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This week in “Last Week in BizBall”, Cubs request public dollars to finance Wrigley Field renovations, details emerging on Astros new RSN, three former White Sox employees indicted on federal charges, plus tidbits.
CUBS ASK THE PUBLIC TO FINANCE WRIGLEY FIELD RENOVATIONS
LWIB the Chicago Cubs made public their plans to finance a $200 million plus renovation of Wrigley Field via future amusement tax revenues generated at the ballpark. According to Chicago news reports, the Illinois Sports Facilities Authority would issue up to $300 million in tax-exempt bonds to finance the renovations, which would be repaid over 35 years from the growth in amusement tax revenues generated at Wrigley from annual increases in ticket and concession prices. The ISFA has previously issued bonds to finance construction/renovations at US Cellular Field and Soldier Field. Cubs ownership would like to see the renovations commence after the 11 season and be completed over 3-5 years. The Cubs would continue to play at Wrigley during that timeframe. The culmination of the renovations would reportedly include Wrigley hosting the 16 ASG. The Cubs “2014 plan”, which was to see a newly renovated Wrigley Field host the ASG that same year to coincide with the franchise’s 100th anniversary, is evidently no longer viable.
The plan will require the approval of the Illinois General Assembly. Senate President John Cullerton has agreed to sponsor the bill which is to be presented during the veto session which begins next week. Both Mr. Cullerton and Cubs owner Thomas Ricketts are framing the issue as being about ensuring that the franchise remains viable at Wrigley Field. In other words, the Cubs won’t leave Chicago. Fran Spielman quoted Mr. Ricketts in her report:
"It's not about adding seats. It's about saving the stadium and making the fan experience better. Other ballparks have player amenities that we don't. We need to catch up to them," Cubs Chairman Tom Ricketts said Thursday.
"I don't see any circumstances under which we would leave Wrigley Field in the short-run. But, we also know it's a 100-year-old ballpark, and we're gonna have to address the issues of playing there someday. We'd rather do it now than waiting around."
Senator Cullerton was quoted in the same report, "The state is not affected by this at all — other than to ensure that the Cubs stay at Wrigley Field for decades to come," Both Governor Pat Quinn and ISFA Chairman (and former Governor) Jim Thompson were non-committal in their public comments regarding the proposal.
News reports also included claims from Mr. Ricketts that the Cubs and Wrigley Field contribute more than $600 million annually to the local economy. The same reports also included statements that approval of the plan would allow the Cubs owners to invest $200 million of private money in developing the long discussed “Triangle Building” adjacent to Wrigley, thus creating jobs and generating future additional tax revenues. Mr. Ricketts (see the above quote) also emphasized in reports that the renovations would NOT result in increased seating capacity (ie. no additional revenues for the Cubs)
Not surprisingly, it isn’t difficult to find those questioning the fairness of the proposed plan. (typically presented with a sub-text contrasting huge government budget shortfalls against public assistance to billionaire sports owners) Neil deMause’s headline was, Cubs owner demands $200m in tax kickbacks for Wrigley reno. And in her aforementioned report, Fran Spielman wrote of the plan to finance the publicly issued bonds via future tax revenues:
That would require the city and county to forfeit tax growth they desperately need at a time when both are facing massive budget deficits. And if amusement tax growth falls short of the amount needed to make debt payments, the city and county would be deprived of the tax growth for even longer than 35 years.
This isn’t the first attempt by a Cubs owner to have the ISFA finance renovations to Wrigley Field. In 07, previous Cubs owner Sam Zell and the ISFA engaged in negotiations over a plan which would have resulted in the stadium authority buying Wrigley and then financing renovations via the sale of “equity seat licenses”. As recently as six months ago, Mr. Ricketts publicly raised the possibility of selling personal seat licenses (which are different from equity seat licenses) to finance Wrigley Field renovations.
That Wrigley Field is in need of extensive repairs is widely agreed upon. At a minimum, aging steel, concrete and electrical infrastructure needs replacing. Beyond that, the debate becomes more divisive. Are further renovations such as bigger concourses and more premium seating about ensuring the Cubs remain at Wrigley or are they about the Cubs’ bottom line? Can you separate the two? As discussed previously here, more aesthetic changes to Wrigley such as additional signage and the installation of a video/jumbotron-type screen are complicated by both the ballpark’s landmark status and the need to maintain it’s unique character. The Ricketts’ challenge in completing renovations might also be complicated by persistent speculation that their approximately $850 million purchase of the franchise, ballpark and minority stake in CSN Chicago maxed out their credit. (see this LWIB from February) Finding somebody else to finance the renovations is also tricky. I suspect that selling PSLs or equity seat licenses is a last resort for Mr. Ricketts. In February when he raised the subject it was as part of his campaign to build support for political approval of installation of an advertising billboard in the left field bleachers. (If I can’t install advertising I’ll be forced to sell PSLs) And in the post Lehmann Brothers world, there is less popular and political support for public investment in professional sports (it still happens, less so ) What is certain is that the Chicago Cubs will never leave Wrigley Field. The Cubs brand, amongst the most valuable in all of professional sports, is inextricably linked to “the friendly confines”. Separating the two makes no sense and Tom Ricketts knows that better than any of us. Wrigley Field will be renovated. How long that takes and who pays for it, I don’t know. But as fans of the Marlins and Twins know all too well, it can be a long, long road.
