“There are times, honestly, when I have to pinch myself to make sure all of this is happening…Growth and revenue, growth and profitability, it’s just been really, really, good.”
-- Bud Selig, in November 2007, at the conclusion of the MLB owners’ meetings.
NEVADA -- It would make one wonder if indeed MLB believes that it is but recession-proof, given the $6.75 billion dollars in revenue it took in for the 2007 MLB season and its $5.2 billion totals for 2006.
But it is a reality that less and less discretionary income is available to average or marginal baseball fans going into the 2008 MLB season. And at the same time, gas prices at the pump are expected to flirt with $4.00 a gallon.
Even so, it has not deterred MLB and two of its two major league teams from cashing in on public entitlements, courtesy of the City of New York. It is well known throughout the country that tax abatements and waived property taxes are the modus operandi for many cities and counties in order to supposedly retain major corporate conglomerates, threatening to relocate elsewhere.
That brings us to New York’s Mayor Michael Bloomberg who in 2004 gave himself credit for ending the squeeze by corporations from getting tax breaks to remain in NYC.
“We’ve essentially ended corporate welfare as we know it, by no longer paying companies -- who wouldn’t have left anyway -- to stay in our great city,” Bloomberg said back then.
But even after Mayor Bloomberg lauded himself as the anti-corporate welfare czar, monies to the tune of $650 million in city and state subsidies were given to Goldman Sachs to build its headquarters in Battery Park City, or 9/11’s Ground Zero, and $240 million were allocated in givebacks to JP Morgan Chase, also to build in lower Manhattan, after stating that it would move to Stamford, CT, and later unsubstantiated by the City of Stamford.
Under the guise of revitalizing lower Manhattan after the streets were deserted as the result of the terrorist attacks of 9/11, this ploy by Mayor Bloomberg was somehow forgivable by the legislators and politicos of NYC and New York State.
Then came the new Yankee Stadium and the new stadium for the Mets. Both the Yankees and the Mets essentially led successful swindles, as both stole home with the blessings of City Hall.
As both stadiums near the end of construction, with both planned to be ready for the 2009 MLB season, the tallying of total costs to the NYC and NY state taxpayers has begun.
On his weekly radio show on WABC New York on February 29, 2008, Mayor Bloomberg stated that, “Hey, we got a good deal at only spending $75 million each on Yankee and Shea…er..Citi Field stadiums.”
He was referring to the outlay in real costs by NYC for each of the NYC stadiums for the Yankees and the Mets.
But for the owner and founder of Bloomberg Communications and self-made billionaire, Mayor Bloomberg seems to have forgotten his arithmetic along the way. For the actual costs to the city and state of NY for the new Yankee Stadium will total over $800 million and for Citi Field, or what will be known as the new Mets stadium, $500 million has been tallied for a grand total of $1.3 billion in public funding for the two stadiums combined.
This includes tax-exempt bonds, on which the government will pay the interest, tax abatements on property taxes, new street construction, a new railroad station stop for Yankee Stadium, new car garages as well as re-construction of open space for the parks outside of Yankee Stadium, which were completely destroyed.
In fact, the residents of the area outside of Yankee Stadium, a minority community, are now without 400 trees and 21.5 acres of less park space, greenery and playing fields. Although NYC and the Yankees originally promised more parkland, they now include the top of the parking garages as open space, where playgrounds will be put.
And while there is no shortage of propaganda on the benefits that new professional sports stadiums supposedly bring to metropolitan areas, that topic alone is worthy of an additional in-depth report and a far more realistic and intelligent discussion.
And as much as MLB and its owners want to praise themselves for their reputed black ink, it comes but at the expense of taxpayers and local communities, whether they are baseball fans or not.
And more often than not, it comes at the expense of the poorer minority neighborhoods, which are but expendable to big business and to City Hall.
But the latest feat by MLB should make even bona fide global capitalists wince. For in a coup by one of the largest realty developers in the U.S., Vornado Realty Trust, has been granted by NYC’s Planning Commission a waiver to building height restrictions on 125th Street and Park Avenue, which is the main thoroughfare of the historic neighborhood known as Harlem.
In addition, Mayor Bloomberg has been campaigning to rezone the entirety of Harlem allowing massive buildings as tall as 29 stories in order to attract even more major corporate partners.
