WASHINGTON, Dec. 6 (UPI) -- Baseball Commissioner Bud Selig, testifying before the House Judiciary Committee, said Thursday his sport operated at a loss of $232 million in 2001 and that when interest expenses were added, the red ink totaled $519 million.
Selig appeared before the committee to argue against a bill that would remove baseball's anti-trust exemption, saying to do so would make the sport's problems even larger. He placed much of the blame for baseball's difficulty on player salaries and said anyone who doubts the financial figures he presented to Congress is, "just plain misinformed or is engaging in deliberate misstatement."
Baseball is facing a significant turning point in its history with owners having agreed to eliminate two teams by the start of next season. But lawsuits filed by the players' union and by representatives of the Metrodome in Minneapolis have curtailed that effort. Although baseball owners have not named which teams will be "contracted," Minnesota and Montreal are reportedly at the top of the list.
In addition, the sport no longer has a contract in place with the players and the lack of one could cause a delay in the start of the 2002 season. Spring training is scheduled to begin in just over two months and an enormous gulf exists between the teams and the union as to what needs to be done.
With that as a background, Selig painted a bleak picture before the committee -- making public financial figures that have traditionally been kept secret by the sport.
"Although this year's audits are not yet final," he said, "the consolidated loss for all 30 clubs in 2001 will be approximately $519 million. Twenty-five clubs lost money and five made money this year. The consolidated loss from just baseball operations will be approximately $232 million. When the net interest expense is added to this number, the loss becomes nearly $345 million.
"The interest I speak of relates predominantly to debt that is staggering in its proportions. The total industry debt is currently over $3 billion. If you add deferred compensation and future, guaranteed obligations to players, that number approaches $8 billion. Needless to say, those numbers are the highest in baseball history and, incredibly, they are still growing rapidly. Two of baseball's bankers spoke to the clubs at our meeting last week and underscored the severity of this situation.
"I have read that the union and its economists will be skeptical about these numbers. Well, I am here to tell this committee that the union has had these numbers, that these numbers have been audited repeatedly, and that the union has represented that it accepts the veracity of the numbers we have presented.
"The union has had club financial data since the mid-1980's. Since 1985, the clubs have provided the union with audited financial statements from each club, uniform financial questionnaires prepared by each club and the industry's consolidated financial statements. Since 1997, we have also provided the union with the results of the separate revenue sharing audits that are done of each club's books each year by Pricewaterhouse Coopers.
"Finally, the union has the right under our collective bargaining agreement to conduct is own audit of any of the clubs' revenues. It has never done so. As part of my submission, I have provided three pages describing the financial information that has been presented to the union.
"The idea that somehow what I have presented today is not an accurate picture of the industry's economics is sheer nonsense. It is disappointing that union head (Donald) Fehr is not here to verify my statements, but anyone who would state otherwise is just plain misinformed or is engaging in deliberate misstatement.
"In examining baseball's competitive and financial issues, it has become clear that no single measure will solve the industry's overall problems. The owners recognized that in January, 2000 when they concluded by resolution passed by a 30-0 vote that the industry did not currently have sufficient competitive balance and directed me to take action to correct the problem."