SELECT READ MORE TO SEE NEWS ON THE ASTROS AND CSN HOUSTON, FORMER WHITE SOX EMPLOYEES INDICTED, PLUS THIS WEEK'S TIDBITS
THE ASTROS AND CSN HOUSTON
One of the most interesting baseball biz storylines this year is the windfall of cash clubs are seeing from local TV deals. If you are a regular reader you are well versed. If you aren’t a regular reader, see here and here. As noted here a few weeks ago, the Houston Astros are the most recent franchise to own some - or all - of a Regional Sports Network (RSN). The Astros, Rockets and Comcast have partnered in the channel CSN Houston, set to launch in 12. David Barron (HT Fang’s Bites) reported on what, according to his sources, are the details of the deal. The Astros and Rockies own 77.5% of the channel, Comcast owns 22.5%. According to an official with knowledge of the talks, the teams value the new channel at $1 billion. The Astros and Rockets will be severing ties with current rights holder Fox Sports Houston. As an example of how vigorous the competition is for local TV rights, consider what Fox reportedly offered to maintain their partnership with the Houston teams:
A person with knowledge of the negotiations said Fox offered more than a billion dollars, with a $200 million signing bonus, over a period of more than 10 years to keep the Astros and Rockets on Fox Sports Houston. The teams receive about $45 million to $50 million per year.
"The only thing that wasn't offered was ownership (in the network)," the person said.
With Astros owner Drayton McLane reportedly motivated to sell the franchise it will interesting to see what the Astros’ stake in CSN Houston does for the value of ballclub.
FORMER WHITE SOX EMPLOYEES INDICTED FOR ALLEGED BONUS SKIMMING
Another baseball biz storyline I’ve been tracking the past few years is MLB’s efforts to reform player recruitment in Latin America, particularly the Dominican Republic. As both more players are recruited from Latin America, and the signing bonuses awarded the most sought after of those players have skyrocketed, MLB has chosen to take an active role in limiting the rampant misrepresentation of players ages and identities. This year has seen both the MLB Department of Investigations and Scouting Bureau very active in the Dominican Republic, working with clubs to evaluate talent and ensure the accurate age and identity of that talent. It is also widely anticipated that the next CBA will allow for an expansion of the Rule 4 draft (aka amateur draft) to Latin America. The past few years have revealed that the unscrupulous behaviour associated with developing players in Latin America (particularly the DR) has not been limited to the local “buscones” who serve as both trainers and agents to the young players. Bonus skimming and kickback scandals involving MLB employees active in recruiting Latin players have been connected to a number of clubs. LWIB, three former White Sox employees, including former director of player personnel David Wilder, were indicted on federal charges of skimming approximately $400,000 in signing bonuses from international signings. The indictment alleges that the bonus skimming took place over the period December 04 - February 08. According to the reports, the FBI began investigating in 08 with the cooperation of MLB. That same year Mr. Wilder was reportedly caught at an airport in the DR, attempting to leave with $30,000 - $40,000 in cash. The White Sox dismissed Mr. Wilder in 08. Ben Badler reported for Baseball America:
“The defendants were supposed to recruit players by paying amounts of money that matched their skills and were no greater than the amount needed to sign the players," said Patrick Fitzgerald, U.S. attorney for the northern district of Illinois. "Instead, the indictment alleges that the defendants secretly inflated those signing amounts to fund kickbacks for themselves."
AND
For bonuses of less than $100,000, Wilder was able to authorize those signings himself. Wilder needed the approval of general manager Ken Williams to authorize signings of $100,000 or more and, according to the indictment, allegedly misled Williams intentionally about the fraud to conceal the kickbacks that he and his scouts were receiving.
According to this report, “The FBI has been investigating a number of major league clubs, including the New York Yankees, the Boston Red Sox and the Washington Nationals in addition to the White Sox.”
TIDBITS
- I’ve been bringing attention to ongoing speculation that the independent Northern League might fold. Four of the eight teams from last season have moved to the American Association. According to this (HT IndependentBaseball.net) report, the remaining four have applied to join Frontier League. The Northern League isn’t the only independent league in danger of folding. J.J. Cooper reported for Baseball America that the Victoria Seals franchise of the Golden League has shut down. He adds, The Seals become the fifth Golden League team to either shut down, fold or announce plans to not play in 2011, shrinking what had been a 10-team league to a fraction of its former self. Four days later, Ballpark Digest reported that the beleaguered Golden, Northern and United League(s) may merge into one for the 11 season. The plan, we're told, is for each league to play an abbreviated schedule (76 games in the case of the Northern League teams), with 24 or so games against the other two leagues. The whole thing will be played under the Golden Baseball League banner, with four divisions: Canada, West Coast, Midwest and Texas.
- Last year I brought attention (scroll way down) to the Australian Baseball Federation’s announcement that they were launching a new baseball league. According to the ABF, MLB was investing in the league. LWIB, Darren Heitner of the Sports Agent Blog brought to my attention that the Australian Baseball League has officially began play.
Pete Toms is senior writer for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.
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Pete Toms 
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