As part of the waiver to Vornado, which raises the height limit to 21 stories, or an additional four stories, in this mixed-use residential and commercial area, the building will include 630,000 square feet of office space and will contain a variety of corporate businesses.
With the steep rise in real estate costs in NYC, many corporate entities are willing to move uptown to save on leasing costs, even at the expense of displacing thousands of people from their residences or crushing over 70 small local businesses in the neighborhoods made up of African-Americans and Hispanic communities.
Of significance, is that those 4 extra stories, most likely to be approved by the NYC Council in the near future, will be occupied by none other than MLB and its new cable television baseball channel. MLB would occupy two floors for executive offices and the top two floors for television studios.
But the Vornado organization also gave NYC an ultimatum along with the height restriction being lifted. They said that without the additional four stories it would be a deal-breaker for them attracting MLB as an anchor tenant in its building and thereby the whole deal would be off.
But it gets even worse, as Vornado also demanded $15 million in a public funding incentive package for itself and an additional $5 million package of incentives to be paid directly to MLB by the City of NY.
Out of that $5 million package part of it would be allowed to cover the costs for redecorating Commissioner Bud Selig’s MLB headquarter offices at 245 Park Avenue, in mid-town Manhattan. This brings but new meaning to corporate-welfare.
The projection of revenue for the MLB baseball television channel, to launch in January 2009, and to be located temporarily in Secaucus, NJ, is somewhere around $550 million over its first seven years, with a guarantee of a minimum of $80 million per year during that time.
It expects between 40 and 50 million viewers upon startup and will initially carry only 26 non-exclusive live games, with the rest of the 24/7 coverage comprised of all-things-baseball.
In 2007 when MLB threatened to remove its MLB Extra Innings packages --allowing fans to pay a premium to cable providers to access many out-of-market games -- from all cable and satellite broadcasters with the exception of Direct TV, it was Senator John Kerry and the Senate Commerce Committee which pushed MLB to allow Extra Innings to continue its agreements with Time Warner Cable, Cox Communications and the Comcast Corp. and they were allowed to continue to broadcast MLB Extra Innings for the 2007 season.
However, as the result of that arrangement in 2007, an agreement was made that MLB will own a 66.6% interest in its MLB television channel with Direct TV, Time Warner, Cox and Comcast divvying up the remaining shares along with a commitment from them to carry the baseball network for the next seven years.
There is no word as of yet on the status of the MLB channel on such remaining digital and cable broadcasters as Dish TV or Adelphia Communications nor confirmation that MLB will offer the channel on basic cable television.
But MLB in its arrogance, by taking its present fan-base for granted, should be doing some real world soul-searching right about now. For after 15 years of Bud Selig’s reign of denial of illegal drugs in baseball and after the off-season MLB has suffered in light of the Mitchell Report, looking for handouts should be the last thing with which MLB should be associated.
It is bad enough that much of MLB’s revenues come by way of the very taxpayers it seeks to disenfranchise, and namely the African-American communities in the inner cities. But for it to muscle its way into Harlem’s neighborhood is more than ironic and should not merely be accepted as gentrification for a better NYC.
Some have speculated that by moving corporate jobs to Harlem, such will endear MLB to the black community it has virtually lost, both as active professional baseball players and as fans, and yet woo them back to baseball. And such speculation should be an insult to all baseball fans alike.
But until MLB makes an asserted commitment to retain its present fan-base as well as makes an investment in future generations to come, such as an in bringing African-American children and families back to MLB, it has no moral right to demand givebacks; much less in Harlem or outside of Yankee Stadium.
And perhaps a good way for MLB to make amends would be to start by using some of those givebacks to build some decent baseball fields for the kids of Harlem, rather than picking out new wallpaper patterns for its executives’ office suites.
Just prior to the beginning of this 2008 Major League Baseball (MLB) season, this writer wrote an article titled, MLB Goes to Harlem Seeking Welfare, Part 1 of these series of articles, primarily examining the deceit and misappropriation of funds, regarding the new Yankee Stadium project.
It referenced the public entitlements that MLB will be receiving from the City of New York in the form of public financing and incentives, including a direct cash payment to MLB to the tune of $5 million in order to lure the tenancy of its new baseball broadcast network offices into a new high-rise building in the historic neighborhood of Harlem.
Since that time, in March 2008, the New York City Council has approved and ratified the complete rezoning of the entirety of Harlem in order to level up to 76 neighborhood businesses as well as many residences, to completely and forever change the skyline of this once hallowed neighborhood.
