FARM PROFITS : In Class-A California League, Teams Don’t Have to Sell Out to Prosper, Thanks to Help From Major League Teams

It’s a warm but comfortable July evening in San Bernardino. The California Angels are playing an hour down the road in Anaheim, the Dodgers are on TV and the movie theaters are showing the summer hits.

But more than a thousand people have chosen to forgo all those entertainment options to sit in a little ballpark, watch youngsters struggle with an American pastime, eat $1.50 hot dogs, slurp $2 beers and qualify for a chance to win a $50 U.S. savings bond. This is minor league baseball.

And it can be a profitable business. The California League, a 10-team Class-A league with clubs from Reno to Riverside, drew a record total of 849,880 last season. The San Bernardino Spirit broke the single-season club attendance record with 161,054 in its first year of operation.

Attendance this season has lagged behind last year’s pace by 11%, but with two weeks to go, the league still has a chance to top the 700,000 mark for only the second time since 1949.

The California League has been able to draw fans in towns that are close to major league franchises. Six of the 10 ballparks in the league are within 90 miles of a major league club.

Six of the 10 California League clubs said they are expecting to turn a profit this season. Of the four clubs expecting to sustain losses, two (Riverside and Palm Springs) are in their first three years of existence, and two (Reno and Fresno) are without a major league affiliation--a crucial factor in generating profits.

“Absolutely, Class-A ball can be a profitable business,” said Joe Gagliardi, president of the California League.

And, thanks to revenues from concessions, billboard advertising and support from parent teams, minor league clubs don’t have to sell out to show a profit.

Franchise values in the California League, and throughout the nation, have been rising, as more wealthy baseball fans look to buy a piece of the pastime.

The Visalia Oaks were bought for $15,000 in 1983, according to Visalia General Manager Bruce Bucz. He estimates the club’s current value at $300,000.

The San Bernardino Spirit was bought for $260,000 in 1986. Spirit General Manager Bill Shanahan estimates the club’s current worth at $750,000.

The San Jose Giants were bought for a reported $409,000 in 1987. San Jose General Manager Harry Steve approximates the team’s value now at $750,000.

Even if the clubs’ estimates of current values are inflated, it’s evident that California League franchises have been appreciating rapidly.

“I thought (club prices) had peaked three years ago, but they’ve kept going up,” said baseball consultant Bob Freitas, who runs a baseball investment firm in Santa Cruz.

But if the economy takes a downturn, will minor league franchises be hard hit?

Most owners and general managers in the California League contend that a poor economy means good business for baseball. During past recessions, they say, baseball--with its cheap admission prices--has been a hot ticket.

“The entertainment dollar is still going to be there in the midst of bad times,” Gagliardi said. “That’s the one time people will flock to baseball. It’s still one of the cheapest forms of entertainment going on today’s market, especially minor league baseball.”

But if ticket sales don’t turn sour during tough economic times, franchise values might.

“It (a recession) might affect the resale values,” said Dan Kiser, general manager and part-owner of the Modesto A’s. “Right now, it’s a seller’s market. There’s a lot of people interested in becoming involved in owning minor league clubs. That could change.”

A major reason that owning a minor league club can be profitable is the financial support of the major league teams. Each major league club spends about $4 million on its minor league operations annually, according to Tom Romenesko, director of the San Diego Padres’ minor league operations.

Through player development contracts with the minor league franchises, the big league clubs pay major expenses such as players’ and coaches’ salaries, equipment costs and some travel costs. The major league clubs reap no profits from the minor league operations. Instead, they’re banking on the chance to develop players, who they hope will make the turnstiles spin in the big leagues.

A player development contract on the Class-A level can mean about $125,000 for a minor league club, according to Shanahan.

“We consider the minor league operations our research and development costs,” said Charles Blaney, director of minor league operations for the Dodgers. “It’s our chance to define and develop players who will hopefully make it to the major leagues.”

Without a player development contract, turning a profit is difficult, if not impossible, for a minor league team. You need to look no further than the Reno Silver Sox for an example.

The Reno club has operated as a nonprofit business since 1954, when it was organized by a group of Reno businessmen eager for baseball to become a fixture in the little gambling town. With major-league affiliation, the club rarely sustained operating losses, according to Keith Lee, president of the Silver Sox.

Last year, the club finished with $30,000 in the bank from operations. That was before the team’s major league affiliate, the Padres, decided not to renew its player development contract with the club. That forced Reno to operate as an independent.

The $30,000 is long gone, and Lee expects the club to lose $18,000 to $24,000, under the best circumstances. A bank note of about $20,000 is due in December, and the directors of the nonprofit organization--including Lee--may have to foot the bill.

Lee says that without a player development contract, the team probably will not operate next year. Without an affiliation, running a profitable minor league club is almost impossible, he said.

“From our experience, I think unless you’re a person with a lot of money, it’s very difficult to make money without a player development contract,” Lee said. “In the past, we always made money (that was reinvested into the nonprofit club). This year, we’re losing money. There’s more start-up expenses.”

California League clubs that do have player development contracts have been able to turn a steady profit. Modesto’s Kiser said the team has made a profit every year except one since 1971, when he joined the organization.

Minor league baseball is a business that doesn’t require sold-out crowds. Some clubs can be profitable with an average attendance of less than 1,000 a game. A winning team isn’t a necessity for financial success.

