Ricketts’ answers don’t explain Cubs’ lower payroll spending
BY GORDON WITTENMYER Staff Reporter February 19, 2014 9:35PM
Updated: March 21, 2014 3:48PM
MESA, Ariz. — Cubs chairman Tom Ricketts adamantly denied Wednesday that Ricketts family ownership is taking profits at the expense of spending on the baseball operation.
‘‘Profit-taking? I’m not even sure what that means,’’ he said during his annual spring training media conference. ‘‘Of course not. Absolutely not. That’s ridiculous.’’
But Ricketts fell far short of explaining where the fifth-highest revenues in the sport are being spent as the baseball operation — which killed an offseason by setting aside $20 million in 2014 budget to make the run at Japanese free agent Masahiro Tanaka that ultimately couldn’t compete with the New York Yankees — deals with a decade-low payroll.
The Cubs appear to have a strong group of minor-league hitters in the system, but nobody builds and sustains a championship-caliber organization on homegrown players alone. And nobody with a market size even close to the Cubs’ has tried it since the reserve clause was outlawed nearly 40 years ago.
Ricketts says all the revenue is going back into the team. But where? And how much will the current trend of baseball spending affect a return to competitiveness that already has been delayed by several years since Theo Epstein took over the baseball department in the fall of 2011?
It’s already raising the question of how much capable, veteran support the Cubs will have by the time the Kris Bryants, Albert Almoras and C.J. Edwardses get to the big leagues.
If the Cubs are waiting for revenue-producing changes to Wrigley Field that are still held up by ‘‘ongoing’’ negotiations with rooftop owners — along with increases in local TV and radio deals that are ‘‘too early to predict’’ — it’s going to be too late.
‘‘What you’re seeing is dollars that are being taken in the organization and spent in ways that are just not obvious to everybody on the payroll side,’’ Ricketts said of the spending, acknowledging that the debt-loaded purchase terms demanded by Sam Zell five years ago are part of that.
He wouldn’t give details, at one point citing a non-disclosure agreement that was part of the terms. But according to sources, debt service costs the Cubs close to $35 million a year, and bank covenants add another layer of spending restrictions.
Ricketts and other officials on the business side point to spending on amateurs, increases in front-office personnel and capital-expenditure investments in the ballpark and other areas.
But amateur spending is cost-controlled through spending caps imposed by Major League Baseball two winters ago, front-office costs don’t come close to matching up with decreases on player spending, and capital expenditures are mitigated significantly through tax deductions.
Meanwhile, evenly distributed league revenues have increased significantly in recent years, while the Cubs’ payroll has gone down by $60 million since the Rickettses’ first season.
Even the losses in attendance — which could exceed $22 million if internal projections of a 300,000 decrease are accurate — will be offset by nearly half by the new Budweiser sign Ricketts said he hoped to have above right field for Opening Day.
Ricketts didn’t offer a timeline for the kind of budgets that would restore the Cubs’ place at the grown-ups’ table during the holiday spending season. In two years, they have failed in their bids for pre-prime players such as Cuban outfielder Yoenis Cespedes, Korean pitcher Hyun-Jin Ryu and Tanaka.
‘‘We’ve looked at spots where a free agent would fit,’’ Ricketts said, ‘‘but ultimately, that’s the budget on the baseball side, and those guys decide where those dollars go.’’
That can’t sound too encouraging to baseball bosses who refuse to comment on finances.
Ricketts was asked if ownership could draw from its TD Ameritrade-based personal wealth to override some of the financing-related restrictions that run at least five more seasons. TD Ameritrade stock has risen in value 71 percent in the last year alone, through Tuesday’s closing price.
‘‘Well, for example, the dollars that are going in, once we get the renovations started, is all privately funded,’’ he said. ‘‘There are a lot of other constraints. Not only are they boring and tedious, but they’re also under NDA [non-disclosure agreement]. But obviously for us, it’s about investing in the park, growing revenue and getting good media contracts.’’
And maybe, eventually, baseball.