The rezoning will provide for the construction of buildings over 20 stories high and is a boon for big business looking to cash in on lower real estate costs, especially in light of the present mortgage crisis and with property values in flux.
That prior report also discussed the parameters and arrangements of the initial public financing of both new stadiums for the New York Yankees and the New York Mets, set to be ready for Opening Day 2009 and both beneficiaries of such funding.
But upon further inspection, in addition to the now realized and disclosed cost-overruns by the Yankees just recently, these rather complex and in some cases unorthodox arrangements extended the Yankees by the City of New York date back to former Mayor Giuliani’s administration in the mid-1990’s.
And as recently as mid-June 2008, the Yankees are looking for even more handouts from New York city and state taxpayers between $350-400 million in funds, bringing the total and final cost of the new Yankee Stadium to nearly $2 billion, up from its current total of $1.3 billion. And of the $2 billion, the majority would be funded either directly or indirectly by public subsidies.
But the machinations of the funding as well construction costs are now just part of the story and now includes both ongoing federal and state investigations on a multitude of issues where there is no shortage of actors in this drama. One would think that the Yankees' new stadium would not necessitate so many state and federal agencies and investigations, including nefarious characters involved in this script, no better suited for Broadway.
However, the new Yankee Stadium construction now includes the issues of graft within City Hall-- including the former Giuliani administration-- the hiring of state and federal lobbyists for both the U.S. Congress and the Internal Revenue Service, a state probe of construction fraud and violations, a Manhattan District Attorney’s Office racketeering investigation, an FBI probe, the Seminole Indian Tribe involvement-- with its own federal problems-- and the lack of oversight by the NYC Economic Development Corporation, the NYC Buildings Department, the NYC Parks Department as well as the Yankees own oversight.
In order to simplify, this part of the series discusses the involvement of the New York State legislature as well as the IRS. Part 3 will delve into the more involved details concerning NYC and the NY Yankees organization and how both of their interactions and deals have led to all of their various conflict-of -interest scenarios.
What got the ire of the NY State legislature was perhaps best described by NY State Assemblyman, Richard Brodsky, Chairman of the Committee on Corporations, Authorities and Commissions. “These decisions are being made in secret, in these Soviet-style meetings and it is outrageous.”
Brodsky was referring to a meeting between the Yankees and Mayor Michael Bloomberg’s administration and its Economic Development Corporation office during the month of June 2008.
It was revealed that NYC is seeking relief from the Internal Revenue Service (IRS) to receive a special waiver from a law that the IRS amended in 2006 concerning the amount of tax-exempt bonds that may be allotted for the public financing of sports stadium facilities.
The Yankees’ argument is that the amendment should be waived retroactive to 2004, when the original agreement with NYC was finalized. However, over $940 million in tax-exempt bonds have already have been floated for Yankee stadium alone.
With the NY State legislature’s shortfalls in its present annual budget, Brodsky, among other legislators, feel that the $60-70 million in lost NYC revenue, as the direct result of issuing more tax-exempt bonds, could be better spent on its infrastructure in desperate need of repairs.
Similarly, the United States Congress has gotten involved, as both NYC as well as the Yankees have hired lobbyists to get face-time with various members of Congress serving on various finance committees who may have influence over the IRS and input in its special consideration for the Yankees.
But certain members of Congress believe that it would but set a terrible precedent for sports stadium construction all over the nation and that there was good reason for reeling in the financial structuring of such ventures, especially at a time when states are considerably strapped for cash.
Among the amenities that the Yankees claim they need the additional financing for is a larger video scoreboard. It is curious as to why in June 2008 that the Yankees all of a sudden had a need to enlarge the scoreboard decided upon a few years ago in its finalized plans.
Could it be that over the winter the Kansas City Royals installed a new scoreboard at Kauffman Stadium, which is now the largest of its kind in North America?
If there were not so many serious issues involved in this whole matter it certainly would be comical. But this is past the point of amusement. It is but greed, abuse of power and thievery in the dead of night put on the backs of New York residents and that which has potential national ramifications for all professional sports franchises.
It must thoroughly be examined by all of the officials and agencies involved.
As we will see in the next report, you cannot make this stuff up!
