Tuesday, January 29, 2008

MLB in Tampa – Destined to Fail

A report in Saturday’s St. Petersburg Times said it all. Rays president Matthew Silverman announced during a televised appearance he made Friday afternoon, the franchise has lost between $20-million and $30-million since 2005. As terrible as that may sound, many local media pundits believe the Rays have been losing close to $20 million annually.

The business hasn't been self-sustaining in the past," Silverman said at a Suncoast Tiger Bay Club meeting, shown live on BayNews 9. "... We're getting close to getting back on our feet."

New York investor Stuart Sternberg took control of the Rays from founding owner Vince Naimoli on October 6, 2005. If one wants to understand the issues linked to the Rays economic plight, all one needs to do is look back at the reign of terror associated with Naimoli’s days as owner.

Forbes Magazine suggested a 2004 Financial Valuation of $176 million for the D-Rays, and offered these benchmark financial valuations over the last six years: $225 million in 1999, $163 in 2000, $150 in 2001, $142 in 2002, $145 in 2003 and the increase to $176 million for 2004 (all figures in millions of dollars).

And how does Forbes regard the D-Rays? As the most horrific baseball franchise of the modern era. The Tampa Bay Rays have never come close to a winning season since their inaugural 1998 season and have lost at least 100 games twice. The franchise is known for squabbling owners, low-budget rosters, lousy public relations and teams that are out of the pennant race by July 4. The home town fans are more passionate about the Yankees' visits than they are about their own club. Bright spot? The team had the most wins last season-per-dollar-of payroll (that because the team has the lowest payroll in baseball).

Problems ensued from Day One, emblematic of not only a terrible owner, but a businessman who set goals that could never be reached. The Devil Rays put their inaugural season single game tickets on sale in December 1997. Namoli boasted the team would sell out 20 of its games that day. They had sold nearly 29,000 season tickets, leaving 16,000 single game tickets available for each game. The team managed to sell out one game that day (their first ever game). They managed to sell out only that one game in their first six years.

The St. Petersburg Times offered a laundry list of mistakes, and as the paper points out not all of the mistakes could be blamed on Namoli:

Major League Baseball put the new owners in a financial hole before the team ever took the field, raising the expansion fee to an unprecedented $130-million and forcing them to forfeit millions in national TV revenue at a time when the overall costs of competing were soaring. The financial wherewithal of the Tampa Bay ownership group was immediately challenged, and has been a persistent concern.

Just how often have those who own professional sports franchises taken a greedy approach when it comes to establishing the parameters for expansion? Well it’s tough enough of a challenge to pay a $130 million franchise fee, and next to impossible when MLB decided to ‘penalize’ the D-Rays by denying the franchise MLB national TV revenues. When Bob McNair paid the National Football League a $700 million expansion fee for the Houston Texans he was immediately eligible for the league’s lucrative network TV deal.

While the Rays stocked their inaugural roster with veteran players, they fielded too many rookies in key management positions. The owner Naimoli, had never owned a sports team; the general manager, Chuck LaMar, had never been a general manager; the manager, Larry Rothschild, had never managed. Of the six department-leading vice presidents on the 1998 staff, only one had done his same job before.

It’s almost amusing to note the Devil Rays followed a pattern similar to the NHL’s Tampa Bay Lightening. Then Lightening General Manager Phil Esposito believed the only way he could build awareness for hockey in Florida was with established players. Baseball is a known and established product in Florida. The D-Rays paid a price for making bad decisions,

The promising Tampa Bay baseball market turned out to be something of a mirage. Projections for massive fan support turned out to be overly optimistic, as the Rays have ranked at or near the bottom of the league in attendance the past six seasons. They struggle to cross the regional barriers that define the area and to connect with transient fans who preferred to stick with their successful "home" team. In a recent Times survey, less than 30 percent of Tampa Bay area baseball fans named the Devil Rays their favorite team.

As for the market, the same can also be said for the Florida Marlins, who despite winning two World Series in the last eight years, have suffered at the box office as do the Rays. One can make a pretty strong business case it never made any sense for Major League Baseball to expand to Florida. Floridians love spring training, or at least the dollars spring training brings to the state.

However those who live in the Sunshine State year round love football most. The state is home to three NFL franchises, seven Division I programs, including three of the premier college football powerhouses and arguably the best high school football anywhere. For Florida sports fans there is only one season: football. Baseball will never find a place in the hearts, minds and disposable incomes of Florida sports fans.

In compiling one of the worst cumulative seven-year records (451-680) of any expansion team, their plan for building has changed repeatedly and many of their high-profile, big-dollar player acquisitions have been huge busts, whether through bad scouting, bad decisions or bad luck.
They handed $10.2-million to a 1996 high-school phenom, Matt White, who has yet to pitch in the major leagues because of injuries; gave a $12.5-million, two-year deal to an oft-injured veteran, Juan Guzman, who lasted five outs in his first game and never pitched again; and paid $82-million in multiyear deals to supposed stars Wilson Alvarez, Vinny Castilla and Greg Vaughn, who were all released. Their 1997 trade of future All-Star outfielder Bobby Abreu for pedestrian shortstop Kevin Stocker is still ridiculed.

