Can Los Angeles baseball “Dodger” a bullet?

Joe O'Sullivan Roar Rookie

By Joe O'Sullivan, Joe O'Sullivan is a Roar Rookie

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    Clubs and teams enduring financial turmoil is a common feature of the Australian sporting landscape. But it’s also a problem not unique to us.

    The national sport of the world’s biggest economy has hit a road bump and the clean up may be just as protracted as the BP oil spill.

    Long considered America’s pastime, baseball, or more correctly ‘The Office of the Commissioner of Baseball’, has this year been forced to take urgent action to ensure two if its clubs remain in the field.

    MLB has had to take over the day to day operations of one of the most storied clubs in American baseball, the Los Angeles Dodgers, a team whose over-leveraged owner is going through a humiliating public divorce and steering the franchise towards bankruptcy. Financial woes that had been brewing over recent years came to a head last month when owner Frank McCourt was forced to borrow $30 million from the Fox media group (previous owners of the Dodgers) in order to pay wages.

    Underpinning the Dodger’s precarious position is the bitter divorce battle now being played out between McCourt and his soon to be ex wife Jamie. Court proceedings for the couple, who were Boston real estate developers when they bought the team in 2004, revealed that they owned seven properties, employed an astrologer as a six-figure consultant, and paid a hair stylist $150,000, all as player payroll dropped.

    As the details of their extravagant lifestyle were revealed the couple became synonymous with arrogance, greed and corporate excess in the minds of many Los Angeles fans.

    Among the financial details that emerged were that the McCourts directed more than $100 million from team revenues toward a lavish personal lifestyle.

    In January 2004, Frank McCourt purchased the team, Dodger Stadium and training facilities in Florida and the Dominican Republic for $430 million. At the time the deal was described as “highly leveraged” with Dodgers fans referring to McCourt as “McBankrupt” after the money he had to borrow to complete the purchase.

    Fox media were keen to unload the Dodgers and were willing to float McCourt a $145 million loan to facilitate the sale. McCourt used his Boston parking lot properties as collateral on the loan only to later default those same properties to the media company.

    Since then McCourt has managed to burden the club with more than $457 million of debt and was having trouble securing more loans to meet the team’s expenses.

    MLB was concerned that money coming in from a potential front-loaded TV deal with Fox would be redirected to McCourt and not used for the team.

    The Los Angeles Dodgers were once baseball’s model franchise. From 1973 to 1986, they led the major leagues in attendance every year except one. In 1978, when they became the first team to draw three million fans, 20 teams didn’t even draw two million.

    But to Dodger fans it seemed the McCourts cared more about glamour than producing a winning product, and as a result, attendance slipped.

    The McCourts may not have intended to ravage the Dodgers but in the end their personal failings have led to an epic fall. And the damage they did to the reputation of a proud Dodgers franchise is something many fans may not be able to forgive.

    Now that MLB has taken over the Dodgers, supporters are hoping that new leadership could restore the storied franchise to fiscal stability — and past glory.

    The other team looking like a patient in ER is the New York Mets.

    The news for the Mets keeps getting worse. Coming into this season most people expected a steady stream of pessimism to emanate from their on-field performances.

    However, it’s the organisation’s bottom-line that has become the greatest cause for concern. The Mets’ problems stem mainly from owner Fred Wilpon’s entanglement in Bernie Madoff’s massive financial fraud.

    Madoff, you’ll remember, is the Wall Street money manager who swindled an estimated $50 billion from thousands of hapless investors through his Ponzi schemes.

    The trustee for Madoff’s victims has filed a lawsuit against the ownership group seeking $300 million for lost profits and another $700 million in damages.

    The ramifications of the suit will impact the way the Mets are run for years to come, whether Fred Wilpon is forced to take on a minority owner, sell the entire team, or spend the upcoming months (and possibly years) in litigation.

    There were rumblings of the Wilpons being in financial straits for over a year and it was recently revealed that the Mets received a $25 million loan from Major League Baseball at the end of last season.

    This is a team, despite a new stadium, that was beginning to swim in debt.

    Compounding the Mets’ financial problems is that interest in the team continues to wane. Despite opening brand new CitiField in 2009, attendance has declined thanks to two losing seasons. Unfortunately for the Mets, debt payments don’t abate when attendance does and according to some reports 2011 could see an even greater attendance decline.

    Financial empires can collapse over night, especially when they are constructed like a house of cards. Moving money from one entity to another works well when cash is plenty, but once liquidity dries up so does the organization’s financial health.

    The Wilpons are finding this out the hard way. It is widely known that they have used their other businesses to support the Mets, a lifeline that is now being cut off by their current financial predicament.

    Without the ability to fund the team’s operations from its own revenue, the Wilpons and their partners may have no choice but to sell out completely lest liquidity continues to be an issue.

    The good news for the Mets is that New York is a baseball town.

    Perhaps more than in any other US city the great American pastime still dwarfs all other sports. When they finally get their financial house in order and put a winning team on the field, people will pack CitiField. In the meantime, however, the team runs the risk of financial insolvency and baseball irrelevancy.

    As long as the dark Ponzi cloud lingers, it will continue to impact the everyday operations of this franchise.

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