As previously chronicled in this series of reports on the public financing of the new Yankee Stadium in the Bronx, a borough of New York City, the issues it encompasses and the various impending outcomes may have a broad impact for cities across the United States.
Moreover, public-private partnerships have become intentionally blurred when it comes to taxpayers ultimately funding of Major League Baseball (MLB), the National Football League (NFL), the National Basketball Association (NBA) and other professional sports’ stadiums and venues.
Balance sheets, land assessments, funding arrangements via questionable ethical relationships if not borderline illegal ones between public officials and corporate entities are now being revealed as more than troublesome with respect to the new Yankee Stadium.
And it may eventually take an act of the U.S. Congress to unravel that which appears to be an egregious violation of the public trust on behalf of NYC and the New York Yankees.
As last reported here in July 2008 in NYC, Yankees Redefine Crookery, Part 2 of MLB Goes to Harlem Seeking Welfare, the NY Yankees a/k/a/ Yankees Global Enterprises LLC, had requested that an additional $366 million in tax-free bonds be appropriated, to the already ballooning $1.3 billion cost of the new Yankee Stadium tallied thus far, and financed primarily through such funding instruments.
But in order for any new approval for any such new appropriations, the process must be cleared again by a host of multiple New York City, New York state and federal agencies.
However, unanticipated by the NY Yankees is that not only could such a request be denied but that they have opened up a proverbial Pandora’s box of quagmires now being given scrutiny with a fine tooth comb by both the State of NY and a powerful Congressional committee.
On July 4, 2008, during the NY Yankees game at Yankee Stadium versus the Boston Red Sox and broadcast on the YES cable network , the NY Yankees own broadcast outlet, play-by-play announcer, Michael Kay, was speaking about how the current stadium would be replaced starting with the 2009 season.
And he stated at the top of the second inning that “And across the street they’re building a new ball park which the Steinbrenner family is paying for.”
Mr. Kay should have gone to Capitol Hill and testified under oath and relay such news to those investigating the suspicious circumstances under which the Yankees obtained all of their dough.
Just this week, additional hearings were held by the House Committee of Oversight and Government Reform’s Sub-Committee on Domestic Policy. After all, Kay would be in good company along with notable others associated with MLB who have been less than forthright before Congress.
But sadly, most New Yorkers either already believe that which Kay and others have reiterated or have no idea about anything going on in Yankee Land. Yet, such may set important precedents for future building projects and land takings both in NYC and other municipalities.
But far more importantly, and at a time when NYC and NY state are both eliminating important public services due to budget shortfalls, it is incumbent for taxpayers to know far more comprehensively, than that which the local tabloids have recently and but occasionally provide, about this complex web of wheeling and dealing.
For the new Yankee Stadium is no longer a house that Ruth built, but one that New Yorkers citywide and statewide will be paying for and for generations to come. And in that regard a brief context of the back-story is in order and to understand in the interest of public policy.
Prior to the NY Yankees’ initial approvals required from public agencies, the last of which were not completed until 2006, the Yankees put into motion key lobbyist law firms and former public officials who had prior governing positions from City Hall to the IRS to the U.S. Department of Treasury. And it was through such seemingly conflicts of interests that have driven the realized stadium.
Initially, the NY Yankees had to clear a hurdle by the IRS, which many now consider questionable, for the $941 million gain in triple tax-exempt bonds with a favorable low interest rate. Such will save the Yankees close to $150 million in saved interest alone.
Bond buyers get a considerably less lower set interest rate of return, when exempt from federal, state and city income taxes and therefore the NY Yankees benefit from an interest rate approximately 25% lower than taxable bonds.
Bruce Serchuk, a partner at the law firm, Nixon Peabody LLP, was retained by both the NYC Industrial Development Agency, and the NY Yankees to lobby the IRS.
Serchuk was a former lawyer in the Office of the Chief Counsel at the Internal Revenue Service (IRS) and in the Office of Taxation Policy at the Department of the Treasury. He was instrumental in providing NYC lawyers help with submitting the request that allowed such payments-in-lieu-of-taxes (PILOTs).
In June 2006, the IRS granted that request to NYC in a private letter ruling. In spite of regulations that changed that very year which further restricted publicly financed stadiums using tax-exempt bonds, it got the attention of the Committee on Oversight and Government Reform’s Sub-committee on Domestic Policy and precipitated a March 2007 hearing.
