Arizona Has One for the Books

Surveying the baseball landscape but careful to avoid any comment that touches on labor and could produce a $1-million fine from the commissioner, Jerry Colangelo said, “I think you can look at some teams in baseball and see a dead end. I don’t see a dead end here. It just cost us a lot to get started and there’s no magic formula to wipe out all that debt.”

With start-up costs of $350 million and a $119-million investment in six free agents after their first year, the Arizona Diamondbacks are burdened with debt as they approach their fourth season.

The tally of the sum in the Valley of the Sun is a concern to baseball, but the club’s managing general partner did produce a little magic in the off-season.

At a time when some of union leader Don Fehr’s constituents have given new meaning to greed, Colangelo revealed that he’d met with 10 of his players individually during the off-season and each agreed to defer salary--about$17 million at 6.5% interest--to improve the Diamondbacks’ 2001 cash flow.

The players, of course, will eventually get their money and more, but how often does the modern athlete help his employer out of a bind?

“It’s a feel-good story at a time when professional sports needs a feel-good story,” Colangelo said. “I felt comfortable in my relationship with each that I could have that kind of discussion with them and it was gratifying to hear them say, ‘Hey, you stepped up for us and we’ll step up for you.’

“When you think of all the whining and complaining about contracts and you see this kind of response, it creates a camaraderie, it enhances the relationship in so many ways. There’s just a great feel in terms of cohesion and team. We’re all in the trenches together.”

The 10: Matt Williams, Steve Finley, Randy Johnson, Curt Schilling, Luis Gonzalez, Tony Womack, Jay Bell, Todd Stottlemyre, Brian Anderson and Armando Reynoso. The Diamondbacks already had $37 million deferred from their first three seasons and now have deferred more than $120 million through the first seven.

At some point, of course, the bills will come due, but Colangelo said he has to focus on today.

He said that in juggling the debt with a desire to field a competitive team, the Diamondbacks’ situation is a microcosm of professional sports economics, that he made a four-year competitive commitment to Williams, Johnson, Finley and others when they signed, and “to break up the team would be to renege on that commitment.”

“I can’t worry about five years from now,” he said. “It’s true, we’re only delaying some of the [financial obligation], but it’s no different than refinancing your home. Ultimately, you pay, but during the interim you have a place to live.

“I don’t have a solution long-term. I’m still looking for the money tree, but I’m comfortable where we’re at right now. All the steps we’ve taken have put us in position to have a positive cash flow this year, and that’s the key. There’s no question that we’ll show a book loss because it would be impossible not to, with the debt servicing, so I have to focus on cash flow, which is the real tell-tale in my opinion anyway.”

The willingness of the 10 to defer $17 million allowed Colangelo to sign Mark Grace and Reggie Sanders. He also made a statement about his commitment by picking up Johnson’s $12-million option for 2003--with Johnson agreeing to increase his deferred package.

The 2001 payroll is $83 million, but the payout will be more like $53 million because of the deferrals. The cash flow may be black this year, but the Diamondbacks are swimming in a red sea. Colangelo has already made cash calls and loans of about $65 million in three seasons, the commissioner’s office having to guarantee a loan enabling the team to pay bills last summer.

There have been marketing and advertising cutbacks, and about 15 employees lost their jobs during the winter, although none on the baseball side except for manager Buck Showalter, who remains on the ledger because he’s still owed $2.6 million.

All of this started, Colangelo said, with the premium price to join the fraternity. The franchise fee was $130 million, the ballpark obligation $110 million, and the total start-up about $350 million. The Diamondbacks, he said, were then dealt “a double whammy” by their new business colleagues in baseball. They were required to pay into revenue sharing, at the same time receiving $5 million less a year than the 28 other clubs from the national TV contract for their first five years.

The ultimate killer has been a dramatic attendance falloff from 3.6 million in 1998 to 3.1 million in 1999 to 2.6 million last year. A 25% drop in season-ticket sales after the first season prompted Colangelo to make that $119-million investment in the six free agents, including Johnson, Finley and Stottlemyre.

“In order to protect the $350 million, I felt we had to go out and get competitive sooner rather than later,” he said. “I still think the logic was correct. I’d do it again.”

The Diamondbacks responded in ’99 by winning a division title and 100 games. It was the biggest turnaround in baseball history but it wasn’t reflected at the gate. In response partly to a ticket increase to help pay for the free-agent splurge, attendance fell 500,000, and then 500,000 more last year when the Diamondbacks, in Colangelo’s view, underachieved and had several key injuries, finishing third, 12 games behind the San Francisco Giants in the National League West.

Is he disappointed in a market booming with growth?

“Not at all,” Colangelo said. “We’ve had great support in terms of the numbers. Whether that number is 2.9, 3.1 or 3.6, it wasn’t that long ago that if a team drew 2 million, it was a big year. I can’t be disappointed in attendance. The fact is, I may have misread where we were and what to expect. Had we maintained a certain level [on the field and at the gate], we’d be in much better shape now, of course, but that didn’t happen.”

Nevertheless, season-ticket sales should match last year’s 21,000, and Colangelo thinks the team is primed for a competitive year under Manager Bob Brenly, who has loosened the reins after Showalter’s tense and control-oriented tenure. The Diamondbacks have a solid rotation built around Johnson and Schilling (obtained in trade for Travis Lee, who had cost the club $10 million to sign), a reliable closer in Matt Mantei and a veteran lineup that will try to hold off age and injury.

Colangelo is now typically upbeat--the financial concerns aside--although only a few weeks ago he was publicly reexamining his long involvement in pro sports. As managing general partner of the NBA’s Phoenix Suns, he was disillusioned by a series of incidents involving his players, among them a spousal-abuse charge against Jason Kidd and a drunk-driving charge against Cliff Robinson. Colangelo, in reflection, said he was coming off double hernia surgery and at a low point and has since regained “my competitive nature, my belief you tackle issues head-on and don’t walk away.”

He said the Suns are holding Kidd and Robinson responsible to fans and community beyond what the league and legal ramifications are, and he recently lectured the Diamondbacks regarding accountability and making the right choices.

Of course, the willingness of the 10 players to defer salaries has convinced Colangelo he’s working with a special group.

He reflected on recent and ongoing baseball headlines and said, “On one hand I can understand, to some small degree, a player’s dissatisfaction from time to time, but the bottom line is that we have to protect contract sanctity. A player willing to sign a guaranteed, long-term contract has to understand he’s being protected from injury [and ineffectiveness] and that he has to honor the contract. I mean, his team can’t tear up the contract or renegotiate it, so what right does the player have to do it? In addition, we all have to be cognizant of the impact a contract can have on the entire industry.”

That may have been a veiled knock at the Texas Rangers for their $252-million signing of Alex Rodriguez, spawning much of the Gary Sheffield and Frank Thomas fallout this spring.

Colangelo, however, deferred comment. He can’t afford that $1-million fine.