Situation Not as Bad as Selig Described It

Baseball officials backpedaled a day after Commissioner Bud Selig claimed two teams face imminent cash-flow crises, saying Thursday every club would make its upcoming payroll, though some might have problems later this season.

Bob DuPuy, baseball’s chief operating officer and a labor negotiator, moved to clarify comments Selig made Wednesday during interviews in Milwaukee, raising the possibility of a team being unable to pay its players next week and another folding this season because of debt. Selig declined to reveal the supposedly teetering clubs, increasing skepticism of the owners’ cry of poor and continuing their public-relations nightmare with collective bargaining talks possibly resuming today in New York.

Management sources, who declined to be identified because of a gag order and threat of a $1-million fine, said no clubs would be eliminated during the season.

“I believe that the immediate crisis has been solved,” DuPuy told the Associated Press, “regarding the team that could have missed payroll [Monday].”

But Selig contradicted DuPuy when contacted by The Times late Thursday in Milwaukee, saying nothing had been resolved.

“That isn’t quite accurate,” he said of DuPuy’s assessment of the situation. “We hope it’s resolved, but we won’t know until [today] or Saturday. The problem is, what happens a week from now? Or what happens two months from now? The solution doesn’t just rest on this payroll.”

Selig’s comments were perceived by players as a negotiating ploy, trying to increase the heat on the Major League Baseball Players Assn. with the sides still apart on key issues, including increased revenue sharing among the clubs and a luxury tax on teams with high payrolls. There was no way to corroborate the claims Selig made this week or in May to The Times, having then claimed “six to eight [teams] can’t exist another year.”

The Detroit Tigers and Tampa Bay Devil Rays are two of the clubs on Selig’s list of strapped teams, executives said, but it is unclear which clubs he refers to when explaining the owners’ position, further confusing the situation. And spokesmen for Detroit and Tampa Bay said their franchises are doing fine.

What is certain is that shutting doors would be the last of many steps for a financially insolvent major sports franchise, and teams in other sports have continued to operate even after filing for bankruptcy. The NHL’s Kings and Pittsburgh Penguins remained afloat despite bankruptcy proceedings in the ‘90s.

Baseball awaits a contraction ruling from arbitrator Shyam Das, who hopes to reach a decision Monday on the grievance filed by the union, which could give Selig the ability to eliminate teams. But that process is complicated, and one that likely won’t begin this season.

“There are a number of reasons a team is not going to fold at this point,” said David Carter of the Sports Business Group, an L.A.-based consulting firm. “There are scheduling difficulties, and just too many logistical issues, to not think that any of these teams, either by themselves or with some assistance from major league baseball, would not be able to limp out the year. It’s certainly inconceivable that they would be shutting down any teams.”

Selig said 20 of the 30 franchises have reached the limit on the $72-million lines of credit the commissioner’s office established for each team, and he would no longer prop up clubs that cannot meet their obligations. But executives said baseball would bail out clubs for at least the remainder of the schedule.

If the situation is as dire as Selig claims, they said, clubs probably would be put in receivership until a buyer could be found, or contracted if Das rules in favor of the owners. But before reaching that point, owners of strapped clubs could raise funds by selling a stake in the team, providing an infusion of cash to meet operating expenses. Franchises owned by corporations could seek loans from parent companies.

The Kings were the first modern-day major sports franchise in Los Angeles to file for bankruptcy when the hockey team entered Chapter 11 proceedings in September 1995. The action punctuated almost two years of financial chaos, which started with the swift unraveling of former owner Bruce McNall’s business enterprises.

The era of financial uncertainty finally ended with the bankruptcy, which paved the way for the approval of the sale of the team about a month later from Joseph Cohen and Jeffrey Sudikoff to Denver billionaire Philip Anschutz and Southern California real estate developer Ed Roski Jr. In 1999, star center Mario Lemieux assembled a group of investors to buy the Pittsburgh Penguins out of bankruptcy.

“Bankrupt companies continue to function all the time,” Carter said. “They have enough resources to keep going, and they’re bailed out for a period of time to reorganize. Just because someone is in that state of affairs, it doesn’t mean that they stop conducting business.”

Baseball’s divisional races would be affected if teams were dissolved at this point.

“Clearly, there are teams that are struggling,” said Rick Burton, executive director of the Warsaw Sports Marketing Center at the University of Oregon. “But this concept of teams going under, meaning they can’t pay their players, that’s the part that’s hard to believe.

“It’s hard to believe that even a small-market team, like the Kansas City Royals, would say, ‘We can’t make payroll, therefore we are going out of business.’ I have a problem with that.”

It is believed the commissioner’s office bailed out the Arizona Diamondbacks and Devil Rays in 1998, and baseball is bankrolling the Montreal Expos this season.

The commissioner’s office also guaranteed a credit line for Arizona in 2000, after the franchise had sought $53 million from investors. However, the defending World Series champion denied it needs another financial boost, having received $160 million from current and new investors.

“We have taken care of our business,” owner Jerry Colangelo said in a statement. “And I’m appalled that our organization continues to be mentioned when financial inquiries arise.”

The Tigers, owned by pizza mogul Mike Ilitch, are also upset. David Dombrowski, the club’s president and general manager, denied a Fox Sports News report that the franchise is having financial problems.

According to a spokesman for Vince Naimoli, Tampa Bay’s managing general partner, the Devil Rays are not experiencing severe cash-flow problems, as has been reported after Selig’s comments.

“By being vague about which franchises are in trouble, it leads to speculation about a lot of teams,” Carter said. “That is not going to help any of those franchises market themselves to corporations, or even attract fans at the gate. That’s another problem Selig is going to have.”

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Staff writers Ross Newhan and Lisa Dillman contributed to this report.