Yet, instead of putting a cap on spending by the NY Yankees and NYC’s Industrial Development Agency (IDA), an arm of the NYC Economic Development Corporation, which operates at the Mayor’s behest, NYC was granted another $190 million in tax-exempt financing for the new stadium’s three parking garages.
But in order to get this increased financing, the garages were termed by NYC officials as “Civic Facility Projects.” Additionally, the IDA created a specious not-for-profit organization, referred to as the Bronx Community Initiative Development Corporation as a “special purpose LLC” that was needed as a bridge to complete the garage financing.
Tishman Speyer Properties, now a global multi-national conglomerate, was hired by the NY Yankees for the construct of the new stadium. Anthony Mannarino, who now is in charge of Tishman’s stadium development, was previously the Executive Vice President of the NYC Economic Development Corporation from 1990-1994 and its acting President in 1994.
None other than former Mayor Rudolph Giuliani and one of his former NYC Police Commissioners, Howard Safir, are both listed in court documents as security consultants for the new stadium project as Giuliani Security & Safety Partners, a division of Giuliani Partners, LLC and Safir-Rosetti Security, respectively.
There are far too many lobbying interests and reciprocal relationships to detail in this one report, but suffice it to say that the NY Yankees and NYC officials have easily spent upwards of $500,000.00 of taxpayer dollars in lobbying costs for their back-scratching stadium behemoth.
Most of the lobbying expenses were accorded in a final deal which Mayor Giuliani had ratified prior to his departure from City Hall in 2001. It allocated $25 million over a five-year period from 2002-2007 to be used by the NY Yankees in any way they saw fit for the planning stages of the new stadium on the taxpayer’s dime.
And unfortunately far more than new stadium expenses were charged to the taxpayers, which had nothing whatsoever to do with stadium planning. But the NY Yankee organization could not help itself and applied for every last dime of that $25 million.
The puppet master of the whole deal is former NYC Deputy Mayor of Economic Development, Planning and Administration, Randy Levine, from 1997-2000, and now President of the NY Yankees.
Prior to Levine’s leaving his office in 2000, he was given the primary responsibility to craft a financing structure document for Mayor Giuliani and the new Yankee Stadium.
And prior to becoming Deputy Mayor, Randy Levine was a chief labor negotiator for MLB Commissioner Bud Selig. To make matters worse, Levine was granted a waiver from the NYC Conflict of Interest Board which oversees NYC’s Conflict of Interest Law. And as a direct result of that waiver, throughout Randy Levine’s term as NYC Deputy Mayor, he maintained a consulting contract with MLB.
The House Committee on Oversight and Government Reform’s Sub-Committee on Domestic Policy whose Chairman is Congressman Dennis Kucinich (D-Ohio) who concentrated on those federal agencies formerly involved in the previous financing approvals and the newly requested $366 million in additional funding requested by NYC and the NY Yankees in June 2008.
Those agencies include the U.S. Department of the Treasury, the IRS, and the National Park Service of the U.S. Department of the Interior along with the NY Yankees, the NYC Department of Finance, and the NYC Economic Development Corporation.
Those involved agencies were required to submit specific documentation to Congressman Kucinich’s committee by August 6, 2008 in preparation for this week's hearing which took place on Capital Hill on Thursday, September 18th.
The issues explored were the conflicting land value assessments which were supplied and used as a basis for the original $941 million tax-free bonds.
It has come to the attention not only of Rep. Kucinich but New York State Assemblyman, Richard Brodsky, that the unjustified land assessment valuations may be the smoking gun in the now $1.3 billion house of cards which may bloat to upwards of $2 billion before all is said and done.
The Yankees claim that the land upon which the new stadium sits is worth $275.00 per square foot, more than most lots on waterfront property on Manhattan Island, the heart of NYC.
The NYC Department of Finance claims that the land is worth $204 million versus NYC’s commissioned independent assessors who value it at $21 million.
And land just across the street from the new Yankee Stadium, according to the NYC Department of Finance’s latest assessments and the latest average market value of such land in that area of the Bronx, is but $36 per square foot.
According to NY State Assemblyman, Richard Brodsky, who heads the NY State Committee on Corporations, Authorities and Commissions and who is also holding hearings on this issue on the state level has said that, “This issue goes to the heart of whether it is a public project or a private project…There is substantial discrepancy on a whole host of levels that we are going to proceed to investigate thoroughly and fairly, but we are going to get to the truth.”