Bad decision after bad decision. The player personal decisions made by the Devil Rays have made the organization the laughing stock of professional sports.

Tropicana Field was nearly 10 years old by the time the Rays moved in, and proved to be a cheaply built, generic, multipurpose stadium rather than a new vibrant, retro-style ballpark that would become a fan destination. The Rays spent $35-million to enlarge the facility and enhance the experience, but couldn't - and still can't - dispel its poor reputation, nor the perception that its downtown St. Petersburg location is inconvenient.

Both Florida MLB franchises are forced to suffer with terrible stadiums. With the Marlins playing in a football stadium, and the Rays in Tropicana Field….the best baseball facility in the Tampa area is Legends Field, the spring home of the Yankees. There are no less then six Florida State League baseball franchises within driving distance of The Trop. The ambiance of Tropicana Field doesn’t exist and as Major League Baseball has come to understand since Camden Yards opened in 1992, the in-game experience is a key to any teams’ success. Just what were The Lords of the Realm thinking when they awarded a franchise to a city that didn’t have a proper facility to play in? That’s easy to figure out- the $130 million expansion fee.

Armed with an apparently ironclad contract, Namoli has been, and continues to be, the face of the franchise, which may not be a good thing. The same hard-nosed, bulldog style that earned him praise for acquiring the team has not played well in public, and his controversial actions have often reflected negatively on the team and, according to a former partner, hurt sales efforts. What seemed a stellar ownership group of successful Tampa Bay area businessmen fell victim to philosophical differences and in-fighting, with five of the six general partners (all but Namoli) selling their shares last May to New York investor Stuart Sternberg. And the dysfunction made its way to the field as the Rays head into their fourth consecutive season of having the smallest payroll in the major leagues.

As for Namoli, one of the first indicators he would live in infamy as one of the worst owners in Major League Baseball history took place after the St. Petersburg Times published a negative story about Namoli and his ownership of the team early in the team’s history. The Times was a team sponsor at the time. One of the benefits they enjoyed as a sponsor was the right to position newspaper boxes throughout the facility. Not an important financial consideration for the paper, but a benefit that offered good visibility to the paper. Namoli became so enraged when the editorial appeared that he ordered his staff to collect all of the Times newspaper boxes located throughout Tropicana Field and leave them on the facility’s loading dock to be removed by the paper. That despite signing a sponsorship agreement that clearly stated the paper had the right to sell their papers in Tropicana Field, and of course the paper didn’t agree to succeed editorial control to one of the papers corporate partners.

Sternberg headed a group that acquired about 50 percent of the Devil Rays in May 2004. He originally had an agreement to take control from Naimoli in January 2007 but was willing to pay the managing general partner to step aside early.

"I can't speak to the arrangement I have with Mr. Naimoli," Sternberg said when asked about a report that the former managing general partner may have received an extra $4 million to $6 million to accelerate the timetable.

On November 28, 2007 the Rays announced an ambitious $1 billion plan to build a new state of the art ballpark.

"Our vision is to build a breath-taking and contemporary waterfront ballpark," said Sternberg. "It will be an iconic landmark for the entire Tampa Bay region and showcase all that is great about Major League Baseball in the State of Florida."

At a press conference conducted in the outfield of Progress Energy Park, home of Al Lang Field, Sternberg and the Rays introduced renderings of the proposed ballpark which will provide an intimate baseball venue and offer sweeping views of the picturesque St. Petersburg waterfront. The design draws upon the 100-year history of baseball and spring training on the Al Lang site. In addition to modern fan- and family-friendly amenities, the ballpark will feature 360 degree circulation, air-conditioned concourses with open views to the playing field, the smallest upper deck in baseball, and a new public park that will seamlessly link the waterfront park system to the north of the ballpark with the emerging cultural district to its south.

The ballpark design also includes a unique retractable roof which will shield the playing field and fans from the elements yet still maintain an intimate environment. The roof will be comprised of a light weatherproof fabric that will be pulled along cables that are suspended between arches on one end, and a central mast structure on the other. It will take approximately 8 minutes to open or close the roof, and, even when the roof is deployed, the feel of an open-air ballpark will be maintained. The Rays have worked closely with a team of architects and engineers, led by HOK Sport, on the design. The total cost for the ballpark is estimated to be $450 million.

The design also takes advantage of the Al Lang site's proximity to the existing interstate highway network and over 12,000 publicly-accessible parking spaces in downtown St. Petersburg. In addition, 5,000 overflow parking spaces will be available on the Tropicana Field site.

