Economists and politicians nationwide are questioning professional sports teams’ cries of financial woes.
During last Thursday’s Stadium Task Force meeting, one member questioned the validity of Major League Baseball’s claim that it’s in financial straits.
The Twins are prepared to release their financial records to the Stadium Task Force.
“Between 1995 and the end of the 1998 season, Major League Baseball said they lost $1 billion,” said Stadium Task Force co-chairman William Haddeland, “But Forbes (magazine) said they made $450 million.”
Rodney Fort, Washington State University economics professor and co-author of “Hardball” and “Paydirt,” said the most confusing part of the difference between the MLB and Forbes’ numbers is their origin.
“The source of both sets of information is the owners,” Fort said.
He said the difference could be attributed to the numbers being taken at different times, the owners being uninformed of exactly what the revenues were, or “there could be some reason to be more strategic about (answering financial questions).”
Twins President Jerry Bell said the team would open its financial records to the task force, but some experts question the truth of MLB’s financial history.
“We’re still a long way from the truth,” said Larry Hadley, a University of Dayton economics and finance professor.
Hadley said there are motives for owners to hide their teams’ revenues, but open financial records make fiscal secrets difficult.
David St. Peter, Twins senior vice president for business operations, said the public will see MLB’s 2001 loss of $500 million when the organization testifies before Congress on Thursday.
“The Twins’ books, as well as 29 other teams’, are going to be opened up,” St. Peter said.
He said this would not be the first time in recent years the Twins have made their financial records public.
“The Metropolitan Sports Facilities Commission did it on the state’s behalf Ö in the past five years,” St. Peter said.
Fort said watching what a team claims on taxes can be an indicator of its financial position.
“All we can do is watch what baseball claims is its financial position and see if the IRS responds,” Fort said.
He said there are a number of reasons for owners to underreport what their teams are worth. The brink of bankruptcy can be an excellent bargaining tool during negotiations with the players’ union and when asking their communities for stadium funds.
Even if teams are losing money, both Hadley and Fort said there are advantages to owning an MLB team, beyond the chance of turning over a direct profit.
“(Owning a team) is cheap advertising even if they take a loss on the team,” Hadley said.
He said owners such as Braves owner Ted Turner, who also owns Turner Broadcasting Station, use the exposure their team gives them to advertise other assets.
“Owning a team is only part of the wealth-generating table,” Fort said.
He said a baseball team is to the owner what the motor division is to the Ford Motor Company.
“Does the Ford motor division make a profit? No,” Fort said.
He said the motor division is a non-profit producing aspect of the whole company that does contribute to its overall success.
Hadley said the values of baseball teams are always going up – sometimes as much as 20 percent per year – making them a sound investment for owners.
“You’ve got to look at what the value of the team is when it sells,” he said. “When you do, baseball is doing pretty good.”
