The Mets are a mess. This oft-repeated sentiment usally refers to the team’s play on the field and disorganization in the front office. This winter, it was revealed that the Mets finances are like the Oliver Perez contract: damn near untenable.
In 2010, the Mets on-field product finished fourth in the NL East, despite the fifth-highest payroll. During an off season where the team made no major additions, the Mets financial issues dominated the headlines.
The New York Times has done an exceptional job over the last few months uncovering the relationship and ties Mets owners Jeffrey Wilpon and Saul Katz had with disgraced financier Bernie Madoff. It was a long relationship that benefited the Wilpon and Katz families. Millions of dollars in fake Madoff profits went to Wilpon, Katz, and in turn the Mets.
Here is a quick re-cap of the last five months for the Mets organization since the team walked off the field at Citi Field, losing a 14-inning debacle to the Washington Nationals that went on for so long that Oliver Perez was the pitcher of record for New York.
In November of last year, Major League Baseball loaned Sterling Equities, the company owned by Wilpon and Katz, that runs the Mets $25 million. It still hasn’t been repaid. There has been no explanation as to what the loan went to or the interest rate or the terms. Little known fact about the MLB: the league provides each team with a credit line of $75 million. The Mets had already blown through that with no word on how or when they will pay that money back. On top of this $100 million from MLB, the team has $400 million in debt based on loan and bond payments, partially based on the cost of building Citi Field. A stadium whose naming rights were sold to a bank at the center of the Great Recession.
While The New York Times reports that the Mets have had cash flow problems for at least a year, it is a particularly ominous time for the teams finances. Reports out of Queens indicate that advance ticket sales for the 2011 season are in the toilet. Last year, before finishing fourth in the NL East for the second year in a row, the Mets sold 600,000 fewer seats. Things are so bad in Flushing that long-time sales staff have been let go and part-time employees usually hired to answer calls for purchases weren’t even hired this winter.
This stuff is bad. But in comparison to what was reported in late January, it is the least of the team’s worries. On January 28, The New York Times report that Irving Picard, the trustree for the victims of Bernie Madoff’s ponzi-scheme, announced a $1 billion lawsuit against the Mets’ owners. Picard is looking for $300 million in “fictitious profits” to be returned. The remaining $700 million, Picard argues, should be paid, in part, since the owners ignored warnings about Madoff’s business practices. This article, paints, a ghastly picture of the Mets finances in the wake of the Madoff fallout.
The lawsuit, which Picard, asked to have amended last week, in a move that could mean more charges are in the offing, accuses Wilpon and Katz of aiding Madoff by ignoring “red flags….Returns were almost statistically impossible….Willfully disregarded any criticisms of Madoff and simply buried their heads in sand.” Just standard operating procedure for the Mets at this point. Bullpen trouble, schullpmen troubles. It will be tough to do that now as a trustee’s powers in bankruptcy court are rather broad.
Recently, Moody’s lowered their outlook on the team’s bonds to negative, portending the possibility that the bonds would be further downgraded. They are already below investment grade. The New York Times explains that the lawsuit makes it impossible for Wilpon and Katz to move money from other ventures into the team, an action they’ve done in the past.
The Mets, having already tapped into the MLB, who is a lender of last resort, have one of the highest payrolls, with many of the most expensive players untradeable, and costly loan and bond repayments coming up. The team announced earlier this year it was seeking a minority owner, intending to sell up to 25 percent of the team. Less than a dozen prospective buyers requested the right to examine the team’s finances, the first step in a long process. This is a team with little potential, lots of debt, owners who got rich and financed the team on money that never existed, facing a season filled with sparsely attended home games. And then what happens at the trading deadline? Will the team trade Jose Reyes for pennies on the dollar to save money? And in the off-season, will they remain as quiet as they did this past winter? The saying, the Mets are a mess has never been more true. The best solution is to contract this mess and have a pre-existing team move into Citi Field.
While the NBA and NFL have been at the forefront of collective bargaining agreement fights the last few months, baseball’s CBA expires at the end of this year. That is why Yankees owner Hank Steinbrenner told reporters this month that he is tired of baseball propping up teams in small markets. His beef, and he is not alone among big market owners, according to Ken Rosenthal, is with the luxury tax and revenue sharing. Rosenthal has even reported that some big market teams want to contract the Oakland A’s and Tampa Bay Rays.
The A’s problems lie in their inability to move to Fremont until MLB redraws the Giants territorial borders. The A’s, despite their typically spendthrift manner, have the building blocks for another Billy Beane-crafted run at the AL West. The Rays, who have been a force in the AL East for the last three seasons and will remain so, find themselves in a far more tenuous spot in Tampa Bay. The team is playing in front of Expos-esque crowds, despite their recent successes, and they have little chance of getting a new ballpark in this economy. The Rays, with a talented young team and a strong farm system, find themselves playing their home games at an in-door stadium that sits near the Gulf of Mexico. Many have noted that Rays owner, Stuart Sternberg, is a New York native and has ties to the city.
Whenever the Indians trade their most expensive player in the last year of the contract or the Red Sox sign a small-market team’s free agent star, the party line is well, major league sports are a business. This sentiment always has a way of screwing over teams that don’t have the fortune of playing in huge media markets. If each team is a business, they can suffer from the same fate as any other business. And one of those possibilities is bankruptcy, liquidation, and folding up shop. The Mets, as a team, are mediocre on their best day. The Mets, as a business, are abysmal. $100 million in loans from the MLB, the lender of last resort. Another $400 million in debt and the target of a $1 billion lawsuit. Suffice to say, patching together a starting rotation in the wake of Johan Santana’s injury is the least of the team’s worries. What happens when the Mets sputter out of the gate in April? What if Jason Bay’s regression was for real? Jose Reyes gets injured again. Imagine an August where the Mets are keeping Francisco Rodriguez out of save situations so his 2012 option doesn’t vest. The financial peccadilloes of the team puts the Mets ability to field a competitive team in question for 2011 and beyond.
The facet of sports we often overlook is that if these leagues are business sectors, and the teams are businesses, there is a possibility that they can fail. And by fail, I don’t just mean in the win-loss columns. I’m talking about money-making ventures. In the early days of the sport, teams would fold and spring up every year. In some respects, we’ve become complacent and expect teams that are in certain places will always remain there.
Now imagine, MLB contracts the Mets and moves the Rays to CitiField. The Rays, with their stacked minor league system and well-managed front office would immediately be able to compete on a level on par, if not equal, to the Yankees and Red Soxs. There would be nearly 20 games between the two teams in the city. This would be a stupendous rivalry that would be great for both teams. Then consider the possibility for playoff baseball – a dynamic Subway Series for the right to get to the World Series.
The time is now. Bud Selig, make this the last year of the New York Metropolitans. The team isn’t getting any better, unless the DJ Carrasco signing was just the thing they needed to get them over the hump to the .500 mark. The Mets on-field performance is directly tied to the financial health of their owners. With each story released this offseason, the team’s finances become clearer and clearer. While guys like Hank Steinbrenner may worry about the A’s and Rays, one of the biggest financial headaches for MLB sits a few miles from Yankee Stadium. Moving the Rays to CitiField will give all those Mets fans and Yankees haters a team to root for that is deserving of their loyalty, money, and fandom.