If Players Strike, Home Field Is a Disadvantage

Those with the biggest financial stakes in major league baseball are positioned to weather the immediate pain of a players’ strike, but cities such as Los Angeles and Anaheim would lose millions of dollars in tax and business revenues with every canceled game.

Estimates by the U.S. Conference of Mayors show that if players strike as early as today, it would cost baseball cities and area businesses an average $1.4 million a game, a spokesman said Wednesday. Only if a strike eliminates the playoffs and World Series or drags into next season, as the 1994-95 labor impasse did, would the strain on baseball’s internal economy begin to show, potentially forcing several weaker teams into bankruptcy protection, sports financial experts warned.

“Baseball is the Titanic of sports leagues, and it’s headed for the glacier now,” said Dean Bonham, chief executive of Denver-based Bonham Group, a sports-marketing and finance firm. “The glacier is the strike. And if the players go out on strike, the ship is going to sink.”

Lessons learned from the sport’s checkered labor history have prompted baseball bankers and some landlords to limit their exposure with large reserve funds or contracts that lock teams into making lease payments. Players will be able to draw on a union savings fund. And owners, who complain that they lose millions of dollars when their teams are playing under the sport’s current system, say they can withstand a strike financially.

“There is no looming financial pressure out there that in one week’s time, if the players go out, we’ll all collapse,” said Jonathan Mariner, senior vice president and chief financial officer for the league.

The strike’s timing--coming at the end of the season--and its relatively isolated effect will blunt any drastic economic hit.

“This is not like the airlines, an engine of the American economy, are going on strike,” said Mark Rosentraub, dean of urban affairs at Cleveland State University and author of a book on stadium economics. “It’s not like the entire auto industry went out and you’re talking about 15% of the nation’s employment.”

In Los Angeles and Orange counties, pro sports--basketball, hockey and baseball--employ 2,600 full-time workers and generate $265 million a year, according to the most recent U.S. Census data. This is dwarfed when compared with a regional work force of 4.5 million and output of $457 billion, said Jack Kyser, chief economist of the Los Angeles Economic Development Corp. “This is not going to devastate the local economy,” he said.

Yet some will feel the hurt right away.

Farmer John brand meats would lose the sale of 260,000 Dodger Dogs if the remaining 13 games of the Dodgers’ regular season are canceled, said Ron Smith, the firm’s director of public relations.

“We’re concerned about this,” he said. “If the Dodgers are no longer, then we’re no longer. It’s an integral part of who we are.”

Also in a pickle are companies such as Aramark Corp., which operates concessions at Edison Field, Dodger Stadium and 12 other ballparks. The firm declined to say how its business would suffer from a strike, but its 2001 annual report said the last strike resulted in a 5% drop in operating income and predicted a repeat could “result in a substantial loss of sales and reduced profits.”

A top executive at rival Sportservice Inc. said the hardest hit would be part-time vendors. “It’s the common guy who is going to be affected, who is making $25,000 to $30,000 a year,” said Nick Biello, chief operating officer of contract services for the firm, which runs concessions at eight major league parks.

At Edison Field, the ax would fall on 300 part-time Aramark cashiers, cooks and other vendors who make $60 to $112 per six-hour shift. Many are students or workers looking for a second income; many also depend on the job for insurance.

A strike would deprive them of income from the remaining 12 Angels home games, plus the potential for making more during the playoffs, said Ada Torres, president of Hotel Employees and Restaurant Employees Union Local 681.

“They really look forward to working each and every shift because there’s a limited number,” Torres said. “The workers are concerned.”

The cumulative effect of lost taxes, local business and stadium revenues on any major league city would be about 20% more than the last strike, said the Mayor’s Conference spokesman. Based on that, another work stoppage would cost the city of Anaheim approximately $2.3 million per home game.

No numbers were immediately available for Los Angeles but a city official said municipal coffers would lose 10% of Dodger Stadium parking revenue, 1% of the sales tax on tickets and a business tax of one-half of 1% of gross receipts from concessions. The Dodgers will be billed approximately $1.44 million for property taxes, strike or no strike.

At the top of the sports economic food chain, the players have been urged for more than a year to put money aside in anticipation of a strike, said Greg Bouris, communications director for the Major League Players Assn.

The athletes, who make an average $2.4 million a year, will lose two of their 12 paychecks for the year. And as an added measure, the union executive board may give out shares from a pot of licensing fees collected for using player images on trading cards, video games and clothes.

Their bosses, meanwhile, have counted the cost and concluded a strike wouldn’t hurt them right away, said Mariner, the league CFO. Part of the reason: Although revenue would stop, owners would shed two major expenses, player payroll and stadium rent, which in many cases is tied to attendance. The league also would keep the payments from its $2.5-billion national television contract with Fox Sports, which receives credits for lost games and advertising.

More worrisome is the $2.5 billion in debt that team owners have taken on to pay for stadiums, the purchase of franchises and meeting payroll. Some believe several owners are so seriously in debt that a strike of any length would have dire consequences.

“There are a number of teams out there that are highly leveraged and need every game to make payroll,” said John A. Moag Jr., CEO of Moag & Associates, a Baltimore-based sports investment banking firm. “If that gets cut off, it has very serious implications for franchises ... about a third of them.” He declined to elaborate.

But baseball officials say they are prepared. There are nine months worth of reserves to cover the debt teams owe through a $1.3-billion leaguewide revolving line of credit underwritten by lead investment bankers J.P. Morgan, Bank of America and FleetBoston Financial, Mariner said.

Team owners are on the hook to bankers for an additional $1.2 billion for individual loans taken to build stadiums, make player payroll and purchase their franchises. Bankers who make those loans often require similar reserve funds, said one financier.

“That’s an unfortunate comment on the state of sports, but people have planned for it [work stoppages],” said Tom Whitworth, executive vice president of Legg Mason Real Estate Services, a Philadelphia-based firm that helps team owners find loans.

An escrow account also will keep construction going on the $296-million downtown ballpark for the San Diego Padres, according to city and Padres officials. The park is set to be ready by Opening Day 2004.

Officials for other public stadium authorities say they probably will suffer a decrease from stadium revenue because some lease payments are tied to attendance. Cut out the last games of the season, and the money stops coming in. In Cleveland, officials say the shortage won’t affect the repayments to bondholders but might cut deeply into the operating budget of the nonprofit that operates and maintains Jacobs Field.

The public authority running Coors Field, home to the Colorado Rockies, would take a financial hit--just over $200,000--if the final 13 games are canceled. On pace to draw nearly 2.9 million fans, the Rockies pay 25 cents to 50 cents for each ticket sold between 2.25 million and 3 million.

Other baseball landlords, mindful of potential strikes, have insisted on clauses that locked teams into their mortgage payments. In Milwaukee, where taxpayers pay an additional penny on a $10 purchase to cover stadium bonds, the Brewers are locked into a lease requiring payment of $900,000 to $1.21 million a year.

Mick Duckett, who runs the Southeast Wisconsin Professional Baseball Park District, said he has no fear that a strike would interrupt the payments. “That’s like saying, ‘What happens if the sun doesn’t come up tomorrow morning?’ ” he said.

Times staff writer Kimi Yoshino contributed to this report.