Economic Committee Study May Lead to Labor Trouble

Citing alarming disparities between baseball’s haves and have-nots, the independent members of a blue-ribbon committee on industry economics presented their solutions in an 87-page report Friday. They did not recommend a salary cap--knowing perhaps it would never be approved by the players’ union and would only ensure another work stoppage--but did propose a stiffer luxury tax on teams with high payrolls that the union may conclude is tantamount to a cap.

Commissioner Bud Selig, speaking by phone after the report was presented to major league owners in New York, said he did not know if the recommendations would form the basis of management’s approach to the next collective bargaining negotiations--”We’ll determine how we proceed and in what areas over the next several months”--but industry sources said it is reasonable to conclude that this is exactly where the owners are headed.

As Don Fehr, executive director of the players’ union, noted, “The report was prepared with management data and in consultation only with the owners and their representatives. Each of the independent members have or have had ties to management. Gene Orza [the union’s associate counsel] and myself appeared before the committee only once to answer a few questions for less than an hour.”

For Fehr, the report seemed to be another of those doomsday messages that “surface before every negotiations,” or as Selig put it:

“You may disagree with the recommendations, but it’s hard to disagree with the conclusion that we have serious problems.

“The fact that no team in [the lower half] of the payroll rankings has won a playoff game in the last five years or even reached the World Series speaks for itself.”

The committee, appointed by Selig on Jan. 13, 1999, was composed of 12 club executives--including Tony Tavares and Sandy Litvak of the Angels--and the four independent members: former Senator George J. Mitchell; economist and Yale president Richard C. Levin; former Federal Reserve System chairman Paul A. Volcker, and commentator and columnist George Will, who is on the board of the San Diego Padres and Baltimore Orioles.

In a statement, Mitchell said the independent members “did not and do not see ourselves as mediators in the collective bargaining process, but rather as outside, independent analysts for the game. . . . We do not pretend to believe these changes will be easy or universally popular, [but] we do believe them to be a solution to the alarming disparities between baseball’s have and have-nots.”

The key recommendations:

* A 50% tax on all payrolls above $84 million.

* Substantial increase in revenue sharing to include at least 40% of all local revenue after ballpark expenses.

* National broadcasting and licensing revenue distributed unequally to assist low-revenue clubs, providing they maintain a $40-million payroll.

* Broadening the amateur draft, now restricted to players from the U.S., Canada and Puerto Rico, to include all foreign players, giving low-revenue clubs a chance to vie for the top Latin and Asian players currently affordable only to the high-revenue clubs.

* Initiation of a competitive balance draft in which the weakest eight clubs as determined by the standings can select players not on the 40-man rosters of the eight clubs that qualified for the playoffs.

* Permitting clubs that have little likelihood of securing a new ballpark or undertaking other revenue-enhancing activities to relocate if better markets can be identified.

The report also notes that while there has been some speculation about the possible need to eliminate two or more franchises, “there should be no immediate need for that if the recommendations are implemented.”

According to management figures revealed, the 30 teams lost $212 million last year on total revenue of $2.7 billion.

The revenue disparity stretched from the New York Yankees at $177.9 million to the Montreal Expos at $48.8 million, with the Dodgers ($114.15 million) and Angels ($86.12 million) in between. Only the Yankees ($64.5 million), Cleveland Indians ($45.9 million) and Colorado Rockies ($12.4 million) had an operating profit from 1995 through 1999, while the San Francisco Giants had the most losses at $97 million, followed by the Toronto Blue Jays at $87.6 million and the Angels at $83.3 million. The Dodgers lost $77.3 million in that span, according to management’s count.

Fehr, after a cursory reading, said the absence of a hard salary cap seemed positive but that other mechanisms can serve as a cap, and that the union has opposed the concept of a fixed luxury tax threshold because it does not allow for payroll inflation.

A 50% tax on payroll above $84 million, for instance, would result in the Yankees, now at$107 million, being taxed $12.5 million, a more meaningful deterrent than the now-expired and experimental tax in the current agreement.

Fehr also said the report, on first reading, fails to recognize three enormous factors.

* If the 1994-95 stoppage exacerbated the economic situation for some clubs, “you can’t suggest that’s part of an overall trend.”

* The revenue-sharing plan in the current agreement only has been fully implemented the last two years “and now several teams not expected to contend have begun to contend.”

* With a new TV contract, new Internet revenue and new stadiums on line in weaker markets, “there’s plenty of new revenue on the horizon.”

Of course, the current agreement won’t expire until the end of next season. Plenty of time to quantify. Plenty of time for rhetoric.