NEW YORK -- Despite the rapid escalation of players' salaries, baseball teams may not be as financially pinched as their owners and Commissioner Fay Vincent complain, Forbes suggests in its April 1 issue.
Why else, the magazine asks, are businessmen 'fighting tooth and nail to buy the National League's twonew expansion teams for $95 million each.'
'... while the reported numbers do look bad for many teams, the real returns are often far better,' Forbes said.
The reason: proper, but misleading, accounting principles that lead to better post-tax returns.
In questioning Vincent's recent claim that 10 of the 26 teams lost money last year, Forbes focuses primarily on the Pittsburgh Pirates, the only team whose 1990 financial statement is publicly disclosed. The disclosure is a condition of a $20 million loan from Pittsburgh's Urban Redevelopment Authority.
The Pirates' 1990 income statement shows revenue of $42.8 million and an operating loss of $7 million.
But Roger Noll, a baseball accounting expert and professor of economics at Stanford University, had a different analysis.
'This is not a team losing $7 million, but equivalent to one producing profits of $3 million to $4 million a year,' Forbes quoted Noll as saying.
Noll pointed to an $8 million operating expense charged to 1990 for 'grievance claims settlement' and a $2.1 million expense labeled 'released player.'
The former sum is the Pirates' share of the money baseball must pay the players' union in a grievance settlement finding the owners colluded to limit the movement of free agents and to hold down salaries. The latter amount is the salary the Pirates' owe released pitcher Walt Terrell over the next two years.
The Pirates properly wrote off the collussion payment last year, Forbes said, but actually won't pay out the money until this year and next. The Pirates similarly wrote off all of Terrell's salary in 1990.
Forbes quotes George Sorter, a New York University professor of law and accounting, as saying the collusion payment did not really reduce the Pirates' operating profits in 1990.
'It's clearly a one-time, nonrecurring event, not an operating expense,' Sorter said.
Smilarly Noll called the money written off because of Terrell as a 'completely fictitious and random loss.'
Forbes also pointed to subsidiary or related-party transactions that make it difficult for analysts to measure a team's actual earnings.
The magazine cited the $1 million in income from local TV rights the Atlanta Braves claimed in 1984 against a total loss of $3 million. It said that Turner Broadcasting Co., which owns both the Braves and the superstation that broadcasts their games nationally, buys the rights at 'artificical prices.'
Forbes also noted that the St. Louis Cardinals, owned by Anheuser- Busch, generates an estimated $4 million in concession and parking revenue -- 'much of it serving Bush-brewed beer.'
'But this money isn't booked on the Cardinals' income statement,' Forbes said. 'It's reported instead in the income of the stadium's subsidiary.'
