto, for the first time in recorded history. As for Rudy's final gambit, it was quickly quashed by his successor, Mayor Michael Bloomberg, who declared that "the priorities at the moment do not allow for the construction of new sports stadiums." (Bloomberg's priorities did, however, allow for the continuation of a $25 million Giuliani grant to the Yankees—and one of equal value to the Mets—for "design and planning" of new venues.)

It would have been just business as usual, then, when Crain's first leaked word this July that Steinbrenner was again preparing a new stadium plan for Macombs Dam Park, to be officially issued in coming months. It would have been, but for one startling development: this time, Steinbrenner would be offering to pay the entire $750 million construction cost—lock, stock, and luxury box—out of his own pocket.

Newspaper columnists, even those who normally turn a jaundiced pen on the city's numerous stadium plans, leaped to sing the Boss's praises—the Daily News' Mike Lupica devoted an entire column to trash-talking the Jets for demanding public stadium aid when the Yankees were prepared to go it alone. That Steinbrenner, like the Jets, would be requesting taxpayer aid for "infrastructure"—between $300 million and $400 million, according to early reports—didn't temper the praise: George was finally opening his wallet, and isn't that all we could ask?

So what has produced this change of—you'll excuse the term, given that it's Steinbrenner—heart? Clearly, twenty years of beating his head against the brick wall of city bureaucracy has shaken something loose in the owner's head, as has the San Francisco Giants' success at turning Your Bank Name Here Ballpark into a financial and fan success, despite minimal public subsidies.

What has really changed, though, is the financial structure of baseball. When the owners and players finally settled on a new collective bargaining agreement on August 30, 2002, forestalling a strike that had seemed all but certain, one of the key provisions was an expanded revenue-sharing system among rival clubs: henceforth, on each new dollar earned, about forty cents would be sent back to the league for redistribution to other teams. And while, in general, revenue-sharing payments were to be paid on gross revenue, not net—no deducting (as Steinbrenner has done) that $20 million payment to yourself for negotiating your own cable deal, in other words—teams would be allowed to deduct "stadium operations costs," including debt payments on construction bonds.

Nobody noticed it at the time, but this was a huge bombshell in the world of stadium finance—in effect, an enormous "tax break" for spending private funds on stadium construction. The St. Louis Cardinals were apparently the first to take advantage of it: within months of the new CBA, Cards management was offering to shoulder two-thirds of the cost of a new $387 million stadium—without mentioning that by doing so, they'd be reducing their revenue-sharing payments to the rest of the league by about $6 million a year.

As far as taking advantage of the new revenue-sharing deduction, though, Steinbrenner's plan would dwarf that of the Cardinals. By spending $750 million on a new stadium, the Yankees would reduce their reported revenue by about $40 million a year; multiply this amount by their 39 percent revenue-sharing "bracket," and you get an annual revenue-sharing break of $15 million. Over time, about $300 million worth of Steinbrenner's new pleasure palace would come straight out of the pockets of the other twenty-nine teams.

The implications of all this for baseball are staggering, and a bit of a mixed bag for fans. First off, the fact that the revenue-sharing plan encourages private spending would be a huge boon to taxpayers—the Cardinals' new stadium will be only the second ballpark in the last forty years to be funded primarily through private sources, and the new CBA no doubt deserves much of the credit.

For fans of baseball's few remaining historic ballparks, however, the Steinbrenner dodge could be a disaster. Because while it creates an incentive for owners to fund new stadiums with their own money, it also creates a huge new incentive to subject old parks to the wrecking ball.

A simple thought experiment shows why. Say a team—let's call them the Red Sox—is weighing renovations to its existing park versus building anew. Suppose that the Red Sox have crunched the numbers for the two options and determined that they can either spend $50 million on renovations that would, over time, bring in $100 million in new revenue, or spend $500 million on a new stadium that would bring in $400 million in new revenue. Easy choice, right? Renovations make a moderate profit; building anew turns a large loss; so renovation wins out.

Now let's apply the revenue-sharing deduction and see what happens. The $50 million in renovation now creates a $20 million revenue-sharing savings, meaning the effective cost to the Sox is $30 million; new revenue remains the same, so profits from renovation are now $70 million. Meanwhile, the $500 million build-new option creates a $200 million deduction, so its effective cost is $300 million; new revenue remains $400 million, so building anew now turns a $100 million profit. Suddenly a new stadium means a bigger profit, even though, in pure economic terms, it would be a money loser.

Since baseball's new stadium boom began in 1989 with Toronto's Sky-Dome, most of the sport's "classic" ballparks have either been demolished or abandoned: Comiskey Park, Memorial Stadium, Cleveland Municipal Stadium, Tiger Stadium, Candlestick Park, County Stadium. Those few that remain—Fenway Park, Wrigley Field, Yankee Stadium, and Dodger Stadium—have survived mostly because the teams that play in them have decided, reluctantly at times, that if they could keep packing fans into the old buildings, it wasn't worth the tremendous costs of building anew. Fenway Park, in particular, came perilously close to the wrecking ball in 2000, only to have plans for a replacement falter when local banks insisted that the potential new revenue wasn't enough to pay off the new debt. Today, with the revenue-sharing breaks to be had, those same banks might say: Go ahead, bring on the bulldozers.

It's a dangerous moment for classic ballparks, as the four remaining holdouts to the mallpark boom are all publicly mulling tearing down and starting fresh. Wrigley Field was recently granted city landmark status, but after this summer's falling concrete incidents, the once-unthinkable talk has begun around Chicago of whether the Tribune Corp. would be better off razing Wrigley for more luxury-box-friendly confines. The former owners of the Dodgers had floated the idea of tearing down Dodger Stadium before selling out to Frank McCourt—perhaps ominously, a Boston-based real estate developer. And while John Henry has given every indication of going full-speed ahead with more modest renovations to Fenway Park—a couple thousand seats here, a couple thousand there, along the lines of the relatively unobtrusive additions already made atop the right field roof and the Green Monster—it's hard to see how he could long resist the lure of luxury suites coupled with a huge revenue-sharing windfall, especially when his hated AL East rivals were already availing themselves of it.

None of these parks, nor Yankee Stadium itself, is doomed just yet. Even at sixty cents on the dollar, new stadiums remain staggeringly expensive to build—and nearly impossible to make work without appeals for public cash. It will be interesting to see if the rave reviews continue for Steinbrenner's plan once that $400 million in public "infrastructure" cash hits the city council docket. Moreover, the remaining owners, those who'd be footing the bill for their rivals' new parks, could yet revolt and eliminate the construction-debt deduction when the next CBA is negotiated in 2006.

If not, though, baseball's attempts to level the playing field between teams could end up creating a windfall for rich teams at the expense of their less-rich competitors—and destroy much of baseball's remaining heritage in the process. In the long, sad history of baseball ownership, that could be the bitterest irony yet.

—EFQ

 

NEIL deMAUSE is co-author of the book Field of Schemes and maintains the website fieldofschemes.com.

© 2004 Neil deMause

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