Billboard advertising is one reason. The outfield walls in the California League look as if they belong tucked inside a comics section. In Bakersfield, where the Dodgers’ Class-A affiliate plays, one finds an odd assortment of advertising billboards that would cause a few chuckles on Madison Avenue.

There is an ad for Union 76 gasoline next to a billboard pitching Bail Bond Leon. There is an ad for the Prime Ticket network next to a sign for Roto Rooter. The Marlboro man is standing above a sign for San Joaquin Community Hospital.

But, most important, the signs pay. At an average advertising fee of about $1,500 per sign per season, the California League clubs are often able to collect their biggest chunk of revenues before the season starts.

San Jose charges $2,250 for its biggest signs, and Palm Springs charges $2,500. Multiply those figures by, say, 30 signs, and the team has a healthy influx of cash.

For some teams, concession sales are the biggest money-makers. San Bernardino’s Shanahan says concessions account for about half the team’s revenues.

To keep their gate receipts up, minor league teams promote heavily. Modesto has 68 home dates this season, and promotions have been scheduled for 55 of those dates, Kiser said.

“You have to promote,” said Kiser. “You have to offer something over and above the game itself to draw people out to the park.”

But what else is drawing people to the California League ballparks? What is keeping them from packing the kids in the station wagon and taking a relatively short ride to a nearby big league park?

None of the California League clubs said they are competing with major league baseball for fans’ attention.

“We aren’t going head-to-head with the major leagues,” said Dick Beahrs, part-owner of the San Jose Giants. “We have lower ticket prices; it’s a lot cheaper to see a minor league game. We’re closer, the food is good, we have good parking. . . . It’s more convenient.”

Owners and general managers such as Kiser say they feel more pressure from TV than the big leagues. As the cable TV industry expands, and more major league games come into family living rooms, minor league clubs may have more trouble budging people from their armchairs.

But TV is hardly the only worry for minor league owners. For one, there is weather. Bad weather is bad news for the minor leagues. The California League was hit hard by cold temperatures at the beginning of this season, which put a dent in attendance figures.

Utility bills, insurance costs, and bus repairs have to be paid for.

Some clubs overcome the problems and prosper, and others struggle. A striking contrast is provided by clubs in San Bernardino and Riverside.

When an ownership group, including actor Mark Harmon, bought the Ventura minor league franchise and moved it to San Bernardino in 1987, there was a downtown baseball diamond awaiting the club, but no stadium.

A visitor nowadays to San Bernardino’s Fiscalini Field, nestled picturesquely against a surrounding hillside, sees a stadium complete with press box, sound system and rooftop beer garden. The Spirit has averaged 2,258 fans a game this season, slightly fewer than last year.

San Bernardino’s honeymoon with the Spirit hasn’t worn off. The current owners are even looking into acquiring a Continental Basketball Assn. franchise.

“I think the town was really ready to hang their hat on something--you know, civic pride,” Shanahan said. “It really comes back down to how you tie yourself into the community.”

Robert and Paula Moore, residents of San Bernardino, used to make drive an hour to Anaheim to watch the Angels play. Now they have season tickets behind home plate at Fiscalini Field.

“We don’t go to the Angels’ games anymore,” Paula Moore said as she watched the Spirit lose to Fresno. “This is run just like the major leagues. Everyone is so excited about the club. Even when they’re losing, people still stay to the end.”

Riverside has been a different story. When the Brett brothers bought the club and moved it from Salinas to its current home, they met their fair share of problems.

The team received late approval from the Riverside city council to operate, giving the club roughly two months to prepare. Then on opening day, the stadium was still in the process of being refurbished. The concession stands were unfinished, the players dressed in trailers, and there was a slight problem with the power.

“It’s tough to cook hot dogs without electricity,” Riverside General Manager Leanne Pagliai said.

Also, the team hasn’t been able to obtain an alcohol license. Pagliai says it is tough to operate a minor league franchise successfully without selling beer.

The stadium was finally finished midway through the season, but the average attendance has remained lackluster, averaging 832 a game.

But Bobby Brett, president and part-owner of the club, says he wouldn’t trade his team for the San Bernardino Spirit. He says that minor league baseball can work in Riverside, and that the major problems there have been solved.

“It’s been frustrating, but we expected that,” Brett said. “It would have been nice to have everything in place for opening day, but it didn’t happen. Now everything is in excellent condition. We have what I feel is one of the finest facilities for Class-A ball in the nation. I’ll put our facility up against any in the market.”

The success of the Riverside franchise might play a part in the direction of the California League. Gagliardi, the league president, said he is in favor of expansion, but the first priority of the league is to find player development contracts for Fresno and Reno.

Minor league baseball nationwide may be on the verge of expansion, according to Sal Artiaga, president of the National Assn.--the minor leagues’ front office. Artiaga said the National Assn. is in the process of studying expansion possibilities and preparing for the transition.

“We have a chance to grow in a very positive manner,” Artiaga said. “ . . . Expansion can enhance player development and help major league organizations build from within.”

But there is a paradox. With the current boom in the minor league business, the owners may be ready to expand, and the major league clubs may not. The big league teams may not be interested in increasing their minor league expenses.

“In a lot of ways, that’s the situation right now,” said the Padres’ Romenesko. “When you see the money we spend in the development process, we can’t be forced--and I think forced is the proper word here--to come up with player development contracts of $400,000 just because the minor leagues want to expand.”

Minor league expansion may have to wait for major league expansion.

“I don’t see expansion without more working agreements,” Bobby Brett said. “Until the major leagues are ready to expand, we won’t be ready to expand.”