And as the ongoing story of this slippery slope of either trickery or merely free market big business, depending on one’s point of view, this journalist will pick up the case later this month and report back in Part 4 of this series.
And just in case you were wondering, “Everything is politics.”-- Thomas Mann (1950).
But wait!
Before you roll your eyes and click on another page, since you no longer want to hear any more about the economy and the $850 billion government bailout and how the American people just got played, it behooves you to know some basic facts relative to sports fans and more specifically as fans of Major League Baseball (MLB).
It includes knowing how the fat cats who own baseball teams are one in the same types as those who prevail over Wall Street. It does not take an economist to know that everyone has taken tremendous hits for months now whether it has been to fill up at the pump, paying energy bills or affording groceries, where there is no end in sight to rising prices. The average taxpayers know that their pocketbooks are much lighter these days and are angry.
They want answers!
But Wall Street and MLB have become nearly indistinguishable these days. When Wall Street tanks it not only has profound global ramifications but impacts the local economies ever more so, and as such the financing of MLB teams is entrenched in corporate sponsorships.
MLB has long enjoyed its own type of bailouts with public financing of its stadiums, but with corporate sponsorships now in jeopardy, maybe its billionaire owners will finally get a taste of their own medicine.
If You Build It They Will Come no longer applies in the economic landscape of 2008. And unlike prior recessions at the beginning of this decade, followed by a dip in the economy post-9/11, the turmoil in which Wall Street now finds itself cannot simply be explained away or spun by economic prognosticators.
And for fans who simply want to tune into a baseball game to put their worries on hold for a couple of hours, you cannot even get away from it. There was no greater reminder to fans of the bankrupt economy than during the first inning of Game 3 of the National League Championship Series (NLCS) on Sunday night at Dodger Stadium. Dodger second baseman, Blake DeWitt, hit a three-run triple into right field, where cameras zoomed in on the AIG sign on the wall in right field.
For those of you not yet caught up, American International Group (AIG), was bailed out by the U.S. Treasury a couple of weeks back to the tune of $85 billion and an additional $38 billion this past week was also added to its piggy bank.
The U.S. government now owns 80% of AIG and is its majority shareholder. And one would guess by extension that the U.S. taxpayers are now paying for AIG sponsorships throughout the sports world and in this case as subsidizers of the Los Angeles Dodgers.
And the Philadelphia Phillies, opposing the Dodgers in the NLCS, got some bad news last week too. Citizens Bank which has the naming rights for Citizens Bank Park, the stadium in which the Phillies play, is owned by the Royal Bank of Scotland, but another bank on shaky ground and whose assets are in freefall.
Think baseball is not a part of this whole mess? The owners of MLB teams within the past decade have retrofitted their revenue streams to the point that it now dictates who can actually get in to see a baseball game.
MLB has gone the way of the elite sports and caters to the elite. Working class people need not apply. Greed in the government, greed on Wall Street, greed in the sports industry and greed in MLB may destroy the whole house of cards.
And in that regard it may be a good thing for the middle class eventually. For when the elite stop paying for MLB, it might someday be rightfully returned to the fans.
Unfortunately, not before the bill comes due for those two new behemoth stadiums in New York City, set to open in April 2009. And with potentially 64,000 jobs that will be cut in NYC’s financial sector by 2010, the well heeled, expected to attend games, will be on the unemployment line instead.
What MLB did not foresee, much like its compatriots on Wall Street who bought up valueless mortgages, and pimped them off as viable commodities, was that such actions would have such a deleterious impact on their baseball revenues come next season, just a few months from now.
But while MLB Commissioner, Bud Selig, is wont to put on a happy face, sponsors and owners are more realistically waiting for the next shoe to drop, while no one from Wall Street to Capitol Hill has a clue.
What we do know is that since sponsorships, naming rights and broadcast rights are usually multi-year contracts, right now, the primary savior for MLB will be its broadcast partners.
But many financial service groups have either filed for bankruptcy or are close to it and waiting for their portion of the bailout money to kick in. In this recession, all bets are off.
So what does this mean for the average baseball fan? Well, in some markets the news is good, where teams are more dependent upon the fan base. But in the market of New York City, the average fan has already been displaced, due to the 47 luxury suites in the new Yankee Stadium and the 49 luxury suites in Citi Field, the Mets’ new home.
