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 today urged baseball to impose a 50 percent luxury tax on payrolls above $84 million; proposed sharing 40 percent to 50 percent of local revenues after ballpark expenses; and recommended that national broadcasting and licensing 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, under the committee’s proposed formula. Minnesota has the low payroll, about $20 million.
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 cities were mentioned.
In addition, the panel said baseball should expand its domestic and international promotion of the sport.
Haves and Have-Nots
“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.
Baseball has not moved a team in almost 30 years.
“If an area doesn’t want to support a team, that answers itself,” Volcker said.
“Clubs that have little likelihood of securing a new ball park or other revenue-enhancing activities should have the opportunity to relocate,” Mitchell said.
Three Teams Had an Operating Profit
For now, the committee opposed eliminating teams — an idea that is 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.
Team Elimination Opposed — For Now
Before the meeting, owners appeared set to put off the issue of realignment until 2002 and there was talk they might even discuss getting rid of the Montreal Expos and another team.
Colorado owner Jerry McMorris first discussed this so-called “contraction” idea a year ago.