The Rays and the City of St. Petersburg have been evaluating financing alternatives for the facility. The ballpark financing will include a large contribution by the Rays. An essential component of the financing is the redevelopment of the Tropicana Field site into a major retail, entertainment, and housing development. The Rays also expect to seek financing assistance from the State of Florida.

"We are eager to advance our discussions with the City of St. Petersburg, Pinellas County, and the State of Florida to reach agreement on an appropriate financing plan for these projects," said Rays President Matt Silverman. "We believe this ballpark can be built without any new taxes, and we will work in partnership with the public to make these projects a reality."

The Rays have partnered with Hines, a leading national developer of high-quality and environmentally-friendly mixed-use projects, to develop a site plan on the Tropicana Field redevelopment. Hines envisions creating an entirely new community at the Tropicana Field site, with new shops and restaurants, residential buildings (including affordable workforce housing), street-level retail, entertainment venues and new parks and open spaces.

"We are excited about this opportunity to work with the Rays and the City of St. Petersburg," said Hines Senior Vice President Michael Harrison. "We can transform Tropicana Field and its parking lots into a thriving neighborhood of residences, shops, entertainment and parkland."

The waterfront ballpark and Tropicana Field redevelopment projects are estimated to bring more than $1 billion in investment to St. Petersburg, create thousands of construction and permanent jobs, and generate tens of millions of dollars in increased tax revenue for St. Petersburg, Pinellas County and its schools. The Rays expect both the new ballpark and the Tropicana Field redevelopment will qualify for LEED-certification, the highest standard of environmentally responsible construction.

"We look forward to working with the community to develop this vision for the future of St. Petersburg," said Michael Kalt, Rays Senior Vice President of Development and Business Affairs. "These twin development projects will be a significant economic development engine, drawing visitors from around the region into the heart of downtown, and extending greater economic opportunity into Midtown and beyond."

November’s announcement kicked off a year-long public process for the two projects. The Rays will conduct extensive public outreach to present plans and gather feedback on all aspects of these developments. Hines must also compete for the rights to redevelop the Tropicana Field site through a Request for Proposal (RFP) process managed by the city. In addition to the RFP process on the Tropicana Field site, the City Council would also need to approve adding to the November 2008 ballot a referendum to authorize the construction of the new ballpark on the site of Al Lang Field. Following referendum approval, construction on both sites is anticipated to begin in mid-2009, with the new ballpark ready by Opening Day 2012. The retail, commercial, and housing development on the Tropicana Field site is scheduled to open in 2011 and continue through approximately 2013.

"Downtown St. Petersburg has undergone a tremendous renaissance in recent years," said St. Petersburg Mayor Rick Baker. "We look forward to exploring this opportunity with the Rays."

The Rays will continue to operate under their current lease agreement at Tropicana Field during this process. Tropicana Field was completed in 1990 as a multi-purpose stadium. Tampa Bay was awarded a Major League Baseball franchise in 1995, and the facility underwent an $85 million renovation before the Rays (then named the Devil Rays) began play in 1998. The domed Tropicana Field, one of only five multipurpose stadiums in baseball, was the last baseball stadium constructed before Oriole Park at Camden Yards in Baltimore ushered in a new era of ballpark design and innovation.

Not surprisingly, the financing for the project remains a very big question. When Sternberg announced the ambitious plan it included a $60-million state subsidy to help pay for a new downtown waterfront stadium. The team announced in early January that it was withdrawing their request for state financial assistance.

"We said from the beginning that we don't see (the state money) as crucial," Team senior vice president Michael Kalt said. "It's nice to have, but it's not essential. We're not in the business of pushing things through that we think are unrealistic."

According to a report in The St. Petersburg Times, the Rays' decision came days after the Times reported it would be next to impossible for the franchise to receive state money. In the Times' Saturday editions, the overwhelming majority of the Rays' hometown lawmakers - the 12 members of the Pinellas County delegation that would be most likely to push the team's interest - sounded unwilling or uninterested in aiding the Rays this spring.

"The timing couldn't be worse," said Sen. Dennis Jones, R-Treasure Island. "Maybe in 10 years things will be different, but right now everywhere we go people are talking about property taxes and insurance. I can guarantee you they're not worried about a baseball stadium."

How the organization finds the money needed to finance the stadium will be determined over the next year, but this issue is certain – without a new stadium the Tampa Bay Rays are dead in the Tampa/St. Petersburg market. Major League Baseball was wrong to award a franchise to both Miami (in 1993), and St. Petersburg in 1997 without each franchise having a plan in place to build a baseball specific stadium. The Rays and Marlins are the lat two major league teams who either aren’t playing in a baseball specific stadium, or have plans for one. The day of the multi-purpose stadium is gone – as will be the Rays if their dreams of a billion dollar stadium plan don’t come to fruition.

For Sports Business News this is Howard Bloom. Sources cited and used in this Insider Report: The St. Petersburg Times

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