10 August 2007

How to have your pinstriped cake and eat it too

A Fortune article shows that the $1.2 billion new Yankee Stadium could bring in a whopping $253 million per year in revenue to the pinstripers.

Think about that. $253 million. They're not even selling stadium naming rights or seat licenses. That's enough to fit the Yankees' current payroll including Roger Clemens plus the inevitable $25 million in luxury tax they'll pay at the end of the year, and still leave enough for a couple of Scott Boras clients and a little profit. All that makes the Yanks' ginormous radio and TV money pure gravy. Scary, isn't it?

Worst of all, the $51 million mortgage will be at least partly deductible, probably 40%. Since they get to hold that revenue back, the other 29 teams get to indirectly pay for the new Yankee Stadium. Of course, the same goes for the Mets and their new digs. And everyone else that has new stadia or renovations on their dockets, including the A's.

Back to the Bombers. Like all teams, they'll pay one-third of their stadium revenues into the big revenue sharing pool. That doesn't mean they'll pay 1/3 of $253 million, they'll probably have some slick holding company/vertical arrangement that allows them to hide some of it. After they've hidden some of that away, they can take the stadium expenses deduction. Only after those two methods of gaming the system do they pay into the pool, plus they get dinged by the luxury tax. But if the stadium expenses deduction effectively or largely cancels out the luxury tax, it's really no skin off Steinbrenner's ass, is it?

Think of it like filling out a long form 1040. You've got your mortgage interest deduction (akin to stadium expenses), charitable contributions, and perhaps other deductions. Then you pay in and because you're in the higher tax bracket, you're supposed to pay more. The poor teams get their own version of tax credits (like our EIC) and head right for the check cashing place. It's not altogether that different from MLB, except in terms of scale.

Cisco Field is a third way, using non-baseball revenues such as housing development rights sales and commercial leases as an outside revenue stream to pay for the ballpark. I can't think of a proper analogy at the moment, can you?