Selig: Some teams at break point

Selig: Some teams at break point

By RICHARD JUSTICE
Copyright 2002 Houston Chronicle
MILWAUKEE -- Baseball commissioner Bud Selig said today that his sport's debt problems have grown so severe that one team is in danger of being unable to pay its players next Monday when checks are scheduled to be distributed.

If it happens, that team likely would be forced out of business, thereby throwing baseball into turmoil at a time when the owners and players are engaged in increasingly angry labor negotiations.

Major league players typically are paid on the first and 15th of every month during the regular season, and next Monday, July 15th, is the next payroll day.

In addition, Selig said a second team is so deep in red ink it may not be able to finish the season.

Selig declined to name either team, saying he didn't want to put additional pressure on owners as they attempt to trade their highest-paid players and obtain loans that would allow them to stay in business.

However, he did say that unlike last winter when he arranged loans that kept "two or three" teams afloat, he has no choice but to allow the two clubs in question to fail.

"That's it," Selig said today in an interview with a small group of reporters in his downtown office. "I'm done. Major League Baseball's credit lines are at the maximum. We've done everything we can to help people by arranging credit lines. Frankly, at this point in time, we don't have that luxury anymore.

"If a club can't make it, I have to let 'em go. I'm a traditionalist, and I hate all that. It pains me to do it. I just don't have any more alternatives."

Industry sources have indicated that Selig arranged financing that may have kept the world champion Arizona Diamondbacks and Tampa Bay Devil Rays afloat last winter. He steadfastly refused to engage in speculation about which teams were in trouble now, except to say that the club in the greatest jeopardy "will surprise you."

While Selig steadfastly insisted no more financing is available, he also confirmed that some owners believe the players and their union won't believe the sport's financial problems are serious until a team or two winds up in bankruptcy.

However, he emphasized allowing a team to go out of business was not a bargaining chip in labor talks.

"I've been told that," he said, "but it's just not true. It would have enormous financial and legal implications for every team."

While the idea of a team failing during the regular season seems incomprehensible, Selig said baseball teams are carrying unprecedented debt loads.

Each major league team has a $72 million credit line through Major League Baseball, and Selig said "around 20 teams" have reached their limit. In addition, many teams have separate loans arranged through individual banks.

"Our total debt is $3.5-$3.6 billion," he said. "It's stunning. Right now, there's nowhere else to. Some clubs have enormous debt. Some of it is stadium debt, but it's still debt you have to pay off. There are teams in debt by hundreds of millions of dollars.

"People want to question the losses. Nobody who has ever seen the numbers questions them. People ask why we don't share our numbers. Guys, we've shared everything. There's nothing left to share. No one ever questions the veracity of these numbers except those that want to question them for some other reason."

Of the team in immediate danger, he said: "I'll be frank, I don't know if they'll make it or not."

Selig's comments come at a time when labor talks are reaching a critical stage. Owners and players return to the bargaining table today, and if no real progress is made in the next few weeks, players appear ready to walk off the job, just as they did in 1994.

Players will strike -- or at least set a strike date -- to gain leverage in the negotiations and because they're convinced owners intend to unilaterally implement a dramatically new labor agreement after the season.

At issue is revenue sharing between the sport's large-market and small-market clubs.

Selig and the owners believe that the disparity between the teams has grown so large that only a few clubs can compete for a championship each season.

If the season ended today, six of the eight playoff spots would go to teams ranked in the top 10 in payroll. Only two teams out of the top 10 -- the Cardinals at 13th and the Twins at 27th -- would make the playoffs.

Meanwhile, five teams are on a pace to lose 98 games, and all five of them are ranked in the bottom 11 in payrolls.

Selig's mantra has been "faith and hope," saying fans must have both on opening day, or they'll stop coming to the ballpark. He said teams like the Royals, Twins and Devil Rays, among others, can't consistently compete for the playoffs unless the system is changed.

To remedy this disparity, the owners want to contract two teams and to increase revenue sharing between clubs from around 20 percent of local revenues to around 50 percent. They would also like a 50 percent luxury tax on payrolls above $98 million.

The players have proposed much more modest increases in revenue sharing, saying that any dramatic differences might slow the growth of player salaries.

Selig said another work stoppage like the one that forced cancellation of the 1994 World Series would be painful, but that the game's economic system must be changed to allow teams other than the Yankees, Dodgers and Mets to regularly compete for a championship.

While Donald Fehr, executive director of the Major League Players Association, said the differences in each's sides proposal are "bridgeable," Selig painted a much different picture.

"There are significant differences," he said. "Nobody wants a work stoppage less than me. The other side of the coin is that we have problems that need to be dealt with. We can't continue to ignore them and make believe they don't exist. That's all I hear from the clubs, from the fans.

"The path of least resistance would be to maintain the status quo or something close to that. I tell you that baseball as we know it can't survive that. I know people don't like to hear that and say, `There they go again.' I am telling you that the game we're sitting around here talking about is not going to survive by maintenance of the status quo. It just can't happen."

The players agree that additional revenue sharing is needed, but say that simply transferring money from teams like the Yankees to teams like the Royals is not necessarily the way to fix the problems.

Fehr said some of the small-market teams have been badly run and that they don't deserve to siphon off profits from smart teams. In addition, he said taking away profits from well-run teams would remove their incentive to continue to grow their revenues.

As Fehr begins a tour to brief players on all 30 big league teams on the state of negotiations, Selig said he's considering making his own tour of clubhouses to guarantee that players hear his side of the story as well.

He said several players, including some prominent ones, have encouraged him to do this.

"One guy told me last night, `Why can't you come and talk to these guys?' " Selig said. "Before this is over, I may do that. We're walking off a cliff if we have another work stoppage."

At times, Selig seemed close to acknowledging that another work stoppage is inevitable. Given the game's history, it's unlikely real negotiations will take place until a strike date looms. If players do strike, it'll be the ninth work stoppage -- player strike or owner lockout -- since 1972.

Still, Selig said the system must be changed even if it means enduring another work stoppage.

"You know how much I love the game," he said. "I don't like the position I'm in. But somebody is going to have to have the courage to fix it. This is going to be my last job. I've been in this sport all my adult life. This is a painful ordeal.

"The solutions are painful, very painful. They've been let go too long. Regardless of whose fault it is, it doesn't make any difference. I can't take my eye off the ball."

 

I have little doubt that when all is said and done, the league will get it's salary cap. I really don't know how it could survive without one...

What kind of cap is it going to take to allow all teams to truly be competitive with Boston, Arizona, and New York? Would a "luxury tax" really be effective or would it only serve to increase the gap between smaller market teams and those willing to spend?

I personally think that a hard cap would be necessary, but wonder how it would be implemented. Would teams over that cap be given a "phase in" grace period, or would teams simply have to reorganize?