The Mets will have 10,000 less seats available to the public than Shea Stadium had. And the Yankees will have 5,000 less available public seats, with the average ticket costing $75.00; that’s before the $30.00 parking fee or food or concession costs.
The luxury suites at Citi Field are as high as $500,000.00 for the season, while the Yankees’ suites run between $600,000.00 - $800,000.00 for the season or 81 games.
And one of those suites will go for free for the Mayor of New York City, to boot.
But purchases of these luxury suites not only cost a fortune but are contingent upon multi-year commitments. And that could spell trouble for corporations cutting back on expenditures, personnel or even going bust.
For as much as the big-wigs in the sports industry would like you to believe that their industry will flourish in the down times, that was in the days when games were more affordable and when people could at least rely upon experts in the economy to be truthful about their life savings.
Since the finance industry outspends all others when it comes to sponsorships and naming rights for teams, it is perhaps a good thing that the Yankees and the Mets got theirs locked in before the biggest collapse on Wall Street in 70 years.
Bank of America not only gobbled up Merrill Lynch in the past couple of weeks, but committed to a $20 million a year deal sponsorship with the Yankees. And CitiGroup’s naming rights will adorn the Mets’ new house.
But other teams are holding the line with their fans such as the Seattle Mariners. They will not be raising ticket prices in 2009, more so because of the economy rather than finishing with the second worst record in MLB for 2008 by losing 101 games.
Washington Mutual Inc., the largest savings and loan bank in the United States, was bought by the government’s FDIC for a short time 2 weeks ago, and then was sold by the U.S. government to JP Morgan Chase & Co.
It was the largest bank failure in U.S. history -- yet, Chase had just purchased Bear Sterns weeks before the Washington Mutual deal, which raised even more eyebrows on Wall Street.
Unfortunately, Washington Mutual is also one of the Mariners’ biggest sponsors. In addition, the economy in Seattle is struggling with a month-long strike by Boeing workers. That has impacted its suppliers and other corporations with which it does business in the region.
So, follow the money. Where Wall Street goes, so goes MLB. As these new team stadiums and other teams scramble for revenue streams, more and more teams will be competing for the same dollars in this new small world, especially in light of the middle class having been written off.
And with luxury boxes and field seats commanding thousands of dollars per game, at least in NYC, such expenditures will have to be justified to corporate shareholders and spending will be more scrutinized in the year ahead.
Down payments for season ticket holders as well as corporate commitments are due in the next few weeks for the Mets and the Yankees, and will lock in corporations to their multi-year agreements.
In fairness, there has been less disconnect from some quarters of MLB. MLB’s Senior Vice President of Corporate Sales and Marketing, John Brody, in an interview in late September with the Sports Business Journal stated that, “Anyone who says this isn’t a different time is either not in touch or not telling the truth. This is a different time and people are evaluating how they’re going to spend their dollars, not just for next year, but for next month.”
To put sponsorship spending in scope one only needs to know that General Motors announced it would not purchase any advertising time during the next Super Bowl in February 2009.
If that is not an ominous sign, it would be hard to say what is.
And finally, the disconnect between the federal government and the American people and the disconnect between Wall Street and in its ignoring the rules are now joined by the disconnect between MLB and its fan base.
But with the symbiotic relationship between Wall Street and MLB as monies dry up, both NYC teams may have overestimated the revenue they expected would never quit.
Maybe the Tampa Bay Rays will be the ultimate winners both on the field and otherwise when this whole thing shakes out. As they strive to reach the World Series and maybe eventually win it, a deal for the public financing of their new stadium has been put on hold indefinitely. And with a $45 million payroll they have little to lose as well.
The franchise can only go up in value from here on out.
But Seattle Mariners President, Chuck Armstrong, is rightfully cautious and may have said it best when he told the Seattle Post-Intelligencer in early October that, “I do have great trepidation over the economy."
"If the good folks in Washington (D.C.) and NY don’t know what will happen, I’m not sure we at the Mariners should either. We’ll have to wait and see what happens after the dust settles.”
Diane M. Grassi is a freelance columnist, reporting and writing commentary on current events of the day providing honest and often politically incorrect assessments. From U.S. public policy to Major League Baseball, she is an eclectic thinker, and demanding of her readers to reflect on their own thinking patterns from an alternative perspective.
