MLB Addresses Money Matters

Baseball's latest economic study committee recommended a vast increase in revenue sharing and possible franchise moves, but it did not say the sport needs a salary cap.

To increase competitive balance, the committee on Friday urged baseball to impose a 50 percent luxury tax on payrolls above $84 million; proposed sharing 40-50 percent of local revenues after ballpark expenses; and recommended that new national broadcasting, licensing and Internet revenue be distributed unequally to assist low-revenue clubs, provided that they meet a minimum payroll of $40 million.

The New York Yankees, with a payroll of about $115 million, would have to pay a tax of about $15 million this year under the committee's proposed formula. Minnesota has the low payroll, about $20 million.

"There is no hard cap. Obviously, that is good," union head Donald Fehr said. "Hopefully, that issue is behind us. As you know ... you can have a series of devices that amount to a cap."

The panel recommended that players born outside the United States be included in the amateur draft, that there be an annual "competitive balance draft," and that baseball relocate franchises "when necessary to address the competitive issues facing the game." No specific teams were mentioned.

In addition, the panel said baseball should expand its domestic and international promotion of the sport.

"We do not pretend to believe these changes will be easy or universally popular," said former Senate Majority Leader George Mitchell, one of the panelists. "We do believe them to be a solution to the alarming disparities between baseball's haves and have-nots. We offer them to the commissioner, the ownership of major league baseball, the players and to the fans of the game."

Also on the panel were former Federal Reserve board chairman Paul Volcker, Yale president Richard Levin and political commentator George Will.

No changes are possible until after baseball's current labor agreement expires, probably after the 2001 season.

Commissioner Bud Selig, speaking after the report was released, said it confirms the competitive disparity.

"I told the clubs today we're done making believe it doesn't exist," he said.

Baseball had a luxury tax during the 1997-99 seasons, but it applied only to the top five teams by payroll at a 34-35 percent tax rate. Asked if that was a failure, Selig wouldn't give a direct answer but said "my 7-year-old granddaughter Marissa, I think she's already made that judgment."

Baseball has not moved a team since the Washington Senators became the Texas Rangers after the 1971 season.

"If an area doesn't want to support a team, that answers itself," Volker said.

"Clubs that have little likelihood of securing a new ballpark or other revenue-enhancing activities should have the opportunity to relocate," Mitchell said.

For now, the committee opposed eliminating teams an idea being discussed by owners.

"We would not look to a contraction except as a last resort," Volcker said. "I don't think that the industry should exclude it."

To support its contention that baseball has a growing revenue disparity, the committee released dozens of economic charts, among them one that showed the Yankees generated the most revenue last season, $177.9 million, while Montreal generated the least, $48.8 million.

In 1995, the first year following the strike that wiped out the World Series, the Yankees led baseball with $97.7 million in revenue, while Montreal had the least, $27.6 million.

According to the report, only the Yankees ($64.5 million), Cleveland ($45.9 million) and Colorado ($12.4 million) generated an operating profit from 1995-99.

San Francisco had the largest operating loss from 1995-99 ($97 million). Toronto lost $87.6 million and Anaheim lost $83.3 million.

As an industry, baseball had an operating loss of $212 million last year on revenue of $2.787 billion.

Owners also approved an unbalanced 2001 schedule, putting off realignment until 2002 at the earliest. Teams will play, for the most part, 18-19 games against opponents in their own division, up from 12-13 last year.

"We need some franchise realignment, there is no question about that," Selig said. "One could debate how extensive that should be."

The Texas Rangers and Houston Astros will me in interleague play for the first time next year, but other than that, the interleague lineup could remain the same: AL East vs. NL East, AL Central vs. NL Central and AL West vs. NL West.

Baseball is trying to develop a schedule in which interleague opponents rotate, except for natural rivals such as Mets-Yankees and Cubs-White Sox. Selig said a decision on whether interleague play will rotate next year will be made in about two weeks.

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